U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES OF
SMALL BUSINESS ISSUERS
UNDER SECTION 12(B) OR (G) OF THE SECURITIES EXCHANGE ACT OF 1934
CLEARWORKS.NET, INC.
(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
DELAWARE 76-057542
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
2450 FONDREN, SUITE 200
HOUSTON, TEXAS 77063
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
ISSUER'S TELEPHONE NUMBER: (713) 334-2595
SECURITIES TO BE REGISTERED UNDER SECTION 12(B) OF THE ACT: NOT APPLICABLE
SECURITIES TO BE REGISTERED UNDER SECTION 12(G) OF THE ACT: COMMON STOCK, $.001
PAR VALUE
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PART I
ClearWorks.net, Inc. (the " Company") is including the following
cautionary statement to make applicable and take advantage of the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995 for any
forward-looking statements made by, or on behalf of, the Company.
Forward-looking statements include statements concerning plans, objectives,
goals, strategies, expectations, future events or performance and underlying
assumptions and other statements which are other than statements of historical
facts. Certain statements contained herein are forward-looking statements and,
accordingly, involve risks and uncertainties which could cause actual results or
outcomes to differ materially from those expressed in the forward-looking
statements. The Company's expectations, beliefs and projections are expressed in
good faith and are believed by the Company to have a reasonable basis, including
without limitations, management's examination of historical operating trends,
data contained in the Company's records and other data available from third
parties, but there can be no assurance that management's expectations, beliefs
or projections will result or be achieved or accomplished. In addition to other
factors and matters discussed elsewhere herein, the following are important
factors that, in the view of the Company, could cause actual results to differ
materially from those discussed in the forward-looking statements: the ability
of the Company to maintain its rights in its intellectual property; the ability
of the Company to obtain acceptable forms and amounts of financing to fund
planned acquisitions and operations, technology development, marketing and other
expansion efforts; and the global market for technology. The Company has no
obligation to update or revise these forward-looking statements to reflect the
occurrence of future events or circumstances.
ITEM 1. DESCRIPTION OF BUSINESS.
GENERAL
The Company is a turnkey provider of voice, data and video services for
both commercial and residential customers. The Company's vision is to become an
industry leader in integrated voice, data and video solutions. The Company is
pursuing this vision by integrating technology and technology based companies
into its organization focused on the delivery of a suite of digital services to
its clients. The Company is taking advantage of the convergence of telephone,
cable TV, satellite TV, telecommunications and internet technology to accomplish
its objectives. Additionally, the Company intends to take advantage of the
deregulation of the telecommunications industry based on the passage by the US
Congress of the Telecommunications Act in 1997.
The Company initially began developing its voice, data and video
integration capabilities to address business needs. During its early operations,
the Company recognized an opportunity to utilize its expertise to develop and
deliver "bundled digital services" to residential customers directly. The
Company has developed a proprietary solution to deliver a turnkey digital
services package directly to consumers. Through research and development (R&D),
the Company possess technology that can utilize a high speed internet connection
for the delivery of all services. The Company currently provides a wide array of
digital solutions to its commercial customers and it anticipates deploying its
technology to residential customers in the near future.
The Company currently has three principal operating companies, ClearWorks
Structured Wiring Services, Inc., ClearWorks Communications, Inc., and
ClearWorks Integration Services, Inc. The Company anticipates the advantages of
operating these companies together based on delivering like services to both
sets of customers, much like the regional Bell operating companies (RBOCs) do
today. Additionally, the Company can utilize its proprietary technology to
deliver voice, data and video solutions to both sets of customers via the
Internet.
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Internet users can access additional information about Company and its
services at http://www.clearworks.net. Our web site is not a part of this Form
10-SB.
BACKGROUND
The Company is a Delaware corporation that was incorporated on March 5,
1998. On May 12, 1998, Southeast Tire Recycling, Inc., a Florida corporation,
which had been approved for trading on the over-the-counter Electronic Bulletin
Board on December 24, 1997, merged into Company. (Southeast Tire Recycling, Inc.
had previously purchased the stock of Millennium Integration Technologies, Inc.
on April 1, 1998. Millennium Integrated Technologies, Inc. then became a wholly
owned subsidiary of Southeast Tire Recycling, Inc.) ClearWorks Technologies,
Inc. was the surviving corporation in such merger. The Southeast Tire Recycling
changed its name from Southeast Tire Recycling, Inc. to ClearWorks Technologies,
Inc. to better reflect the Company's redirection as a high tech computer
company. The Company divested itself of the tire recycling business and began an
aggressive acquisition strategy on the high tech arena by acquiring Team
Renaissance (TeamLink), Inc, and InfraResources, L.L.C. in May 1998.
InfraResources was acquired by the Company's wholly owned subsidiary, Millennium
Integration Technologies, Inc., a Texas Corporation. On or about April 30, 1999,
the Company changed its name from ClearWorks Technologies, Inc. to
ClearWorks.net, Inc.
The Company recently began its acquisition strategy in the high tech
industry.
In the acquisition of TeamLink Renaissance, Inc. in May 1998, the Company
paid TeamLink's principals a total of 156,250 shares of restricted Common Stock
of the Company. TeamLink is a provider of network computing solutions that
specializes in delivering systems integration services, design services, and
structured wiring solutions.
In the acquisition of InfraResources, L.L.C. in May 1998, the Company paid
$40,000 cash and 80,000 shares of restricted Common Stock of the Company, which
was distributed among the principals of InfraResources. InfraResources is a
provider of high-end consultants delivering integrated solutions for
client/server based computing.
On November 19, 1998, the Company purchased the assets of Vidatel
Communications, a sole proprietorship owned by Juan "John" Diaz. The Company
paid Mr. Diaz 98,039 shares of restricted Common Stock of the Company as
consideration for the Vidatel assets. The Company incurred no liabilities in
this transaction other than assuming a note payable bearing interest at 13.46%,
due $513.33 monthly until September 2002, in the principal amount of $18,078.
On May 14, 1999, the Company purchased all of the membership interests in
Archer-Mickelson Technologies, L.L.C., which has become a wholly owned
subsidiary of Company. On June 3, 1999 Archer-Mickelson Technologies, L.L.C.
converted into a Texas corporation, and changed its name to ClearWorks
Integration Services, Inc. As consideration, the Company paid $50,000 and
delivered to its sole member 75,000 restricted shares of Company's Common Stock.
The Company also discharged three loans at closing totaling $5,549.
The Company presently has three wholly owned subsidiaries: ClearWorks
Structured Wiring Services, Inc., a Texas corporation (formerly known as
Millennium Integration Technologies, Inc.), ClearWorks Communications, Inc., a
Texas corporation, and ClearWorks Integration Services, Inc. ClearWorks
Communications, Inc. has a wholly owned subsidiary called Northpointe Telecom
Services, L.L.C.
ClearWorks Structured Wiring Services, Inc. focuses primarily on
developing commercial accounts for deployment
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of structured wiring solutions. These customers consist of companies who seek
outside expertise to deploy fiber optics and copper-based structured wiring
solutions. ClearWorks Structured Wiring Services, Inc. generates revenue through
time and materials billings, consulting contracts, service and support contracts
as well as hardware and software sales. The Company does not intend to focus
ClearWorks Structured Wiring Services on product sales, but rather acting as a
turnkey provider of structured wiring solutions.
ClearWorks Communications, Inc. focuses primarily on the delivery of
integrated voice, data and video services to the residential marketplace. The
Company has proprietary technology to enable it to proceed into the voice, data
and video market for bundled consumption. The Company foresees deploying
dialtone, multi-channel digital video services, dedicated internet connectivity,
on-demand video rental, voicemail, and a community intranet as a Bundled Digital
Service over one wire into the home. The market for these customers is just
beginning to develop and is benefited by a strategic business alliance with
other companies in the technology market. ClearWorks Communications is providing
solutions to consumers by implementing technology both within the community and
within the home. Within the residential community, ClearWorks Communications is
installing fiber optic backbones to deliver voice, data and video solutions
directly to consumers.
ClearWorks Integration Services, Inc. performs and provides various
networking and product technology to clients utilizing a high level of technical
expertise. Such services include designing, consultation, implementation,
building, modifying and supporting a variety of solutions.
The Company has developed a Remote Response Center ("RRC"). The RRC
consists of three primary components, the Network Support Center, the Remote
Network Management Center, and the Internet Support Center. The Network Support
Center is fully operational and provides existing clients with advanced
technical support and comprehensive network operational support. The Remote
Network Management Center enables the Company's systems engineers to monitor and
administer clients' Local Area Networks (LAN) and Wide Area Networks (WAN)
systems remotely from the Company's headquarters by means of an established
communication link. The Internet Support Center offers a broad range of services
including Internet access, security and publishing services. The Company intends
to leverage the services provided by its RRC to enhance the Company's long-term
client relationships and to expand the scope of services offered to existing and
potential clients.
The Company offers software and hardware products to enhance its ability
to provide complex technology solutions for enterprise wide networks. The
Company is an authorized reseller of networking products, which enables it to
deliver integration services. Generally, these products are technically
sophisticated and require a high level of integration services for successful
deployment. The Company has reseller relationships with many industry-leading
vendors of information technology products. The Company also has established
relationships with leading aggregators of computer hardware and software which
enable the Company to provide its clients with competitive product pricing,
ready product availability and services such as electronic product ordering,
product configuration and testing and product warehousing and delivery. These
relationships enable the Company not to carry inventory normally associated with
the delivery of products.
BUSINESS DEVELOPMENTS
The Company has formed a strategic business alliance with Land Tejas
Development, L.L.C., a major real estate developer in Houston, Texas. The
Company is currently beginning the installation of a state-of-the-art
multi-channel video, telephone and internet communications network, referred to
by the Company as Bundled Digital Servicessm ("BDSsm "), in each of the Land
Tejas development projects in Houston, Texas. The first development project to
receive this network will
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be the development project Canyon Gate. The project is underway and fiber optics
cable is installed in each of the Canyon Gate communities beginning with the
Canyon Gate at Northpointe subdivision in Houston, Texas. On March 26, 1999,
ClearWorks entered into a service agreement with Land Tejas Development at
Northpointe, L.L.C. and the Canyon Gate at Northpointe Home Owner's Association
to begin installing the Bundled Digital Servicessm in the Northpointe
subdivision. Moreover, ClearWorks Communications, Inc. has formed a wholly owned
subsidiary company, Northpointe Telecom Services, L.L.C. on March 26, 1999, and
it is anticipated that this company will service the Northpointe area. It is
further anticipated that the Bundled Digital Servicessm will provide many
benefits to the homeowners in these communities, and the Company believes its
efforts will receive national attention based on the types of services delivered
and the innovation associated with its delivery.
The Company believes that there is substantial demand from customers for
bundled telecommunications services provided on a single monthly bill and with a
single point of contact for all sales and service. Through its Bundled Digital
Servicessm business, the Company will provide a broad array of
telecommunications services, including basic local exchange services, enhanced
switch services, internet services, and video channel transmission services,
aimed at addressing customers' needs. The customers of BDS receive video, audio
and data signals transmitted by nearby television and radio broadcast stations,
terrestrial microwave relay services and communications satellites. Such signals
are then amplified and distributed by optical fiber to the premises of customers
who pay a fee for the service. The Company's multi-channel video systems
generally will carry up to 1000 digital channels. Compressed digital video
technology converts on average as many as 14 analog signals (which will also be
used to transmit video and voice) into a digital format and compresses such
signals (which is accomplished primarily by eliminating the redundancies in
television imagery) into the space normally occupied by one analog signal. The
digitally compressed signal is uplinked to a satellite, which retransmits the
signal to a satellite dish or to a headend to be distributed via optical fiber
to the customer's home. At the home, a set-top video terminal converts the
digital signal into analog channels that can be viewed on a normal television
set.
HIGH-SPEED INTERNET ACCESS
The use of computers, online services and the Internet has increased
significantly over the last few years. The Company believes in the revenue
opportunities of Internet related services and is taking advantage of these
opportunities by developing and providing high-speed Internet access via its
advanced network and point to point optical fiber. By using BDS network
technology that delivers multi-channel video and telephone services, users can
access the Internet at speeds up to hundreds of times faster than existing
telephone modems. More particularly, the Company intends to offer residential
subscribers Internet services that delivers data to homes through a fiber optic
backbone infrastructure at speeds up to 100 times faster than traditional
telephone dial-up alternatives.
SERVICE AND PROGRAMMING CHARGES
Subscribers to the Company's Bundled Digital Servicessm generally will be
charged monthly fees based on the level of service selected, Basic Bundled
Services, Enhanced Bundled Services or Maximum Bundled Services. The monthly
prices for various levels of services (excluding services offered on a
per-channel or per-program basis) will range generally from $78 to $138 for
residential customers. Other services offered include equipment rentals, usually
for an additional monthly fee. Systems offering pay-per-view movies generally
charge between $4 and $6 per movie, and systems offering pay-per-view events
generally charge between $6 and $50, depending on the event. A one-time
installation fee is generally charged for connecting subscribers to the Bundled
Digital Servicessm, but the installation fee has been waived for the residents
at Canyon Gate at Northpointe.
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SALES FORCE
The Company's sales professionals are trained to provide customers with
sales and customer service relating to all of the Company's services. Once a
customer contracts with the Company for services, the Company assigns a single
account relations representative who has the responsibility of proactively
contacting the customer to confirm satisfaction with existing products and to
promote new services and programs. The Company's sales force includes
specialized professionals who focus on sales to commercial and residential
consumers. The Company's sales staff works to gain a better understanding of the
customer's operations in order to develop innovative, application-specific
solutions to each customer's needs. Sales personnel locate potential business
customers by several methods, including customer referral, market research, cold
calling and other networking alliances.
SIGNIFICANT CUSTOMERS
The Company's customers include oil and gas companies, real estate
developers, home builders, multiple unit developers, and individuals. Enron
Corp. and Exxon Chemical Americas individually represented a greater than ten
percent of revenues for fiscal 1998.
COMPETITION
The Bundled Digital Servicessm business faces strong competition with
cable, telephone and internet companies.
RAPIDLY CHANGING INDUSTRY
Changes in the communication services industry are driven by providers of
telecommunication services that are entering, or trying to enter, new markets,
both domestically and internationally. Telecommunication service providers
previously offering services primarily in one segment of the communication
services market, are now offering, either directly or through alliances with
others, new services to complement their primary service offerings. The offering
of these new complementary services, facilitated by evolving technology and by
the regulatory developments is meant to meet the needs of customers who desire
to have most or all of their communication requirements fulfilled by one
supplier. The ability of companies, such as the Company, to be that single
supplier may result in the convergence of the international and local
telecommunication service markets into one global market. The Company expects
that competition from others that enter the telecommunication services market,
some of which have significant financial and other resources, will be intense.
Due to the rapidly changing nature of these markets, the advances being made in
communications technology, the Company cannot predict the level of its future
success, but the Company believes that it can and will compete effectively in
providing its services. The Company anticipates that continued substantial
capital expenditures will be required to compete effectively in the local
telecommunication service markets.
ANTICIPATED ACQUISITIONS
Given the size and highly fragmented composition of the industry, the
Company has identified the potential to carry out a market roll-up within the
systems integration marketplace. Initially, the Company intends to expand its
business through selective, strategic acquisitions of other companies with
complementary businesses in a revenue range of $1 million to $15 million.
Management believes that companies in this range of revenues may be receptive to
the Company's acquisition program since often they are too small to be
identified as acquisition targets of larger public companies or to independently
attempt their own public offering. In particular, the Company intends to focus
its acquisition strategy on candidates which have a proven record of delivering
high-quality technical services and a customer base of large and mid-sized
companies that could benefit from the Company's access to anticipated sources of
financing and long-term growth strategy.
REGULATION AND LEGISLATION
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The cable television industry is regulated by the FCC, some states and
substantially all local governments. In addition, various legislative and
regulatory proposals under consideration from time to time by the Congress and
various federal agencies may in the future materially affect the cable
television industry. The following discussion summarizes certain federal, state
and local laws and regulations affecting cable television.
The Cable Communications Policy Act of 1984 ('1984 Cable Act'), the 1992
Cable Act and the 1996 Telecommunications Act are the principal federal statutes
governing the cable industry. These statutes regulate the cable industry, among
other things, with respect to: (i) cable system rates for both basic and certain
non basic services; (ii) programming access and exclusivity arrangements; (iii)
access to cable channels for public, educational and governmental programming;
(iv) leased access terms and conditions; (v) horizontal and vertical ownership
of cable systems; (vi) consumer protection and customer service requirements;
(vii) franchise renewals; (viii) television broadcast signal carriage
requirements and retransmission consent; (ix)technical standards; and (x)
privacy of customer information.
The FCC, the principal federal regulatory agency with jurisdiction over
cable television, has promulgated regulations implementing the federal statutes.
Under federal laws, nearly all cable television systems are subject to
local rate regulation of basic service pursuant to a formula established by the
FCC and enforced by local franchising authorities. Additionally, the legislation
required the FCC to review rates for non basic service tiers, known as 'cable
programming service tiers' ('CPST'), other than per-channel or per-program
services, in response to complaints filed by franchising authorities; prohibited
cable television systems from requiring subscribers to purchase service tiers
above basic service in order to purchase premium service if the system is
technically capable of doing so; required the FCC to adopt regulations to
establish, on the basis of actual costs, the price for installation of cable
service and rental of cable equipment; and allowed the FCC to impose
restrictions on the retiering and rearrangement of basic and CPST services under
certain limited circumstances. Under the 1996 Telecommunications Act, regulation
of CPST rates is scheduled to terminate on March 31, 1999. Regulation of both
basic and CPST rates also ceases for any cable system subject to 'effective
competition.' The 1996 Telecommunications Act expanded the definition of
'effective competition to cover situations where a local telephone company or
its affiliate, or any multi channel video provider using telephone company
facilities, offers comparable video service by any means except DTH. Cable
operators have the opportunity to make cost-of-service showings which, in some
cases, may justify rates above the applicable benchmarks. The regulations also
provide that future rate increases may not exceed an inflation-indexed amount,
plus increases in certain costs beyond the cable operator's control, such as
taxes, franchise fees and programming costs. Cost-based adjustments to these
capped rates can also be made in the event a cable operator adds or deletes
channels or significantly upgrades its system. In addition, new product tiers
consisting of services new to the cable system can be created free of rate
regulation as long as certain conditions are met, e.g., services may not be
moved from existing tiers to the new product tier. The rules also require that
charges for cable-related equipment (e.g., converter boxes and remote control
devices) and installation be unbundled from the provision of cable service and
based upon actual costs plus a reasonable profit. Local franchising authorities
and/or the FCC are empowered to order a reduction of existing rates which exceed
the maximum permitted level for either basic and/or CPST services and associated
equipment, and refunds can be required.
EMPLOYEES
The Company currently has a total of 39 employees in addition to
independent contractors. The Company currently outsources its human resources
functions for employment administration and benefits management services. None
of the Company's employees is represented by a labor union with respect to his
or her employment by the Company. The Company has experienced no organized work
stoppages and believes its relationship with its employees is good. The Company
believes that its future success will also depend to a significant extent upon
its ability to attract, train and retain highly skilled technical, management,
sales, marketing and consulting personnel. Competition for such personnel in the
industry in the
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United States is intense. There can be no assurance that the Company will be
successful in attracting or retaining such personnel, and the failure to attract
or retain such personnel could have a material adverse effect on Company's
business or results of operations.
BANKING ARRANGEMENTS
The Company has a banking relationship with Southwest Bank of Texas for a
line of credit in the amount of $800,000. The Company also intends to rely upon
future equity offerings to finance its operations.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS.
RESULTS OF OPERATIONS
The following table sets forth certain operating information regarding the
Company:
YEAR ENDED YEAR ENDED
DECEMBER 31, 1998 DECEMBER 31, 1997
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Revenues ............................... $ 1,090,215 $ 113,520
Cost of Goods Sold ..................... $ 1,054,116 $ 88,018
Net Earnings (Loss) .................... $ (187,749) $ 8,338
Net Earnings (Loss) Per Share .......... $ (.02) $ .001
QUARTER ENDED QUARTER ENDED
MARCH 31, 1999 MARCH 31, 1998
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Revenues ....................................... $ 430,442 $ 135,498
Cost of Goods Sold ............................. $ 134,090 $ 72,401
Net Earnings (Loss) ............................ $ 181,005 $ 23,948
Net Earnings (Loss) Per Share .................. $ .01 $ .03
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The following summary table presents comparative cash flows of the Company
for the year ended December 31, 1998, and the year ended December 31, 1997.
YEAR ENDED YEAR ENDED
DECEMBER 31, 1998 DECEMBER 31, 1997
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Net cash used in operating activities ... $ (282,764) $ (40,313)
Net cash used in investing activities ... $ (264,424) $ (2,203)
Net cash provided by financing activities $ 704,961 $ 46,700
At December 31, 1998, the Company had cash balances totaling $161,957 and
net working capital of $93,074.
Fiscal 1998 Compared to Fiscal 1997
The increase in the assets of the Company from $71,737 at December 31,
1997 to $807,984 (an increase of 1,126%) at December 31, 1998, resulted
primarily from (i) the acquisitions of Team Renaissance, Inc. and
InfraResources, L.L.C., and (2) the acquisition of the assets of Vidatel
Communications in November, 1998.
The increase in the liabilities of the Company from $62,399 at December
31, 1997 to $305,812 (an increase of 490%) resulted primarily from the increase
in its business operations, number of employees, and the purchase of equipment,
furniture and fixtures.
During fiscal 1998, shareholders' equity increased to $502,172 from $9,338
(an increase of 5,378%). This increase is primarily attributable to the
acquisition/merger with other companies and financing activities.
The total revenues of the Company increased from $113,520 during fiscal
1997 to $1,090,215 during fiscal 1998 (an increase of 960%), following the
change of its line of business to that of a high-tech provider of voice, data
and video services. As a result of the increased level of business and the
increased cost of goods sold and services related to such operations, the
Company's cost of goods increased from $88,018 during fiscal 1997 to $1,054,116
(an increase of 1198%) during fiscal 1998; and increased gross profit to $36,099
during fiscal 1998 from $25,502 during fiscal 1997.
Operating expenses increased from $16,233 in fiscal 1997 to $213,788 in
fiscal 1998 (an increase of 1,317%), arising primarily from increases in general
and administrative expenses and other support costs related to its increased
level of operations.
During fiscal 1998, the Company realized an operating loss of ($187,749)
compared to net earnings of $8,338 during fiscal 1997.
Fiscal quarter ended March 31, 1999, compared to fiscal quarter ended March 31,
1998.
The revenues of the Company increased from $135,498 in the first quarter
of fiscal 1998 to $430,442 (an increase of 317%) in the first quarter of fiscal
1999. As a result of the increased business activity of the Company, its cost of
goods sold increased from $72,401 in the first quarter of fiscal 1998 to
$134,090 (an increase of 185%) in the same period of fiscal 1999. Gross profit
increased from $63,097 during the first quarter of fiscal 1997 to $296,352 (an
increase of 470%) during the same period of fiscal 1999.
General and administrative expenses and selling expenses increased from
$39,149 during the first quarter fiscal 1998 to $115,347 (an increase of 295%)
during the first quarter of fiscal 1999 due primarily to an increase in the
number of employees and marketing consultants and an increase in rental expenses
arising from its recent lease of expanded executive office and operating
facilities.
The net earnings of the Company increased from $23,948 ($.003 per share)
during the first quarter of fiscal 1998 to $181,005 ($.01 per share) an increase
of 756%, for the first quarter of fiscal 1999.
The following summary table presents comparative cash flows of the Company for
the quarter ended March 31, 1999, and the quarter ended March 31, 1998.
QUARTER ENDED QUARTER ENDED
MARCH 31, 1999 MARCH 31, 1998
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Net cash used in operating activities ....... $ (206,705) $ 7,792
Net cash used in investing activities ....... $ (412,598) $ (318)
Net cash provided by financing activities ... $ 912,302 $ --
CAPITAL EXPENDITURES
The Company has incurred capital expenditures for equipment and office
furniture used in its operations. Capital expenditures during the year ended
December 31, 1998, totaled $264,424.
CAPITAL RESOURCES
The Company's capital resources have been provided primarily by capital
contributions from its stockholders and through an offering of its Common Stock
under Rule 504 of Regulation D under the Securities Act of 1933 which realized
$1,000,000.
LIQUIDITY
The ability of Company to satisfy its obligations depend in part upon its
ability to reach a profitable level of operations and securing short and
long-term financing for its development of its commercial and residential
products. There is no assurance that short and long term financing can be
obtained to fulfill the Company's capital needs. Without the short or long term
financing, the Company will attempt to sell additional common stock to meet its
current and future capital needs.
ITEM 3. DESCRIPTION OF PROPERTY.
CORPORATE OFFICE
The Company currently leases its corporate offices located at 2450
Fondren, Suite 200, Houston, Texas 77063. The lease agreement is for a four year
term and covers approximately 5,845 square feet. The initial monthly payments
are $7,063 which will increase 3.45% during the second and fourth years of the
lease.
The Company also leases an office warehouse located at 5250 Gulfton, Suite
2E, Houston, Texas 77081. The lease agreement is for a three year term and
covers approximately 1,922 square feet. The monthly payments are fixed at $985
per month.
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TRADEMARKS AND SERVICEMARKS
The Company has filed an application with the U.S. Patent and Trademark to
register the Company's name and logo as a registered servicemark. The filing
date of the Trademark Application is May 14, 1998.
The Company intends to file an application with the U.S. Patent and
Trademark to register the name and logo for "Bundled Digital Services".
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The total number of shares of Common Stock of the Company beneficially
owned by each of the officers and directors, and all of such directors and
officers as a group, and their percentage ownership of the outstanding Common
Stock of the Company as of May 31, 1999, are as follows:
SHARES PERCENT OF
MANAGEMENT BENEFICIALLY COMMON
SHAREHOLDERS(1) OWNED(1) STOCK
--------------- ------------ ----------
Michael T. McClere ............................... 2,232,500 (2) 12.3%
2450 Fondren, Suite 200
Houston, Texas 77063
Howard Andrews ................................... 0.4% 0.4%
2450 Fondren, Suite 200
Houston, Texas 77063
Shannon D. McLeroy ............................... 2,475,000 (3) 13.9%
2450 Fondren, Suite 200
Houston, Texas 77063
Celia Figueroa ................................... -0- 0%
2450 Fondren, Suite 200
Houston, Texas 77063
Directors and officers as a group
(4 persons, including the above) ............... 4,784,563 26.5%
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(1) Except as otherwise noted, it is believed by the Company that all persons
have full voting and investment power with respect to the shares
indicated. Under the rules of the Securities and Exchange Commission, a
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person (or group of persons) is deemed to be a "beneficial owner" of a
security if he or she, directly or indirectly, has or shares the power to
vote or to direct the voting of such security, or the power to dispose of
or to direct the disposition of such security. Accordingly, more than one
person may be deemed to be a beneficial owner of the same security. A
person is also deemed to be a beneficial owner of any security which that
person has the right to acquire within 60 days, such as options or
warrants to purchase the Common Stock of the Company.
(2) Includes warrants to purchase 420,000 shares of Common Stock of the
Company and warrants to purchase 500,000 shares of Common Stock held by
Mr. McClere and by the Rachel McClere 1998 Trust and the McClere Family
Trust.
(3) Includes warrants to purchase 600,000 shares of the Common Stock of the
Company.
PRINCIPAL STOCKHOLDERS
The following table sets forth information with respect to the
beneficial ownership of the Company's Common Stock by each shareholder who
beneficially owns more than five percent (5%) of the Company's Common Stock, the
number of shares beneficially owned by each and the percent of outstanding
Common Stock so owned of record as of May 31, 1999. It is believed by the
Company that all persons listed have sole voting and investment power with
respect to their shares, except as otherwise indicated.
SHARES PERCENT OF
NAME AND ADDRESS BENEFICIALLY OUTSTANDING
OF BENEFICIAL OWNER TITLE OF CLASS OWNED COMMON STOCK
------------------- -------------- ------------ ------------
Michael T. McClere Common Stock 2,232,500(1) 12.3%
2450 Fondren, Suite 200
Houston, Texas 77063
Shannon D. McLeroy Common Stock 2,475,000(2) 13.9%
2450 Fondren, Suite 200
Houston, Texas 77063
- --------------
(1) Except as otherwise noted, it is believed by the Company that all persons
have full voting and investment power with respect to the shares
indicated. Under the rules of the Securities and Exchange Commission, a
person (or group of persons) is deemed to be a "beneficial owner" of a
security if he or she, directly or indirectly, has or shares the power to
vote or to direct the voting of such security, or the power to dispose of
or to direct the disposition of such security. Accordingly, more than one
person may be deemed to be a beneficial owner of the same security. A
person is also deemed to be a beneficial owner of any security which that
person has the right to acquire within 60 days, such as options or
warrants to purchase the Common Stock of the Company.
(2) Includes warrants to purchase 420,000 shares of Common Stock of the
company and warrants to purchase 500,000 shares of Common Stock held by
Mr. McClere and the Rachel McClere 1998 Trust and the McClere Family
Trust.
(3) Includes warrants to purchase 600,000 shares of the Common Stock of the
Company.
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WARRANTS
As part of the original transaction in which Millennium Integration
Technologies, Inc.'s stock was purchased by Southeast Tire Recycling, Inc., a
Stock Warrant Plan dated April 24, 1998 was executed by the former management of
Southeast Tire Recycling, Inc. The Stock Warrant Plan was executed in
conjunction with the Agreement for Purchase of Common Stock dated April 1, 1998
and Addendum to Agreement for Purchase of Common Stock dated April 24, 1998. In
such Addendum to Agreement for Purchase of Common Stock, the management of
Southeast Tire Recycling, Inc. agreed to issue warrants to each of the sellers
of stock named below:
NAME: WARRANT CLASS AMOUNT
----- ------------- -------
Shannon D. McLeroy A 300,000
B 300,000
Michael T. McClere A 210,000
B 210,000
Tech Technologies A 240,000
B 240,000
Rachel McClere 1998 Trust A 50,000
B 50,000
McClere Family Trust A 200,000
B 200,000
Class A Warrants provide for an exercise price of $3.00 per common share
and shall expire five years from the date of issuance. Each Class A Warrant
provides that it shall be cancellable at the sole discretion of the Company on
or before 30 days after written notice upon payment of a cancellation price of
$1.00 per share. Each such Class A Warrant is subject to the terms, conditions
and provisions of the Stock Warrant Plan.
Class B Warrants provide for an exercise price of $6.00 per common share
and shall expire 10 years from the date of issuance. Each Class B Warrant
provides that it shall be cancellable at the sole discretion of the Company on
or before 30 days after written notice upon payment of a cancellation price of
$1.20 per share. Each such Class B Warrant is subject to the terms, conditions
and provisions of the Stock Warrant Plan.
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS.
Board of Directors: Michael T. McClere (age 38) and Howard Andrews (age
38).
The Company's executive officers and their ages are as follows:
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NAME AGE POSITION
- ---- --- --------
Michael T. McClere 38 Chairman of the Board and Chief Executive
Officer
Shannon D. McLeroy 33 President and Treasurer
Celia Figueroa 30 General Counsel and Corporate Secretary
There is no family relationship between or among the above directors and
officers.
The Company's success will depend largely on the efforts and abilities of
the Company's senior management. In particular, the Company is dependent upon
Michael T. McClere, Chief Executive Officer, and Shannon D. McLeroy, President.
The loss of services of senior management could have a substantial adverse
effect on the Company.
MICHAEL T. MCCLERE-- Mr. McClere is the Chief Executive Officer and
Director of the Company. Prior to the Company, Mr. McClere has been involved in
several businesses in the information technology (IT) area, serving on the board
of directors and as chief executive officer. Mr. McClere has been involved in
the purchasing of numerous businesses, as well as selling businesses that he had
assisted in the development. Mr. McClere's business background includes all
aspects of the development and implementation of information technology
businesses. Mr. McClere has also assisted in the development and implementation
of major technology deployments for NASA in various space centers throughout the
world. As a consultant on information systems, Mr. McClere assisted Lockheed
Engineering & Sciences Company from May 1988 to October 1990, SAE, Inc. from May
1984 to May 1988, and Baker Hughes from May 1979 to May 1984. Mr. McClere has
over seventeen (17) years experience in the information technology field. He has
received a BS in Computer Science from The University of Houston-University
Park.
HOWARD ANDREWS--Mr. Andrews is the Director of the Company. Mr. Andrews is
currently co-founder and developer of RBL, Ltd., managing member of Royal
Bancshares Limited, LLC., an offshore bank holding company. Mr. Andrews is also
co-founder of an offshore bank in St. Vincent, W.I. Within the scope of business
he has helped lead companies in their expansions through acquisitions and
mergers both domestically and internationally. Mr. Andrews has presided, and
currently presides, as a director on numerous corporate boards. Mr. Andrews
served as CEO and Chairman for four (4) corporations. Mr. Andrews has been
responsible for overseeing the development of corporate strategies for marketing
locally and nationally, as well as, training and control measures. He has
experience in many facets of industry including retail and wholesale development
of clients, training, public speaking, product development, sales management,
executive management, public and private capital underwriting, investor
relations director, and corporate consultant. He was President and Principal
Compliance Officer until March 1992 of Andrews, Hentges & Associates, Inc., a
Broker/Dealer with management of assets in excess of $200 million and 93
registered brokers in 17 states. During his direction he was instrumental in
building the 2nd largest Broker/Dealer domiciled in the State of Oklahoma.
Since 1992, Mr. Andrews has concentrated his efforts in the development of
various project ventures by working in association with management groups,
merchant banking firms, banks, and developed funding sources in both the private
and public sector, including RBL, Ltd., AMAC, Royal Bancshares Limited, LLC, and
ACB Mortgage Fund.
SHANNON D. MCLEROY--Mr. McLeroy serves as President of the Company. Mr.
McLeroy has been in the systems integration business for over ten (10) years. He
has worked beginning as a technician and has progressed through various stages
of management. Mr. McLeroy has managed teams of engineers to deploy technical
computer services with the last three companies with which he has worked. Mr.
McLeroy was solely responsible for managing and putting together a team of
computer professionals to run a major portion of Exxon USA's network. This
network was responsible for delivering key financial and business data to enable
Exxon to perform its business.
13
<PAGE>
CELIA FIGUEROA-- Ms. Figueroa is the Secretary and the General Counsel of
the Company. The chief legal counsel position entails considerable interaction
with the Board of Directors. Ms. Figueroa's responsibilities include: (1)
preparing and finalizing mergers and acquisitions; (2) litigation management;
(3) negotiating business parameters in commercial transactions; (4) general risk
assessment; (5) preparation and maintenance of all corporate records; and (6)
corporate transactions. Ms. Figueroa, born Houston, Texas, February 5, 1969; was
admitted to the Texas bar in 1994. She graduated from Rice University (B.A.,
1991); and from the University of Houston (J.D. 1994).
ITEM 6. EXECUTIVE COMPENSATION.
No executive officer or director of the Company received compensation in
excess of $100,000 during its fiscal year ended December 31, 1998. Michael T.
McClere, the Chief Executive Officer of the Company, presently receives a salary
of $150,000 per year; and Shannon D. McLeroy, the President of the Company,
presently receives a salary of $125,000 per year.
The Company does not presently have any pension plan, profit sharing plan,
or similar plans for the benefit of its officers, directors or employees.
However, the Company reserves the right to establish any such plans in the
future.
On May 12, 1999, the Board of Directors adopted the Company's Stock Option
Plan (the "Plan"), which provides for the granting to officers and key employees
of the Company options to acquire stock in the Company. Such Plan is intended to
qualify as "incentive stock options" within the meaning of Section 422A of the
Internal Revenue Code of 1986, as amended (the "Code"), and certain other
options to purchase shares of Common Stock which are not intended to receive
special income tax treatment under the Code. Adoption and approval of the Plan
by the stockholders is pending. Subject to approval by the shareholders of the
Company, the Board reserved for issuance upon the exercise of stock options
granted pursuant to the Plan 10,000,000 shares of Common Stock. Shannon D.
McLeroy and Michael T. McClere were appointed to act as the members of the Stock
Option Committee of the Board of Directors (the "Stock Option Committee") for
the purpose of administering the Plan and, commencing on the date of adoption by
the Board of the Plan and until otherwise provided by resolution of the Board of
Directors and subject to the approval by the shareholders of the Company of the
Plan, such Stock Option Committee shall have all the powers and exercise all the
duties conferred upon it by the Plan. To date, no options have been granted or
exercised.
Directors of the Company who do not serve as officers thereof are not
currently compensated by the Company for meeting attendance or otherwise, but
are entitled to reimbursement for their travel expenses. The Company does not
pay additional amounts for committee participation or special assignments of the
Board of Directors.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
During the fiscal 1997, the Company borrowed $22,000 from Michael T.
McClere with a note due November 13, 1998; and borrowed an additional $30,000
with a note due March 31, 1999. These notes have been repaid during fiscal 1999.
In connection with acquisition of Millennium Integration Technologies,
Inc. ("Millennium") during fiscal 1998, the Company issued 1,312,500 shares of
its common stock to Michael T. McClere and 1,875,000 shares of its common stock
to Shannon D. McLeroy, the principal stockholders of Millennium; and the Company
also agreed to issue warrants to purchase 920,000 shares of stock to Mr. McClere
and his affiliates, and warrants to purchase 600,000 shares of stock to Mr.
McLeroy.
14
<PAGE>
ITEM 8. DESCRIPTION OF SECURITIES.
The Company is authorized to issue 50,000,000 shares of Common Stock,
$.001 par value. At May 31, 1999, there were 17,213,159 shares of Common Stock
issued and outstanding.
There were 299 stockholders of record of the Common Stock of the Company
as of May 31, 1999.
The Company is authorized to issue 5,000,000 shares of Preferred Stock,
$.001 par value. At May 31, 1999, there are no shares of Preferred Stock issued
and outstanding.
COMMON STOCK
Holders of Common Stock are entitled to receive ratably such dividends as
may be declared by the Board of Directors, out of funds legally available,
without any preference. Holders of Common Stock are entitled to one vote per
share. Cumulative voting is not allowed for purposes of the election of
directors. Thus, the holders of more than 50% of the shares voting for directors
can elect all directors. The holders of the Common Stock of the Company have no
preemptive rights to purchase new issues of the securities of the Company. There
are no redemption or conversion features attached to the Common Stock.
At the present time, the Company does not intend to pay any dividends on
its Common Stock.
Upon liquidation or dissolution of the Company, holders of Common Stock
are entitled to receive pro rata, either in cash or in kind, all of the assets
of the Company after payment of debts.
WARRANTS
As of May 31, 1999, there were outstanding warrants to purchase 2,000,000
shares of Common Stock of the Company with exercise `prices' ranging from $3.00
to $6.00 per share.
DELAWARE CORPORATE LAW AND CERTAIN BY-LAW PROVISIONS
The Company is a Delaware corporation, and may become subject to the
anti-takeover provisions of the Delaware General Corporation Law (the "Delaware
Law"). In general, Delaware Law prevents take-over offers to acquire equity
securities of a Delaware corporation if the offeror would become a beneficial
owner of more than 20% of any class of outstanding equity securities, and other
similar provisions, subject to certain exceptions such as the written approval
of the board of directors. The existence of these provisions would be expected
to have an anti-takeover effect, including attempts that might result in a
premium over the market price for the shares of Common Stock held by
stockholders.
Article II, Section 5 of the Company's By-Laws provides that only
the Company's President, Secretary, a majority of the members of the Company's
Board of Directors or at the written request of the holders of at least 50% of
the outstanding voting power may call a special meeting of stockholders. These
provisions of the By-Laws could discourage
15
<PAGE>
potential acquisition proposals and could delay or prevent a change in control
of the Company. Such provisions also may have the effect of preventing changes
in the management of the Company.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock of the Company is
Registrar and Transfer Company, 10 Commerce Drive, Cranford, New Jersey 07016;
telephone 1 (800) 456-0596.
REPORTS TO STOCKHOLDERS
The Company will furnish its shareholders with annual reports containing
the financial statements of the Company examined by independent certified public
accountants. The Company presently intends to issue unaudited quarterly reports
and may distribute other reports to the stockholders as it deems appropriate.
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
OTHER SHAREHOLDER MATTERS.
GENERAL
The Common Stock of the Company is traded on the Electronic Bulletin Board
over-the-counter market, and is quoted under the symbol CLWK.
MARKET PRICE
When the trading price of the Company's Common Stock is below $5.00 per
share, the Common Stock is considered to be "penny stocks" that are subject to
rules promulgated by the Securities and Exchange Commission (Rule 15g-1 through
15g-9) under the Securities Exchange Act of 1934. These rules impose significant
requirements on brokers under these circumstances, including: (a) delivering to
customers the Commission's standardized risk disclosure document; (b) providing
to customers current bid and offers; (c) disclosing to customers the
brokers-dealer and sales representatives compensation; and (d) providing to
customers monthly account statements.
The following table sets forth the range of high and low closing bid
prices per share of the Common Stock of the Company as reported by National
Quotation Bureau, L.L.C. for the periods indicated.
YEAR ENDED DECEMBER 31, 1998 HIGH BID(1) LOW BID(1)
---------------------------- ----------- ----------
1st Quarter.... $ 0.5625 $ 0.375
2nd Quarter.... $ 3.625 $ 0.5625
3rd Quarter.... $ 3.3125 $ 1.03125
4th Quarter.... $ 2.15625 $ 0.3125
YEAR ENDING DECEMBER 31, 1999
1st Quarter (1) $ 1.25 $ 0.4375
16
<PAGE>
- ------------
(1) The Company is unaware of the factors which resulted in the significant
fluctuations in the prices per share during the periods being presented,
although it is aware that there is a thin market for the Common Stock,
that there are frequently few shares being traded and that any sales
activity significantly impacts the market.
The closing bid and ask prices of the Common Stock of the Company on June
24, 1999, were $1 31/32 and $2 1/32, respectively.
DIVIDENDS
The Company has not paid any dividends on its Common Stock and does not
expect to do so in the foreseeable future. The Company intends to apply its
earnings, if any, in expanding its operations and related activities.
The payment of cash dividends in the future will be at the discretion of
the Board of Directors and will depend upon such factors as earnings levels,
capital requirements, the Company's financial condition and other factors deemed
relevant to the Board of Directors. In addition, the Company's ability to pay
dividends may become limited under future loan agreements of the Company which
may restrict or prohibit the payment of dividends.
ITEM 2. LEGAL PROCEEDINGS.
The Company is subject to legal proceedings and claims which arise in the
ordinary course of business. The Company's management does not expect that the
results in any of these legal proceedings will have a material adverse effect on
the Company's financial condition or results of operations.
The Company is currently a defendant and counter-plaintiff in MICHAEL
CALLIHAN AND LINDA CALLIHAN VS. CLEARWORKS TECHNOLOGIES, INC.; 80th Judicial
District Court of Harris County, Texas; Cause No. 98-39147. Suit was filed
August 29, 1998 alleging causes of action based on fraud. This suit is an
uninsured claim in the amount of approximately $250,000.00 and an Answer and
Counterclaim was filed on behalf of ClearWorks.net, Inc. on September 4, 1998
denying the claim, and presenting ClearWorks' causes of action against the
Michael and Linda Callihan which include but are not limited to fraud, negligent
misrepresentation, indemnification, breach of contract, breach of fiduciary
duty, and equitable entitlement to injunctive relief. Management is vigorously
contesting these claims by Michael and Linda Callihan on the basis they are
without merit, and the Company is vigorously pursuing its claims against the
Callihans.
The Company is currently a nominal defendant in the following interpleader
action in which it takes no position with respect to ownership of stock
currently held in the registry of the court: CAUSE NO. 98-34190; MARTIN R.
NATHAN VS. CLEARWORKS.NET, INC., ET AL; In the 269th Judicial District Court of
Harris County, Texas. This matter is being handle by the office of the general
counsel.
17
<PAGE>
Also, the Company is currently a defendant in CAUSE NO. 1999-15281; ROBERT
HORN VS. CLEARWORKS TECHNOLOGIES, INC.; IN THE 333 JUDICIAL DISTRICT COURT OF
HARRIS COUNTY, TEXAS. Suit was filed March 25, 1999 alleging causes of action
based on breach of contract in the amount of approximately $200,000.00. An
Answer was filed on April 16, 1999 wherein Company denied the claim and asserted
its affirmative defenses. Management is vigorously contesting these claims by
Robert Horn on the basis they are without merit.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS.
None.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES.
During the period April 1, 1998 through December 31, 1998, the Company
issued shares to the following persons as partial compensation for services:
NUMBER
NAME OF SHARES
---- ---------
FYI Financial 150,000
Creative Equity Strategies 6,666
Golden Triangle Industries, Inc. 75,000
M. Stephen Roberts, Attorney 5,000
These securities were issued in reliance on the exemption from
registration provided by Section 4(2) of the Securities Act of 1933 as amended.
The above mentioned individuals/entities were sophisticated investors who
knowledgeable about the Company's operations and financial condition; they were
able to evaluate the risks and merits of receipt of the shares, and they each
agreed to accept the shares as partial compensation.
During the period of November 30, 1998 and April 6, 1999, the Company
offered and sold 5,635,409 shares of the Company's Common Stock at a per share
cash offer price of not less than $.25, unless otherwise modified by the
Company, with the requirements that (i) share offers and sales be made either to
"accredited investors," as that quoted term is defined in Rule 215, as amended
(the "Act"), and/or up to a maximum of 35 non-accredited investors each of whom,
in the judgment of the Company's representatives, is determined to have such
knowledge and experience in high risk equity investments and other financial
matters as to be capable of evaluating the relative risks and merits of an
investment in the shares, as well as the economic worth and liquidity to be able
to sustain a complete loss of his investment in the shares; (ii) each such offer
and sale be undertaken only in accordance with the transactional exemption from
registration afforded by Rule 504 of Regulation D, as promulgated under Section
3(b) of the Act; and (iii) there is no minimum number of shares which may be
acquired by any qualified purchaser.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The provisions of the General Corporation Law of Delaware provide for the
indemnification of the directors and
18
<PAGE>
officers of the Company. These provisions generally permit indemnification of
directors and officers against certain costs, liabilities and expenses of any
threatened, pending or completed action, suit or proceeding that any such person
may incur by reason of serving in such positions if the person acted in good
faith and in a manner the person reasonably believed to be in or not opposed to
the best interests of the corporation, except that no indemnification shall be
made in respect of any claim, issue or matter as to which such persona had been
adjudged to be liable to the corporation, unless and only to the extent that the
Court of Chancery or the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but in
view of all the circumstance of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery or such
other court shall deem proper. Any determination that indemnification of a
director or an officer, unless ordered by the court, must be made by a majority
vote of the directors who are not parties to such action, suit or proceeding,
even though less than a quorum; or by a committee of such directors designated
by majority vote of such directors even though less than a quorum; or if there
are no such directors, or if such directors so direct, by independent legal
counsel in a written opinion; or by the stockholders.
The Eleventh Article of the Articles of Incorporation of the Company
provides that the Company shall, to the fullest extent permitted by the
provisions of Section 145 of the General Corporation Law of Delaware, as the
same may be amended and supplemented, indemnify any and all persons whom it
shall have power to indemnify under said section from and against any and all of
the expenses, liabilities or other matters referred to in or covered by said
section, and the indemnification provided for shall not be deemed exclusive of
any other rights to which those indemnified may be entitled under any by-law,
agreement, vote of stockholders or disinterested directors or otherwise, both as
to action in his official capacity and as to action in another capacity while
holding such office, and shall continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person.
Section 6.10 of the Bylaws of the Company provides that the Company shall
indemnify all of its officers and directors, past, present and future, against
any and all expenses incurred by them, including but not limited to legal fees,
judgments and penalties which may be incurred, rendered or levied in any legal
action brought against any or all of them for or on account of any act or
omission alleged to have been committed while acting within the scope of their
duties as officers or directors of the Company.
PART III
ITEM 1. INDEX TO EXHIBITS.
EXHIBIT
3(i) Articles of Incorporation of the Registrant
3(ii) Amendment to Articles of Incorporation
3(iii) By-Laws of the Registrant
10(a) Plan and Agreement of Merger and
Reorganization
10(b) Certificate of Merger of Southeast Tire
Recycling, Inc. into ClearWorks Technologies, Inc.
19
<PAGE>
10(c) Certificate of Authority to Transact
Business in Texas
10(d) Agreement for Purchase of Common Stock (By
Southeast Tire Recycling, Inc. of Millennium)
10(e) Addendum to Agreement for Purchase of
Common Stock
10(f) Stock Option Plan
10(g) Stock Warrant Plan
10(h) Agreement of Merger and Plan of
Reorganization (Team Renaissance)
10(i) Agreement of Merger and Plan of
Reorganization (InfraResources)
10(j) Asset Purchase Agreement (Vidatel)
10(k) Agreement and Plan of Acquisition (Archer
Mickelson Technologies, Inc.)
11 Statement re: computation of per share
earnings Reference is made to the
Consolidated Statements of
Operations of the Registrant
for its fiscal years ended
December 31, 1998, and 1997,
which are incorporated herein
by reference.
21 A description of the subsidiaries of the
Registrant
27 Financial Data Schedule
20
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant caused this registration statement to be signed on its behalf by the
undersigned, hereunto duly authorized.
CLEARWORKS.NET, INC.
Date: June 28, 1999
By: /s/ MICHAEL T. MCCLERE /s/ HOWARD ANDREWS
Michael T. McClere Howard Andrews
Director, Chief Executive Officer, Director
And Chairman of the Board of Directors
/s/ SHANNON D. McLEROY
Shannon D. McLeroy
President and Treasurer and
principal accounting officer
21
<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We consent to the inclusion in this Form 10-SB Registration Statement of our
report dated May 18, 1999 on our audit of the financial statements of
ClearWorks.net, Inc. We also consent to the reference to our firm under the
caption "Experts".
McManus & Co., P.C.
Certified Public Accountants
Morris Plains, New Jersey
<PAGE>
------------------------------------------------------------------------
CLEARWORKS.NET, INC. AND SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
------------------------------------------------------------------------
TABLE OF CONTENTS
PAGE
----
Independent Accountant's Report ...................................... 1
Consolidated Balance Sheets .......................................... 2
Consolidated Statements of Operations ............................... 3
Consolidated Statements of Changes in Stockholders' Equity ....... 4
Consolidated Statements of Cash Flows .............................. 5
Notes to the Consolidated Financial Statements .................... 6 - 17
i
<PAGE>
INDEPENDENT ACCOUNTANT'S REPORT
TO THE BOARD OF DIRECTORS AND STOCKHOLDERS
OF CLEARWORKS.NET, INC.:
We have audited the accompanying consolidated balance sheets of ClearWorks.net,
Inc. and Subsidiary as of December 31, 1998 and 1997 and the related
consolidated statements of operations, stockholders' equity, and cash flows for
the year ended December 31, 1998 and the period from September 18, 1997 (date of
inception) to December 31, 1997. These financial statements are the
responsibility of ClearWorks.net, Inc.'s management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, based on our audits, the consolidated financial statements
referred to above present fairly, in all material respects, the financial
position of ClearWorks.net, Inc. and Subsidiary as of December 31, 1998 and 1997
and the results of their operations, shareholders' equity, and their cash flows
for the year ended December 31, 1998 and the period ended December 31, 1997 are
in conformity with generally accepted accounting principles.
McManus & Co., P.C.
Certified Public Accountants
Morris Plains, New Jersey
May 18, 1999
1
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- --------------------------------------------------------------------------------
CLEARWORKS.NET, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------
ASSETS
DECEMBER 31,
----------------------
1998 1997
----------- --------
CURRENT ASSETS:
Cash and Cash Equivalents (Note 1) .................. $ 161,957 $ 4,184
Accounts Receivable (Note 1) ........................ 202,896 62,260
Deferred Advertising Costs (Note 1) ................. 5,208 --
Other Receivable .................................... 2,712 --
Inventories (Note 1) ................................ 12,000 --
----------- --------
Total Current Assets ............................. 384,773 66,444
PROPERTY AND EQUIPMENT (NOTE 1):
Transportation Equipment ............................ 26,245 --
Operating Equipment ................................. 234,719 1,616
Furniture & Fixtures ................................ 5,663 587
Less: Accumulated Depreciation ...................... (13,240) (59)
----------- --------
Total Property and Equipment ..................... 253,387 2,144
OTHER ASSETS:
Security Deposits ................................... -- 1,746
Intangible Assets (Notes 1 & 5) ..................... 175,809 1,161
Less: Accumulated Amortization ...................... (8,031) (58)
Other Assets ........................................ 2,046 300
----------- --------
Total Other Assets ............................... 169,824 3,149
----------- --------
TOTAL ASSETS ........................................ $ 807,984 $ 71,737
=========== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts Payable .................................... $ 19,759 $ 4,486
Accrued Expenses .................................... 146,117 2,934
Notes Payable (Note 3) .............................. 55,965 45,700
Deferred Revenues ................................... -- 4,200
Payroll Taxes Payable ............................... 57,107 5,079
Sales Taxes Payable ................................. 12,751 --
----------- --------
Total Current Liabilities ........................ 291,699 62,399
LONG - TERM LIABILITIES:
Notes Payable - net of current portion (Note 3) ..... 14,113 --
----------- --------
Total Long - Term Liabilities .................... 14,113 --
COMMITMENTS AND CONTINGENT LIABILITIES (NOTE 9)
SHAREHOLDERS' EQUITY:
Preferred Stock - $.001 par value
Authorized at 1998 and 1997
5,000,000 and 5,000,000 shares, respectively .... -- --
Common Stock - $.001 and $.001 par value
at 1998 and 1997, respectively
Authorized at 1998 and 1997
50,000,000 and 50,000,000 shares, respectively
Issued and Outstanding at 1998 and 1997
11,460,249 and 6,250,000, respectively ........... 11,460 6,250
Paid in Capital ..................................... 1,098,781 (5,250)
Retained Earnings ................................... (608,069) 8,338
----------- --------
Total Shareholders' Equity ....................... 502,172 9,338
----------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY .......... $ 807,984 $ 71,737
=========== ========
See accompanying accountant's report and notes to the financial statements.
2
<PAGE>
- --------------------------------------------------------------------------------
CLEARWORKS.NET, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
- --------------------------------------------------------------------------------
FOR THE PERIODS ENDED
DECEMBER 31,
--------------------------
1998 1997
----------- ---------
NET SALES
Integration Services ......................... $ 486,331 $ 113,520
Network Cabling and Wiring ................... 555,550 --
Software Administration ...................... 48,334 --
----------- ---------
Total Revenues ............................ 1,090,215 113,520
COST OF GOODS SOLD
Materials and Supplies ....................... 50,145 --
Direct Labor and Related Costs ............... 975,019 88,018
Depreciation and Amortization ................ 13,169 --
Other Manufacturing Costs .................... 15,783 --
----------- ---------
Total Cost of Goods Sold .................. 1,054,116 88,018
----------- ---------
GROSS PROFIT ................................... 36,099 25,502
----------- ---------
OPERATING EXPENSES
Selling, General and Administrative
Salaries and Related Costs ................ 12,235 --
Advertising and Promotion ................. 21,421 --
Depreciation and Amortization ............. 7,985 117
Other Support Costs ....................... 172,147 16,116
----------- ---------
Total Operating Expenses .................. 213,788 16,233
----------- ---------
EARNINGS/(LOSS) FROM OPERATIONS BEFORE
OTHER EXPENSES AND INCOME TAXES .............. (177,689) 9,269
OTHER EXPENSES
Interest Expense ............................. (10,060) (931)
----------- ---------
Total Other Expenses ...................... (10,060) (931)
----------- ---------
EARNINGS/(LOSS) BEFORE INCOME TAXES ............ (187,749) 8,338
Provision For Income Taxes ................... -- --
----------- ---------
NET EARNINGS/(LOSS) ............................ $ (187,749) $ 8,338
=========== =========
Net Earnings Per Common Share:
Primary (Note 1) .......................... $ (0.02) $ 0.01
Fully Diluted (Note 1) .................... $ (0.02) $ 0.01
See accompanying accountant's report and notes to the financial statements.
3
<PAGE>
- --------------------------------------------------------------------------------
CLEARWORKS.NET, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ADDITIONAL TOTAL
SEPTEMBER 18, 1997 (DATE OF INCEPTION) COMMON PREFERRED PAID IN RETAINED SHAREHOLDERS'
TO DECEMBER 31, 1998 STOCK STOCK CAPITAL EARNINGS/(DEFICIT) EQUITY
- ----------------------------------------- -------- --------- ----------- ------------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
September 18, 1997 (Date of Inception) .................... $ -- $ -- $ -- $ -- $ --
-------- --------- ----------- ------------------ -------------
Issuance of Common Stock .................................. 100 -- 900 -- 1,000
Par Value Adjustment Due to Merger
from $.01 to $.001 .................................... (99) -- 99 -- --
Stock Exchanged During Reorganization ..................... (1) -- 1 -- --
Stock Issued During Reorganization ........................ 6250 -- (6,250) -- --
Net Income as of December 31, 1997 ........................ -- -- -- 8,338 8,338
-------- --------- ----------- ------------------ -------------
Total Shareholders' Equity
As Of December 31, 1997 ................................. 6,250 -- (5,250) 8,338 9,338
Stock Issued for Merger With
Southeast Tire Recycling, Inc. .......................... 3,780 -- 424,878 (428,658) --
Stock Issued for Acquisitions
Team Renaissance ........................................ 156 -- 29,570 -- 29,726
InfraResources .......................................... 80 -- 9,920 -- 10,000
Conversion of Notes Payable ............................... 273 -- 26,982 -- 27,255
Stock Issued for Services Rendered ........................ 50 -- 6,200 -- 6,250
Stock Issued for Acquisition of
Assets from Vidatel ..................................... 98 -- 149,902 -- 150,000
New Stock Issued for Cash ................................. 773 -- 456,579 -- 457,352
Net Loss 1998 ............................................. -- -- -- (187,749) (187,749)
-------- --------- ----------- ------------------ -------------
Total Shareholders' Equity
As Of December 31, 1998 ................................... $ 11,460 $ -- $ 1,098,781 $ (608,069) $ 502,172
======== ========= =========== ================== =============
</TABLE>
See accompanying accountant's report and notes to the financial statements.
4
<PAGE>
- --------------------------------------------------------------------------------
CLEARWORKS.NET, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIODS ENDED DECEMBER 31,
--------------------------------
1998 1997
--------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Earnings ........................................................................ $(187,749) $ 8,338
Adjustments To Reconcile Net Earnings To Net Cash
Used By Operating Activities:
Depreciation and Amortization .................................................. 21,154 117
(Increase) / Decrease in Accounts Receivable ..................................... (140,636) (62,260)
(Increase) / Decrease in Deferred Advertising Costs ............................. (5,208) --
(Increase) / Decrease in Other Receivable ........................................ (2,712) --
(Increase) / Decrease in Inventories ............................................. (12,000) --
(Increase) / Decrease in Security Deposits ....................................... 1,746 (1,746)
(Increase) / Decrease in Intangible Assets ....................................... (174,648) (1,161)
(Increase) / Decrease in Other Assets ............................................ (1,746) (300)
Increase / (Decrease) in Accounts Payable ........................................ 15,273 4,486
Increase / (Decrease) in Accrued Expenses ........................................ 143,183 2,934
Increase / (Decrease) in Deferred Revenues ....................................... (4,200) 4,200
Increase / (Decrease) in Payroll Taxes Payable ................................... 52,028 5,079
Increase / (Decrease) in Sales Tax Payable ....................................... 12,751 --
--------- --------
Total Adjustments ................................................................ (95,015) (48,651)
--------- --------
Net Cash Used By Operating Activities ............................................... (282,764) (40,313)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of Property and Equipment ............................................... (264,424) (2,203)
--------- --------
Net Cash Used By Investing Activities ............................................... (264,424) (2,203)
CASH FLOWS FROM FINANCING ACTIVITIES
Increase / (Decrease) in Notes Payable - short term .............................. 10,265 45,700
Increase / (Decrease) in Notes Payable - long term ............................... 14,113 --
Proceeds From Sale of Common Stock, Net .......................................... 680,583 1,000
--------- --------
Net Cash Provided By Financing Activities ........................................... 704,961 46,700
Net Increase / (Decrease) in Cash ................................................... 157,773 4,184
CASH AT THE BEGINNING OF THE YEAR ..................................................... 4,184 --
--------- --------
CASH AT THE END OF THE YEAR ........................................................... $ 161,957 $ 4,184
========= ========
Supplemental Disclosures of Cash Flow Information:
Net cash paid during the year for:
Interest ..................................................................... $ 10,060 $ 931
Income Taxes ................................................................. $ -- $ --
</TABLE>
See accompanying accountant's report and notes to the financial statements.
5
<PAGE>
CLEARWORKS.NET, INC. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998
NOTE 1 - BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES:
ClearWorks.net, Inc. and its subsidiary, Millennium Integration
Technologies, Inc., (the Company), formerly known as ClearWorks
Technologies, Inc., incorporated as a Delaware corporation on March 6,
1998 under the name Millennium Integration Technologies, Inc. Prior to
such date, the Company named Millennium Integration Technologies, LLC, a
Texas Limited Liability Company, was organized on September 18, 1997 (date
of inception). Millennium Integration Technologies, LLC was converted into
a Texas C-Corporation on April 9, 1998. Thereafter, Southeast Tire
Recycling, Inc., a publicly traded company, purchased the stock of
Millennium Integration Technologies, Inc. (Texas) on April 24, 1998, and
Millennium Integration Technologies, Inc. (Texas) became a wholly owned
subsidiary of Southeast Tire Recycling, Inc. On May 12, 1998, the Company
completed a reverse merger with Southeast Tire Recycling, Inc., where the
surviving company retained the name ClearWorks Technologies, Inc. until
April 27, 1999 (see Note 10).
The Company is a leading provider of business and information technology
solutions. Using both client/server and Web-based technologies, the
Company offers a variety of services designed to help clients achieve
their business objectives, including implementation and integration of
third-party packaged software solutions, custom software development,
implementation of enterprise resource planning (ERP) systems, production
support and business, and operational consulting.
A) Consolidation
At December 31, 1998, the Company has a wholly-owned subsidiary,
Millennium Integration Technologies, Inc.
The consolidated financial statements include the accounts of the Company
and its subsidiary. All significant inter-company transactions and
balances have been eliminated in consolidation.
B) Cash and Cash Equivalents
The Company has $161,957 and $4,184 invested at December 31, 1998 and
1997, respectively, most of which is in non-interest bearing accounts.
6
<PAGE>
CLEARWORKS.NET, INC. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998
NOTE 1 -BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES: (continued)
C) Property and Equipment
Property and equipment are carried at cost less accumulated depreciation.
Depreciation is calculated by using the straight-line method for financial
reporting and accelerated methods for income tax purposes. The recovery
classifications for these assets are listed as follows:
YEARS
-----
MACHINERY AND EQUIPMENT 7
FURNITURE AND FIXTURES 7
Expenditures for maintenance and repairs are charged against income as
incurred and major improvements are capitalized.
D) Accounts Receivable
Management has elected to write-off uncollectable receivables to bad debt
expense at the time that they are identified. For the years ended December
31, 1998 and 1997 $18,925 and $0, respectively, had been written off.
E) Inventories
Inventories are valued at the lower of cost or market. The cost is
determined by using the FIFO method. Inventories consist of the following
items:
1998 1997
--------- -------
Raw Materials ................. $ 12,000 $ - 0 -
--------- -------
$ 12,000 $ - 0 -
========= =======
F) Accounting Pronouncements
During August of 1998, the American Institute of Certified Public
Accountants (AICPA) issued Statement of Position (SOP) No. 98-5 "Reporting
on the Costs of Start-Up Activities". This statement requires all costs
related to a company's start-up activities be expensed during the period
incurred rather than capitalized and amortized over a period of time.
7
<PAGE>
CLEARWORKS.NET, INC. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998
NOTE 1 -BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES: (continued)
F) Accounting Pronouncements (continued)
Although this pronouncement does not become effective for fiscal years
beginning after December 15, 1998, the Company has elected early
application of this pronouncement effective for the year ended December
31, 1998.
G) Income Taxes
For the year ended December 31, 1997, the company had elected to be taxed
under the provision of a Limited Liability Corporation of the Internal
Revenue Code. Under those provisions, the Company does not pay federal
corporate income taxes on its taxable income and is not allowed a net
operating loss carry-over or carry-back as a deduction. However, the
stockholders are liable for individual federal income taxes on their
respective shares of income and include their respective shares of the
Company's operating loss on their individual income tax returns.
During 1998, with the change in corporate status (see Note 1), the Company
adopted the provisions of Statement of Financial Accounting Standards
(SFAS) No. 109, "Accounting for Income Taxes", which requires a change
from the deferral method to assets and liability method of accounting for
income taxes.
H) Net Earnings Per Common Share
Net earnings per common share is shown as both primary and fully diluted.
Primary earnings per common share are computed by dividing net income less
any preferred stock dividends (if applicable) by the weighted average
number of shares of common stock outstanding. Fully diluted earnings per
common share are computed by dividing net income less any preferred stock
dividends (if applicable) by the weighted average number of shares of
common stock outstanding plus any dilutive common stock equivalents. The
components used for the computations are shown as follows:
DECEMBER 31, 1998 DECEMBER 31, 1997
----------------- -----------------
Weighted Average Number of Common
Shares Outstanding Including:
Primary Common Stock Equivalents 9,424,480 1,562,500
Fully Dilutive Common Stock Equivalents 10,924,480 1,562,500
8
<PAGE>
CLEARWORKS.NET, INC. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998
NOTE 1 -BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES: (continued)
I) Advertising and Promotion
All advertising related costs are expensed as incurred. The Company does
not incur any cost for direct-response advertising. For the years ended
December 31, 1998 and 1997, the Company had expensed $21,421 and $0,
respectively.
J) Deferred Advertising Costs
The Company issued 50,000 shares of its common stock at the commencement
of its one-year contract with Investments 101 (see Note 9) and is being
carried as deferred advertising costs. These costs will be expensed at a
monthly rate of $521 as services are rendered. At December 31, 1998,
$1,042 has been expensed.
K) Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent asset and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
L) Comprehensive Income
There were no items of other comprehensive income in 1998 and 1997, and,
thus, net income is equal to comprehensive income for each of those years.
M) Re-capitalization
On April 30, 1998, Southeast Tire Recycling, Inc. acquired all outstanding
shares of the Company's common stock (10,000) in exchange for six and
one-quarter million (6,250,000) shares of its own common stock. For
accounting purposes, this transaction has been treated as a
re-capitalization of the Company with the Company as the acquirer (reverse
acquisition). The historical financial statements prior to April 30, 1998
are those of the Company. Pro forma information giving effect to the
acquisition as if the acquisition occurred on January 1, 1997 is stated in
Note 4.
N) Reclassification
The Company has reclassified certain costs and expenses for the year ended
December 31, 1997 to facilitate comparison to the year ended December 31,
1998.
9
<PAGE>
CLEARWORKS.NET, INC. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998
NOTE 2 - FACTORING:
In August 1998, the Company entered into a factoring agreement with
Amerisource Funding, Inc. (ASF). Under this agreement, AFS may purchase
the Company's accounts receivable at the Company's discretion in
accordance with the terms.
ASF purchases acceptable accounts from the Company at a discount of 6.25%.
Under the agreement, ASF reserves the right to withhold 13.75% of any
account in a non-interest bearing reserve account until the account has
been fully paid and/or satisfied. If ASF deems any portion of an account
to be uncollectable, the Company must repurchase those accounts and
proceed with their own collections.
Subsequent to December 31, 1998, the Company terminated this factoring
agreement. The Company's current financing requirements will be provided
under an open line of credit with Southwest Bank of Texas. (see Note 10)
NOTE 3 - NOTES PAYABLE:
DECEMBER 31,
--------------------
1998 1997
------- -------
Note payable to KMA Investments
bearing interest at 15%; payable upon
demand ......................................... $ - 0 - $23,700
Note payable to M. McClere bearing
interest at 15%; payable upon demand ........... 22,000 22,000
Note payable to M. McClere bearing
interest at 18.5%; due on March 31, 1999 ...... 30,000 - 0 -
Note payable to Planet Ford bearing
Interest at 13.46%, due $513.33 monthly
until September 2002 .......................... $18,078 $ - 0 -
------- -------
Total .................................... 70,078 45,700
Less Current Portion of
Long - Term Debt ...................... 55,965 45,700
------- -------
Total Long - Term Debt ................... $14,113 $ - 0 -
======= =======
10
<PAGE>
CLEARWORKS.NET, INC. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998
NOTE 3 - NOTES PAYABLE: (continued)
Future minimum payments are as follows:
1999 $ 55,965
2000 4,533
2001 5,183
2002 4,397
At the noteholder's option, during October 1998, the note payable to KMA
Investments had been converted into the Company's common stock. In lieu of
$23,700 plus accrued interest of $3,555, KMA Investments received 272,550
shares of the Company's common stock.
The notes payable to M. McClere have been repaid during 1999.
NOTE 4 - BUSINESS COMBINATIONS:
On May 21, 1998, the Company acquired InfraResources LLC in a business
combination accounted for as a purchase. InfraResources is primarily
engaged in integration technology services. The results of operations for
InfraResources are included in the accompanying financial statements since
the date of acquisition. The total cost of the acquisition was $50,000,
which exceeded the fair value of the net assets of InfraResources by
$50,000. The excess is being amortized using the straight-line method over
fifteen (15) years.
Additionally, on May 21, 1998, the Company acquired Team Renaissance, Inc.
in a business combination accounted for as a purchase. Team Renaissance,
Inc. is primarily engaged in integration technology services. The results
of operations for Team Renaissance, Inc. is included in the accompanying
financial statements since the date of acquisition. The total cost of the
acquisition was $29,726
Additionally, the Company purchased the assets of John Diaz DBA Vidatel
Communications (Vidatel), an individual residing in Texas, on November 19,
1998. In exchange for these assets, the Company issued 98,039 shares of
its common stock, valued at $150,000. The excess of cost over fair market
value is $125,138 of which is carried as goodwill and is being amortized
using the straight-line method over fifteen (15) years.
11
<PAGE>
CLEARWORKS.NET, INC. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998
NOTE 4 - BUSINESS COMBINATIONS: (continued)
The following summarized pro forma (unaudited) information assumes the
aforementioned acquisitions had occurred on January 1, 1997.
1998 1997
----------- -----------
Total Revenues ................... $ 1,688,502 $ 1,963,564
Cost of Revenues ................. 1,390,643 1,492,774
----------- -----------
Gross Profit ..................... 297,859 470,790
----------- -----------
Operating Expenses ............... 611,882 780,450
----------- -----------
Net Operating Loss ............... $ (314,023) $ (309,660)
=========== ===========
Earnings Per Share
Basic ................ $ (0.03) $ (0.20)
=========== ===========
Diluted .............. $ (0.03) $ (0.20)
=========== ===========
NOTE 5 - WARRANTS:
The Company has issued and outstanding the following warrants which, at
December 31, 1998, have not yet been exercised:
1,000,000 Class A stock purchase warrants expiring April 24, 2003.
These warrants are subject to the marketability of the Company's
common stock. These warrants are to purchase fully paid and
non-assessable shares of the common stock, par value $.001 per share
at a purchase price of $3.00 per share. Each Class A stock purchase
warrant provides that it shall be cancelable at the sole discretion
of the Company on or before 30 days after written notice upon
payment of a cancellation fee of $1.00 per share. Such transactions
may occur in whole or in part, but must never amount to less than
100 shares.
1,000,000 Class B stock purchase warrants expiring April 24, 2008.
These warrants are subject to the marketability of the Company's
common stock. These warrants are to purchase fully paid and
non-assessable shares of the common stock, par value $.001 per share
at a purchase price of $6.00 per share. Each Class B stock purchase
warrant provides that it shall be cancelable at the sole discretion
of the Company on or before 30 days after written notice upon
payment of a cancellation fee of $1.20 per share. Such transactions
may occur in whole or in part, but must never amount to less than
100 shares.
12
<PAGE>
CLEARWORKS.NET, INC. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998
NOTE 6 - INTANGIBLE ASSETS:
Intangible assets consist of goodwill and organization costs. Organization
costs were created during the start-up phase of the Company whereas
goodwill was created during the acquisitions of Team Renaissance and
InfraResources and the purchase of the assets of Vidatel Communications.
Goodwill is amortized using the straight-line method over a period of
fifteen (15) years. Accumulated amortization for goodwill for the years
ended December 31, 1998 and 1997 are $8,031 and $0, respectively.
Prior to the year ended December 31, 1998, organizational costs had been
amortized using the straight-line method over a period of sixty (60)
months. Accumulated amortization was $58 for the year ended December 31,
1997.
As a result of "SOP" 98-5 (Note 1), the remaining unamortized organization
costs of $1,103 have been expensed during 1998.
NOTE 7 - INCOME TAXES:
As discussed in note 1, the Company adopted the provisions of Statement of
Financial Accounting Standards (SFAS) No. 109, "Accounting for Income
Taxes". Implementation of SFAS 109 did not have a material cumulative
effect on prior periods nor did it result in a change to the current
year's provision.
A) The effective tax rate for the Company is reconcilable to statutory tax
rates as follows:
DECEMBER 31,
-------------------
1998 1997
----- -----
% %
U.S. Federal Statutory Tax Rate .................... 34 - 0 -
U.S. Valuation Difference .......................... (34) - 0 -
----- -----
Effective U.S. Tax Rate ............................ - 0 - - 0 -
----- -----
Effective Tax Rate ................................. - 0 - - 0 -
===== =====
B) Deferred income taxes are provided for differences between financial
statement and income tax reporting. Principal difference is the manner in
which depreciation is computed for financial and income tax reporting
purposes.
For the year ended December 31, 1998 a deferred tax asset of $63,835
existed. Due to the early stages of the Company, a one hundred percent
valuation was used against this deferred tax asset.
13
<PAGE>
CLEARWORKS.NET, INC. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998
NOTE 7 - INCOME TAXES: (continued)
C) During 1997, the Company conducted its business under the umbrella of a
limited liability corporation. As such, the accompanying financial
statements do not include a provision or liability for federal income
taxes due to the fact that the members are taxed individually on their
share of company earnings.
NOTE 8 - RELATED PARTY TRANSACTIONS:
As stated in note 2, the Company has borrowed money from M. McClere (CEO
of the Company) in the form of two notes. The first note, in the amount of
$22,000, had been due November 13, 1998 and has since become payable upon
demand. The second note, in the amount of $30,000, is due on or before
March 31, 1999. These notes have been repaid during 1999. (See Note 2)
NOTE 9 - SIGNIFICANT CUSTOMERS:
The Company had gross revenues of $1,049,920 and $113,520 for the years
ended December 31, 1998 and 1997, respectively. The following parties
individually represent a greater than ten percent of these revenues.
DECEMBER 31, 1998 DECEMBER 31, 1997
-------------------- --------------------
CUSTOMER AMOUNT PERCENTAGE AMOUNT PERCENTAGE
-------- ---------- -------- ----------
Enron Corp. .............. $213,813 20.36 % $ - 0 - 0.00%
Exxon Chemical Americas .. $108,623 10.35 % $ - 0 - 0.00%
NOTE 10 - COMMITMENTS AND CONTINGENT LIABILITIES:
The Company now leases its primary office space for $1,259 per month under
a month to month lease. For the years ended December 31, 1998 and 1997,
rental expenses of $15,108 and $4,792 were incurred, respectively. As a
result, there are no future obligations under this lease agreement.
Subsequent to December 31, 1998, the Company has entered into a long-term
lease agreement for its office space.
14
<PAGE>
CLEARWORKS.NET, INC. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998
NOTE 10 - COMMITMENTS AND CONTINGENT LIABILITIES: (continued)
Coinciding with the reverse merger with Southeast Tire Recycling, Inc.
(Southeast), the former management of Southeast established a trust
containing shares of the Company's common stock. This trust had been
established with the intent of selling the stock to pay the remaining
debts associated with Southeast. However, the trustee resigned without
appointing a new trustee. As a result, the trust shares have been
deposited in the registry of the Harris County, Texas District Court, and
the Company has been named a nominal defendant in an Interpleader action.
It is management's belief that this matter is completely without merit and
the Company intends to vigorously defend its position by requesting that
the court release the stock for payment of debt as was originally
intended.
The Company has entered into an employment contract with John Diaz, the
principal of the company involved in the asset purchase discussed in Note
4. The agreement provides that Mr. Diaz will be compensated with a gross
annual salary of $65,000. Additionally, Mr. Diaz will receive the
Company's restricted common stock valued at $150,000 in the event Mr. Diaz
brings to the Company $1,000,000 worth of new business within one year of
the date of execution of the Asset Purchase Agreement between the Company
and Vidatel. This incentive is subject to such new business being
generated by Mr. Diaz's sole sales efforts.
The Company had entered into a three-year employment contract with Michael
Callihan. The agreement provides that Mr. Callihan shall be compensated
with a gross annual salary of $70,000 for the initial year with raises of
not less than ten percent per year on the first and second anniversaries
of the effective date. In addition to the annual salary, the employee
shall be entitled to receive commissions equal to one percent for the
first year and one-half of one percent for the second year of the purchase
price of any acquisition brought to the Company's attention while Mr.
Callihan is employed by the Company. Mr. Callihan voluntarily resigned his
position with the Company thus negating the employment contract.
Subsequent to his resignation, Mr. Callihan has brought suit against the
Company alleging fraud. It is management's belief that this suit is
completely without merit and the Company intends to vigorously defend its
position.
During November 1998, the Company entered into a one-year
investor-relations contract with Investments 101, Ltd. (Investments).
Investments was to provide a variety of services including but not limited
to advertising, public relations, and the normal maintenance of the
Company's web page in exchange for 50,000 shares of the Company's
restricted common stock. The contract was terminated in January 1999.
(see Note 10).
15
<PAGE>
CLEARWORKS.NET, INC. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998
NOTE 11 - SUBSEQUENT EVENTS:
Subsequent to December 31, 1998, the Company registered its common stock
in certain states in accordance with the Securities and Exchange
Commission rule 504 of Regulation D. This registration allows the Company
to sell no more than $1,000,000 of its securities to the public. This
offering was completed whereat the Company raised $1,000,000
The Company has secured a line of credit with Southwest Bank of Texas in
the amount of $800,000.
Subsequent to December 31, 1998, the Company has entered into a
non-cancelable lease for its office space with 2000 North Loop, L.P. This
forty-eight (48) month lease will commence May 1, 1999 and expire April
30, 2000. The initial monthly payment under this agreement will be in the
amount of $7,063 which will be increased by 3.45% over the base year
during the second and forth years annually.
The Company has formed two wholly owned subsidiaries; ClearWorks
Residential Services, Inc. and ClearWorks Commercial Services, Inc. These
two newly created entities will service the operations of the residential
and commercial markets, respectively, for their parent, ClearWorks
Technologies, Inc.
In April 1999, the Company has sold an additional one million restricted
shares of the Company's common stock through a private placement. In
exchange for these shares, the Company received one million dollars.
The Company has completed a name change to that of ClearWorks.net,
effective April 27, 1999. This change will have no effect on daily
operations of the Company.
As stated in Note 9, the Company terminated its contract with Investments
(a public relations firm) whereat the Company believed Investments was not
performing according to the contract. As a result, Investments returned
the initial 50,000 shares of the Company's restricted common stock in
exchange for 12,500 shares of the Company's restricted common stock and
cash.
On May 14, 1999, the Company acquired Archer Mickelson Technologies
L.L.C., a systems-integration firm located in Houston, Texas.
The Company has been named as a defendant in a lawsuit involving a former
employee of the Company. The suit alleges breach of contract. It is
management's belief that this suit is completely without merit and the
Company intends to vigorously defend its position.
16
<PAGE>
CLEARWORKS.NET, INC. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998
NOTE 11 - SUBSEQUENT EVENTS: (continued)
The Company has entered into an agreement with Merger Communications
(Merger), a public relations consultant, whereby Merger will develop,
implement, and maintain an ongoing program to increase the investment
community's awareness of the Company's activities and to stimulate the
investment community's interest in the Company. As compensation for these
services, Merger will be paid in cash and common stock as outlined in the
agreement.
The Company has entered into an agreement with Castle Developments, Ltd.
(Castle), a management-consulting firm, whereby Castle will provide
management consulting and advisory services. As compensation for these
services, Castle will be paid in cash and common stock as outlined in the
agreement.
17
<PAGE>
CLEARWORKS.NET, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS-MARCH 31, 1999 AND 1998
(UNAUDITED)
<TABLE>
<CAPTION>
ASSETS 1999 1998
----------- --------
<S> <C> <C>
Current assets:
Cash ................................................................. $ 452,956 $ 11,588
Accounts receivable:
Trade ............................................................. 462,286 74,719
Employees ......................................................... 43,939 --
Inventories .......................................................... 33,558 --
Prepaid expenses ..................................................... 43,491 --
----------- --------
1,036,230 86,307
----------- --------
Property and equipment:
Operating equipment ............................................... 644,542 440
Furniture, fixtures and equipment ................................. 34,683 2,150
----------- --------
679,225 2,590
Accumulated depreciation ............................................. (23,533) (189)
----------- --------
655,692 2,401
----------- --------
Other assets, principally the excess of cost over assets acquired, net 166,906 2,046
----------- --------
$ 1,858,828 $ 90,754
=========== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable, trade .............................................. $ 106,583 $ 3,756
Accrued expenses ..................................................... 86,687 8,012
Current maturities of long-term debt ................................. 3,551 23,700
Note payable, shareholder ............................................ 52,000 22,000
----------- --------
248,821 57,468
----------- --------
Long-term debt, net of current maturities ............................ 17,447 --
----------- --------
Shareholders' equity:
Common stock, $.001 par value; 100,000,000 authorized;
15,538,159 and 6,250,000 shares issued and outstanding
in 1999 and 1998, respectively .................................... 15,538 6,250
Paid-in-capital ...................................................... 2,004,086 (5,250)
Retained earnings .................................................... (427,064) 32,286
----------- --------
1,592,560 33,286
----------- --------
$ 1,858,828 $ 90,754
=========== ========
</TABLE>
<PAGE>
CLEARWORKS .NET, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
FOR THE THREE MONTHS ENDED MARCH 31, 1999
(UNAUDITED)
1999 1998
--------- --------
Revenues ......................................... $ 430,442 $135,498
Costs of goods sold:
Salaries and related expenses .................. 52,459 36,858
Field support costs ............................ 38,830 32,963
Other .......................................... 42,801 2,580
--------- --------
134,090 72,401
--------- --------
Gross profit ..................................... 296,352 63,097
--------- --------
Selling, general and administrative
Salaries and related expenses .................. 57,441 27,688
Insurance ...................................... 5,344 4,554
Interest ....................................... 4,840
Rental ......................................... 24,728 2,803
Advertising .................................... 6,013
Office ......................................... 3,769 3,974
Depreciation and amortization .................. 13,212 130
--------- --------
115,347 39,149
--------- --------
Income from continuing operations ................ 181,005 23,948
Income taxes ..................................... -- --
--------- --------
Net income ....................................... 181,005 23,948
--------- --------
Retained earnings, beginning ..................... (608,069) 8,338
--------- --------
Retained earnings, ending ........................ $(427,064) $ 32,286
========= ========
Net earnings per share:
Primary ........................................ $ 0.01 $ 0.003
Fully diluted .................................. $ 0.01 $ 0.003
<PAGE>
CLEARWORKS.NET, INC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
--------- --------
<S> <C> <C>
Cash flows from operating activities
Net income ............................................................. $ 181,005 $ 23,948
Adjustments to reconcile net earnings to net cash Used by operating
activities:
Depreciation and amortization ..................................... 13,212 130
(Increase)/decrease in accounts receivable ........................ (300,617) (12,459)
(Increase)/decrease in prepaid expenses ........................... (38,283) --
(Increase)/decrease in inventories ................................ (21,558) --
(Increase)/decrease in intangible assets .......................... -- 1,102
(Increase)/decrease in accounts payable ........................... 86,824 (730)
(Increase)/decrease in accrued expenses ........................... (129,288) 1
(Increase)/decrease in deferred revenues .......................... -- (4,200)
--------- --------
Total adjustments .................................................... (389,710) (16,156)
--------- --------
Net cash provided (used) by operating activities ....................... (208,705) 7,792
Cash flows from investing activities
Purchase of property and equipment ................................ (412,598) (388)
--------- --------
Net cash used by investing activities .................................. (412,598) (388)
Cash flows from financing activities
Increase/(decrease) in notes payable .............................. 2,919 --
Proceeds from sale of common stock, net ........................... 909,383 --
--------- --------
Net cash provided by financing activities .............................. 912,302 --
Net increase in cash ................................................... 290,999 7,404
Cash at the beginning of the year ........................................ 161,957 4,184
--------- --------
Cash at the end of the year .............................................. $ 452,956 $ 11,588
========= ========
Supplemental disclosures of cash flow information: Net cash paid
during the year for:
Interest .................................................... $ 4,840 $ --
Income taxes ................................................ $ -- $ --
</TABLE>
<PAGE>
CLEARWORKS.NET, INC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998
<TABLE>
<CAPTION>
ADDITIONAL RETAINED TOTAL
COMMON PREFERRED PAID IN EARNINGS/ SHAREHOLDERS'
STOCK STOCK CAPITAL (DEFICIT) EQUITY
------- --------- ----------- --------- -------------
<S> <C> <C> <C> <C> <C>
December 31, 1997 .............. $ 6,250 -- $ (5,250) $ 8,338 $ 9,338
------- --------- ----------- --------- -------------
Net income for the period ...... -- -- -- 23,948 23,948
------- --------- ----------- --------- -------------
Total shareholder's equity
As of March 31, 1998 ........... $ 6,250 $ -- $ (5,250) $ 32,286 $ 33,286
======= ========= =========== ========= =============
December 31, 1998 .............. $11,460 -- $ 1,098,781 $(608,069) $ 502,172
------- --------- ----------- --------- -------------
New stock issued for cash ...... 4,078 -- 905,305 -- 909,383
------- --------- ----------- --------- -------------
Total shareholder's equity
As of March 31, 1999 ........... $15,538 $ -- $ 2,004,086 $(427,064) $ 1,592,560
======= ========= =========== ========= =============
</TABLE>
<PAGE>
CLEARWORKS.NET, INC. AND SUBSIDIARIES
Note 1. General
The unaudited financial statements included herein for the Company for the
quarters ended March 31, 1998 and 1999 have been prepared without audit pursuant
to the rules and regulations of the Securities and Exchange Commission and
include all adjustments which are, in the opinion of management, necessary for a
fair presentation. Certain information and footnote disclosures required by
generally accepted accounting principles have been condensed or omitted pursuant
to such rules and regulations. These financial statements should be read in
conjunction with the audited financial statements and related notes thereto
included with this filing for the annual periods ended December 31, 1998 and
1999.
The results for interim periods are not necessarily indicative of trends or of
results to be expected for the full year.
EXHIBIT 3(i)
CERTIFICATE OF INCORPORATION
OF
MILLENNIUM INTEGRATION TECHNOLOGIES, INC.
The undersigned, a natural person, for the purpose of organizing a
corporation for conducting the business and promoting the purposes hereinafter
stated, under the provisions and subject to the requirements of the laws
(particularly Chapter 1, Title 8 of the Delaware Code and the acts amendatory
thereof and supplemental thereto, and known, identified and referred to as the
"Delaware General Corporation Law") hereby certifies that:
FIRST:
The name of this corporation (hereinafter called the "Corporation") is
MILLENNIUM INTEGRATION TECHNOLOGIES, INC.
SECOND:
The address, including street, number, city and county, of the registered
office of the Corporation in the State of Delaware is 1013 Centre Road,
Wilmington, New Castle County, Delaware 19805; and the name of the registered
agent of the Corporation is Corporation Services Company.
THIRD:
The purpose of the Corporation is to engage in any lawful act or activity
for which corporations may be organized under the Delaware General Corporation
Law of the State of Delaware.
FOURTH:
The total number of shares of stock which the Corporation shall have
authority to issue is 55,000,000. The par value of each of such shares is $.00l.
50,000,000 of such shares shall be shares of common stock.
5,000,000 of such shares shall be shares of preferred stock. The board of
directors of the Corporation is hereby granted the power to determine by
resolution from time to time the powers, preferences, rights, qualifications,
restrictions or limitations of the preferred stock.
FIFTH:
The name and mailing address of the incorporator are as follows:
Sylvia White, 1013 Centre Road. Wilmington, Delaware 19805
SIXTH:
The Corporation is to have perpetual existence.
1
<PAGE>
SEVENTH:
The power of the incorporator is to terminate upon filing of the
Certificate of Incorporation, and the name and mailing address of the person who
is to serve as the director until the first annual meeting of stockholders or
until his successor is elected and qualified is as follows:
Michael McClere, 505 North Belt - Suite lO4, Houston, Texas 77060
EIGHTH:
Whenever a compromise or arrangement is proposed between the Corporation
and its creditors or any class of them and/or between the Corporation and its
stockholders or any class of them, any court of equitable jurisdiction within
the State of Delaware may, on the application in a summary way of the
Corporation or of any creditor or stockholder thereof or on the application of
any receiver or receivers appointed for the Corporation under the provisions of
Section 291 of Delaware General Corporation Law or on the application of
trustees in dissolution or of any receiver or receivers appointed for the
Corporation under the provisions of Section 279 of Delaware General Corporation
Law order a meeting of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of the Corporation, as the case may be, to
be summoned in such manner as the said court directs. If a majority in number
representing three-fourths in value of the creditors or class of creditors,
and/or of the stockholders or class of stockholders of the Corporation, as the
case may be, agree to any compromise or arrangement of the Corporation as
consequence and to any reorganization of such compromise or arrangement, the
said compromise or arrangement and the said reorganization shall, if sanctioned
by the court to which the said application has been made, be binding on all the
creditors or class of creditors, and/or on all the stockholders or class of
stockholders, of the Corporation, as the case may be, and also on the
Corporation.
NINTH:
For the management of the business and for the conduct of the affairs of
the Corporation, and in further definition, limitation and regulation of the
powers of the Corporation and of its directors and of its stockholders or any
class thereof, as the case may be, it is further provided:
1. The management of the business and the conduct of the affairs of the
Corporation shall be vested in its board of directors. The number of
directors which shall constitute the whole board of directors shall be fixed
by, or in the manner provided in, the by-laws. The phrase "whole board" and
the phrase "total number of directors" shall be deemed to have the same
meanings to wit, the total number of directors which the Corporation would
have if there were no vacancies. No election of directors need be by written
ballot.
2. After the original or other by-laws of the Corporation have been adapted,
amended, or repealed, as the case may be, in accordance with the provisions
of Section 109 of the Delaware General Corporation Law, and after the
Corporation has received any payment for any of its stock, the power to
adopt, amend, or repeal the by-laws of the Corporation may be exercised by
the board of directors of the Corporation; provided, however, that any
provision for the classification of directors of the Corporation for
staggered terms pursuant to the provisions of subsection (d) of Section
141 of the Delaware General Corporation
2
<PAGE>
Law shall be set forth in an initial by-law or in a by-law adopted by the
stockholders of the Corporation entitled to vote.
3. WHENEVER the Corporation shall be authorized to issue only one class of
stock, each outstanding share shall entitle the bolder thereof to notice of,
and the right to vote at, any meeting of stockholders. Whenever the
Corporation shall be authorized to issue more than one class of stock, no
outstanding share of any class of stock which is denied voting power under
the provisions of this certificate of incorporation shall entitle the holder
thereof to the right to vote at any meeting of stockholders except as the
provisions of paragraph (2) of subsection (b) to Section 242 of the Delaware
General Corporation Law shall otherwise require; provided, that no share of
any such class which is otherwise denied voting power shall entitle the
holder thereof to vote upon the increase or decrease in the number of
authorized shares of said class.
4. With the consent in writing or pursuant to a vote of the holders of a
majority of the capital stock issued and outstanding, the board of directors
shall have the authority to dispose, in any manner, of the whole property of
the Corporation.
5. The by-laws shall determine whether and to what extent the accounts and
books of the Corporation, or any of them, shall be open to inspection by
the stockholders; and no stockholder shall have any right or inspecting
any account or book or document of the Corporation, except as conferred by
law or by by-laws or by resolution of the stockholders.
6. The stockholders and directors shall have the power to hold their meeting
and to keep the books, documents and papers of the Corporation outside the
State of Delaware at such places as may be from time to time designated by
the by-laws or by resolution of the stockho1ders or directors, except as
otherwise required by the Delaware General Corporation Law.
TENTH:
The personal liability of the directors of the Corporation is hereby
eliminated to the fullest extent permitted by the provisions of paragraph (7)
of subsection (b) of Section 102 of the Delaware General Corporation Law, as the
same may be amended and supplemented.
ELEVENTH:
The corporation shall, to the fullest extent permitted by the provisions of
Section 145 of the Delaware General Corporation Law, as the same may be amended
and supplemented, indemnify any and all persons whom it shall have power to
indemnify under said section from and against any and all of the expenses,
liabilities or other matters referred to in or covered by said section, and the
indemnification provided for herein shall not be deemed exclusive of any other
rights to which those indemnified may be entitled under any by-law, agreement,
vote of stockholders or disinterested directors or otherwise, both as to action
in his official capacity and as to action in another capacity while holding such
office, and shall continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
3
<PAGE>
TWELFTH:
From time to time any of the provisions of this certificate of
incorporation may be amended, altered or repealed, and other provisions
authorized by the laws at the time in force may be added or inserted in the
manner and at the time prescribed by said laws, and all rights at any time
conferred upon the stockholders of the Corporation by this certificate of
incorporation are granted subject to the provisions of this Article TWELFTH.
THIRTEENTH:
The corporation elects not to be governed by Section 203 of the Delaware
General Corporation Law.
DATED: March 5, 1998
State of: Delaware
County of: New Castle
/s/ SYLVIA WHITE
SYLVIA WHITE
4
<PAGE>
STATE OF DELAWARE
OFFICE OF THE SECRETARY OF STATE
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF AMENDMENT
OF "MILLENNIUM INTEGRATION TECHNOLOGIES, INC.", CHANGING ITS NAME FROM
"MILLENNIUM INTEGRATION TECHNOLOGIES, INC." TO "CLEARWORKS TECHNOLOGIES, INC.",
FILED IN THIS OFFICE ON THE EIGHTH DAY 0F MAY, A.D. 1998, AT 9 O'CLOCK A.M.
A FILED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE NEW CASTLE
COUNTY RECORDER OF DEEDS.
[SECRETARY OF OFFICE SEAL] /s/ EDWARD J. FREEL
Edward J. Freel, Secretary of State
AUTHENTICATION: 9073068
DATE: 05-11-98
<PAGE>
CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION
OF
MILLENNIUM INTEGRATION TECHNOLOGIES, INC.
It is hereby certified that:
1. The name of the corporation (hereinafter called the "corporation") is
MILLENNIUM INTEGRATION TECHNOLOGIES, INC.
2. The certificate of incorporation of the corporation is hereby amended
by striking out Article One thereof and by substituting in lieu of said
Article[s] the following new Article[s]:
"CLEARWORKS TECHNOLOGIES, INC."
3. The amendment(s) of the certificate of incorporation herein certified
has [have] been duly adopted in accordance with the provisions of Section 242 of
the General Corporation Law of the State of Delaware.
Signed on May 8, 1998
/s/ MICHAEL T. McCLERE
Michael T. McClere, President
<PAGE>
STATE OF DELAWARE
OFFICE OF THE SECRETARY OF STATE
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
INCORPORATION OF "MILLENNIUM INTEGRATION TECHNOLOGIES, INC.", FILED IN THIS
OFFICE ON THE FIFTH DAY OF MARCH, A.D. 1998, AT 9 O'CLOCK A.M.
[SECRETARY OF OFFICE SEAL] /s/ EDWARD J. FREEL
Edward J. Freel, Secretary of State
AUTHENTICATION: 8957432
DATE: 03-06-98
EXHIBIT 3(ii)
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
CLEARWORKS TECHNOLOGIES, INC.
ClearWorks Technologies, Inc. a corporation organized and existing
under and by virtue of the General Corporation Law of the State of Delaware,
DOES HEREBY CERTIFY:
1. That the Board of Directors of said corporation, by the unanimous
written consent of its members, filed with the minutes of the Board adopted a
resolution proposing and declaring advisable the following amendment to the
Certificate of Incorporation of said corporation:
RESOLVED, that the Certificate of Incorporation of ClearWorks
Technologies, Inc. be amended by changing Article One thereof so that, as
amended, said Article shall be and read as follows:
"The name of this corporation (hereinafter called "Corporation" is
ClearWorks.net, Inc."
2. That the aforesaid amendment was duly adopted in accordance with the
applicable provisions of Sections 242 and 228 of the General Corporation Law of
the State of Delaware.
IN WITNESS WHEREOF, ClearWorks Technologies, Inc. has caused this
Certificate to be signed by Shannon D. McLeroy, its President, and attested by
Celia Figueroa, its Secretary, and its corporate seal to be affixed hereto this
27th day of April, 1999.
CLEARWORKS TECHNOLOGIES, INC.
[Corporate Seal]
By:/S/SHANNON D. MCLEROY
Shannon D. McLeroy
President
Attest:/S/CELIA FIGUEROA
Celia Figueroa
Secretary
EXHIBIT 3(iii)
[SEAL OF THE STATE OF TEXAS]
THE STATE OF TEXAS
SECRETARY OF STATE
APR. 5, 1999
CLEARWORKS/CELIA FIGUEROA
505 N. BELT, SUITE 140
HOUSTON, TEXAS 77060
RE:
CLEARWORKS TECHNOLOGIES, INC.
CHARTER NUMBER 00121994-06
IT HAS BEEN OUR PLEASURE TO APPROVE AND PLACE ON RECORD YOUR ARTICLES OF MERGER.
THE APPROPRIATE EVIDENCE IS ATTACHED FOR YOUR FILES; THE ORIGINAL HAS BEEN FILED
IN THIS OFFICE. PAYMENT OF THE FILING FEE IS ACKNOWLEDGED BY THIS LETTER.
IF THE PLAN OF MERGER PROVIDES FOR INCORPORATION OR ORGANIZATION OF AN ENTITY
OTHER THAN A TEXAS BUSINESS CORPORATION, YOU SHOULD FILE THE ORGANIZATIONAL
DOCUMENTS FOR THAT ENTITY WITH THE APPROPRIATE GOVERNMENTAL OFFICE.
IF WE CAN BE OF FURTHER SERVICE AT ANY TIME, PLEASE LET US KNOW.
VERY TRULY YOURS,
/s/ELTON BOMER
Elton Bomer, Secretary of State
[SEAL OF THE STATE OF TEXAS]
<PAGE>
BYLAWS OF
CLEARWORKS TECHNOLOGIES, INC.
ARTICLE I
OFFICES
The registered office of the Corporation shall be at 1013 Centre
Road, Wilmington, Delaware. The Corporation may have such other offices within
or without the State of Delaware as the board of directors may from time to time
establish.
ARTICLE II
CAPITAL STOCK
SECTION 2.1. CERTIFICATE REPRESENTING STOCK. Shares of the classes
of capital stock of the Corporation shall be represented by certificates in such
form or forms as the board of directors may approve; provided that, such form or
forms shall comply with all applicable requirements of law or of the certificate
of incorporation. Such certificates shall be signed by the president or vice
president, and by the secretary or an assistant secretary, of the Corporation.
In the case of any certificate countersigned by any transfer agent or registrar,
provided such countersigner is not the Corporation itself or an employee
thereof, the signature of any or all of the foregoing officers, and of the seal,
of the Corporation may be represented by a printed facsimile thereof. If any
officer whose signature, or a facsimile thereof, shall have been set upon any
certificate shall cease, prior to the issuance of such certificate, to occupy
the position in right of which his signature, or facsimile thereof, was so set
upon such certificate, the Corporation may nevertheless adopt and issue such
certificate with the same effect as if such officer occupied such position as of
such date of issuance; and, issuance and delivery of such certificate by the
Corporation shall constitute adoption thereof by the Corporation. The
certificates shall be consecutively numbered, and as they are issued, a record
of such issuance shall be entered in the books of the Corporation.
SECTION 2.2. UNCERTIFIED SHARES. Subject to any conditions imposed
by the General Corporation Law, the board of directors of the Corporation may
provide by resolution or resolutions that some or all of any or all classes or
series of the stock of the Corporation shall be uncertificated shares. Within a
reasonable time after the issuance or transfer of any uncertificated shares, the
Corporation shall send to the registered owners thereof any written notice
prescribed by General Corporation Law.
<PAGE>
SECTION 2.3. STOCK CERTIFICATE BOOK AND STOCKHOLDERS OF RECORD. The
secretary of the Corporation shall maintain, among other records, a stock
certificate book, the stubs in which shall set forth the names and addresses of
the holders of all issued shares of the Corporation, the number of shares held
by each, the number of certificates representing such shares, the date of issue
of such certificates, and whether or not such shares originate from original
issue or from transfer. The names and addresses of stockholders as they appear
on the stock certificate book shall be the official list of stockholders of
record of the Corporation for all purposes. The Corporation shall be entitled to
treat the holder of record of any shares as the owner thereof for all purposes,
and shall not be bound to recognize any equitable or other claim to, or interest
in, such shares or any rights deriving from such shares on the part of any other
person, including, but without limitation, a purchaser, assignee, or transferee,
unless and until such other person becomes the holder of record of such shares,
whether or not the Corporation shall have either actual or constructive notice
of the interest of such other person.
SECTION 2.4. STOCKHOLDER'S CHANGE OF NAME OR ADDRESS. Each
stockholder shall promptly notify the secretary of the Corporation, at its
principal business office, by written notice sent by certified mail, return
receipt requested, of any change in name or address of the stockholder from that
as it appears upon the official list of stockholders of record of the
Corporation. The secretary of the Corporation shall then enter such changes into
all affected Corporation records, including, but not limited to, the official
list of stockholders of record.
SECTION 2.5. TRANSFER OF STOCK. The shares represented by any
certificate of the Corporation are transferable only on the books of the
Corporation by the holder of record thereof or by his duly authorized attorney
or legal representative upon surrender of the certificate for such shares,
properly endorsed or assigned. The board of directors may make such rules and
regulations concerning the issue, transfer, registration and replacement of
certificates as they deem desirable or necessary.
SECTION 2.6. TRANSFER AGENT AND REGISTRAR. The board of directors
may appoint one or more transfer agents or registrars of the shares, or both,
and may require all share certificates to bear the signature of a transfer agent
or registrar, or both.
SECTION 2.7. LOST, STOLEN OR DESTROYED CERTIFICATES. The Corporation
may issue a new certificate for shares of stock in the place of any certificate
theretofore issued and alleged to have been lost, stolen or destroyed; but, the
board of directors may require the owner of such lost, stolen or destroyed
certificate, or his legal representative, to furnish an affidavit as to such
loss, theft, or destruction and to give a bond in such form and substance, and
with such surety or sureties, with fixed or open penalty, as the board may
direct, in order to indemnify the Corporation and its transfer agents and
registrars, if any, against any claim that may be on account of the alleged
loss, theft or destruction of such certificate.
SECTION 2.8. FRACTIONAL SHARES. Only whole shares of the stock of
the Corporation shall be issued. In case of any transaction by reason of which a
fractional share might otherwise be
2
<PAGE>
issued, the directors, or the officers in the exercise of powers delegated by
the directors, shall take such measures consistent with the law, the certificate
of incorporation and these bylaws, including (for example, and not by way of
limitation) the payment in cash of an amount equal to the fair value of any
fractional share, as they may deem proper to avoid the issuance of any
fractional share.
ARTICLE III
THE STOCKHOLDERS
SECTION 3.1. ANNUAL MEETING. The annual meeting of the stockholders,
for the election of directors and for the transaction of such other business as
may properly come before the meeting, shall be held on such date and at such
time and place, either within or without the State of Delaware, as may be
determined by the board of directors unless such day is a Saturday, Sunday or
legal holiday, in which case such meeting shall be held at such hour on the
first day thereafter which is not a Saturday, Sunday or legal holiday; or, at
such other place and time as may be designated by the board of directors.
Failure to hold any annual meeting or meetings shall not work a forfeiture or
dissolution of the Corporation.
SECTION 3.2. SPECIAL MEETINGS. Except as otherwise provided by law
or by the certificate or incorporation, special meetings of the stockholders may
be called by the chairman of the board of directors, the president, any one of
the directors, or the holders of not less than one-tenth of all the shares
having voting power at such meeting, and shall be held at the principal office
of the Corporation or at such other place, and at such time, as may be stated in
the notice calling such meeting. Business transacted by any special meeting of
stockholders shall be limited to the purpose stated in the notice of such
meeting given in accordance with the terms of section 3.3.
SECTION 3.3. NOTICE OF MEETINGS - WAIVER. Written notice of each
meeting of stockholders, stating the place, day and hour of any meeting and, in
case of a special stockholders' meeting, the purpose or purposes for which the
meeting is called, shall be delivered not less than ten nor more than sixty days
before the date of such meeting, either personally or by mail, by or at the
direction of the president, the secretary, or the persons calling the meeting,
to each stockholder of record entitled to vote at such meeting. If mailed, such
notice shall be deemed to be delivered when deposited in the United States mail
addressed to the stockholder at his address as it appears on the stock transfer
books of the Corporation, with postage thereon prepaid. Such further or earlier
notice shall be given as may be required by law. The signing by a stockholder of
a written waiver of notice of any stockholders' meeting, whether before or after
the time stated in such waiver, shall be equivalent to the receiving by him of
all notice required to be given with respect to such meeting. Attendance by a
person at a stockholders' meeting shall constitute a waiver of notice of such
meeting except when a person attends a meeting for the express purpose of
objecting, at the beginning of the meeting, to the transaction of any business
because the meeting is not lawfully called or convened. No notice of any
adjournment of any meeting shall be required.
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SECTION 3.4. CLOSING OF TRANSFER BOOKS AND FIXING RECORD DATE. In
order that the Corporation may determine the stockholders entitled to notice of
or to vote at any meeting of stockholders or adjournment thereof, or to express
consent to corporate action in writing without a meeting, or entitled to receive
payment of any dividend or other distribution or allotment of any rights, or
entitled to exercise any rights in respect of any change, conversion or exchange
of stock or for the purpose of any other lawful action, the board of directors
may fix, in advance, a record date, which shall not be more than sixty nor less
than ten days before the date of such meeting, nor more than sixty days prior to
any other action. If no record date is fixed, the record date shall be as
follows: the record date for determining stockholders entitled to notice of or
to vote at a meeting of stockholders shall be at the close of business on the
day next preceding the day on which notice is given, or, if notice is waived, at
the close of business on the day next preceding the day on which the meeting is
held; the record date for determining stockholders entitled to express consent
to corporate action in writing without a meeting, when no prior action by the
board of directors is necessary, shall be the day on which the first written
consent is expressed; and, the record date for determining stockholders for any
other purpose shall be at the close of business on the day on which the board of
directors adopts the resolution relating thereto.
SECTION 3.5. VOTING LIST. The officer or agent having charge of the
stock transfer books for shares of the Corporation shall make, at least ten days
before each meeting of stockholders, a complete list of the stockholders
entitled to vote at such meeting or any adjournment thereof, arranged in
alphabetical order, with the address of and the number of shares held by each,
which list, for a period of ten days prior to such meeting, shall be kept on
file at a place within the city where the meeting is to be held, which place
shall be specified in the notice of the meeting, or, if not so specified, at the
place where the meeting is to be held. The list shall be subject to lawful
inspection by any stockholder at any time during the usual business hours. Such
list shall be subject to the inspection of any stockholder during the whole time
of the meeting.
SECTION 3.6. QUORUM AND OFFICERS. Except as otherwise provided by
law, by the certificate of incorporation or by these bylaws, the holders of a
majority of the outstanding shares entitled to vote and represented in person or
by proxy shall constitute a quorum at a meeting of stockholders, but the
stockholders present at any meeting, although representing less than a quorum,
may from time to time adjourn the meeting to some other day and hour, without
notice other than announcement at the meeting. The stockholders present at a
duly organized meeting may continue to transact business until adjournment,
notwithstanding the withdrawal of enough stockholders to leave less than a
quorum. The vote of the holders of a majority of the outstanding shares entitled
to vote and thus represented at a meeting at which a quorum is present shall be
the act of the stockholders' meeting, unless the vote of a greater number is
required by law. The chairman of the board shall preside at, and the secretary
shall keep the records of, each meeting of stockholders, and in the absence of
either such officer, his duties shall be performed by any other officer
authorized by these bylaws or any person appointed by resolution duly adopted at
the meeting.
SECTION 3.7. VOTING AT MEETINGS. Each outstanding share shall be
entitled to one vote on each matter submitted to a vote at a meeting of
stockholders except to the extent that the certificate
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of incorporation or the laws of the State of Delaware provide otherwise.
SECTION 3.8. PROXIES. A stockholder may vote either in person or by
proxy executed in writing by the stockholder; but, no such proxy shall be voted
or acted upon after three years from its date, unless the proxy provides for a
longer period. A duly executed proxy shall be irrevocable if it states that it
is irrevocable and if, and only as long as, it is coupled with an interest
sufficient in law to support an irrevocable power. A proxy may be made
irrevocable regardless of whether the interest with which it is coupled is an
interest in the stock itself or an interest in the Corporation generally.
SECTION 3.9 BALLOTING. Upon the demand of any stockholder, the vote
upon any question or matter before the meeting shall be by ballot. At each
meeting, inspectors of election may be appointed by the presiding officer of the
meeting; and, at any meeting for the election of directors, inspectors shall be
so appointed on the demand of any stockholder present or represented by proxy
and entitled to vote in such election of directors. No director or candidate for
the office of director shall be appointed as such inspector. The number of votes
cast by shares in the election of directors shall be recorded in the minutes.
SECTION 3.10. VOTING RIGHTS, PROHIBITION OF CUMULATIVE VOTING FOR
DIRECTORS. Each outstanding share of common stock shall be entitled to one (1)
vote upon each matter submitted to a vote at a meeting of stockholders. No
stockholder shall have the right to cumulate his votes for the election of
directors but each share shall be entitled to one vote in the election of each
director. In the case of any contested election for any directorship, the
candidate for such position receiving a plurality of the votes cast in such
election shall be elected to such position.
SECTION 3.11. RECORD OF STOCKHOLDERS. The Corporation shall keep at
its principal business office, or the office of its transfer agents or
registrars, a record of its stockholders, giving the names and addresses of all
stockholders and the number and class of the shares held by each.
SECTION 3.12. ACTION WITHOUT MEETING. Any action required by statute
to be taken at a meeting of the stockholders of the Corporation, or any action
which may be taken at a meeting of the stockholders, may be taken without a
meeting, without prior notice and without a vote, if a consent in writing,
setting forth the action so taken, shall be signed by the holders of outstanding
stock having not less than the minimum number of votes that would be necessary
to authorize or take such action at a meeting at which all shares entitled to
vote thereon were present and voted.
SECTION 3.13. INSPECTORS. The directors, in advance of any meeting,
may, but need not, appoint one or more inspectors of election to act at the
meeting or any adjournment thereof. If an inspector or inspectors are not
appointed, the person presiding at the meeting may, but need not, appoint one or
more inspectors. In case any person who may be appointed as an inspector fails
to appear or act, the vacancy may be filled by appointment made by the directors
in advance of the meeting or at the meeting by the person presiding thereat.
Each inspector, if any, before entering upon the discharge of his duties, shall
take and sign an oath faithfully to execute the duties of inspectors at such
meeting with strict impartiality and according to the best of his ability. The
inspectors, if any, shall
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determine the number of shares of stock outstanding and the voting power of
each, the shares of stock represented at the meeting, the existence of a quorum,
the validity and effect of proxies, and shall receive votes, ballots, or
consents, hear and determine all challenges and questions arising in connection
with the right to vote, count, and tabulate all votes, ballots, or consents,
determine the result, and do such acts as are proper to conduct the election or
vote with fairness to all stockholders. On request of the person presiding at
the meeting, the inspector or inspectors, if any shall make a report in writing
of any challenge, question, or matter determined by him or them and execute a
certificate of any fact found by him or them.
ARTICLE IV
THE BOARD OF DIRECTORS
SECTION 4.1. NUMBER, QUALIFICATIONS AND TERM. The business and
affairs of the Corporation shall be managed or be under the direction of the
board of directors; and, subject to any restrictions imposed by law, by the
certificate of incorporation, or by these bylaws, the board of directors may
exercise all the powers of the Corporation. The board of directors shall consist
of two (2) members. Such number may be increased or decreased by amendment of
these bylaws, provided that no decrease shall effect a shortening of the term of
any incumbent director. Directors need not be residents of Delaware or
stockholders of the Corporation absent provision to the contrary in the
certificate of incorporation or laws of the State of Delaware. Except as
otherwise provided in section 4.3 of these bylaws, each position on the board of
directors shall be filled by election at the annual meeting of stockholders. Any
such election shall be conducted in accordance with section 3.10 of these
bylaws. Each person elected a director shall hold office until his successor is
duly elected and qualified or until his earlier resignation or removal in
accordance with section 4.2 of these bylaws.
SECTION 4.2. REMOVAL. Any director or the entire board of directors
may be removed from office, with or without cause, at any special meeting of
stockholders by the affirmative vote of a majority of the outstanding shares of
the stockholders entitled to vote at such meeting, if notice of the intention to
act upon such matter shall have been given in the notice calling such meeting.
If the notice calling such meeting shall have so provided, the vacancy caused by
such removal may be filled at such meeting by the affirmative vote of majority
of the outstanding shares of the stockholders entitled to vote.
SECTION 4.3. VACANCIES. Vacancies and newly created directorships
resulting from any increase in the authorized number of directors may be filled
by a majority of the directors then in office, although less than a quorum, or
by a sole remaining director. When one or more directors shall resign from the
board, effective at a future date, a majority of the directors then in office,
including those who have so resigned, shall have power to fill such vacancy or
vacancies, the vote thereon to take effect when such resignation or resignations
shall become effective, and each director so chosen shall hold office as
provided in this section in the filling of other vacancies. A director elected
to fill a vacancy shall be elected for the unexpired term of his predecessor in
office.
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SECTION 4.4. REGULAR MEETINGS. Regular meetings of the board of
directors shall be held immediately following each annual meeting of
stockholders, at the place of such meeting, and at such other times and places,
either within or without the State of Delaware, as the board of directors shall
determine. No notice of any kind of such regular meetings needs to be given to
either old or new members of the board of directors.
SECTION 4.5. SPECIAL MEETINGS. Special meetings of the board of
directors shall be held at any time by call of the chairman of the board, the
president, the secretary or any one of the directors. The secretary shall give
notice of each special meeting to each director at his usual business or
residence address by mail at least three days before the meeting or by telegraph
or telephone at least one day before such meeting. Except as otherwise provided
by law, by the certificate of incorporation, or by the bylaws, such notice need
not specify the business to be transacted, or the purpose of, such meeting. No
notice shall be necessary for any adjournment of any meeting. The signing of a
written waiver of notice of any special meeting by the person or persons
entitled to such notice, whether before or after the time stated therein, shall
be equivalent to the receiving of such notice. Attendance of a director at a
meeting shall also constitute a waiver of notice of such meeting, except where a
director attends a meeting for the express and announced purpose of objecting,
at the beginning of the meeting, to the transaction of any business on the
ground that the meeting is not lawfully called or convened.
SECTION 4.6. QUORUM. All of the directors fixed by these bylaws
shall constitute a quorum for the transaction of business and the act of not
less than all of the directors shall be required in order to constitute the act
of the board of directors.
SECTION 4.7. PROCEDURE AT MEETINGS. The board of directors shall
appoint one of their number as chairman of the board of directors to serve in
such capacity until the board of directors appoints his successor. The chairman
of the board shall preside at meetings of the board. In his absence at any
meeting, any officer authorized by these bylaws or any member of the board
selected by the members present shall preside. The secretary of the Corporation
shall act as secretary at all meetings of the board. In his absence, the
presiding officer of the meeting may designate any person to act as secretary.
At meetings of the board of directors, the business shall be transacted in such
order as the board may from time to time determine.
SECTION 4.8. PRESUMPTION OF ASSENT. Any director of the Corporation
who is present at a meeting of the board of directors at which action on any
corporate matter is taken shall be presumed to have assented to the action taken
unless his dissent shall be entered in the minutes of the meeting or unless he
shall file his written dissent to such action with the person acting as the
secretary of the meeting before the adjournment thereof or shall forward such
dissent by registered mail to the secretary of the Corporation immediately after
the adjournment of the meeting. Such right to dissent shall not apply to a
director who voted in favor of such action.
SECTION 4.9. ACTION WITHOUT A MEETING. Any action required by
statute or permitted to be taken at a meeting of the directors of the
Corporation, or of any committee thereof, may be taken without a meeting if a
consent in writing, setting forth the action so taken, shall be signed by all
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directors or all committee members as the case may be, and if the consent in
writing shall be filed with the minutes of the proceedings of the board or
committee.
SECTION 4.10. MEETINGS BY TELEPHONE. Unless otherwise restricted by
the certificate of incorporation or these bylaws, members of the board of
directors, or members of any committee designated by the board of directors, may
participate in and hold any meeting required or permitted under these bylaws by
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other. Participation in a meeting
pursuant to this section shall constitute presence in person at such a meeting,
except where a person participates in the meeting for the express purpose of
objecting, at the beginning of the meeting, to the transaction of any business
on the ground that the meeting is not lawfully called or convened.
SECTION 4.11. COMPENSATION. As such, directors of the Corporation
may receive, pursuant to resolution of the board of directors, fixed fees and
other compensation for their service as directors, including without limitation,
their services as members of committees of the directors.
SECTION 4.12. EXECUTIVE COMMITTEE. The board of directors, by
resolution adopted by a majority of the number of directors fixed by these
bylaws, may designate an executive committee, which committee shall consist of
two or more of the directors of the Corporation. Such executive committee may
exercise such authority of the board of directors in the business and affairs of
the Corporation as the board of directors may by resolution duly delegate to it
except as prohibited by law. The designation of such committee and the
delegation thereto of authority shall not operate to relieve the board of
directors, or any member thereof, of any responsibility imposed upon it or him
by law. Any member of the executive committee may be removed by the board of
directors by the affirmative vote of a majority of the number of directors fixed
by the bylaws whenever in the judgment of the board the best interest of the
Corporation will be served thereby.
The executive committee shall keep regular minutes of its
proceedings and report the same to the board of directors when required. The
minutes of the proceedings of the executive committee shall be placed in the
minute book of the Corporation.
SECTION 4.13. ADVISORY COMMITTEES. The board of directors may for
its convenience, and at its discretion, appoint one or more advisory committees
of two or more directors each; but, no such advisory committees shall have any
power or authority except to advise the board of directors, any such committee
shall exist solely at the pleasure of the board of directors, no minutes of the
proceedings of any such committee shall be kept, and no member of any such
committee shall receive any compensation for such membership except by way of
reimbursement for reasonable expenses actually incurred by him by reason of such
membership.
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ARTICLE V
OFFICERS
SECTION 5.1. NUMBER. The officers of the Corporation shall consist
of a president, one or more vice presidents, a secretary and a treasurer; and,
in addition, such other officers and assistant officers and agents as may be
deemed necessary or desirable. Officers shall be elected or appointed by the
board of directors. Any two or more offices may be held by the same person
except that the president and secretary shall not be the same person. In its
discretion, the board of directors may leave unfilled any office except those of
president, treasurer and secretary.
SECTION 5.2. ELECTION; TERM; QUALIFICATION. Officers shall be chosen
by the board of directors annually at the meeting of the board of directors
following the annual stockholders' meeting. Each officer shall hold office until
his successor has been chosen and qualified, or until his death, resignation, or
removal.
SECTION 5.3. REMOVAL. Any officer or agent elected or appointed by
the board of directors may be removed by the board of directors whenever in its
judgment the best interests of the Corporation will be served thereby; but, such
removal shall be without prejudice to the contract rights, if any, of the person
so removed. Election or appointment of an officer or agent shall not of itself
create any contract rights.
SECTION 5.4. VACANCIES. Any vacancy in any office for any cause
may be filled by the board of directors at any meeting.
SECTION 5.5. DUTIES. The officers of the Corporation shall have such
powers and duties, except as modified by the board of directors, as generally
pertain to their offices, respectively, as well as such power and duties as from
time to time shall be conferred by the board of directors and by these bylaws.
SECTION 5.6. CHAIRMAN OF THE BOARD. The chairman of the board, if
such an officer shall be elected, shall preside, when present, at all meetings
of the board of directors and stockholders, and shall have and may exercise such
other powers as are from time to time assigned to him by the board of directors.
In the absence of the chairman of the board, such duties shall be performed by
the president of the Corporation. In addition, if such an officer shall be
elected, the chairman of the board shall exercise and perform such other powers
and duties as usually appertain to the office of chairman of the board and as
may from time to time be assigned to the chairman of the board by the board of
directors of the Corporation or be prescribed by these bylaws.
SECTION 5.7. PRESIDENT. Subject to the control of the board of
directors of the Corporation and subject to the supervisory powers, if any, as
may be assigned by the board of directors of the Corporation to the chairman of
the board, if such an officer shall be elected, the president shall supervise
and control the business and affairs of the Corporation. The president shall
perform such
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other duties as usually appertain to the office of president, except for any
duties expressly delegated to other persons by these bylaws or the board of
directors, and such other duties as may be prescribed by the stockholders or the
board of directors from time to time. In the absence of a chairman of the board,
the president shall preside at all meetings of the board of directors and of the
stockholders of the Corporation. The president shall formulate and submit to the
board of directors matters of general policy for the corporation and shall keep
the board of directors fully informed as they or any of them shall request and
shall consult the board of directors concerning the business of the Corporation.
The president shall have the power to appoint and remove subordinate officers,
agents and employees, except those elected or appointed by the board of
directors. The president shall vote, or shall give a proxy to any other officer
of the Corporation to vote, all shares of stock of any other Corporation
standing in the name of the Corporation. The president may sign with the
secretary or any other officer of the Corporation thereunto authorized by the
board of directors, certificates for shares of capital stock of the Corporation
and any deeds, bonds, mortgages, contracts, checks, notes, drafts or other
instruments which the board of directors has authorized to be executed, except
in cases where the signing and execution thereof has been expressly delegated by
these bylaws or by the board of directors to some other officer or agent of the
Corporation, or shall be required by law to be otherwise executed.
SECTION 5.8. THE VICE PRESIDENT. At the request of the president, or
in his absence or disability, the vice presidents, in the order of their
election, shall perform the duties of the president, and, when so acting, shall
have all the powers of, and be subject to all restrictions upon, the president.
Any action taken by a vice president in the performance of the duties of the
president shall be conclusive evidence of the absence or inability to act of the
president at the time such action was taken. The vice presidents shall perform
such other duties as may, from time to time, be assigned to them by the board of
directors or the president. A vice president may sign, with the secretary or an
assistant secretary, certificates of stock of the Corporation.
SECTION 5.9. SECRETARY. The secretary shall keep the minutes of all
meetings of the stockholders, of the board of directors, and of the executive
committee, if any, of the board of directors, in one or more books provided for
such purpose and shall see that all notices are duly given in accordance with
the provisions of these bylaws or as required by law. He shall be custodian of
the corporate records and of the seal (if any) of the Corporation and see, if
the Corporation has a seal, that the seal of the Corporation is affixed to all
documents the execution of which on behalf of the Corporation under its seal is
duly authorized; shall have general charge of the stock certificate books,
transfer books and stock ledgers, and such other books and papers of the
Corporation as the board of directors may direct, all of which shall, at all
reasonable times, be open to the examination of any director, upon application
at the office of the Corporation during business hours; and in general shall
perform all duties and exercise all powers incident to the office of the
secretary and such other duties and powers as the board of directors or the
president from time to time may assign to or confer on him.
SECTION 5.10. TREASURER. The treasurer shall keep complete and
accurate records of account, showing at all times the financial condition of the
Corporation. He shall be the legal custodian of all money, notes, securities and
other valuables which may from time to time come into the possession of the
Corporation. He shall furnish at meetings of the board of directors, or whenever
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requested, a statement of the financial condition of the Corporation, and shall
perform such other duties as these bylaws may require or the board of directors
may prescribe.
SECTION 5.11. ASSISTANT OFFICERS. Any assistant secretary or
assistant treasurer appointed by the board of directors shall have power to
perform, and shall perform, all duties incumbent upon the secretary or treasurer
of the Corporation, respectively, subject to the general direction of such
respective officers, and shall perform such other duties as these bylaws may
require or the board of directors may prescribe.
SECTION 5.12. SALARIES. The salaries or other compensation of the
officers shall be fixed from time to time by the board of directors. No officer
shall be prevented from receiving such salary or other compensation by reason of
the fact that he is also a director of the Corporation.
SECTION 5.13. BONDS OF OFFICERS. The board of directors may secure
the fidelity of any officer of the Corporation by bond or otherwise, on such
terms and with such surety or sureties, conditions, penalties or securities as
shall be deemed proper by the board of directors.
SECTION 5.14. DELEGATION. The board of directors may delegate
temporarily the powers and duties of any officer of the Corporation, in case of
his absence or for any other reason, to any other officer, and may authorize the
delegation by any officer of the Corporation of any of his powers and duties to
any agent or employee, subject to the general supervision of such officer.
ARTICLE VI
MISCELLANEOUS
SECTION 6.1. DIVIDENDS. Dividends on the outstanding shares of the
Corporation, subject to the provisions of the certificate of incorporation, if
any, may be declared by the board of directors at any regular or special
meeting, pursuant to law. Dividends may be paid by the Corporation in cash, in
property, or in the Corporation's own shares, but only out of the surplus of the
Corporation, except as otherwise allowed by law.
Subject to limitations upon the authority of the board of directors
imposed by law or by the certificate of incorporation, the declaration of and
provision for payment of dividends shall be at the discretion of the board of
directors.
SECTION 6.2. CONTRACTS. The president shall have the power and
authority to execute, on behalf of the Corporation, contracts or instruments in
the usual and regular course of business, and in addition the board of directors
may authorize any officer or officers, agent or agents, of the Corporation to
enter into any contract or execute and deliver any instrument in the name of and
on behalf of the Corporation, and such authority may be general or confined to
specific instances. Unless
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so authorized by the board of directors or by these bylaws, no officer, agent or
employee shall have any power or authority to bind the Corporation by any
contract or engagement, or to pledge its credit or to render it pecuniarily
liable for any purpose or in any amount.
SECTION 6.3. CHECKS, DRAFTS, ETC. All checks, drafts, or other
orders for the payment of money, notes, or other evidences of indebtedness
issued in the name of the Corporation shall be signed by such officers or
employees of the Corporation as shall from time to time be authorized pursuant
to the bylaws or by resolution of the board of directors.
SECTION 6.4. DEPOSITORIES. All funds of the Corporation shall be
deposited from time to time to the credit of the Corporation in such banks or
other depositories as the board of directors may from time to time designate,
and upon such terms and conditions as shall be fixed by the board of directors.
The board of directors may from time to time authorize the opening and
maintaining within any such depository as it may designate, of general and
special accounts, and may make such special rules and regulations with respect
thereto as it may deem expedient.
SECTION 6.5. ENDORSEMENT OF STOCK CERTIFICATES. Subject to the
specific directions of the board of directors, any share or shares of stock
issued by any corporation and owned by the Corporation, including reacquired
shares of the Corporation's own stock, may, for sale or transfer, be endorsed in
the name of the Corporation by the president or any vice president; and such
endorsement may be attested or witnessed by the secretary or any assistance
secretary either with or without the affixing thereto of the corporate seal.
SECTION 6.6. CORPORATE SEAL. The corporate seal, if any, shall be in
such form as the board of directors shall approve, and such seal, or a facsimile
thereof, may be impressed on, affixed to, or in any manner reproduced upon,
instruments of any nature required to be executed by officers of the
Corporation.
SECTION 6.7. FISCAL YEAR. The fiscal year of the Corporation shall
begin and end on such dates as the board of directors at any time shall
determine.
SECTION 6.8. BOOKS AND RECORDS. The Corporation shall keep correct
and complete books and records of account and shall keep minutes of the
proceedings of its stockholders and board of directors, an shall keep at its
registered office or principal place of business, or at the office of its
transfer agent or registrar, a record of its stockholders, giving the names and
addresses of all stockholders and the number and class of the shares held by
each.
SECTION 6.9. RESIGNATION. Any director or officer may resign at any
time. Such resignations shall be made in writing and shall take effect at the
time specified therein, or, if no time is specified, at the time of its receipt
by the president or secretary. The acceptance of a resignation shall not be
necessary to make it effective, unless expressly so provided in the resignation.
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SECTION 6.10. INDEMNIFICATION OF OFFICERS, DIRECTORS, EMPLOYEES AND
AGENTS.
(a) The Corporation shall indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Corporation) by
reason of the fact that he is or was a director, officer, employee or agent of
the Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the Corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful.
(b) The Corporation shall indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the Corporation to procure a judgment in
its favor by reason of the fact that he is or was a director, officer, employee
or agent of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the Corporation and except that no indemnification shall be
made in respect of any claim, issue or matter as to which such person shall have
been adjudged to be liable for negligence or misconduct in the performance of
his duty to the Corporation unless and only to the extent that the Delaware
Court of Chancery or the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but in
view of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Delaware Court of Chancery or
such other court shall deem proper.
(c) To the extent that a director, officer, employee or agent of the
Corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in subsections (a) and (b) of this
section 6.10, or in defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorney's fees) actually and reasonably
incurred by him in connection therewith. In the event a determination is made
under subsection (d) below that a director, officer, employee or agent of the
corporation has met the applicable standard of conduct as to some matters but no
such determination has been made as to others, amount to be indemnified may be
reasonably prorated.
(d) Any indemnification under this section 6.10 shall be made by the
Corporation only as authorized in the specific case upon a determination that
indemnification is proper because the director, officer, employee or agent has
met the applicable standard of conduct set forth above. Such determination shall
be made as follow: by the board of directors by a majority vote of a quorum
consisting of directors who are not parties to such action, suit or proceeding;
or if such a quorum is not
13
<PAGE>
obtainable, or even if obtainable a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion; or by the
stockholders.
(e) Expenses incurred in defending a civil or criminal action, suit
or proceeding shall be paid by the Corporation in advance of the final
disposition of such action, suit or proceeding within thirty days of receipt of
(1) a written affirmation by such director, officer, employee, or agent of his
good faith belief that he has met the standard of conduct necessary for
indemnification by the Corporation set forth in this section 6.10, and (2) a
written undertaking by or on behalf of the director, officer, employee or agent
incurring such expense to repay such mount if it shall ultimately be determined
that he is not entitled to be indemnified by the Corporation as authorized in
this section 6.10.
(f) Any right of indemnification granted by this section 6.10 shall
be in addition to and not in lieu of any other such right which an officer,
director, employee or agent of the Corporation may at any time be entitled under
the law of the State of Delaware.
(g) The Corporation shall have the power to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the Corporation, or is or was serving at the request of the Corporation
as director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against any liability asserted against
him and incurred by him in any such capacity, or arising out of his status as
such, whether or not the Corporation would have the power to indemnify him
against such liability under the provisions of section 6.10.
ARTICLE VII
AMENDMENTS
These bylaws may be altered, amended, or repealed, or new bylaws may
be adopted, by the holders of not less than a majority of the outstanding shares
entitled to vote at any duly held meeting of stockholders; provided that notice
of such proposed action shall have been contained in the notice of any such
meeting.
14
<PAGE>
CERTIFICATE BY SECRETARY
The undersigned, being the secretary of CLEARWORKS TECHNOLOGIES,
INC., hereby certifies that the foregoing code of bylaws was duly adopted by the
initial directors of said Corporation effective on May 19, 1998.
In Witness Whereof, I have signed this certification on this the
19th day of May, 1998.
SIGNATURE ILLEGIBLE
Secretary
15
EXHIBIT 10(a)
PLAN AND AGREEMENT OF MERGER AND
REORGANIZATION
PLAN AND AGREEMENT OF MERGER (this "Agreement of Merger") made the day
of May, 1998, between Clearworks Technologies, Inc., a Delaware corporation
(hereinafter called the "Clearworks"), and Southeast Tire Recycling, Inc., a
Florida corporation (hereinafter called the "Southeast") (the parties to this
Agreement of Merger are hereinafter referred to as the "Parties")
WHEREAS Southeast has authorized capital consisting of 100,000,000 shares
of common stock, par value $.0001 per share, of which 7,774,000 shares have been
duly issued and are now outstanding; and
WHEREAS Clearworks has an authorized capital stock consisting of
55,000,000 shares of stock, consisting of 50,000,000 shares of common stock, par
value $.001 per share, and 5,000,000 shares of preferred stock, par value $.001
per share, no common or preferred shares having been duly issued and
outstanding; and
WHEREAS Southeast desires to reincorporate in Delaware; and
WHEREAS the Boards of Directors of Southeast and the sole director of
Clearworks, respectively, deem it advisable and generally to the advantage and
welfare of the two corporate parties that Southeast reincorporate in Delaware by
merging with Clearworks under and pursuant to the provisions of the General
Corporation Law of Delaware and the Florida Business Corporation Act.
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements herein contained and of the mutual benefits hereby provided, it is
agreed by and between the Parties as follows:
1. MERGER.
Southeast shall be and it hereby is merged into Clearworks.
2. EFFECTIVE DATE.
This Agreement of Merger shall become effective upon compliance with the
laws of the States of Delaware and Florida, the time of such
effectiveness being hereinafter called (the "Effective Date").
3. SURVIVING CORPORATION.
Clearworks shall survive the merger herein contemplated and shall
continue to be governed by the laws of the State of Delaware, but the
separate corporate existence of Southeast shall cease forthwith upon the
Effective Date
4. AUTHORIZED CAPITAL.
The authorized capital of Clearworks following the Effective Date shall
continue to be 55,000,000 shares of stock, consisting of 50,000,000
shares of common stock, par value
<PAGE>
$.00l per share, and 5,000,000 shares of preferred stock, unless and
until the same shall be changed in accordance with the laws of the State
of Delaware.
5. CERTIFICATE OF INCORPORATION.
The Certificate of Incorporation, as amended, of Clearworks as it exists
on the Effective Date shall be the Certificate of Incorporation of
Clearworks following the Effective Date unless and until the same shall
be amended or repealed in accordance with the provisions thereof, which
power to amend or repeal is hereby expressly reserved, and all rights or
powers of whatsoever nature conferred in such Certificate of
Incorporation or herein upon any shareholder or director or officer of
Clearworks or upon any other person whomsoever are subject to this
reserve power.
6. BYLAWS.
The Bylaws of Clearworks as they exist on the Effective Date shall be the
Bylaws of Clearworks following the Effective Date unless and until the
same shall be amended or repealed in accordance with the provisions
thereof.
7. BOARD OF DIRECTORS AND OFFICERS.
The members of the Board of Directors and the officers of Clearworks
immediately after the Effective Date shall be those persons who were the
members of the Board of Directors and the officers, respectively, of
Southeast immediately prior to the Effective Date, and such persons shall
serve in such offices, respectively, for the terms provided by law or in
the Bylaws, or until their respective successors are elected and
qualified.
8. CONVERSION OF OUTSTANDING STOCK.
Forthwith upon the Effective Date, each of the issued and outstanding
shares of common stock of Southeast and all rights in respect thereof
shall be converted into one fully paid and nonassessable share of common
stock of Clearworks, and each certificate nominally representing shares
of common stock of Southeast shall for all purposes be deemed to evidence
the ownership of a like number of shares of common stock of Clearworks.
The holders of such certificates shall not be required immediately to
surrender the same in exchange for certificates of common stock of
Southeast but, as certificates nominally representing shares of common
stock of Southeast are surrendered for transfer, Clearworks will cause to
be issued certificates representing shares of common stock of Clearworks
and, at any time upon surrender by any holder of certificates nominally
representing shares of common stock of Southeast, Clearworks will cause
to be issued therefor certificates for a like number of shares of common
stock of Clearworks.
9. FURTHER ASSURANCE OF TITLE.
If at any time Clearworks shall consider or be advised that any
acknowledgments or assurances in law or other similar actions are
necessary or desirable in order to acknowledge or confirm in and to
Clearworks any right, title, or interest of Southeast held immediately
prior to the Effective Date, Southeast and its proper officers and
directors shall and will execute and deliver all such acknowledgments or
assurances in law and do all things necessary or proper to acknowledge or
confirm such right, title, or interest in
<PAGE>
Clearworks as shall be necessary to carry out the purposes of this
Agreement of Merger, and Clearworks and the proper officers and directors
thereof are fully authorized to take any and all such action in the name
of Southeast or otherwise.
10. RIGHTS AND LIABILITIES OF DELAWARE COMPANY.
At and after the Effective Date, Clearworks shall succeed to and possess,
without further act or deed, all of the estate, rights, privileges,
powers, and franchises, both public and private, and all of the property,
real, personal and mixed of each of the Parties; all debts due to
Southeast of whatever account shall be vested in Clearworks; all claims,
demands, property, rights, privileges, powers and franchises and every
other interest of either of the Parties shall be as effectively the
property of Clearworks as they were of the respective parties hereto; the
title to any real estate vested by deed or otherwise in the Southeast
shall not revert or be in any way impaired by reason of the merger, but
shall be vested in Clearworks; all rights of creditors and all liens upon
any property of either of the Parties shall be preserved unimpaired,
limited in lien to the property affected by such lien at the effective
time of the merger; all debts, liabilities, and duties of the respective
Parties shall thenceforth attach to Clearworks, and may be enforced
against it to the same extent as if such debts, liabilities, and duties
had been incurred or contracted by it; and Clearworks shall indemnify and
hold harmless the officers and directors of each of the parties hereto
against all such debts, liabilities and duties and against all claims and
demands arising out of the merger.
11. STOCK OPTIONS.
Forthwith upon the Effective Date, each outstanding option, if any, to
purchase shares of the common stock of Southeast granted under any stock
option plan and each common stock purchase warrant shall be converted
into and become an option or warrant, as the case may be, to purchase the
same number of shares of common stock of Clearworks, upon the same terms
and subject to the same conditions as set forth in such Plan and option
agreements issued any such plan and any warrants. The same number of
shares of common stock of Clearworks shall be reserved for issuance upon
the exercise of stock options as were so reserved for issuance by
Southeast immediately prior to the Effective Date.
12. BOOK ENTRIES.
The merger contemplated hereby shall be treated as a pooling of interest
and as of the Effective Date entries shall be made upon the books of
Clearworks in accordance with the following:
(a) The assets and liabilities of Clearworks shall be recorded at the
amounts at which they are carried on the books of Southeast
immediately prior to the Effective Date with appropriate adjustment
to reflect the retirement of the shares of Common Stock of Southeast
presently issued and outstanding.
(b) There shall be credited to Capital Account the aggregate amount of
the par value per share of all of the common stock of Clearworks
resulting from the conversion of the outstanding Common Shares of
the Southeast.
<PAGE>
(c) There shall be credited to Capital Surplus Account of Clearworks an
amount equal to that carried on the Capital Surplus Account of the
Southeast immediately prior to the Effective Date.
(d) There shall be credited to Earned Surplus (Deficit) Account of
Clearworks an amount equal to that carried on the Earned Surplus
(Deficit) Account of Southeast immediately prior to the Effective
Date.
13. SERVICE OF PROCESS ON CLEARWORKS.
Clearworks agrees that it may be served with process in the State of
Florida in any proceeding for enforcement of any obligation of Southeast
as well as for the enforcement of any obligation of Clearworks arising
from the merger.
14. TERMINATION.
This Agreement of Merger may be terminated and abandoned by action of the
Board of Directors of Southeast at any time prior to the Effective Date,
whether before or after approval by the shareholders of the Parties
15. PLAN OF REORGANIZATION.
This Agreement of Merger constitutes a Plan of Reorganization to be
carried out in the manner, on the terms and subject to the conditions
herein set forth.
IN WITNESS WHEREOF each of the Parties, pursuant to authority duly granted
by the Board of Directors at a duly constituted meeting at which a quorum was
present, has caused this Agreement of Merger to be executed by a duly empowered
officer and its corporate seal to be hereunto affixed.
SOUTHEAST TIRE RECYCLING, INC.
By: /s/ MICHAEL T. MCCLERE
Michael McClere, President
CLEARWORKS TECHNOLOGIES, INC.
By: /s/ MICHAEL T. MCCLERE
Michael McClere, Sole Director
EXHIBIT 10(b)
CERTIFICATE OF MERGER
OF
SOUTHEAST TIRE RECYCLING, INC.
INTO
CLEARWORKS TECHNOLOGIES, INC.
(UNDER SECTION 252 OF THE GENERAL
CORPORATION LAW OF THE STATE OF DELAWARE)
CLEARWORKS TECHNOLOGIES, INC. hereby certifies that:
(1) The name and state of incorporation of each of the constituent corporations
are:
(a) Southeast Tire Recycling, Inc., a Florida corporation; and
(b) Clearworks Technologies, Inc., a Delaware corporation.
(2) An agreement of merger has been approved, adopted, certified, executed and
acknowledged by Southeast Tire Recycling, Inc. and by Clearworks Technologies,
Inc. in accordance with the provisions of subsection (c) of Section 252 of the
General Corporation Law of the State of Delaware.
(3) The name of the surviving corporation is Clearworks Technologies, Inc.
(4) The certificate of incorporation of Clearworks Technologies, Inc. shall be
the certificate of incorporation of the surviving corporation.
(5) The surviving corporation is a corporation of the State of Delaware.
(6) The executed agreement of merger is on file at the principal place
of business of Clearworks Technologies, Inc.
(7) A copy of the agreement of merger will be furnished by Clearworks
Technologies, Inc., on request and without cost, to any stockholder of Southeast
Tire Recycling, Inc. or Clearworks Technologies, Inc.
(8) The authorized capital stock of Clearworks Technologies, Inc. is 55,000,000
shares, consisting of 50,000,000 shares of common stock, $.001 par value per
share and 5,000,000 shares of preferred stock, $.001 par value per share.
IN WITNESS WHEREOF, Clearworks Technologies, Inc. has caused this certificate
to be signed by Michael McClere, its sole director, there being no officers, on
the day of May, 1998.
By: /s/ MICHAEL McCLERE
Michael McClere
<PAGE>
ARTICLES OF MERGER
(Under Florida Business Corporation Act, Section 607.1105)
Southeast Tire Recycling, Inc., a Florida corporation, hereby sets forth
the following information relative to the proposed merger of Southeast Tire
Recycling, Inc. into Clearworks Technologies, Inc., a Delaware corporation, the
surviving corporation.
(a) The Plan and Agreement of Merger is appended hereto.
(b) The effective date of the merger shall be the date on which the
Articles of Merger are filed.
(c) Shareholder approval:
(i) Southeast Tire Recycling, Inc. - 7,774,000 shares of common
stock were entitled to vote on the plan; the vote taken
without a meeting was 6,250,000 shares to none to approve
the plan, said vote being sufficient to approve the plan.
(ii) Clearworks Technologies, Inc. - Having no shareholders, the
plan was approved by its sole director, said vote being
sufficient to approve the plan
IN WITNESS WHEREOF, Southeast Tire Recycling, Inc. has caused this
certificate to he signed by Michael T. McClere, its authorized officer, on the
day of May, 1998.
SOUTHEAST TIRE RECYCLING, INC.
By: /s/ MICHAEL McCLERE
Michael T. McClere
President
<PAGE>
[THE STATE OF TEXAS SEAL]
THE STATE OF TEXAS
SECRETARY OF STATE
CERTIFICATE OF AUTHORITY
OF
CLEARWORKS TECHNOLOGIES, INC.
CHARTER NUMBER 00121994
THE UNDERSIGNED, AS SECRETARY OF STATE OF THE STATE OF TEXAS, HEREBY
CERTIFIES THAT THE ATTACHED APPLICATION OF THE ABOVE ENTITY FOR A CERTIFICATE OF
AUTHORITY TO TRANSACT BUSINESS IN THIS STATE HAS BEEN RECEIVED IN THIS OFFICE
AND IS FOUND TO CONFORM TO LAW.
ACCORDINGLY THE UNDERSIGNED, AS SUCH SECRETARY OF STATE, AND BY VIRTUE OF
THE AUTHORITY VESTED IN THE SECRETARY BY LAW, HEREBY ISSUES THIS CERTIFICATE OF
AUTHORITY TO TRANSACT BUSINESS IN THIS STATE FROM AND AFTER THIS DATE, FOR THOSE
PURPOSES SET FORTH IN THE APPLICATION, UNDER THE NAME OF
CLEARWORKS TECHNOLOGIES, INC.
DATED JULY 9, 1998
EFFECTIVE JULY 9, 1998
/s/ ALBERTO R. GONZALES
Alberto R. Gonzales, Secretary of State
EXHIBIT 10(c)
STATE OF DELAWARE
OFFICE OF THE SECRETARY OF STATE
________________________________
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF MERGER,
WHICH MERGES:
"SOUTHEAST TIRE RECYCLING, INC.", A FLORIDA CORPORATION, WITH AND INTO
"CLEARWORKS TECHNOLOGIES, INC." UNDER THE NAME OF "CLEARWORKS TECHNOLOGIES,
INC.", A CORPORATION ORGANIZED AND EXISTING UNDER THE LAWS OF THE STATE OF
DELAWARE, AS RECEIVED AND FILED IN THIS OFFICE THE TWELFTH DAY OF MAY, A.D.
1998,. AT 9 0'CLOCK A.M.
[SECRETARY OF STATE SEAL] /s/ EDWARD J. FREEL
EDWARD J. FREEL, SECRETARY OF STATE
AUTHENTICATION: 9358687
DATE: 10-16-98
<PAGE>
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 09:00 AM 05/12/1998
981181905-2867624
CERTIFICATE OF MERGER
OF
SOUTHEAST TIRE RECYCLING, INC.
INTO
CLEARWORKS TECHNOLOGIES, INC.
(UNDER SECTION 252 OF THE GENERAL
CORPORATION LAW OF THE STATE OF DELAWARE)
CLEARWORKS TECHNOLOGIES, INC., hereby certifies that:
(1) The name and state of incorporation of each of the constituent
corporations are:
(a) Southeast Tire Recycling, Inc., a Florida corporation; and
(b) Clearworks Technologies, Inc., a Delaware corporation.
(2) An agreement of merger has been approved, adopted, certified, executed
and acknowledged by Southeast Tire Recycling, Inc. and by Clearworks
Technologies, Inc. in accordance with the provisions of subsection (c) of
Section 252 of the General Corporation Law of the State of Delaware.
(3) The name of the surviving corporation is Clearworks Technologies, Inc.
(4) The certificate of incorporation of Clearworks Technologies, Inc. shall
be the certificate of incorporation of the surviving corporation.
(5) The surviving corporation is a corporation of the State of Delaware.
(6) The executed agreement of merger is on file at the principal place of
business of Clearworks Technologies, Inc.
(7) A copy of the agreement of merger will be furnished by Clearworks
Technologies, Inc., on request and without cost, to any stockholder of
Southeast Tire Recycling, Inc. or Clearworks Technologies, Inc.
(8) The authorized capital stock of Clearworks Technologies, Inc. is
55,000,000 shares, consisting of 50,000,000 shares of common stock, $.001
par value per share and 5,000,000 shares of preferred stock, $.001 par
value per share.
IN WITNESS WHEREOF, Clearworks Technologies, Inc. has caused this
certificate to be signed by Michael McClere, its sole director, there being no
officers, on the 11th day of May, 1998.
By: /s/ MICHAEL McCLERE
Michael McClere
EXHIBIT 10(d)
AGREEMENT FOR PURCHASE OF COMMON STOCK
AGREEMENT (this "Agreement"), made as of the 1st day of April, 1998, by
and between SHANNON MCLEROY, 10806 Rio Rancho Ct., Houston, Texas 77064, MICHAEL
T. MCCLERE, 3803 Loch Glen Ct., Houston, Texas 77059, TECH TECHNOLOGY SERVICES,
LLC, 2533 N. Carson St., Carson City, Nevada 89706, RACHEL MCCLERE 1998 TRUST,
1980 Post Oak Blvd., Suite 1777, Houston, Texas, and MCCLERE FAMILY TRUST, 1980
Post Oak Blvd., Suite 1777, Houston, Texas (collectively the "Sellers" or the
"Shareholders"), and SOUTHEAST TIRE RECYCLING, INC., 15315 Indian Head Drive,
Tampa, Florida 33618 (the "Buyer" or "Southeast").
WHEREAS, the Sellers own all the outstanding shares of Millennium
Integration Technologies, Inc., a Texas corporation ("Millennium"); and
WHEREAS, the Buyer wishes to purchase and the Sellers desire to sell to the
Buyer all the outstanding shares of common stock of Millennium (the "Millennium
Common Shares") pursuant to the terms and conditions as set forth below.
NOW, THEREFORE, in consideration of the mutual promises, covenants and
representations contained herein, the Parties agrees as follows:
ARTICLE I
SALE OF SECURITIES
1.01 SALE OF SHARES
Subject to the terms and conditions of this Agreement, the Sellers shall
sell their respective Millennium Common Shares to the Buyer, and the Buyer shall
purchase the same from the Sellers. Each of the Sellers is the sole owner of the
legal and beneficial interests in the number of shares appearing opposite
his/her/its name on Exhibit A annexed hereto. The Buyer shall not be obligated
to purchase any Millennium Common Shares unless all the Millennium Common Shares
shall be delivered to it on the Closing Date, in accordance with the provisions
of this Agreement and in proper form for transfer.
1.02 PAYMENT
The total purchase price shall be Six Million Two Hundred Fifty Thousand
(6,250,000) shares of common stock of Southeast (the "Southeast Common
Shares") payable as follows: Each of the Sellers shall receive Six Hundred
Twenty-Five (625) Southeast Common Shares for each Millennium Common Share
appearing opposite the Seller's name on Exhibit A. Payment of the stock
consideration ("Stock Consideration") shall be by delivery of certificates
representing the respective number of Southeast Common Shares as against
delivery of the Millennium Common Shares in proper form for transfer. The
Southeast Common Shares constituting the Stock Consideration may be (i) issued
by Southeast from its authorized but unissued capital stock or from treasury
stock; or (ii) transferred from stockholders of Southeast; or any combination of
the foregoing.
REPRESENTATIONS AND WARRANTIES OF MILLENNIUM
AND SHAREHOLDERS
The Principal of Millennium named on the signature page hereof
("Millennium Principal"), Millennium, and the Shareholders represent and
warrant to the Buyer the following:
2.01 ORGANIZATION
Millennium is a corporation organized in the State of Texas, and as of the
Closing, Millennium will be validly existing, and in good standing under the
laws of the State of Texas. Millennium has all necessary corporate powers to own
properties and carry on a business, and is duly qualified to do business and is
in good standing in every other state requiring such qualification.
1
<PAGE>
2.02 CAPITAL
The authorized capital stock of Millennium consists of 10,000 shares of
common stock, $.01 par value per share, of which all 10,000 Shares of Common
Stock are issued and outstanding. All outstanding shares are fully paid and
non-assessable, free of liens, encumbrances, options, rights, warrants
convertible securities, or other agreements or commitments obligating Southeast
to transfer or issue from treasury any additional shares of its capital stock.
2.03 FINANCIAL STATEMENTS
Exhibit B annexed hereto contains the audited financial statements of
Millennium Integration Technologies, LLC, Millennium's predecessor as of
December 31, 1996 and December 31, 1997, (the "Millennium Financial
Statements"). The Millennium Financial Statements accurately present the
financial position of Millennium as of the dates of the balance sheet included
in the Millennium Financial Statements.
2.04 ABSENCE OF CHANGES
Since the date of the most recent balance sheet in the Millennium Financial
Statements (the "Millennium Balance Sheet Date"), there have been no changes
in the financial condition or operations of Millennium, except changes in the
ordinary course of business, which changes have not in the aggregate been
materially adverse.
2.05 LITIGATION
As of the dates of both balance sheets comprising the Millennium Financial
Statements, neither the Principal nor Millennium is aware, and as of the Closing
neither the Principal nor Millennium will be aware, of any pending, threatened
or asserted claims, lawsuits or contingencies involving Millennium or its common
stock. There is no dispute of any kind between Millennium and any third party,
and no such third party, and no such dispute will exist at the closing of this
Agreement.
2.06 TAX RETURNS
Millennium (and/or its predecessor, Millennium Integration Technologies,
LLC,) has filed all federal, state and local tax returns required by law to be
filed, and has paid all taxes, assessments, and penalties due and payable. No
federal income tax returns of Millennium have been audited by the Internal
Revenue Service. The provision for taxes, if any and all federal, state,
country, and local taxes for the period ending on the date of that balance sheet
and for all prior periods, whether or not disputed. There are no present
disputes as to taxes of any nature payable by Millennium.
2.07 ABILITY TO CARRY OUT OBLIGATIONS
Millennium, its Principal and the Shareholders have the right, power and
authority to enter into and perform their respective obligations under this
Agreement. The execution and delivery of this Agreement by those parties and the
performance by them of their obligations hereunder will not cause, constitute or
conflict with or result in (a) any breach or violation or any provisions of or
constitute a default under any license, indenture, mortgage, charter,
instrument, articles of incorporation, bylaw, or other agreement or instrument
to which Millennium or any of them is a party, or by which they may be bound,
nor will any consents or authorizations of any party other then those hereto be
required, (b) and event that would cause Millennium to be liable to any party,
or (c) an event that would result in the creation of imposition of any lien,
charge, or encumbrance on any asset of Millennium or upon the Shares to be
acquired by Buyers.
2.08 TITLE
The Shareholders have good and marketable title to all of the Shares to be
sold to the Buyer pursuant to this Agreement. The Shares to be sold to Buyer
will be, at closing, free and clear of all aliens, security interests, pledges,
charges, claims and options.
2
<PAGE>
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Principal of Southeast named on the signature page hereof ("Southeast
Principal") and Southeast represent and warrant to the Sellers the following.
3.01 ORGANIZATION
Southeast is a corporation organized in the State of Florida, and as of the
Closing, Southeast will be validly existing, and in good standing under the laws
of Florida. Southeast has all necessary corporate powers to own properties and
carry on a business, and is duly qualified to do business and is in good
standing in every other state requiring such qualification.
3.02 CAPITAL
The authorized capital stock of Southeast consists of 100,000,000 shares of
common stock, $.0001 par value per share, of which 1,524,000 Shares of Common
Stock are issued and outstanding. All outstanding shares are fully paid and
non-assessable, free of liens, encumbrances, options, rights, warrants
convertible securities, or other agreements or commitments obligating Southeast
to transfer or issue from treasury any additional shares of its capital stock.
No shares have been issued since September, 1997.
3.03 FINANCIAL STATEMENTS
Exhibit C annexed hereto contains the audited financial statements of
Southeast as of December 31, 1996 and December 31, 1997, (the "Southeast
Financial Statements"). The Southeast Financial Statements accurately present
the financial position of Southeast as of the dates of the balance sheet
included in the Southeast Financial Statements.
3.04 ABSENCE OF CHANGES
Since the date of the most recent balance sheet in the Southeast Financial
Statements (the "Southeast Balance Sheet Date"), there has not been any change
in the financial condition or operations of Southeast, except changes in the
ordinary course of business, which changes have not in the aggregate been
materially adverse.
3.05 LIABILITIES
Southeast will not, as of the closing, have any debt, liability, or
obligation of any nature, whether accrued, absolute, contingent, or otherwise,
and whether due or to become due. As of the dates of both balance sheets
comprising the Financial Statements, neither the Principal nor Southeast is
aware, and as of the closing neither the Principal nor Southeast will be aware,
of any pending, threatened or asserted claims, lawsuits or contingencies
involving Southeast or its common stock. There is no dispute of any kind between
Southeast and any third party, and no such dispute will exist at the closing of
this Agreement. At closing, Southeast will be free from any and all liabilities,
liens, claims and/or commitments.
3.06 TAX RETURNS
Southeast has filed all federal, state and local tax returns required by
law to be filed, and has paid all taxes, assessments, and penalties due and
payable. No federal income tax returns of Southeast have been audited by the
Internal Revenue Service. The provision for taxes, if any and all federal,
state, country, and local taxes for the period ending on the date of that
balance sheet and for all prior periods, whether or not disputed. There are no
present disputes as to taxes of any nature payable by Southeast.
3.07 ABILITY TO CARRY OUT OBLIGATIONS
Southeast and its Principal have the right, power and authority to enter
into and perform their respective obligations under this Agreement which has
been approved by its shareholders. The execution and delivery of this Agreement
by those parties and the performance by them of their obligations hereunder will
not cause, constitute or conflict with or result in (a) any breach or violation
or any provisions of or constitute a default under any license, indenture,
mortgage, charter, instrument, articles of incorporation, bylaw, or other
agreement or instrument to which Southeast or any of them is a party, or by
which they may
3
<PAGE>
be bound, nor will any consents or authorizations of any party other then those
hereto be required, (b) and event that would cause Southeast to be liable to any
party, or (c) an event that would result in the creation of imposition of any
lien, charge, or encumbrance on any asset of Southeast or upon the Shares to be
acquired by Sellers.
3.08 CONTRACTS AND LEASES
Southeast does not now carry on any business. Southeast is not a party to
any contract, agreement or lease. No person holds a power of attorney from
Southeast.
3.09 LITIGATION
Southeast is not and has not been a party to any suit, action, arbitration,
or legal, administrative, or other proceeding, or pending governmental
investigation. To the best knowledge of Southeast and its Principal, there is no
basis for any action or proceeding pending and no action or proceeding is
threatened against Southeast. Southeast is not subject to or in default with
respect to any order, writ, injunction, or decree of any federal, state, local
or foreign court, department, agency, or instrumentality. Neither Southeast nor
the Principal is now or has ever been the subject of (a) any criminal
proceeding, or (b) any injunctive action or administrative proceeding brought by
the Securities and Exchange Commission.
3.10 TRANSFER AGENT
Southeast's stock transfer agent is Olde Monmouth Stock Transfer Co., Inc.
The stockholder list is to be delivered to Buyer at the Closing will be a true
and complete list of each shareholder of record, last known address and number
of shares.
3.11 SECURITIES AND EXCHANGE COMMISSION FILINGS
Southeast has made no filings with the Securities and Exchange Commission
except for the Forms D referred to herein; and Southeast is not now and never
has been required to be a reporting issuer under the Securities Exchange Act of
1934.
3.12 CONDUCT OF BUSINESS
Southeast currently is not conducting any business and neither owns nor
leases any assets. Prior to the closing, Southeast will not carry on any
business, and shall not (without the prior written approval of Seller) (i) sell,
pledge or assign any assets (ii) amend its Articles of Incorporation or Bylaws,
declare dividends, redeem or issue or sell stock or other securities, (iii)
incur any liabilities, (iv) acquire or dispose of any assets, enter into any
contract, guarantee obligations of any third party, or (v) enter into any other
transaction.
3.13 ENVIRONMENTAL MATTERS
Southeast has not been notified by any governmental authority, agency or
third party, and Southeast has no knowledge, of any violation by Southeast of
any Environmental Laws (as defined below). In conducting its prior business,
Southeast possessed all required licenses and permits to be issued by
governmental agencies pursuant to environmental, health and safety laws.
Southeast has not received any notice or any request for information, notice of
claim, demand or other notification that it may be potentially responsible with
respect to any investigation or cleanup of any threatened or actual release of
hazardous substances. To the knowledge of the Principal of Southeast and
Southeast, in conducting its business, all hazardous wastes and substances have
been stored, treated, disposed of and transported in conformance with all
requirements applicable to such hazardous substances and wastes. The Principal
of Southeast shall indemnify and hold harmless the Sellers and/or Southeast or
any successor to Southeast against all costs, claims or liabilities, whenever
such costs, claims or liabilities may be asserted, arising under or related in
any manner to the Environmental Laws and their application to the assets or the
business for conditions which existed or for events which occurred on or before
the date of closing, specifically including (A) fines, penalties, judgments,
awards, settlements, losses, damages, costs, fees (including reasonable
attorneys' and consultants' fees), expenses and disbursements, (B) defense and
other responses to any administrative or judicial action instituted by any third
person concerning any such liability, and (C) financial responsibility for (i)
cleanup costs and injunctive relief, including any removal, remedial or other
response actions, and
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(ii) any other compliance or remedial measures. For purpose of this Agreement,
"Environmental Laws" shall mean all Federal, state, local and foreign laws,
statues, rules, regulations and ordinances and all applicable state
environmental acts and including any rules, regulations, orders, decrees, plans,
codes, judgments, injunctions, notice or demand letters, prohibitions,
obligations, schedules, timetables, standards, conditions or requirements
issued, entered, approved or promulgated thereunder, relating to pollution or
protection of the environment, including laws relating to emissions, discharges,
releases or threatened releases of wastes in, into, onto or upon the environment
(including, without limitation, ambient air, surface water, ground water, or
land), or otherwise relating to the manufacture, processing, distribution, use,
treatment, collection, accumulation, storage, disposal, transport, or handling
of wastes.
3.14 CORPORATE DOCUMENTS
Copies of each of the following Southeast documents, which are true,
complete and correct in all material respects, at the Seller's option, either
will be delivered to Seller at Closing, remain at Southeast's principal office
or under the custody and control of its Principal:
Articles of Incorporation and any amendments thereto;
i. Bylaws;
ii. All Minutes of Shareholders Meetings;
iii. All Minutes of Directors Meetings;
iv. List of Officers and Directors;
v. Current List of Shareholders certified by Southeast's President;
vi. The Southeast Financial Statements described in Section 3.03;
vii. Certificate of Good Standing;
viii. Copies of all federal and state income tax returns;
ix. Copies of all Forms D filed with the SEC and Form M-11 filed with the
State of New York;
x. Signed undated, resignations of all current officers and directors
together with a signed, undated, unanimous consent of director
appointing Buyer's designees as Southeast's directors; and
3.15 CLOSING DOCUMENTS
All minutes, consents or other documents pertaining to Southeast to be
delivered at closing shall be valid and in accordance with the laws of Florida.
3.16 TITLE
The Southeast Common Shares to be conveyed to the Sellers pursuant to this
Agreement, will be, at closing, validly issued, nonassessable, free and clear of
all liens, security interests, pledges, charges, claims and options.
ARTICLE IV
CLOSING
The Closing of this transaction will occur when the Sellers deliver to the
Buyer all of the documents described below, and Buyer pays the Sellers the
purchase price in full. As part of the Closing, the following documents, in form
reasonably acceptable to counsel to the parties, shall be delivered:
4.1 BY THE BUYER:
A. The purchase price consisting of Certificates representing in the aggregate
6,250,000 Southeast Common Shares.
B. All of the documents referred to in Section 3 herein.
C. The Financial Statements described in Section 3.03 herein.
D. All of the business and corporate records of Southeast referred to in
Section 3.13 herein.
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4.2 BY THE SELLERS:
A. Certificates representing all 10,000 outstanding Millennium Common Shares
duly endorsed in blank.
B. The Millennium Financial Statements described in Section 2.03 of this
Agreement.
C. A Reverse Split Agreement, by which the Sellers agree, for his/her/itself
and on behalf of Southeast, not to reverse split the currently outstanding
shares of the Southeast's common stock for at least 18 months after the
Closing.
ARTICLE V
MISCELLANEOUS
5.01 CAPTIONS AND HEADINGS
The Article and paragraph headings throughout this Agreement are for
convenience and reference only, and shall in no way be deemed to define, limit,
or add to the meaning of any provision of this Agreement.
5.02 NO ORAL CHANGES
This Agreement and any provisions hereof, may not be waived, changed,
modified, or discharged orally, but only by an agreement in writing signed by
the party against whom enforcement of any waiver, change, modification, or
discharge is sought.
5.03 NON WAIVER
Except as otherwise expressly provided herein, no waiver of any covenant,
condition, or provision of this Agreement shall be deemed to have been made
unless expressly in writing and signed by the party against whom such waiver is
charged; and (i) the failure of any party to insist in any one or more cases
upon the performance of any of the provisions, covenants, or conditions; (ii)
the acceptance of performance of anything required by this Agreement to be
performed with knowledge of the breach or failure of a covenant, condition, or
provision hereof shall not be deemed a waiver of such breach or failure, and no
waiver by any party of one breach by another party shall be construed as a
waiver with respect to any other or subsequent breach.
5.04 TIME OF ESSENCE
Time is of the essence of this Agreement and of each and every provision
hereof.
5.05 ENTIRE AGREEMENT
This Agreement contains the entire Agreement and understanding between the
Parties hereto, and supersedes all prior agreements and understandings.
5.06 COUNTERPARTS
This Agreement may be executed simultaneously in one or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
5.07 BINDING EFFORT
This Agreement shall inure to and be binding upon the heirs, executors
personal representatives, successors and assigns of each of the parties to this
Agreement.
5.08 ARBITRATION
Any controversy or claim arising out of, or relating to, this Agreement, or
the making, performance, or interpretation thereof, shall be settled by
arbitration in New York, New York in accordance with the Rules of the American
Arbitration Association then existing, and judgment on the arbitration award may
be entered in any court having jurisdiction over the subject matter of the
controversy.
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5.09 EFFECT OF CLOSING
All representatives, warranties, covenants, and agreements of the parties
contained in this Agreement, or in any instrument, certificate, opinion, or
other writing provided for in it, shall be true and correct as of the Closing
and shall survive the Closing of this Agreement.
5.10 MUTUAL COOPERATION
The Parties shall cooperate with each other to achieve the purpose of this
Agreement, and shall execute such other and further documents and take such
other and future actions as may be necessary or convenient to effect the
transaction described herein.
AGREED AND ACCEPTED as of the date first above written.
SELLERS:
_________________
Shannon McLeroy
__________________
Michael T. McClere
Tech Technology Services, LLC
By: _____________
Rachel McClere 1998 Trust
By: _____________
McClere Family Trust
By: _____________
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<PAGE>
MILLENNIUM INTEGRATION TECHNOLOGIES, INC.
By: ______________________________
, Principal
SOUTHEAST TIRE RECYCLING, INC.
By: /s/JAMES W. WALTERS
, Principal
8
EXHIBIT 10(e)
ADDENDUM TO AGREEMENT FOR PURCHASE OF COMMON STOCK
This Addendum hereby modifies, amends and supplements the Agreement for
Purchase of Common Stock (hereinafter referred to as "Purchase Agreement")
made as of the 1st day of April, 1998, by and between Shannon McLeroy, Michael
T. McClere, Tech Technology Services, LLC, Rachel McClere 1998 Trust and McClere
Family Trust, (hereinafter collectively referred to as "Sellers") and
Southeast Tire Recycling, Inc. (hereinafter referred to as "Buyer" or
"Southeast").
RECITALS
Whereas, since the date that the Sellers and Buyer entered into the
Purchase Agreement, the Sellers have conducted a due diligence examination into
the assets and liabilities, including known and unknown claims, undisputed and
contingent claims, of the Buyer; and,
Whereas, such examination has indicated that Buyer may have contingent
liabilities, including and potential claims, whether asserted or unasserted,
which may be in excess of the assets presently possessed by the Buyer; and,
Whereas, Buyer and certain of its present Shareholders have agreed to
provide a mechanism for the administration, handling and distribution by an
Escrow Agent of One Hundred Thousand (100,000) shares of Southeast Tire
Recycling, Inc., stock to use as the Escrow Agent sees fit in order to pay,
satisfy, defend, compromise, negotiate and/or settle the Debts of Southeast Tire
Recycling, Inc., whether known, or unknown; liquidated or unliquidated; just or
unjust; or disputed or undisputed which exist or which arose against the
Corporation as of the date of Closing. Such shares of stock, or the proceeds
thereof, are sometimes referred to hereinafter as the "Subject matter of the
Shareholders' Escrow Agreement" or the "Escrow Fund"; and,
Whereas, the Buyer has offered to Sellers as an inducement to consummate
the Purchase Agreement and to provide additional funds in the event that the
Seller needs them for its continued growth and development, warrants to purchase
additional common stock of the Seller, as set forth below: and
Whereas, certain of Buyer's present Shareholders have agreed to indemnify
the Buyer from any debt, liability or obligation of any nature, whether accrued,
absolute, contingent or otherwise, and whether due or to become due, in order
for the Buyer to comply with the provisions of Section 3.05 of the Purchase
Agreement.
Whereas, the Sellers have agreed that they will consummate the Purchase set
forth in Purchase Agreement subject to the provisions, agreements and conditions
set forth herein;
Now, therefore, in consideration of the mutual promises and agreements set
forth herein and in the Purchase Agreement, the Parties hereto agree as follows:
AGREEMENT
1. The Parties hereby adopt and agree to the Recitals set forth above.
2. The Buyer shall deliver to Sellers at closing hereof, executed
counterpart originals of the documents attached hereto, if not exactly the same
as attached hereto, then substantially similar in form and substance thereto,
subject to approval of Sellers' Counsel:
a. Cancellation Agreement and Release (Mutual Release of All Claims)
between National Tire Recycling, Inc., and Seller; and,
b. Shareholders' Escrow Agreement; and,
c. Indemnity Agreement; and,
d. Release of all claims against Buyer executed by Reco Tricote,
Inc., the Lessor of the real property (hereinafter referred to as the
"Site") located in Mulberry, Florida. Reco Tricote, Inc., claims that
Buyer owes it $86,481.80 as of March 31, 1998 including land rental and
trailer rental and ad valorem property taxes, although there is no written
or verbal agreement between Lessor and Buyer.
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e. Release of that certain Promissory Note in the original principal
sum of Forty-One Thousand Dollars and No Cents ($41,000.00) executed by the
Buyer payable to the order of National Tire Recycling, Inc.
f. Release of that certain Promissory Note in the original principal sum of
Fourteen Thousand Five Hundred Seventy-Eight Dollars and No Cents ($14,578.00)
executed by the Buyer payable to the order
of ____________________________________.
g. Release of that certain Promissory Note in the original principal sum of Ten
Thousand Six Hundred Twenty-Five Dollars and No Cents ($10,625.00), executed by
the buyer payable to the order
of ____________________________________.
h. One Thousand (1000) Certificates for Class A Warrants, each certificate
providing for the purchase of up to One Thousand (1000) shares of authorized
common stock of Southeast Tire Recycling, Inc., a Florida Business Corporation,
having a par value of $0.0001 per share, which Warrants shall provide for an
exercise price of Three Dollars and No Cents ($3.00) per common share and shall
expire on or before five (5) years from the date of Closing. Each Class A
Warrant shall provide that they shall be cancelable at the sole discretion of
Southeast on or before thirty days after written notice upon payment of a
cancellation price of One Dollar and No Cents ($1.00) per share. Each such Class
A Warrant shall be subject to the terms, conditions and provisions of the Stock
Warrant Plan attached hereto. Each Seller shall receive One Hundred Class A
Warrants for each Millennium Common Share appearing opposite the Seller's name
on Exhibit "A" to the Purchase Agreement.
i. One Thousand (1000) Certificates for Class B Warrants, each certificate
providing for the purchase of up to One Thousand (1000) shares of the authorized
common stock of Southeast Tire Recycling, Inc., a Florida Business Corporation,
having a par value of $0.0001 per share, which Warrants shall provide for an
exercise price of Six Dollars and No Cents ($6.00) per common share and shall
expire on or before ten (10) years from the date of Closing. Each Class B
Warrant shall provide that they shall be cancelable at the sole discretion of
Southeast on or before thirty days after written notice upon payment of a
cancellation price of One Dollar and 20 Cents ($1.20) per share. Each such Class
B Warrant shall be subject to the terms, conditions and provisions of the Stock
Warrant Plan attached hereto. Each Seller shall receive One Hundred Class B
Warrants for each Millennium Common Share appearing opposite the Seller's name
on Exhibit "A" to the Purchase Agreement.
3. To compensate Sellers for their costs and expenses, including unforseen
attorneys' fees and accountants fees and travel costs, necessarily incurred to
conduct and complete their due diligence investigation and to assure themselves
of the debts and liabilities of Buyer, Buyer agrees to reimburse Sellers for
such fees and costs incurred by Sellers from and after April 19, 1998.
4. All documents shall be subject to the approval by Counsel for the Buyer
and Sellers.
5. Arbitration.
A. BINDING ARBITRATION. Any dispute, controversy or claim (including any
claim based on or arising out of an alleged tort) between Sellers and the Buyer,
including but not limited to, (i) those arising out of or relating to the
Purchase Agreement or any document or other agreement made in connection with or
with reference to this Agreement [including any settlement or compromise;
promissory note or security agreement signed pursuant to this Agreement]
(collectively, the "CONTRACT DOCUMENTS") and (ii) those in connection with or
pertaining to the Assets or Properties of any Party hereto, shall be determined
by binding Arbitration in accordance with the Federal Arbitration Act ("FAA")
and the rules for the Arbitration of commercial disputes of the American
Arbitration Association (the "AAA RULES"), and the "Special Rules" set forth
in Section B of this Agreement. The law of the State of Texas shall be
applicable as to all substantive matters. In the event of any conflict between
Texas substantive law and the Special Rules, or between the FAA or AAA Rules and
the Special Rules, the Special Rules shall control. In the event of any conflict
between the FAA or AAA Rules, the FAA Rules shall control. Judgment upon any
Arbitration award may be entered in any court having jurisdiction. Any person
bound by this agreement to Arbitrate
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may bring an action, including a summary or expedited proceeding, to compel
Arbitration of any controversy or claim to which this Section applies in any
court having jurisdiction over such action.
B. SPECIAL RULES. All Arbitrations shall be conducted in the City of
Houston, Harris County, Texas and shall be administered by the American
Arbitration Association ("AAA") who will administer the process of appointing
three Arbitrators, at least one of which shall be a licensed attorney with at
least five (5) years judicial experience, or equivalent experience as a trial
attorney, to preside over any claim or controversy submitted to Arbitration. All
Arbitration hearings will be commenced within One Hundred Twenty (120) days
after the written demand for Arbitration; the Arbitrators may, upon a showing of
cause, extend the commencement of such hearing for up to an additional Ninety
(90) days.
C. RESERVATION OF RIGHTS. Nothing in this Section C or in any of the
provisions of this Agreement or the other Contract Documents pertaining to
Arbitration shall be deemed to (i) limit the applicability of any statutes of
limitation on or repose or any waivers contained in this Agreement or any other
Contract Document, (ii) limit Escrow Agent's rights, powers and authority to
continue in office handling matters within the provisions of this Shareholders'
Escrow Agreement, and (iii) limit the right to obtain provisional or ancillary
remedies from a court of law, such as (but not limited to) injunctive relief or
the appointment of a receiver, provided, however, the right to pursue a remedy
referred to in clauses (i, ii or iii) preceding shall not apply to the extent
the right to pursue such remedy itself is the subject of an Arbitration
proceeding. A party may obtain such provisional or ancillary remedies before,
during or after the pendency of any Arbitration proceeding brought pursuant to
this Agreement or any Contract Document. Neither the exercise of self-help
remedies nor the institution and/or maintenance of an action seeking provisional
or ancillary remedy shall constitute a waiver of the right of any party,
including the claimant in any such action, to Arbitrate the merits of the
controversy or claim occasioning resort to such remedies.
D. ATTORNEYS FEES. In the event of a dispute or breach or default of the
Purchase Agreement or any Contract Document which result in the commencement of
judicial litigation or commercial Arbitration, the successful party shall be
entitled to receive from the unsuccessful party, any and all reasonable
attorneys fees, court costs and expenses incurred in determination of the
dispute or breach or default, including recovery of any Arbitrators' fees or
costs.
E. SURVIVAL. The provisions of this Article shall survive the closing
under the Purchase Agreement, and shall be incorporated (either specifically or
by reference) in each Contract Document.
F. BINDING EFFECT. This Article and the terms, provisions and conditions
hereof, shall be binding upon and shall inure to the benefit of the parties,
their respective legal representatives, heirs, successors and assigns; provided,
however, that nothing contained herein shall negate or diminish the restrictions
set forth in this Article. This Article shall not be for the benefit of any
third party who is not a signatory hereof or assignee by written instrument.
6. ENTIRE AGREEMENT. The Purchase Agreement and this Addendum to
Agreement for Purchase of Common Stock contain the entire agreement between the
parties hereto relating to the subject matter hereof and all prior agreements
relative hereto which are not contained herein are terminated, cancelled and
superseded. THIS WRITTEN AGREEMENT AND ALL DOCUMENTS EXECUTED IN CONNECTION
HEREWITH OR CONTEMPLATED HEREBY REPRESENT THE FINAL AGREEMENT BETWEEN THE
PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES.
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7. Except as modified above, the Purchase Agreement shall remain in full
force and effect.
AGREED AND ACCEPTED AS OF APRIL 24, 1998.
For SELLERS: SOUTHEAST RECYCLING, INC.
By:
Michael T. McClere, Individually Its Authorized Officer and Agent
and as Designated Agent for Sellers:
Shannon McLeroy; Tech Technology Services, LLC; Rachel McClere 1998 Trust;
McClere Family Trust
MILLENNIUM INTEGRATION TECHNOLOGIES, INC.
By: ____________________________________
Its Authorized Officer and Agent
4
EXHIBIT 10(f)
CLEARWORKS TECHNOLOGIES, INC. LONG-TERM INCENTIVE PLAN
(Established Effective ______________, 1999)
1. OBJECTIVES. The ClearWorks Technologies, Inc. Long-Term Incentive
Plan (the "Plan") is designed to retain selected employees of ClearWorks
Technologies, Inc. (the "Company") and its Subsidiaries and reward them for
making significant contributions to the success of the Company and its
Subsidiaries. These objectives are to be accomplished by making awards under the
Plan and thereby providing Participants with a proprietary interest in the
growth and performance of the Company and its Subsidiaries.
2. DEFINITIONS. As used herein, the terms set forth below shall have
the following respective meanings:
"AWARD" means the grant of any form of stock option, stock
appreciation right, restricted stock, deferred stock, stock award or cash award,
whether granted singly, in combination or in tandem, to a Participant pursuant
to any applicable terms, conditions and limitations as the Committee may
establish in order to fulfill the objectives of the Plan.
"AWARD AGREEMENT" means a written agreement between the Company and
a Participant that sets forth the terms, conditions and limitations applicable
to an Award. Stock options shall be evidenced by award agreements, the terms and
provisions of which need not be the same with respect to each Optionee.
"BOARD" means the Board of Directors of the Company.
"CODE" means the Internal Revenue Code of 1986, as amended from time
to time.
"COMMITTEE" means the Compensation Committee or such committee of
the Board as is designated by the Board to administer the Plan. The Committee
shall be constituted to permit the Plan to comply with Rule 16b-3.
"COMMON STOCK" means the Common Stock, par value $.0001 per
share, of the Company.
"COMPANY" means ClearWorks Technologies, Inc., a Delaware
Corporation.
"DIRECTOR" means an individual serving as a member of the Board.
"DISABILITY" means permanent and total disability as determined
under procedures established by the Committee for purposes of the Plan.
"DISINTERESTED PERSON" shall have the meaning set forth in Rule
16b-3(d)(3), as promulgated by the Commission under the Exchange Act, as amended
from time to time.
<PAGE>
"EFFECTIVE DATE" means the date specified by the Board at the
time the Plan is approved by the Board"
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended
from time to time.
"FAIR MARKET VALUE" means, as of a particular date, (a) if the
shares of Common Stock are listed on a national securities exchange, the mean
between the highest and lowest sales price per share of Common Stock on the
consolidated transaction reporting system for the principal such national
securities exchange on that date, or, if there shall have been no such sale so
reported on that date, on the last preceding date on which such a sale was so
reported, (b) if the shares of Common Stock are not so listed but are quoted on
the Nasdaq National Market, the mean between the highest and lowest sales price
per share of Common Stock on the Nasdaq National Market on that date, or, if
there shall have been no such sale so reported on that date, on the last
preceding date on which such a sale was so reported, (c) if the Common Stock is
not so listed or quoted, the mean between the closing bid and asked price on
that date, or, if there are no quotations available for such date, on the last
preceding date on which such quotations shall be available, as reported by
Nasdaq, or, if not reported by Nasdaq, by the National Quotation Bureau, Inc. or
(d) if none of the above is applicable, such amount as may be determined by the
Board (or an Independent Third Party, should the Board elect in its sole
discretion to instead utilize an Independent Third Party for this purpose), in
good faith, to be the fair market value per share of Common Stock.
"INDEPENDENT THIRD PARTY" means an individual or entity independent
of the Company (and any transferor or transferee of Common Stock acquired upon
the exercise of an option under the Plan, if applicable) with experience in
providing investment banking appraisal or valuation services and with expertise
generally in the valuation of securities or other property of the type at issue,
that is chosen by the Board, in its sole discretion, to value securities or
other property for purposes of this Plan. The Company's independent accountants
shall be deemed to satisfy the criteria for an Independent Third Party if
selected by the Board for that purpose. The Board may utilize one or more
Independent Third Parties.
"PARTICIPANT" means an employee of the Company or any of its
Subsidiaries to whom an Award has been made under this Plan.
"PLAN" means the ClearWorks Technologies, Inc. Long Term Incentive
Plan, as set forth herein and as hereinafter amended from time to time.
"RESTRICTED STOCK" means Common Stock that is restricted or subject
to forfeiture provisions.
"RULE 16B-3" means Rule 16b-3 promulgated under the Exchange Act, or
any successor rule.
<PAGE>
"SUBSIDIARY" means any corporation of which the Company directly or
indirectly owns shares representing more than 50% of the voting power of all
classes or series of capital stock of such corporation which have the right to
vote generally on matters submitted to a vote of the shareholders of such
corporation.
"TERMINATION OF EMPLOYMENT" means the termination of the
participant's employment with the Company or any Subsidiary. A Participant
employed by a Subsidiary of the Company shall also be deemed to incur a
Termination of Employment if the Subsidiary ceased to be a Subsidiary and the
participant does not immediately thereafter become an employee of the Company or
another Subsidiary.
3. ELIGIBILITY. All employees of the Company and its Subsidiaries
(but excluding members of the Committee) who are responsible for or contribute
to the management, growth and profitability of the business of the Company are
eligible for Awards under this Plan. The Committee shall select the Participants
in the Plan from time to time by the grant of Awards under the Plan.
The granting of Awards under this Plan shall be entirely
discretionary and nothing in this Plan shall be deemed to give any employee of
the Company or its Subsidiaries any right to participate in this Plan or to be
granted an Award.
4. COMMON STOCK AVAILABLE FOR AWARDS. There shall be available for
Awards granted wholly or partly in Common Stock (including rights or options
which may be exercised for or settled in Common Stock) during the term of this
Plan an aggregate of 10,000,000 shares of Common Stock. The Board and the
appropriate officers of the Company shall from time to time take whatever
actions are necessary to file required documents with governmental authorities
and stock exchanges and transaction reporting systems to make shares of Common
Stock available for issuance pursuant to Awards. Such shares may consist, in
whole or in part, of authorized and unissued shares or treasury shares.
Common Stock related to Awards that are forfeited or terminated,
expire unexercised, are settled in cash in lieu of Common Stock or in a manner
such that all or some of the shares covered by an Award are not issued to a
Participant, or are exchanged for Awards that do not involve Common Stock, shall
immediately become available for Awards hereunder; provided, the person holding
such Award receives no benefits of ownership (within the meaning of Rule 16b-3)
while holding such Award. The Committee may from time to time adopt and observe
such procedures concerning the counting of shares against the Plan maximum as it
may deem appropriate under Rule 16b-3.
In the event of any merger, reorganization, consolidation,
recapitalization, spin-off, stock dividend, stock split, extraordinary
distribution with respect to the Common Stock or other similar change in
corporate structure affecting the Common Stock, such substitution or adjustments
shall be made in the aggregate number of shares reserved for issuance under the
Plan, in the number and option price of shares subject to outstanding Stock
Options and Stock Appreciation Rights, and in the number of shares subject to
other outstanding Awards granted under the Plan as may be determined to be
appropriate by the Board, in its sole discretion;
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<PAGE>
provided, however, that the number of shares subject to any award shall always
be a whole number. Such adjusted option price shall also be used to determine
the amount payable by the Company upon the exercise of any Stock Appreciation
Right associated with any stock option.
5. ADMINISTRATION. This Plan shall be administered by the
Compensation Committee of the Board or such other committee of the Board,
composed of not less than three (3) disinterested persons, each of whom shall be
appointed by and serve at the pleasure of the Board. If at any time no Committee
shall be in office, the functions of the Committee specified in the Plan shall
be exercised by the Board. The Committee shall have full and exclusive power to
interpret this Plan and to adopt such rules, regulations and guidelines for
carrying out this Plan as it may deem necessary or proper, all of which powers
shall be exercised in the best interests of the Company and in keeping with the
objectives of this Plan. The Committee may, in its discretion, provide for the
extension of the exercisability of an Award, accelerate the vesting or
exercisability of an Award, eliminate or make less restrictive any restrictions
contained in an Award, waive any restriction or other provision of this Plan or
an Award or otherwise amend or modify an Award in any manner that is either (a)
not adverse to the Participant holding such Award or (b) consented to by such
Participant, including (in either case), with respect to Awards of incentive
stock options (an "ISO"), an amendment or modification that may result in an
ISO's losing its status as an ISO. The Committee may correct any defect or
supply any omission or reconcile any inconsistency in this Plan or in any Award
in the manner and to the extent the Committee deems necessary or desirable to
carry it into effect. Any decision of the Committee in the interpretation and
administration of this Plan shall lie within its sole and absolute discretion
and shall be final, conclusive and binding on all parties concerned. No member
of the Committee or officer of the Company to whom it has delegated authority in
accordance with the provisions of Paragraph 6 of this Plan shall be liable for
anything done or omitted to be done by him or her, by any member of the
Committee or by any officer of the Company in connection with the performance of
any duties under this Plan, except for his or her own willful misconduct or as
expressly provided by statute.
Among other things, the Committee shall have the authority, subject
to the terms of the Plan:
(a) to select the employees to whom Awards may from time to time
be granted;
(b) to determine whether and to what extent Stock Options, Stock
Appreciation Rights, Restricted Stock and Deferred Stock or any combination
thereof are to be granted hereunder;
(c) to determine the number of shares of Common Stock to be covered
by each Award granted hereunder;
(d) to determine the terms and conditions of any Award granted
hereunder (including, but not limited to, the share price, any vesting
restriction or limitation and any vesting acceleration of forfeiture waiver
regarding any Award and the shares of Common Stock relating thereto, based on
such factors as the Committee shall determine);
(e) to adjust the terms and conditions, at any time or from time to
time, of any Awards, including with respect to performance goals and
measurements applicable to performance-based awards pursuant to the terms of the
Plan;
(f) to determine under what circumstances an Award may be settled in
cash or Common Stock;
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(g) to determine to what extent and under what circumstances Common
Stock and other amounts payable with respect to an award shall be deferred.
6. DELEGATION OF AUTHORITY. The Committee may delegate to the
President and to other senior officers of the Company its duties under this Plan
pursuant to such conditions or limitations as the Committee may establish,
except that the Committee may not delegate to any person the authority to grant
Awards to, or take other action with respect to, Participants who are subject to
Section 16 of the Exchange Act.
7. AWARDS. The Committee shall determine the type or types of Awards
to be made to each Participant under this Plan. Each Award made hereunder shall
be embodied in an Award Agreement, which shall contain such terms, conditions
and limitations as shall be determined by the Committee in its sole discretion
and shall be signed by the Participant and by the President of the Company for
and on behalf of the Company. An Award Agreement may include provisions for the
repurchase by the Company of Common Stock acquired pursuant to the Plan and the
repurchase of a Participant's option rights under the Plan. Awards may consist
of those listed in this Paragraph 7 and may be granted singly, in combination or
in tandem. Awards may also be made in combination or in tandem with, in
replacement of, or as alternatives to grants or rights (a) under this Plan or
any other employee plan of the Company or any of its Subsidiaries, including the
plan of any acquired entity, or (b) made to any Company or Subsidiary employee
by the Company or any Subsidiary. An Award may provide for the granting or
issuance of additional, replacement or alternative Awards upon the occurrence of
specified events, including the exercise of the original Award. Notwithstanding
anything herein to the contrary, no Participant may be granted Awards to
acquire, in the aggregate, more than 40% of the shares of Common Stock
originally authorized for Awards under this Plan, subject to adjustment as
provided in Paragraph 14. In the event of an increase in the number of shares
authorized under the Plan, the 40% limitation will apply to the increased number
of shares authorized.
(i) STOCK OPTION. An Award may consist of a right to purchase a
specified number of shares of Common Stock at a price specified by the Committee
in the Award Agreement or otherwise. A stock option may be in the form of an ISO
which, in addition to being subject to applicable terms, conditions and
limitations established by the Committee, complies with Section 422 of the Code.
Pursuant to the ISO requirements of Code Section 422, notwithstanding anything
herein to the contrary, (a) no ISO can be granted under the Plan more than ten
years following the Effective Date of the Plan, (b) no Participant may be
granted an ISO to the extent that, upon the grant of the ISO, the aggregate Fair
Market Value (determined as of the date the Award is granted) of the Common
Stock with respect to which ISOs (including Awards hereunder) are exercisable
for the first time by the Participant during any calendar year (under all plans
of the Company and any parent and subsidiary corporations) would exceed
$100,000, and (c) the exercise price of the ISO may not be less than 100% of the
Fair Market Value of the Common Stock at the time of grant (or not less than
110% of such Fair Market Value if the ISO is awarded to any person who, at the
time of grant, owns stock representing more than 10% of the combined voting
power of all classes of stock of the Company or any parent or Subsidiary).
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(ii) STOCK APPRECIATION RIGHT. An Award may consist of a right to
receive a payment, in cash or Common Stock, equal to the excess of the Fair
Market Value or other specified valuation of a specified number of shares of
Common Stock on the date the stock appreciation right ("SAR") is exercised over
a specified strike price as set forth in the applicable Award Agreement.
(iii) STOCK AWARD. An Award may consist of Common Stock or may be
denominated in units of Common Stock. All or part of any stock Award may be
subject to conditions established by the Committee and set forth in the Award
Agreement, which conditions may include, but are not limited to, continuous
service with the Company and its Subsidiaries, achievement of specific business
objectives, increases in specified indices, attaining specified growth rates and
other comparable measurements of performance. Such Awards may be based on Fair
Market Value or other specified valuations. The certificates evidencing shares
of Common Stock issued in connection with a stock Award shall contain
appropriate legends and restrictions describing the terms and conditions of the
restrictions applicable thereto.
(iv) CASH AWARD. An Award may be denominated in cash with the amount
of the eventual payment subject to future service and such other restrictions
and conditions as may be established by the Committee and set forth in the Award
Agreement, including, but not limited to, continuous service with the Company
and its Subsidiaries, achievement of specific business objectives, increases in
specified indices, attaining specified growth rates and other comparable
measurements of performance.
8. PAYMENT OF AWARDS.
(a) GENERAL. Payment of Awards may be made in the form of cash or
Common Stock or combinations thereof and may include such restrictions as the
Committee shall determine including, in the case of Common Stock, restrictions
on transfer and forfeiture provisions.
(b) DEFERRAL. The Committee may, in its discretion, (i) permit
selected Participants to elect to defer payments of some or all types of Awards
in accordance with procedures established by the Committee or (ii) provide for
the deferral of an Award in an Award Agreement or otherwise. Any such deferral
may be in the form of installment payments or a future lump sum payment. Any
deferred payment, whether elected by the Participant or specified by the Award
Agreement or by the Committee, may be forfeited if and to the extent that the
Award Agreement so provides.
(c) DIVIDENDS AND INTEREST. Dividends or dividend equivalent rights
may be extended to and made part of any Award denominated in Common Stock or
units of Common Stock, subject to such terms, conditions and restrictions as the
Committee may establish. The Committee may also establish rules and procedures
for the crediting of interest on deferred cash payments and dividend equivalents
for deferred payment denominated in Common Stock or units of Common Stock.
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(d) SUBSTITUTION OF AWARDS. At the discretion of the Committee, a
Participant may be offered an election to substitute an Award for another Award
or Awards of the same or different type.
9. CHANGE IN CONTROL. If so provided in the Award Agreement, an
Award shall become fully exercisable and restrictions on Restricted Stock shall
lapse upon a Change in Control (as hereinafter defined) of the Company. For
purposes of this Plan, a "Change in Control" shall mean the happening of any of
the following events:
(i) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act (a "Person") of
beneficial ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of thirty percent (30%) or more of either (1) the then outstanding
shares of Common Stock of the Company or (2) the combined voting power of the
then outstanding voting securities of the Company entitled to vote generally in
the election of directors; provided, however, that the following acquisitions
shall not constitute a Change in Control: (1) any acquisition directly from
Company; (2) any acquisition by the Company; (3) any acquisition by a Person
including the participant or with whom or with which the participant is
affiliated; (4) any acquisition by a Person or Persons one or more of which is a
member of the Board or an officer of the Company or an affiliate of any of the
foregoing on the Effective Date; (5) any acquisition by any employee benefit
plan (or related trust) sponsored or maintained by the Company or any
corporation controlled by the Company; or (6) any acquisition by any corporation
pursuant to a transaction described in clauses (A), (B) and (C) of paragraph
(iii) herein; or
(ii) During any period of twenty-four (24) consecutive months,
individuals who, as of the beginning of such period, constituted the entire
Board cease for any reason to constitute at least a majority of the Board,
unless the election, or nomination for election, by the Company's stockholders,
of each new director was approved by a vote of at least two-thirds (2/3) of the
Continuing Directors, as hereinafter defined, in office on the date of such
election or nomination for election for the new director. For purposes hereof,
"Continuing Director" shall mean (a) any member of the Board at the close of
business on the Effective Date; or (b) any member of the Board who succeeded any
Continuing Director describe in clause (1) above if such successor's election,
or nomination for election, by the Company's stockholders, was approved by a
vote of at least two-thirds (2/3) of the Continuing Directors then still in
office. The term "Continuing Director" shall not, however, include any
individual whose initial assumption of office occurs as a result of either an
actual or threatened election contest (as such term is used in Rule 14a-11 of
Regulation 14A of the Exchange Act) or other actual or threatened solicitation
of proxies or consents by or on behalf of a person other than the Board.
(iii) Approval by the stockholders of the Company of a
reorganization, merger or consolidation, in each case, unless, following such
reorganization, merger or consolidation, (A) more than 60% of the then
outstanding securities having the right to vote in the election of directors of
the corporation resulting from such reorganization, merger or consolidation is
then beneficially owned, directly or indirectly, by all or substantially all of
the individuals and entities who were beneficial owners of the outstanding
securities having the right to vote in the election of directors of the Company
immediately prior to such reorganization, merger or consolidation,
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(B) no Person (excluding the Company, any employee benefit plan (or related
trust) of the Company or such corporation resulting from such reorganization,
merger or consolidation and any Person beneficially owning, immediately prior to
such reorganization, merger or consolidation, directly or indirectly, 30% or
more of the then outstanding securities having the right to vote in the election
of directors of the Company) beneficially owns, directly or indirectly, 30% or
more of the then outstanding securities having the right to vote in the election
of the corporation resulting from such reorganization, merger or consolidation,
and (C) at least a majority of the members of the board of directors of the
corporation resulting from such reorganization, merger are Continuing Directors
at the time of the execution of the initial agreement providing for such
reorganization or consolidation; or
(iv) Approval by the stockholders of the Company of (A) a complete
liquidation or dissolution of the Company or (B) the sale or other disposition
of all or substantially all of the assets of the Company, other than to a
corporation, with respect to which following such sale or other disposition, (1)
more than 60% of the then outstanding securities having the right to vote in the
election of directors of such corporation is then beneficially owned, directly
or indirectly by all or substantially all of the individuals and entities who
were the beneficial owners of the outstanding securities having the right to
vote in the election of directors of the Company immediately prior to such sale
or other disposition of such outstanding securities, (2) no Person (excluding
the Company and any employee benefit plan (or related trust) of the Company or
such corporation and any Person beneficially owning, immediately prior to such
sale or other disposition, directly or indirectly, 30% or more of the
outstanding securities having the right to vote in the election of directors of
the Company) beneficially owns, directly or indirectly, 30% or more of the then
outstanding securities having the right to vote in the election of directors of
such corporation and (3) at least a majority of the members of the board of
directors of such a corporation are Continuing Directors at the time of the
execution of the initial agreement or action of the Board providing for such
sale or other disposition of assets of the Company.
10. STOCK OPTION EXERCISE. The price at which shares of Common Stock
may be purchased under a stock option shall be paid in full at the time of
exercise in cash or, if permitted by the Committee, by means of tendering Common
Stock or surrendering all or part of that or any other Award, including
Restricted Stock, valued at Fair Market Value on the date of exercise, or any
combination thereof. The Committee shall determine acceptable methods for
tendering Common Stock or Awards to exercise a stock option as it deems
appropriate. If permitted by the Committee, payment may be made by successive
exercises by the Participant. The Committee may provide for procedures to permit
the exercise or purchase of Awards by (a) loans from the Company or (b) use of
the proceeds to be received from the sale of Common Stock issuable pursuant to
an Award. Unless otherwise provided in the applicable Award Agreement, in the
event shares of Restricted Stock are tendered as consideration for the exercise
of a stock option, a number of the shares issued upon the exercise of the stock
option, equal to the number of shares of Restricted Stock used as consideration
therefor, shall be subject to the same restrictions as the Restricted Stock so
submitted as well as any additional restrictions that may be imposed by the
Committee.
11. TAX WITHHOLDING. The Company shall have the right to deduct
applicable taxes from any Award payment and withhold, at the time of delivery of
cash or shares of
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Common Stock under this Plan, an appropriate amount of cash or number of shares
of Common Stock or a combination thereof for payment of taxes required by law or
to take such other action as may be necessary in the opinion of the Company to
satisfy all obligations for withholding of such taxes. The Committee may also
permit withholding to be satisfied by the transfer to the Company of shares of
Common Stock theretofore owned by the holder of the Award with respect to which
withholding is required. If shares of Common Stock are used to satisfy tax
withholding, such shares shall be valued based on the Fair Market Value when the
tax withholding is required to be made.
12. AMENDMENT, MODIFICATION, SUSPENSION OR TERMINATION. The Board
may amend, modify, suspend or terminate this Plan for the purpose of meeting or
addressing any changes in legal requirements or for any other purpose permitted
by law except that (a) no amendment or alteration that would impair the rights
of any Participant under any Award previously granted to such Participant shall
be made without such Participant's consent and (b) no amendment or alteration
shall be effective prior to approval by the Company's shareholders to the extent
such approval is then required pursuant to Rule 16b-3 in order to preserve the
applicability of any exemption provided by such rule to any Award then
outstanding (unless the holder of such Award consents) or to the extent
shareholder approval is otherwise required by applicable legal requirements.
Notwithstanding the foregoing, no amendment or modification shall be made,
without the approval of the shareholders of the Company, which would:
(i) Increase the total number of shares reserved for the purposes of
the Plan under Paragraph 4, except as provided in Paragraph 15; or
(ii) Materially modify the requirements as to eligibility for
participation in the Plan.
13. TERMINATION OF EMPLOYMENT. Upon the termination of employment by
a Participant, any unexercised, deferred or unpaid Awards shall be treated as
provided in the specific Award Agreement evidencing the Award.
14. ASSIGNABILITY. Unless otherwise determined by the Committee and
provided in the Award Agreement, no Award or any other benefit under this Plan
constituting a derivative security within the meaning of Rule 16a-1(c) under the
Exchange Act shall be assignable or otherwise transferable during the
Participant's lifetime and, after the death of the Participant, except to his
executor or the personal representative of the participant's estate; provided,
however, that the Committee may allow for assignments (i) pursuant to a
qualified domestic relations order as defined by the Code or Title I of the
Employee Retirement Income Security Act, or the rules thereunder (a "QDRO") and
(ii) if the Award Agreement, as approved by the Committee, expressly so
provides, to a Permitted Assignee, provided that no consideration is received in
connection with any such assignment. No ISO Award under this Plan shall be
assignable or otherwise transferable, except by will or the laws of descent and
distribution or pursuant to a QDRO. An Award that has been transferred pursuant
to the preceding two sentences may not be further transferred unless the
transfer is made in accordance with the preceding sentence or the transfer is
made to the Participant. "Permitted Assignee" means a
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Family Partnership or a Family Trust. A "Family Partnership" shall mean any
partnership, general or limited, in which at the time of transfer the
Participant is a partner and each of the remaining members of the partnership
are either (x) members of the Participant's immediate family, (y) a Family
Trust, or (z) a charitable organization that is described under Section 170(c)
of the Code (a "Charity"); provided, however, that Charities may not have more
than an aggregate of a five percent capital or profits interest in the
partnership. A "Family Trust" shall mean any trust in which, at the time of
transfer, the beneficiaries under the trust are limited to one or more of (a)
the Participant, (b) a member or members of the Participant's immediate family,
and (c) one or more Charities, provided that all such Charities have no more
than an aggregate of a five percent actuarial interest in the trust. The
Committee may prescribe and include in applicable Award Agreements other
restrictions on transfer. Any attempted assignment of an Award or any other
benefit under this Plan in violation of this Paragraph 14 shall be null and
void.
15. ADJUSTMENTS.
(a) The existence of outstanding Awards shall not affect in any
manner the right or power of the Company or its shareholders to make or
authorize any or all adjustments, recapitalizations, reorganizations or other
changes in the capital stock of the Company or its business or any merger or
consolidation of the Company, or any issue of bonds, debentures, preferred or
prior preference stock (whether or not such issue is prior to, on a parity with
or junior to the Common Stock) or the dissolution or liquidation of the Company,
or any sale or transfer of all or any part of its assets or business, or any
other corporate act or proceeding of any kind, whether or not of a character
similar to that of the acts or proceedings enumerated above.
(b) In the event of any subdivision or consolidation of outstanding
shares of Common Stock or declaration of a dividend payable in shares of Common
Stock or capital reorganization or reclassification or other transaction
involving an increase or reduction in the number of outstanding shares of Common
Stock, the Committee may adjust proportionally (i) the number of shares of
Common Stock reserved under this Plan and covered by outstanding Awards
denominated in Common Stock or units of Common Stock; (ii) the exercise or other
price in respect of such Awards; and (iii) the appropriate Fair Market Value and
other price determinations for such Awards. In the event of any consolidation or
merger of the Company with another corporation or entity or the adoption by the
Company of a plan of exchange affecting the Common Stock or any distribution to
holders of Common Stock of securities or property (other than normal cash
dividends or dividends payable in Common Stock), the Committee shall make such
adjustments or other provisions as it may deem equitable, including adjustments
to avoid fractional shares, to give proper effect to such event. In the event of
a corporate merger, consolidation, acquisition of property or stock, separation,
reorganization or liquidation, the Committee shall be authorized, in its
discretion, (i) to issue or assume stock options, regardless of whether in a
transaction to which Section 424(a) of the Code applies, by means of
substitution of new options for previously issued options or an assumption of
previously issued options, (ii) to make provision, prior to the transaction, for
the acceleration of the vesting and exercisability of, or lapse of restrictions
with respect to, Awards and the termination of options that remain unexercised
at the time of such transaction or (iii) to provide for the acceleration of the
vesting and exercisability of the options and the cancellation thereof in
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exchange for such payment as shall be mutually agreeable to the Participant and
the Committee.
16. RESTRICTIONS. No Common Stock or other form of payment shall be
issued with respect to any Award unless the Company shall be satisfied based on
the advice of its counsel that such issuance will be in compliance with
applicable federal and state securities laws. It is the intent of the Company
that this Plan comply with Rule 16b-3 with respect to persons subject to Section
16 of the Exchange Act unless otherwise provided herein or in an Award
Agreement, that any ambiguities or inconsistencies in the construction of this
Plan be interpreted to give effect to such intention and that, if any provision
of this Plan is found not to be in compliance with Rule 16b-3, such provision
shall be null and void to the extent required to permit this Plan to comply with
Rule 16b-3. Certificates evidencing shares of Common Stock delivered under this
Plan may be subject to such stop transfer orders and other restrictions as the
Committee may deem advisable under the rules, regulations and other requirements
of the Securities and Exchange Commission, any securities exchange or
transaction reporting system upon which the Common Stock is then listed and any
applicable federal and state securities law. The Committee may cause a legend or
legends to be placed upon any such certificates to make appropriate reference to
such restrictions.
17. PARACHUTE PAYMENT LIMITATION. Notwithstanding any provision of
this Plan to the contrary, the Committee may provide in the Award Agreement for
a limitation on the acceleration of vesting and exercisability of unmatured
Awards to the extent necessary to avoid or mitigate the impact on the
Participant of the golden parachute excise tax under Section 4999 of the Code.
In the event the Award Agreement does not contain any contrary provision
regarding the method of avoiding or mitigating the impact of the golden
parachute excise tax under Section 4999 of the Code on the Participant, then,
the aggregate present value of all parachute payments payable to or for the
benefit of the Participant, whether payable pursuant to the Award or otherwise,
shall be limited to three times the Participant's base amount less one dollar
and, to the extent necessary, the exercise of this Award shall be limited by the
Administrator, in its discretion, in order that this limitation not be exceeded.
For purposes of this Paragraph 17, the terms "parachute payment," "base amount"
and "present value" shall have the meanings assigned thereto under Section 280G
of the Code. It is the intention of this Paragraph 17 to avoid excise taxes on
the Participant under Section 4999 of the Code or the disallowance of a
deduction to the Company pursuant to Section 280G of the Code.
18. UNFUNDED PLAN. Insofar as it provides for Awards of cash, Common
Stock or rights thereto, this Plan shall be unfunded. Although bookkeeping
accounts may be established with respect to Participants who are entitled to
cash, Common Stock or rights thereto under this Plan, any such accounts shall be
used merely as a bookkeeping convenience. The Company shall not be required to
segregate any assets that may at any time be represented by cash, Common Stock
or rights thereto, nor shall this Plan be construed as providing for such
segregation, nor shall the Company, the Board or the Committee be deemed to be a
trustee of any cash, Common Stock or rights thereto to be granted under this
Plan. Any liability or obligation of the Company to any Participant with respect
to a grant of cash, Common Stock or rights thereto under this Plan shall be
based solely upon any contractual obligations that may be created by this Plan
and any Award Agreement with such Participant, and no such liability or
obligation of the Company shall be deemed to be secured by any pledge or other
encumbrance on any
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property of the Company. None of the Company, the Board or the Committee shall
be required to give any security or bond for the performance of any obligation
that may be created by this Plan.
19. GOVERNING LAW. This Plan and all determinations made and actions
taken pursuant hereto, to the extent not otherwise governed by mandatory
provisions of the Code or the securities laws of the United States, shall be
governed by and construed in accordance with the laws of the State of Texas.
20. EFFECTIVE DATE OF PLAN. This Plan shall be effective as of the
date (the "Effective Date") it is approved by the Board of Directors of the
Company. Notwithstanding the foregoing, the adoption of this Plan is expressly
conditioned upon the approval by written consent of the holders of a majority of
shares of outstanding shares of Common Stock within one year of the Effective
Date. If the shareholders of the Company should fail so to approve this Plan
prior to such date, this Plan shall terminate and cease to be of any further
force or effect and all grants of Awards hereunder shall be null and void.
21. NO EMPLOYMENT GUARANTEED. No provision of this Plan or any Award
Agreement hereunder shall confer any right upon any employee to continued
employment with the Company or any Subsidiary.
22. RIGHTS AS SHAREHOLDER. Unless otherwise provided under the terms
of an Award Agreement, a Participant shall have no rights as a holder of Common
Stock with respect to Awards granted hereunder, unless and until certificates
for Common Stock are issued to such Participant.
Attested to by the Secretary of ClearWorks
Technologies, Inc. as adopted by the Board
of Directors and Shareholders of ClearWorks
Technologies, Inc. effective as of the
_____day of _______________, 1999 (the
"Effective Date").
__________________________________________
Celia Figueroa
Corporate Secretary
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EXHIBIT 10(g)
STOCK WARRANT PLAN
Southeast Tire Recycling, Inc., a Florida Business Corporation,
(hereinafter referred to as the "Corporation") has adopted this Stock Warrant
Plan under which warrants to purchase a maximum of Five Million (5,000,000)
shares of its fully paid and nonassessable $.0001 common stock may be issued to
employees, consultants and non-employee directors of the Corporation. This Stock
Warrant Plan provides both for the grant of options intended to qualify as
"incentive stock options" under the Internal Revenue Code of 1986, as amended,
as well as options that do not so qualify.
1. Effective Date. This Plan shall become effective as of April 24, 1998,
and prior to such date, no options have been granted under the Plan or any
similar or predecessor Stock Warrant Plan.
2. Term. With respect to incentive stock options, no option may be
granted more than ten years after the effective date of this Stock Warrant plan
or exercised more than ten years after the date of grant (five years if the
optionee owns more than Ten Percent (10%) of the common stock of the Corporation
at the date of grant).
3. Minimum Exercise Price. With regard to incentive stock options, the
exercise price of the option may not be less than 100% of the fair market value
of the common stock at the date of grant (110% if the optionee owns more than
10% of the common stock of the Corporation). Non-qualified options granted under
the plan may not have an exercise price of less than 85% of the fair market
value of the Corporation's common stock on the date of grant.
4. Terms, Conditions and Price. The Board of Directors of the Corporation
shall have the authority and power to determine the terms, conditions and price
of each Warrant and to divide the Warrants into classes and/or series, as they
deem appropriate.
5. Certificates. Warrants shall be evidenced by a Certificate similar in
form as the authorized Stock Certificates of the Corporation but which states
that it is a WARRANT TO PURCHASE COMMON SHARES and shall reference this Stock
Warrant Plan. Each certificate for Warrants shall be transferrable, assignable,
severable, divisible and registered with the Transfer Agent of the Corporation.
No Warrants shall be issued without a named existing entity or person as its
holder and owner. Each certificate shall provide for the purchase of up to One
Thousand (1000) shares of the authorized and nonassessable common stock of
Southeast Tire Recycling, Inc., a Florida Business Corporation, having a par
value of $0.0001 per share. The Corporation (or the Transfer Agent if so
delegated by the Corporation) shall maintain a register of Holders of Warrants
similar in form and substance to that maintained for common stock. No Warrant
may be exercised until it is registered with the Corporation. In the event that
a Warrant is lost, destroyed or misplaced, then it may be replaced only in
accordance with the Corporation's policies regarding issuing a replacement
certificate for its common stock which may be lost, destroyed or misplaced, and
a lost instrument bond from an acceptable surety in an amount to be determined
by the Corporation shall be submitted to the Corporation (or Transfer Agent)
prior to the issuance of a Replacement Certificate.
6. Exercise. A certificate for Warrants may be exercised by written
notice together with the Certificate of Warrants delivered to the Transfer Agent
or the Principal office of the Corporation together with a cashiers' check or
good funds equal to the number of shares to be purchased multiplied by the
exercise price stated in the Warrant, together with payment of an amount equal
to any transfer taxes or transfer agents' fees and costs. The exercise of each
Warrant shall be subject to any applicable Federal and/or State Securities and
Corporation laws or regulations or rules, including those of any applicable
stock exchange upon which the shares of the Corporation may be listed or any
trading market of the Corporation's common shares. The Corporation or the
Transfer Agent, prior to issuing the common shares sought to be exercised, may
require that the holder of the Warrant who seeks to exercise such Warrant
deliver an opinion of Legal Counsel acceptable to the Corporation or the
Transfer Agent that the exercise of the Warrant and the issuance of the common
shares is not in violation of any applicable Federal and/or State Securities and
Corporation laws or regulations or rules, including those of any applicable
stock exchange upon which the shares of the Corporation may be listed or any
trading market of the Corporation's common shares. All costs of Legal Counsel
and any expenses incurred by the Corporation or the Transfer Agent incident to
the
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Stock Warrant Plan (Draft #1) Page 1 of 4
<PAGE>
issuance of the exercised common shares shall be payable by the Holder of the
Warrant, and the certificate for the common shares may be held by the
Corporation or the Transfer Agent until such costs are paid by the Holder of the
Warrant.
7. Rights, Privileges and Obligations of Warrants.
A. Class A Warrants. Class A Warrants shall provide for an exercise price
of Three Dollars and No Cents ($3.00) per common share and shall expire on or
before five (5) years from the date of issuance. Each Class A Warrant shall
provide that it shall be cancellable at the sole discretion of the Corporation
on or before thirty days after written notice upon payment of a cancellation
price of One Dollar and No Cents ($1.00) per share. Each such Class A Warrant
shall be subject to the terms, conditions and provisions of this Stock Warrant
Plan.
B. Class B Warrants. Class B Warrants shall provide for an exercise price
of Six Dollars and No Cents ($6.00) per common share and shall expire on or
before ten (10) years from the date of issuance. Each Class B Warrant shall
provide that it shall be cancellable at the sole discretion of the Corporation
on or before thirty days after written notice upon payment by the Corporation of
a cancellation price of One Dollar and 20 Cents ($1.20) per share. Each such
Class B Warrant shall be subject to the terms, conditions and provisions of this
Stock Warrant Plan.
8. Partial Exercise. A Certificate of Warrants may be exercised for such
number of common shares equal to or less than the number authorized by the
Certificate. If a Certificate of Warrants is exercised for less than the number
of common shares authorized by the Certificate, then the Corporation shall issue
to the Holder of the delivered Certificate of Warrants, in addition to the
number of common shares exercised, a new Certificate of Warrants equal to the
number of common shares not exercised although authorized by the Certificate of
Warrants. For example, if the Certificate of Warrants permits the exercise for
1,000 common shares of the Corporation, but only the Holder only exercises such
Warrant for 100 common shares, then the Corporation shall issue to the Holder a
Certificate of Warrants for 900 common shares.
9. Changes in Common Stock. If the Corporation splits, reverse splits,
changes the par value, classifies or affects the rights, privileges or
entitlements of its common stock, any Certificate of Warrant for common stock
then outstanding shall be appropriately modified. For example, if the common
stock is split 2 for 1, then the Warrant for 1,000 shares of common stock will
be increased to allow the Holder to exercise 2 1,000 (or 2,000 common shares)
and the exercise price shall be similarly divided by 2. Therefore a Class A
Warrant for 1,000 common shares at $3.00 per share would allow the exercise of
2,000 common shares at a price of $1.50 per share.
10. Miscellaneous.
a. Notices. Except as otherwise provided, any notices or other
communications required or permitted to be given pursuant to this Plan shall be
in writing and shall be considered as properly given if mailed by first-class
United States mail properly addressed, postage prepaid, registered or certified,
with return receipt requested, or by prepaid telegram or by facsimile
transmission if receipt is acknowledged by the addressee. Notice so mailed shall
be effective upon the expiration of three business days after its deposit.
Notice given in any other manner shall be effective only if and when received by
the addressee. For purposes of notice, the address of each party shall be the
last known address; Provided, however, that each party shall have the right to
change his respective address for notices hereunder to another location(s)
within the continental United States by giving 30 days' written notice to the
other party in the manner set forth hereinabove.
b. Applicable Law. This Plan, and the obligations of the parties
hereunder, shall be governed by and construed and enforced in accordance with
the laws of the State of Florida and the substantive laws of the United States
of America.
c. Binding Effect. This Plan and the terms, provisions and conditions
hereof, shall be binding upon and shall inure to the benefit of the Corporation,
the Transfer Agent and parties receiving Warrants hereunder, their respective
legal representatives, heirs, successors and assigns; provided, however, that
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nothing contained herein shall negate or diminish the restrictions set forth in
this Plan. This Plan shall not be for the benefit of any third party who is not
a signatory hereof or assignee by written instrument.
d. Entire Plan. This Plan contains the entire Plan relating to the
subject matter hereof and all prior agreements relative hereto which are not
contained herein are terminated, cancelled and superseded. THIS WRITTEN PLAN AND
ALL DOCUMENTS EXECUTED IN CONNECTION HEREWITH OR CONTEMPLATED HEREBY REPRESENT
THE FINAL AGREEMENT AND PLAN BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
e. Amendment. This Plan may be modified or changed by the Board of
Directors of the Corporation as they may deem appropriate, by setting same forth
in a written instrument executed by a majority of the then serving members of
the Board of Directors. Any such amendments, variations, modifications or
changes setting forth more onerous or additional conditions shall not be
effective and binding upon the Holders of certificates of Warrants then issued
and outstanding on the date of modification or change unless the Holder consents
to such change in writing.
f. Exhibits. All exhibits, schedules and documents attached hereto, if
any, are hereby incorporated in this Plan and made a part hereof by reference.
g. Severability. This Plan is intended to be performed in accordance
with, and only to the extent permitted by, all applicable laws, ordinances,
rules and regulations. If any provision of this Plan or the application thereof
to any person or circumstances shall, for any reason and to any extent, be
invalid or unenforceable, the remainder of this Plan and the application of such
provision to the other persons or circumstances shall not be effected thereby,
but rather shall be enforced to the greatest extent permitted by law.
h. Time of the Essence. Time is of the essence of this Plan. Any Warrant
which is not exercised in accordance herewith before the expiration date, shall
not be enforceable and shall be cancelled on the books of the Corporation.
i. Waiver. Any waiver as to any of the terms or conditions of this Plan
shall not operate as a future waiver of the same terms and conditions or prevent
the future enforcement of any of the terms and conditions hereof.
j. Captions. Captions and headings of sections, paragraphs or
subparagraphs of this Plan (and any Table of Contents of this Plan) are solely
for the convenience of the parties and are not a part of this Plan, and shall
not be used for the interpretation or determination of the conditions of this
Plan or any provision hereof.
k. Execution of Additional Documents. Each party hereto agrees to
execute, within ten days after notice, such other documents, instruments or
written evidence of conveyance or assignment as shall be reasonably required or
appropriate to perfect or any conveyance or assignment of any asset or
instrument conveyed or assigned herein.
l. Attorneys Fees. In the event of a dispute or breach or default
hereunder, which result in the commencement of judicial litigation or commercial
arbitration, the successful party shall be entitled to receive from the
unsuccessful party, any and all reasonable attorneys fees, court costs and
expenses incurred in determination of the dispute or breach or default.
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Stock Warrant Plan (Draft #1) Page 3 of 4
<PAGE>
This Plan has been adopted by the Board of Directors of Southeast Tire
Recycling, Inc., effective the date set forth below, to which I hereby certify.
Dated: April 24, 1998 Southeast Tire Recycling, Inc.
Attest: _________________________________________
President
________________________________________________________________________________
Chairman
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Stock Warrant Plan (Draft #1) Page 4 of 4
EXHIBIT 10(h)
AGREEMENT OF MERGER AND PLAN OF REORGANIZATION
This Agreement of Merger and Plan of Reorganization ("Agreement")
dated May 1, 1998 is by and among ClearWorks Technologies, Inc., a Delaware
corporation, (the "Buyer") and Team Renaissance, Inc., a Texas corporation, (the
"Company") and Michael C. Callihan, the majority stockholder of Company and
other stockholders of Company (collectively referred to as the "Sellers").
WHEREAS, the Sellers collectively own all of the outstanding
stock of the Company;
WHEREAS, the Company is engaged in the business (the "Business")
of providing network wiring and cabling services;
WHEREAS, the Buyer desires to acquire by purchase all of Sellers'
shares in the Company;
WHEREAS, for U.S. federal income tax purposes, it is intended that this
merger shall qualify as a tax-free reorganization under the provisions of
Section 368 of the Internal Revenue Code of 1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the foregoing premises and
representations, warranties and agreements contained herein, and for good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
ARTICLE I
CLOSING
Section I.1 CLOSING. Subject to the provisions of this Agreement,
the Merger shall be consummated by filing with the Secretary of State of the
States of Texas and Delaware a certificate of merger, in such form as required
by, and signed and attested in accordance with, the relevant provisions of the
Texas Business Corporation Act (the "TCBA") and the Delaware General
Corporations Law the "DGCL") (the time of such filing or such later time and
date as is specified in such filing being the "Effective Time"). The closing of
the purchase and sales provided for herein (the "Closing") is to take place on
May 21, 1998 ("Closing Date") at the
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offices of Royall & Fleschler, 1331 Lamar, Suite 1375, Houston, Texas 77010,
concurrently with the execution and delivery hereof.
Section 1.2 EFFECT OF CLOSING. By virtue of the Merger and
without the necessity of any action by or on behalf of the parties hereto:
(a) At the Effective Time, (i) the separate existence of the Company
shall cease and the Company shall be merged with and into Buyer (the Buyer
and the Company are sometimes referred to herein as the "Constituent
Corporations" and the Buyer is sometimes referred to herein as the
"Surviving Corporation"), (ii) the Certificate of Incorporation of the
Buyer shall be the Certificate of Incorporation of the Surviving
Corporation until thereafter amended and (iii) the By-laws of the Buyer as
in effect immediately prior to the Effective Time shall be the By-laws of
the Surviving Corporation until thereafter amended.
(b) At and after the Effective Time, the Surviving Corporation
shall possess all the rights, privileges, powers and franchises as well as
of a public and of a private nature, and be subject to all the
restrictions, disabilities and duties, of each of the Constituent
Corporations; and all and singular the rights, privileges, powers and
franchises of each of the Constituent Corporations, and all property,
real, personal and mixed, and all debts due to either of the Constituent
Corporations on whatever account, as well as for stock subscriptions as
all other things in action or belonging to each of the Constituent
Corporations shall be vested in the Surviving Corporation; and all
property, rights, privileges, powers and franchises, and all and every
other interest shall be thereafter the property of the Surviving
Corporation as they were of the respective Constituent Corporations, and
the title to any real estate vested by deed or otherwise, in either of the
Constituent Corporations, shall not revert or be in any way impaired; but
all rights of creditors and all liens upon any property of either of the
Constituent Corporations shall be preserved unimpaired; and all debts,
liabilities and duties of the respective Constituent Corporations shall
thenceforth attach to the Surviving Corporation and may be enforced
against it to the same extent as if said debts and liabilities had been
incurred or contracted by it, except as otherwise provided by law or
contract.
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
Section II.1 EFFECT ON CAPITAL STOCK. As of the Effective Time, by
virtue of the Merger and without any action on the part of any holder of shares
of the Company or shares of capital stock of the Buyer:
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(a) CAPITAL STOCK. Each issued and outstanding share of the capital
stock of the Buyer shall continue to be an issued and outstanding share of
capital stock of the Surviving Corporation. Each certificate representing
immediately prior to the Effective Time issued shares of capital stock of
the Buyer shall continue to evidence ownership of the same number of
shares of capital stock of the Surviving Corporation.
(b) CANCELLATION OF TREASURY STOCK. All shares of Company Common
Stock that are owned by the Company as treasury stock shall be canceled
and retired and shall cease to exist (collectively the "Canceled Shares")
and no stock of the Buyer or other consideration shall be delivered in
exchange therefor.
(c) EXCHANGE RATIO FOR COMPANY COMMON STOCK. Subject to Section 2.2,
each issued and outstanding share of Company Common Stock (other than the
Canceled Shares) shall be converted into the right to receive a number of
shares of Buyer Common Stock exchanged at a ratio of three and two tenths
(3.2) shares of Company Common Stock for one share of Buyer Common Stock.
As of the Effective Time, all shares of Company Common Stock shall no
longer be outstanding and shall automatically be canceled and retired and
shall cease to exist, and each holder of a certificate representing any
such shares shall cease to have any rights with respect thereto.
(d) CANCELLATION OF DEBT. The majority shareholder Michael C.
Callihan will execute a cancellation of debt owed by the Company in the
form of notes payable to Michael C. Callihan in the amount of $14,598.04.
Section II.2 EXCHANGE OF CERTIFICATES. (a) On the Closing Date, each
Seller shall surrender to Shannon McLeroy, 505 N. Belt, Suite 140, Houston,
Texas, 77060, Vice President of the Buyer, all certificates representing the
Company Common Stock. Upon surrender of the Company Common Stock, such Seller
shall be entitled to receive the amount of Buyer Common Stock specified in
Section 2.1. All shares of Buyer Common Stock issued upon the surrender for
exchange of shares of Company Common Stock in accordance with the terms hereof
shall be deemed to have been issued in full satisfaction of all rights
pertaining to such shares of Company Common Stock, and there shall be no further
registration of transfers of the shares of Company Common Stock after the
Effective Time.
Section II.3 AUDIT. Within sixty (60) days of Closing, the interest
holders in the Company shall cooperate at no charge to Buyer, in conducting as
audit of the combined financial statements of the Company as of April 30, 1998
(the "Audit Date"), in accordance with generally accepted auditing standards and
generally accepted accounting principles ("GAAP"). The certificate of such
Accounting Firm having no qualifications or limitations.
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Section II.4 EMPLOYMENT AGREEMENT. At the Closing, the majority
shareholder, Michael C. Callihan shall enter into an employment agreement with
Buyer (the "Employment Agreement") in substantially the form of Exhibit A,
attached hereto and made a part hereof.
Section II.5 SHAREHOLDERS' AGREEMENT. At the Closing, the Sellers
will each enter into a Shareholders' Agreement which contains provisions
concerning the transferability of stock of the Buyer in substantially the form
of Exhibit B, attached hereto and made a part hereof.
Section II.6 TAXES UPON CONVEYANCE AND TRANSFER. The Sellers shall
pay any and all sales, use, transfer or similar taxes payable in connection with
the sale, transfer and assignment of the Company Common Stock to Buyer.
Section II.7 MAIL RECEIVED AFTER CLOSING. Following the Closing,
Buyer may receive and open all mail addressed to the Sellers and, to the extent
that such mail and the contents thereof relate to the Business of the Company,
deal with the contents thereof in its discretion. Buyer shall notify the Sellers
of and provide the Sellers copies of any mail that on its face obliges the
Sellers to take any action.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
The Sellers, jointly and severally, represent and warrant to Buyer
the following:
Section III.1 CORPORATE STATUS AND GOOD STANDING. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Texas, with full corporate power and authority under its
certificate or articles of incorporation and by-laws to own and lease its
properties and to conduct the Business. The Company is duly qualified to do
business as a foreign corporation in all states in which the nature of its
business requires such qualification and the failure to do so would have an
adverse effect on the Company or the Company Common Stock.
Section III.2 CAPITAL STRUCTURE. As of the Closing Date, the Company
Common Stock are duly authorized, validly issued, fully paid and non-assessable
and are not subject to preemptive rights or rights of any person to acquire
securities of the Company. The Company Common Stock are all of the outstanding
shares of the capital stock of the Company and are owned beneficially and of
record by the shareholders in the amounts listed on Exhibit C, attached hereto
and made a part hereof. The Company has not issued (i) any securities
convertible or exchangeable for shares of common stock of the Company; or (ii)
any options, warrants, calls, rights (including preemptive rights), commitments
or agreements to which the Company is bound.
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As of the Closing Date, there are no stockholder agreements, voting trusts or
other agreements or understandings to which either of the Sellers or the Company
is a party that will limit in any way the transactions described in the
Agreement or the free and clear ownership of the Company Common Stock by Buyer.
Section III.3 AUTHORIZATION. Each of the Sellers has full power and
authority to execute and deliver this Agreement and the exhibits attached
hereto; to consummate the transactions contemplated herein; and to take all
actions required to be taken by each of them pursuant to the provisions hereof;
and each of the Sellers agree that this Agreement and the exhibits attached
hereto constitute the valid and binding obligation of the Sellers and this
Agreement and exhibits attached hereto are enforceable in accordance with their
terms. To the extent any spouse or former spouse of the Seller has any community
property interest in the Company Common Stock, such spouse or former spouse has
executed a counterpart hereof.
Section III.4 NON-CONTRAVENTION. Except as set forth in Exhibit D
attached hereto and made a part hereof, neither the execution and delivery of
this Agreement or any documents executed in connection herewith, nor the
consummation of the transactions contemplated herein or therein, does or will
violate, conflict with, result in breach of or require notice or consent under
any law, the charter or bylaws of the Company or any provision of any agreement
or instrument to which the Company is a party. The Sellers collectively own 100%
of the outstanding securities of the Company. The last regularly prepared annual
income statement for the Company shows revenues of less than $2,000,000, and the
last regularly prepared balance sheet of the Company shows assets of less than
$1,000,000. The Sellers are collectively the ultimate parent entity of the
Company and, assuming the accuracy of the representation in Section 4.3, no
filing under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR
Act") is required in connection with the transactions contemplated by this
Agreement.
Section III.5 VALIDITY. There are no pending or threatened judicial
or administration actions, proceedings or investigations which question the
validity of this Agreement or any action taken or contemplated by the Company or
the Sellers in connection with this Agreement.
Section III.6 BROKER INVOLVEMENT. The Sellers have not hired,
retained or dealt with any broker or finder in connection with the transactions
contemplated by this Agreement.
Section III.7 LITIGATION. Except as set forth on Exhibit E attached
hereto and made a part hereof, there is no investigation, claim or proceeding or
litigation of any type pending or threatened involving or that might have an
adverse effect on the Sellers or Buyer as the owner of the Company Common Stock,
and Sellers are unaware of any judgment, order, writ, injunction or decree of
any court, government or governmental agency, or arbitral tribunal against or
involving Sellers or the Company that might have an adverse effect on Sellers or
Buyer as the
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owner of the Company Common Stock.
Section III.8 TITLE. The Sellers are the true and lawful owners of
the Company Common Stock, free and clear of any and all liens, encumbrances,
mortgages, options, security interests, restrictions, liabilities, pledges and
assignments of any kind, and each of the Sellers has the full right to sell and
transfer to Buyer good and marketable title to the Company Common Stock, free
and clear of any and all liens and encumbrances of any nature or description.
The delivery to Buyer of the instruments of transfer of ownership contemplated
by this Agreement will vest good and marketable title to the Company Common
Stock in Buyer, free and clear of all liens and encumbrances of any nature or
description.
Section III.9 CONTINUITY PRIOR TO CLOSING DATE. Except as set forth
on Exhibit F attached hereto and made a part hereof, from the Letter of Intent
Date to and including the Closing Date, the Company has not conducted its
business otherwise than in the usual and customary manner and in the ordinary
course of business, consistent with its historical practice, and there has not
been any:
(a) any sale, lease, distribution, transfer, mortgage, pledge or
subjection to lien of Company's assets, except sales of obsolete or
surplus equipment in the ordinary and usual course of business and the
creation of liens for taxes not yet due and payable, materialmen's,
mechanics', workmen's, repairmen's or other like liens;
(b) any material transaction by the Company not in the ordinary and
usual course of business;
(c) any material damage, destruction or loss to the assets of the
Company or any other assets used in the Business, whether or not covered
by insurance;
(d) a termination, or a threatened termination, or material
modification, in each case not in the ordinary course of business, of any
material contract or the relationship of the Company with any customer or
supplier;
(e) any change by the Company in accounting methods or principles or
the application thereof or any change in the Company's policies or
practices with respect to items affecting working capital;
(f) any delay or reduction in capital expenditures in contemplation
of this Agreement or otherwise, or any failure to continue to make capital
expenditures in the ordinary course of business consistent with past
practice;
(g) any acceleration of shipments, sales or orders or other similar
action in
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contemplation of this Agreement or otherwise not in the ordinary course of
business consistent with past practice;
(h) any bonus payments, salary increases, commission increases or
modifications, the execution of any employment agreement, severance
arrangement, consulting arrangement or similar document or agreement, or
other changes in employee benefits or other compensation;
(i) any waiver by the Company of any rights that, singly or in the
aggregate, are material to the Business, the Company Common Stock, the
assets of the Company or the financial condition or results of operation
of the Company;
(j) any labor strikes, union organizational activities or other
similar occurrence; or
(k) any contract or commitment by the Company to do or cause to be
done any of the foregoing, except in connection with this Agreement and
the transactions contemplated hereby.
Section III.10 CONTRACTS AND COMMITMENTS. Exhibit G, attached hereto
and made a part hereof, lists all agreements, commitments, contracts,
undertakings or understandings to which the Company is a party and which relate
to the Business or the Company, including but not limited to trademark, trade
name or patent license agreements, service agreements, lease, purchase or sale
agreements, supply agreements, distribution or distributor agreements, purchase
orders, customer orders and equipment rental agreements. The Company is not in
breach of or default under any agreement, lease, contract or commitment listed
in Exhibit G (collectively, the "Agreements"). Each Agreement is a valid,
binding and enforceable agreement of the Company and the other parties thereto.
There has not occurred any breach or default under any Agreement on the part of
the other parties thereto, and no event has occurred which with the giving of
notice or the lapse of time, or both, would constitute a default under any
Agreement. There is no dispute between the parties to any Agreement as to the
interpretation thereof or as to whether any party is in breach or default
thereunder, and no party to any Agreement has indicated its intention to, or
suggested it may evaluate whether to, terminate any Agreement.
Section III.11 TRADEMARKS, TRADE NAMES AND INTELLECTUAL PROPERTY.
Exhibit H, attached hereto and made a part hereof, contains an accurate and
complete list of (i) all patents, pending patent applications and invention
memoranda relating to the Company's Business or the Company Common Stock, (ii)
all registered United States and foreign trademarks, trade names, logos and
copyrights owned or used by the Company in connection with its Business or the
Company Common Stock, and all registrations thereof, and (iii) all unregistered
United States and foreign trademarks, trade names, logos and copyrights used by
the Company in connection with
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its Business or the Company Common Stock. The Company has the right to use all
trademarks, trade names, logos, copyrights, patents, pending patent applications
and invention memoranda referred to herein. There is no pending or threatened
action or claim that would impair any such right.
Section III.12 FINANCIAL RECORDS.. The unaudited financial
statements of the Company as of and for the year ended December 31, 1997 and as
of and for each month ending through April 30, 1998 and attached hereto as
Exhibit I and made a part hereof, delivered to Buyer (the "Financial
Statements"), are accurate and complete, were prepared on a consistent basis
(except as set forth therein) and fairly present the financial condition and
results of operations of the Company. The audited financial statements referred
to in Section 2.3 will be completed within sixty (60) days of the Effective
Time, and will be prepared in accordance with GAAP applied on a consistent basis
and will fairly present the financial condition and results of operations of the
Company. Exhibit J, attached hereto and made a part hereof, reflects all
inter-company transactions between the Company and its stockholders or its
affiliates since January 1, 1996 through the date of this Agreement.
Section III.13 EMPLOYEES AND RELATED MATTERS. Exhibit K, attached
hereto and made a part hereof, is a complete list of all employees of the
Company, listing the title or position held, base salary, any commissions or
other compensation paid or payable, all employee benefits received by such
employees and any other terms of any oral or written agreement with the Company.
Section III.14 NO MATERIAL CHANGE. There has been no material
adverse change in the Company Common Stock or their value or in the Business
from the Letter of Intent Date to and including the Closing Date, and no event
has occurred which could be expected to lead to or cause such a material adverse
change.
Section III.15 INVESTMENT INTENTION. Sellers are acquiring the Buyer
Common Stock hereunder for investment, solely for its own account and not with a
view to, or for resale in connection with, the distribution or other disposition
thereof.
Section III.16 COMPLIANCE WITH LAW. The Company is not in violation
of any provision of any applicable law, decree, order, regulation, license,
permit, consent, approval, authorization or qualification or order, including,
without limitation, those relating to health, the environment or Hazardous
Substances, and the Company has received no notice of any alleged violation of
such law, decree, order, regulation, license, permit, consent, approval,
authorization or qualification or order.
Section III.17 GOVERNMENT LICENSES, PERMITS AND RELATED APPROVALS.
Exhibit L, attached hereto and made a part hereof, sets forth a list of all
licenses, permits, consents,
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approvals, authorizations, qualifications and orders of governmental authorities
required for the conduct of the Business by the Company as currently conducted,
all of which are in full force and effect.
Section III.18 SAFETY REPORTS. Exhibit M, attached hereto and made a
part hereof, sets forth a complete listing of all injury reports, worker's
compensation reports and claims, safety citations and reports, OSHA reports and
all documents relating to any of the foregoing.
Section III.19 TRANSACTIONS WITH CERTAIN PERSONS. Except as set
forth on Exhibit N, attached hereto and made a part hereof, during the past
three years the Company has not, directly or indirectly, purchased, leased or
otherwise acquired any property or obtained any services from, or sold, leased
or otherwise disposed of any property or furnished any services to, or otherwise
dealt with (except with respect to remuneration for services rendered as a
director, officer or employee of the Company), in the ordinary course of
business or otherwise, (i) any officer, director or stockholder of the Company
or any subsidiary thereof or (ii) any person, firm or corporation which,
directly or indirectly, alone or together with others, controls, is controlled
by or is under common control with the Company or any stockholder of the
Company. The Company does not owe any amount to, or have any contract with or
commitment to, any of its shareholders, directors, officers, employees or
consultants (other than compensation for current services not yet due and
payable and reimbursement of expenses arising in the ordinary course of business
not in excess of $2,000 in the aggregate), and none of such persons owes any
amount to the Company.
Section III.20 STUDIES, ETC. Exhibit O, attached hereto and made a
part hereof, sets forth a complete list of all studies, reports, plans, analyses
or similar documents (whether prepared by the Company's employees or others) in
the possession or control of the Company or any affiliate thereof relating to
safety, the environment, Hazardous Substances, as defined in Section 6.1,
intellectual property, markets, competitors, strategic planning, product
liability, warranties or otherwise relating in any way to the Business.
Section III.21 DISCLOSURE. All exhibits and schedules to this
Agreement are complete and accurate. No representation or warranty by the
Sellers in this Agreement or in any exhibit to this Agreement, or in any
statement or certificate or other document furnished to Buyer by the Sellers or
any representative of the Sellers, contains or will contain any untrue statement
of a material fact or omits or will omit a material fact necessary to make the
statements therein not misleading.
Section III.22 EMPLOYEE BENEFITS. Exhibit P, attached hereto and
made a part hereof, contains a complete list of "employee welfare plans" (as
that term is defined in Section 3(1) of ERISA) in which active or former
employees of the Company (collectively, the "Affected Employees") participate
(which plans as applied to such Affected Employees are hereinafter referred to
as "Welfare Plans"). Exhibit P also contains a complete list of "employee
pension benefit plans" as that term is defined in Section 3(2) of ERISA in which
Affected Employees participate (which plans as applied to such Affected
Employees are
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hereinafter referred to as "Pension Plans"). No Affected Employees participate
in any "multiemployer plan" (as that term is defined in Section 3(37) of ERISA).
The Welfare Plans and Pension Plans are hereinafter collectively referred to as
"Company's Plans." Each of the Company's Plans is in compliance with the
provisions of all applicable laws, rules and regulations, including, without
limitation, ERISA and the Code. None of the Pension Plans have incurred any
"accumulated funding deficiency" (as defined in Section 412(a) of the Code). The
Company has not incurred any liability to the Pension Benefit Guaranty
Corporation under Sections 4062, 4063 or 4064 of ERISA, or any withdrawal
liability under Title IV of ERISA with respect to any multiemployer plan. The
Company has no employees covered by a collective bargaining agreement.
Section III.23 DISTRIBUTED PRODUCTS. Exhibit Q, attached hereto and
made a part hereof, sets forth a complete listing of all products (i)
distributed by the Company (and the manufacturer thereof and the person, if
different, for whom the Company distributes such product) or (ii) manufactured
or sold by the Company and distributed by others (and the name of such
distributor). Such schedule also sets forth the terms of each such distribution
arrangement. The Company has full right to distribute all products referred to
in clause (i) of the preceding sentence.
Section III.24 CUSTOMERS. Exhibit R, attached hereto and made a part
hereof, sets forth a complete listing of the Company's customers. The transfer
of the Company Common Stock and the transactions contemplated by this Agreement
will not result in the loss of any of the Company's customers.
Section III.25 ACCOUNTS RECEIVABLE. Exhibit S, attached hereto and
made a part hereof, sets forth a complete listing of all accounts receivable or
notes receivable ("Accounts Receivable"). All of the Accounts Receivable are
owned by the Company, free and clear of all liens, and are fully collectible.
Section III.26 ACCOUNTS PAYABLE. Exhibit T, attached hereto and made
a part hereof, sets forth a complete listing of all accounts payable and/or
notes payable. ("Accounts Payable"). The Accounts Payable list is a complete
list of debts validly owed by the Company.
Section III.27 TAXES. The Company has properly filed or caused to be
filed all federal, state, local and foreign income and other tax returns,
reports and declarations that are required by applicable law to be filed by
them, and have paid, or made full and adequate provisions for the payment of,
all federal, state, local and foreign income and other taxes properly due for
the periods covered by such returns, reports and declarations, except such
taxes, if any, as are adequately reserved against in the Company Balance Sheet.
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Section III.28 FACILITIES. The Company is not in breach, violation
or default of any building/office lease with respect to or as a result of which
the other party (whether lessor, lessee, sublessor or sublessee) thereto has the
right to terminate the same, and the Company has not received notice of any
claim or assertion that is or may be in any such breach, violation, or default.
Section III.29 INSURANCE. The Company has insurance policies in full
force and effect which provide for coverages which are usual and customary in
the business of the Company as to amount and scope, and are adequate to protect
the Company against any reasonable foreseeable risk of loss, including business
interruption. The Company has not within the past three (3) years received any
notice of cancellation of any insurance agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to the Sellers the following:
Section IV.1 CORPORATE STATUS AND GOOD STANDING. The Buyer is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware, with full corporate power and authority under its
respective certificate or articles of incorporation and by-laws to conduct its
business as the same exists on the date hereof and on the Closing Date.
Section IV.2 AUTHORIZATION. The Buyer has full corporate power and
authority under its respective certificate or articles of incorporation and
by-laws, and its respective board of directors has taken all necessary corporate
action to authorize, execute and deliver this Agreement and the exhibits and
schedules attached hereto, to consummate the transactions contemplated herein
and to take all actions required to be taken by it pursuant to the provisions
hereof or thereof, and each of this Agreement and the exhibits hereto to which
it is a party constitutes the valid and binding obligation of the Buyer or the
Subsidiary, as the case may be, enforceable in accordance with its terms. The
Buyer Common Stock is duly authorized, validly issued, fully paid and
non-assessable.
Section IV.3 NON-CONTRAVENTION. Neither the execution and delivery
of this Agreement and the schedules and exhibits attached hereto, nor the
consummation of the transactions contemplated herein or therein, does or will
violate, conflict with or result in breach of or require notice or consent under
any law, the charter or bylaws of Buyer or any provision of any agreement or
instrument to which it is a party.
Section IV.4 VALIDITY. There are no pending or threatened judicial
or administrative actions, proceedings or investigations which question the
validity of this Agreement or any action taken or contemplated by Buyer in
connection with this Agreement.
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Section IV.5 BROKER INVOLVEMENT. The Buyer has not hired, retained
or dealt with any broker or finder in connection with the transactions
contemplated by this Agreement.
ARTICLE V
COVENANTS
Section V.1 COVENANT AGAINST COMPETITION. As an essential
consideration for the obligations of the Buyer under this Agreement, the Sellers
hereby agree and covenant that, for a period of three years following the
Closing Date, neither of the Sellers nor any affiliate thereof shall engage in
any manner in providing, marketing or brokering services of the same general
type as those provided or marketed by the Company, or associated services, in
the geographic areas in which the Company has operated since inception, unless
employed by the Buyer, an affiliate of Buyer or the Company. If Buyer believes
the Sellers or any affiliate has violated the provisions of this Section 5.1,
Buyer shall have the right to seek relief from any court of competent
jurisdiction. The Sellers acknowledge that money damages alone will not
adequately compensate Buyer in the event of a breach of the covenants of this
Section. Therefore, the Sellers agree that in addition to all remedies available
at law, in equity or under this Agreement, Buyer shall be entitled to injunctive
relief for the enforcement of this covenant. Each of the Sellers agree that the
covenants in this Section are reasonable with respect to their duration, scope
and geographical area. If, at the time of enforcement of this Section, a court
should hold that the restrictions herein are unreasonable under the
circumstances then existing or otherwise, the parties agree that the maximum
duration, scope or geographical area legally permissible under such
circumstances will be substituted for the duration, scope or area stated herein.
Section V.2 FURTHER ASSURANCES. The Sellers and the Buyer shall
execute and deliver, at Closing or thereafter, any other instrument which may be
requested by a party and which is reasonably appropriate to perfect or evidence
any of the sales, assignments, transfers, conveyances or other transactions
contemplated by this Agreement or to transfer any Company Common Stock after
Closing.
Section V.3 CONSENTS. After the Closing, the Sellers will use their
best efforts to obtain any consents required in connection with the transactions
contemplated hereby that are requested by Buyer and that have not been
previously obtained.
Section V.4 NAME. The Sellers agree that following consummation of
this Agreement none of them shall make any attempt to make any use of the name
of the Company in conjunction with operations in any respect in competition with
those of the Company as its business was conducted prior to the Closing, or
authorize others to do so, without the consent of the Purchaser.
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ARTICLE VI
INDEMNIFICATION
Section VI.1 SELLERS' INDEMNITY OBLIGATIONS. Each of the Sellers
agree to jointly and severally indemnify and hold the Buyer (including its
officers, directors, employees and agents) harmless from and against any and all
claims, actions, causes of action, arbitration's, proceedings, losses, damages,
liabilities, judgments and expenses (including, without limitation, reasonable
attorneys' fees) ("Indemnified Amounts") incurred by the Buyer as a result of
(a) any error, inaccuracy, breach or misrepresentation in any of the
representations and warranties made by or on behalf of either of the Sellers in
this Agreement, (b) any violation or breach by either of the Sellers of or
default by either of the Sellers under the terms of this Agreement, (c) any act
or omission occurring, or condition or circumstances existing, prior to the
Closing Date, or any condition or circumstances caused by any act or omission
occurring prior to the Closing Date, by either of the Sellers or with respect to
the Company Common Stock or the Business not fully covered by a specific accrual
liability or reserve on the unaudited financial statements, including the items
set forth on Exhibit E, (d) the past or present presence, release, remediation
or clean-up of, or exposure to, Hazardous Substances (as defined below) relating
to or located on, within or under the Assets of the Company, (e) any product
liability or other claims concerning services provided or products sold by the
Company prior to the Closing Date not fully covered by a specific accrual
liability or reserve on the audited financial statements and (f) any debts,
liabilities or obligations of Sellers, direct or indirect, fixed, contingent or
otherwise, that are not expressly assumed by Buyer in this Agreement. The
foregoing is not an exclusive remedy, and Buyer shall be entitled to recover its
reasonable and necessary attorneys' fees and litigation expenses incurred in
connection with successful enforcement of its rights under this Section.
"Hazardous Substances" means any pollutant, toxic substance,
asbestos, hazardous waste, or any constituent of any such substance, waste or
product, whether solid, liquid or gaseous in form, described in or regulated
under RCRA, CERCLA, Superfund or under any other federal, state or local law,
statute, ordinance, rule, regulation, order, judicial decision, arbitration
decision or determination of any governmental authority, and shall include
petroleum, natural gas, natural gas liquids, crude oil and any fraction or
product thereof.
Section VI.2 BUYER'S INDEMNITY OBLIGATIONS. Buyer shall indemnify
and hold Sellers harmless from and against any and all Indemnified Amounts
incurred by the Sellers as a result of (a) any error, inaccuracy, breach or
misrepresentation in any of the representations and warranties made by or on
behalf of the Buyer in this Agreement, (b) any violation or breach by the Buyer
of or default by the Buyer under the terms of this Agreement, or (c) any
liabilities or obligations of Sellers expressly assumed by Buyer in this
Agreement. The failure of the Buyer to
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cure, remediate or otherwise repair any condition or circumstance existing at
the Closing or caused by the Sellers shall not be deemed an "omission" for
purposes hereof. The Sellers shall be entitled to recover its reasonable and
necessary attorneys' fees and litigation expenses incurred in connection with
successful enforcement of its rights under this Section.
Section VI.3 SURVIVAL. The representations, warranties and
indemnities set forth in this Agreement and in any certificate or instrument
delivered in connection herewith shall be continuing and shall survive the
Closing. The covenants and agreements entered into pursuant to this Agreement to
be performed after the Closing shall survive the Closing without limitation.
Section VI.4 INDEMNIFICATION PROCEDURES. All claims for
indemnification under this Agreement shall be asserted and resolved as follows:
(a) A party claiming indemnification under this Agreement (an
"Indemnified Party") shall with reasonable promptness (i) notify in writing the
party from whom indemnification is sought (the "Indemnifying Party") of any
third-party claim or claims asserted against the Indemnified Party ("Third Party
Claim") for which indemnification is sought and (ii) transmit to the
Indemnifying Party a copy of all papers served with respect to such claim (if
any) and a written notice ("Claim Notice") containing a description in
reasonable detail of the nature of the Third Party Claim, an estimate of the
amount of damages attributable to the Third Party Claim to the extent feasible
(which estimate shall not be conclusive of the final amount of such claim) and
the basis of the Indemnified Party's request for indemnification under this
Agreement.
Within 15 days after receipt of any Claim Notice (the "Election
Period"), the Indemnifying Party shall notify the Indemnified Party whether the
Indemnifying Party disputes its potential liability to the Indemnified Party
with respect to such Third Party Claim.
If the Indemnifying Party does not dispute its potential liability
to the Indemnified Party within the Election Period, the Indemnified Party shall
give the Indemnifying Party an opportunity to control negotiations toward
resolution of such claim without the necessity of litigation, and if litigation
ensues, to defend the same with counsel reasonably acceptable to the Indemnified
Party, at the Indemnifying Party's expense, and the Indemnified Party shall
extend reasonable cooperation in connection with such defense. The Indemnified
Party shall be entitled to participate in, but not to control, the defense of
any Third Party Claim resulting in litigation, at its own cost and expense;
provided, however, that if the parties to any suit or proceeding shall include
the Indemnifying Party as well as the Indemnified Party and the Indemnified
Party shall have been advised by counsel that one or more legal defenses may be
available to it that may not be available to the Indemnifying Party, then the
Indemnified Party shall be entitled to participate in the defense of such suit
or proceeding along with the Indemnifying Party, but the Indemnified Party shall
be obligated to bear the fees and expenses of counsel of the Indemnified Party,
which shall be selected by the Indemnified Party in its complete and sole
discretion. If the Indemnifying
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Party does not dispute its potential liability to the Indemnified Party within
the Election Period and the Indemnified Party fails to assume control of the
negotiations prior to litigation or to defend such action within a reasonable
time, the Indemnifying Party shall be entitled, but not obligated, to assume
control of such negotiations or defense of such action, and the Indemnifying
Party shall be liable to the Indemnified Party for its expenses reasonably
incurred or amounts paid in connection therewith. If the Indemnifying Party
disputes its potential liability to the Indemnified Party within the Election
Period, then the Indemnified Party shall be entitled to assume control of such
negotiations or defense of action and the liability for the expense thereof, as
well as any liability with respect to such Third Party Claim, shall be
determined as provided in Section 7.5 below.
Neither the Indemnifying Party nor the Indemnified Party shall
settle, compromise, or make any other disposition of any Third Party Claim which
would or might result in any liability to the Indemnified Party or the
Indemnifying Party under this Article VII without the written consent of such
other party.
(b) In the event any Indemnified Party should have a claim against
any Indemnifying Party hereunder that does not involve a Third Party Claim, the
Indemnified Party shall transmit to the Indemnifying Party within a reasonable
time a written notice (the "Indemnity Notice") describing in reasonable detail
the nature of the claim, an estimate of the amount of damages attributable to
such claim to the extent feasible (which estimate shall not be conclusive of the
final amount of such claim) and the basis of the Indemnified Party's request for
indemnification under this Agreement. If the Indemnifying Party does not notify
the Indemnified Party within 15 days from its receipt of the Indemnity Notice
that the Indemnifying Party disputes such claim, the claim specified by the
Indemnified Party in the Indemnity Notice shall be deemed a liability of the
Indemnifying Party hereunder.
Section VI.5 GENERAL. The indemnification obligations under this
Article VI shall apply regardless of whether any suit or action results solely
or in part from the active, passive or concurrent negligence of the Indemnified
Party. The rights of the parties to indemnification under this Article VI shall
not be limited due to any investigations heretofore or hereafter made by such
parties or their representatives, regardless of negligence in the conduct of any
such investigations. All representations, warranties and covenants and
agreements made by the parties shall not be deemed merged into any instruments
or agreements delivered in connection with the Closing or otherwise in
connection with the transactions contemplated hereby.
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ARTICLE VII
ACTIONS TO BE TAKEN AT CLOSING
Section VII.1 ACTIONS TO BE TAKEN BY THE SELLERS AT THE CLOSING. The
Sellers shall take the following actions at the Closing:
(a) Each of the Sellers shall execute and deliver a Shareholder
Agreement.
(b) The Sellers shall endorse and deliver pursuant to Section 2.2
share certificates Nos. 1 through 3 conveying all the Company
Common Stock to Buyer.
(c) Execution of cancellation of debt owed by the Company in the
form of notes payable to Michael C. Callihan
Section VII.2 ACTIONS TO BE TAKEN BY BUYER AT THE CLOSING. Buyer
shall take the following actions at the Closing:
(a) Buyer shall deliver to Sellers a copy certified by its Secretary
of resolutions duly adopted by the board of directors of Buyer authorizing
and approving the execution and delivery of this Agreement, including the
exhibits and schedules hereto, the issuance of the Buyer Common Stock and
the consummation of the transactions contemplated herein.
(b) Buyer and Mr. Michael C. Callihan, respectively, shall execute
and deliver the Employment Agreement.
ARTICLE VIII
GENERAL PROVISIONS
Section VIII.1 CONFIDENTIALITY; PUBLICITY; BOOKS AND RECORDS. (a)
After the Closing, the Sellers will not, directly or indirectly, disclose or
provide to any other person any non-public information of a confidential nature
concerning the Business, the Company Common Stock or the business or operations
of the Company, except as is required in governmental filings or judicial,
administrative or arbitration proceedings. The parties hereto will promptly
advise, and obtain the approval of, the other parties before issuing any press
release with respect to this
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Agreement or the transactions contemplated hereby.
(b) For a period of five years after the Closing Date, Buyer will
preserve and retain the books and records constituting part of the assets of the
Company and make such books and records available at the then current
administrative headquarters of Buyer to Sellers, upon reasonable prior written
notice and at reasonable times, at the requesting party's cost and expense, it
being understood that the requesting party shall be entitled to make copies of
any such books and records as shall be reasonably necessary.
Section VIII.2 EXPENSES. The parties hereto shall pay their own
respective expenses, including the fees and disbursements of their respective
counsel in connection with the negotiation, preparation and execution of this
Agreement and the consummation of the transactions contemplated herein. The
Company shall not bear the expenses of Sellers.
Section VIII.3 ENTIRE AGREEMENT. This Agreement, including all
schedules and exhibits attached hereto, constitutes the entire agreement of the
parties with respect to the subject matter hereof, and may not be modified,
amended or terminated except by a written instrument specifically referring to
this Agreement signed by all the parties hereto.
Section VIII.4 WAIVERS AND CONSENTS. All waivers and consents given
hereunder shall be in writing. No waiver by any party hereto of any breach or
anticipated breach of any provision hereof by any other party shall be deemed a
waiver of any other contemporaneous, preceding or succeeding breach or
anticipated breach, whether or not similar.
Section VIII.5 NOTICES. All notices and other communications
hereunder shall be in writing and shall be deemed to have been received only if
and when (i) personally delivered or (ii) on the third day after mailing, by
United States mail, first class, postage prepaid, by certified mail return
receipt requested, addressed in each case as follows (or to such other address
as may be specified by like notice):
(a) If to Buyer or the Subsidiary, to:
CLEARWORKS TECHNOLOGIES, INC.
505 N. Belt, Suite 140
Houston, Texas 77060
Attention: Shannon McLeroy, Vice President
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(b) If to Seller, to:
Team Renaissance, Inc.
7600 West Tidwell Suite 310
Houston, Texas 77040
Attention: Michael C. Callihan
Section VIII.6 SUCCESSORS AND ASSIGNS. This Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective successors, legal representatives and assigns. No third party shall
have any rights hereunder. No assignment shall release the assigning party.
Section VIII.7 TITLE AND RISK OF LOSS. Title to, liability for and
in connection with, and risk of loss of Company Common Stock shall remain with
the Sellers in every instance until the Closing.
Section VIII.8 LIMITATION ON INTEREST. Regardless of any provision
contained herein or any other document executed in connection with this
Agreement, the parties hereto shall not be obliged to pay, and the parties
hereto shall never be entitled to charge, reserve, receive, collect or apply, as
interest (it being understood that interest shall be calculated as the aggregate
of all charges that are contracted for, charged, reserved, received, collected,
applied or paid that constitute interest under applicable law) payable hereunder
any amount in excess of the maximum nonusurious contract rate of interest
allowed from time to time by applicable law, and in the event any of the parties
hereto ever charges, reserves, receives, collects or applies, as interest, any
such excess, at the option of the payor of such interest, such amount shall be
deemed a partial prepayment of the amount payable hereunder or promptly refunded
to the payor of such interest.
Section VIII.9 CHOICE OF LAW. This Agreement shall be governed by
the laws of the State of Texas (without regard to the choice of law provisions
thereof).
Section VIII.10 SECTION HEADINGS. The section headings and table of
contents contained in this Agreement are for reference purposes only and shall
not affect the meaning or interpretation of this Agreement.
Section VIII.11 COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original and all
of which together shall be deemed to be one and the same instrument.
[THIS SPACE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement
effective on the date first above written.
CLEARWORKS TECHNOLOGIES, INC.
By:/s/SHANNON MCLEROY
Name: Shannon McLeroy
Title: Vice President
TEAM RENAISSANCE, INC.
By:/s/MICHAEL C. CALLIHAN
Name: Michael C. Callihan
Title: President
TEAM RENAISSANCE, INC.
By:/s/ HENRY A. DELOSSANTOS
Name: Henry A. DeLosSantos, Individually
By:/s/MICHAEL C. CALLIHAN
Name: Michael C. Callihan, Individually
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EXHIBITS AND SCHEDULES
EXHIBIT A - Employment Agreement
EXHIBIT B - Shareholders Agreement
EXHIBIT C - Capital Structure
EXHIBIT D - Contravention of Agreements
EXHIBIT E - Litigation
EXHIBIT F - Changes in Continuity
EXHIBIT G - Agreements
EXHIBIT H - Intellectual Property
EXHIBIT I - Financial Statements
EXHIBIT J - Intercompany Transactions
EXHIBIT K - Employees
EXHIBIT L - Government Licenses
EXHIBIT M - Safety Reports
EXHIBIT N - Transactions With Certain Persons
EXHIBIT O - Studies
EXHIBIT P - ERISA
EXHIBIT Q - Company Products
EXHIBIT R - Customer List
EXHIBIT S - Accounts Receivable
EXHIBIT T - Accounts Payable
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EXHIBIT A - EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT
BY AND BETWEEN
CLEARWORKS TECHNOLOGIES, INC.
AND
MICHAEL C. CALLIHAN
This Agreement (this "Agreement") is entered into by and between
CLEARWORKS TECHNOLOGIES, INC., hereinafter called "Employer" or "Company," and
Michael C. Callihan of Houston, Texas, hereinafter called "Employee."
A. EMPLOYMENT
Employer hereby employs Employee as its Director - Mergers & Acquisitions.
This Employment Agreement is effective May 1, 1998 (the "Effective Date"), and
continuing for a term of three (3) years, subject to the termination provisions
set forth below.
B. DUTIES
Employee shall perform such duties as like executives of other companies
in the same industry. It is contemplated that Employee shall be responsible for
identifying and acquiring like companies in the information technology
marketplace. Employee will be responsible for completing acquisitions of
profitable companies in compliance with the Company's Strategic Business Plan.
Employee will utilize his best efforts to acquire companies that will enhance
the Company's profitability and will be responsible for building a team to
acquire companies on a national basis. Employee shall devote Employee's full
productive time and best efforts to the performance of Employee's duties.
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C. COMPENSATION
As compensation, Employee shall receive a base salary totaling $70,000.00
per year, payable in accordance with Employer's usual payroll practices, plus a
raise of not less than 10% per year on the first anniversary of the Effective
Date, plus an additional raise of not less than 10% of Employee's then current
salary on the second anniversary of the Effective Date. Employee shall also be
eligible to receive an annual bonus. Employee shall also receive such other
additional compensation, if any, as may be determined in the discretion of
Employer's Board of Directors.
In addition to the above compensation, Employee shall be entitled to
receive commissions equal to one percent (1%) for the first year and one-half of
one percent (.05%) for the second year of the purchase price of any acquisition
brought to Employer's attention while Employee is employed by Employer. The
percentage of Employee's commission will be determine as of the date Employee
obtains an executed nonbinding nondisclosure agreement along with a company
profile on the company to be acquired. The percentage of Employee's commission
will be determine as of the date Employee obtains an executed nonbinding
nondisclosure agreement along with a company profile on the company to be
acquired. The commission will be paid at the time of closing in the form of
options to acquire stock of Employer at three dollars ($3) for the first year,
and a 20% discount from the trading price of that day for the second and third
year, but otherwise in accordance with Employer's Stock Option Plan.
As additional compensation for his employment and any other agreements
contained herein, Employee shall also receive benefits commensurate with the
benefits received by the Senior Executives of the Company.
D. STOCK OPTIONS AND EQUITY OWNERSHIP
The Employee will acknowledge that the Company Common Stock issued to
Employee will not be registered with the SEC for resale. As such, these shares
of Common Stock will be subject to SEC Rule 144 limitations on their sale.
Employee agrees not to transfer shares of Company Common Stock received in the
transaction for the period during which such sale is prohibited.
1. Employer's Right of First Refusal
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During the term of this agreement, in the event that the Employee elects
to sell any portion of his stock in Employer, Employer shall have the
right of first refusal for thirty days after receiving written
notification by Employee that Employee wishes to sell any portion of his
stock in Employer. Employer shall be deemed to have received notice of
such intention not later than three days after Employee mails notice of
the same to Employer. The sales price of any such shares of stock shall be
the price quoted for such stock in the WALL STREET JOURNAL as of market
opening on the date written notification is mailed or delivered (whichever
is sooner) to Employer. If, after thirty calendar days from the date of
delivery or mailing (whichever is earlier), the Employer does not elect to
purchase any portion of the stock Employee wishes to sell, or fails to pay
the purchase price as provided for below, Employee is free to sell the
stock subject to any and all SEC requirements or restrictions.
2. Payment of Purchase Price
The purchase price for the shares of stock in Employer owned by Employee
may be paid by Employer as follows: The purchase price for the shares of
capital stock in the Corporation will be satisfied by a cash payment to
the Employee at the time of the closing for the full amount of the
purchase price. Employer agrees to take such acts as are necessary,
including but not limited to adoption or amendment of appropriate articles
of incorporation or by-laws, to effectuate the following:
(a) In the event Employer or its Affiliates proposes to register an
offering of its securities under the federal securities laws, other than for an
employee benefit plan or pursuant to a plan of merger or acquisition, Employer
shall use its best efforts to cause Employee's securities to be included in the
registration so as to permit the public sale of those securities.
E. TERMINATION
Employee may terminate this Agreement at any time by giving one month's
advanced written notice to Employer. Employer may terminate this Agreement on or
before three (3) years immediately following the Effective Date only in the
event of "cause," as that term in hereinafter defined. Employer may terminate
this Agreement for cause
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immediately by giving notice identifying the cause. "Cause" is defined as any
act by Employee committed with the subjective intent to injure Employer's
business or reputation, a felony conviction of a crime involving moral
turpitude, dependence on illegal controlled substances, or failure to accomplish
objectives set forth by the company's Management By Objectives (MBO's). In the
event of a lawful termination by Employer for cause, Employee shall be entitled
to the rights provided for in this Agreement earned through the end of the
business day of the date of such termination. In the event of any other
termination of this Agreement, Employee shall be entitled to all compensation
and other rights provided to Employee herein for the entirety of the three-year
term provided in paragraph A above.
F. INTELLECTUAL PROPERTIES
Employee agrees that he will promptly and completely inform and disclose
in writing to Employer all writings, inventions, designs, improvements, and
discoveries that Employee may produce during the term of this Agreement that
pertain or relate to the business of Employer or to any experimental work
carried on by Employer whether conceived by Employee alone or jointly with
others and whether or not conceived during regular working hours. Employee shall
describe the features of concepts considered new or different. All such
writings, inventions, designs, improvements, and discoveries shall be the
exclusive property of Employer. Employee shall assist Employer in obtaining
patents and/or copyrights on all such writings, inventions, designs,
improvements, and discoveries deemed appropriate by Employer. Employee will
execute all assignments and other documentation necessary to assign the entire
right, title, and interest in such writings, inventions, designs, improvements,
and discoveries to Employer, its successors and assigns, and to cooperate with
Employer in protecting and perfecting Employer's legal interest in such items.
Employee represents that there are currently no such writings, inventions,
designs, improvements, or discoveries not included in a copyright, copyright
application, patent or patent application which Employee wishes to exclude from
the provisions of this Agreement.
H. CONFIDENTIALITY
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During the term of employment under this Agreement, Employee will have
access to and become familiar with various trade secrets of Employer. The term
"trade secrets" means devices, inventions, processes, and compilations of
information, records, and specifications that are owned by Employer and that are
regularly used in the operation of the business of Employer. All files, records,
documents, drawings, specifications, equipment, and other similar items relating
to the business of Employer, whether or not prepared by Employee, shall remain
exclusive property of Employer and shall not be removed under any circumstances
from the premises where the work of Employee is being carried on, unless prior
written consent of Employer has been obtained. Employee agrees to safeguard and
maintain the confidentiality and proprietary nature of information obtained in
the course of this engagement relating to research, development, and business
activities of Employer, and shall not use such information without Employer's
written consent for a period of one year following the termination and as are
reasonably requested by Employer of this Agreement. Such information and all
copies thereof shall be returned to Employer upon termination of employment.
Employee will sign further confidentiality agreements as are reasonably
requested by Employer.
I. RIGHTS IN DATA
In the course of performing duties under this Agreement, Employee will
handle financial, accounting, statistical, and personnel information concerning
clients, employees, acquisitions and subsidiaries of Employer. All such
information is confidential and shall not be disclosed, directly or indirectly,
to any person other than agents of Employer, either during the term of this
Agreement or at any time after such term. All work product shall be the property
of Employer. Employee hereby assigns to Employer the ownership of such work
product and agrees to cooperate with Employer in protecting and perfecting
Employer's legal interests in such work product.
J. OWNERSHIP OF ACCOUNTS
Employee understands that Employer's relationships with its customers and
their key personnel are Employer's exclusive property and that all information
concerning Employer's projects including the client's data, processing
requirements, contract expiration dates, and rights are the exclusive province
of Employer.
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K. NON-COMPETETION
For the term of this agreement, employee agrees to not compete with the
Company in any of the trade practices and/or services offered by the company.
Employee shall not engage in any manner in providing, marketing or brokering
services of the same general type as those provided or marketed by the Company,
or associated services unless employed by the Company, or an affiliate of the
Company. The geographic area of non-competition shall be limited to the State of
Texas.
L. MISCELLANEOUS
1. The descriptive headings of the several sections of this Agreement
are inserted for convenience of the parties only and do not
constitute part of this Agreement.
2. The rights and obligations of Employer under this Agreement shall
inure to the benefit of and shall be binding upon the successors and
assigns of Employer.
3. This Agreement, and all rights and obligations of the parties
hereunder, shall be construed and interpreted under and pursuant to
the laws of the State of Texas. Venue for any disputes arising under
this Contract shall rest exclusively in Harris County, Texas.
4. Any disputes including termination disputes arising under this
Agreement first shall be submitted to confidential non-binding
mediation with the mediator to be selected in good faith by both
Employer and Employee. The cost of the mediation will be borne
equally by both parties. If Employer and Employee fail in good faith
to agree upon the selection of a mediator within fifteen (15) days
after written notice of the need for mediation, mediation shall no
longer be required.
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In Witness Whereof, the parties hereto have executed this Agreement in
multiple counterparts on this 15th day of May, 1998.
CLEARWORKS
TECHNOLOGIES, INC.
/s/SHANNON MCLEROY
Shannon McLeroy, Vice President
/s/MICHAEL C. CALLIHAN
Michael C. Callihan
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EXHIBIT B - SHAREHOLDERS AGREEMENT
The Shareholder will acknowledge that the Buyer Common Stock issued to
Shareholder will not be registered with the SEC for resale. As such, these
shares of Common Stock will be subject to SEC Rule 144 limitations on their
sale. Shareholder agrees not to transfer shares of Buyer Common Stock received
in the transaction for the period during which such sale is prohibited.
1. Buyer's Right of First Refusal
In the event that the Shareholder elects to sell any portion of his stock
in Buyer, Buyer shall have the right of first refusal for thirty days
after receiving written notification by Shareholder that Shareholder
wishes to sell any portion of his stock in Buyer. Buyer shall be deemed to
have received notice of such intention no later than three days after
Shareholder mails notice of the same to Buyer. The sales price of any such
shares of stock shall be the price quoted for such stock in the WALL
STREET JOURNAL as of market opening on the date written notification is
mailed or delivered (whichever is sooner) to Buyer. If, after thirty
calendar days from the date of delivery or mailing (whichever is earlier),
the Buyer does not elect to purchase any portion of the stock Shareholder
wishes to sell, or fails to pay the purchase price as provided for below,
Shareholder is free to sell the stock subject to any and all SEC
requirements or restrictions.
2. Payment of Purchase Price
The purchase price for the shares of stock in Buyer owned by Shareholder
may be paid by Buyer as follows: The purchase price for the shares of
capital stock in the Corporation will be satisfied by a cash payment to
the Shareholder at the time of the closing for the full amount of the
purchase price. Buyer agrees to take such acts as are necessary, including
but not limited to adoption or amendment of appropriate articles of
incorporation or by-laws, to effectuate the following:
(a) In the event Buyer or its Affiliates proposes to register an offering
of its securities under the federal securities laws, other than for an
employee benefit plan or pursuant to a plan of merger or acquisition,
Buyer shall use their best efforts to cause Shareholder's securities to be
included in the registration so as to permit the public sale of those
securities.
By:/s/MICHAEL C. CALLIHAN
Name: Michael C. Callihan, Individually
By:/s/TONY DELOSSANTOS
Name: Tony DeLosSantos, Individually
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Many pages of copy followed, no file.
EXHIBIT 10(i)
AGREEMENT OF MERGER AND PLAN OF REORGANIZATION
This Agreement of Merger and Plan of Reorganization ("Agreement")
dated May 1, 1998 is by and among ClearWorks Technologies, Inc., a Delaware
corporation, (the "Buyer"), Millennium Integration Technologies, Inc. a Texas
corporation, (the "Subsidiary"), InfraResources, LLC, a Texas limited liability
company, (the "Company") and Bannon Energy Incorporated, a Texas Corporation,
the major interest holder of the Company and other interest holders of Company
(collectively referred to as the "Sellers").
WHEREAS, the Sellers collectively own all of the outstanding
interest of the Company;
WHEREAS, the Company is engaged in the business (the "Business") of
providing information technology professionals;
WHEREAS, the Buyer desires to acquire by purchase all of Seller's
interest in the Company;
WHEREAS, for U.S. federal income tax purposes, it is intended that
this merger shall qualify as a tax-free reorganization under the provisions of
Section 368 of the Internal Revenue Code of 1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the foregoing premises and
representations, warranties and agreements contained herein, and for good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
ARTICLE I
CLOSING
Section I.1 CLOSING. Subject to the provisions of this Agreement,
the Merger shall be consummated by filing with the Secretary of State of the
State of Texas a certificate of merger, in such form as required by, and signed
and attested in accordance with, the relevant provisions of the Texas Business
Corporation Act (the "TCBA") (the time of such filing or such later time and
date as is specified in such filing being the "Effective Time"). The closing of
the purchase and sale provided for herein (the "Closing") is to take place on
May 26, 1998 ("Closing
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Date") at the offices of Royall & Fleschler, 1331 Lamar, Suite 1375, Houston,
Texas 77010, concurrently with the execution and delivery hereof.
Section 1.2 EFFECT OF CLOSING. By virtue of the Merger and without
the necessity of any action by or on behalf of the parties hereto:
(a) At the Effective Time, (i) the separate existence of the Company
shall cease and the Company shall be merged with and into the Subsidiary
(the Subsidiary and the Company are sometimes referred to herein as the
"Constituent Corporations" and the Subsidiary is sometimes referred to
herein as the "Surviving Corporation"), (ii) the Certificate of
Incorporation of the Subsidiary shall be the Certificate of Incorporation
of the Surviving Corporation until thereafter amended and (iii) the
By-laws of the Subsidiary as in effect immediately prior to the Effective
Time shall be the By-laws of the Surviving Corporation until thereafter
amended.
(b) At and after the Effective Time, the Surviving Corporation
shall possess all the rights, privileges, powers and franchises as well as
of a public and of a private nature, and be subject to all the
restrictions, disabilities and duties, of each of the Constituent
Corporations; and all and singular the rights, privileges, powers and
franchises of each of the Constituent Corporations, and all property,
real, personal and mixed, and all debts due to either of the Constituent
Corporations on whatever account, as well as for stock subscriptions and
member interest as all other things in action or belonging to each of the
Constituent Corporations shall be vested in the Surviving Corporation; and
all property, rights, privileges, powers and franchises, and all and every
other interest shall be thereafter the property of the Surviving
Corporation as they were of the respective Constituent Corporations, and
the title to any real estate vested by deed or otherwise, in either of the
Constituent Corporations, shall not revert or be in any way impaired; but
all rights of creditors and all liens upon any property of either of the
Constituent Corporations shall be preserved unimpaired; and all debts,
liabilities and duties of the respective Constituent Corporations shall
thenceforth attach to the Surviving Corporation and may be enforced
against it to the same extent as if said debts and liabilities had been
incurred or contracted by it, except as otherwise provided by law or
contract.
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
Section II.1 EFFECT ON CAPITAL STOCK. As of the Effective Time, by
virtue of the Merger and without any action on the part of any holder of
interest of the Company or shares of capital stock of the Subsidiary:
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(a) CAPITAL STOCK OF SUBSIDIARY. Each issued and outstanding share
of the capital stock of the Subsidiary shall continue to be an issued and
outstanding share of capital stock of the Surviving Corporation. Each
certificate representing immediately prior to the Effective Time issued
shares of capital stock of the Subsidiary shall continue to evidence
ownership of the same number of shares of capital stock of the Surviving
Corporation.
(b) REPRESENTATION OF INTEREST. All interest whether issued or
un-issued in the Company is represented in this Agreement and there are no
interests outstanding that are not represented herein.
(c) EXCHANGE RATIO FOR COMPANY COMMON STOCK. Subject to Section 2.2,
each issued and outstanding interest holder in the Company shall be
converted into the right to receive a number of shares of Buyer Common
Stock exchanged at a ratio of each one percent (1%) interest in the
Company for 800 fully paid and nonassessable shares of Buyer Common Stock
(such fully paid and nonassessable shares of Buyer Common Stock being
hereinafter referred to as the "Stock Consideration"). As of the Effective
Time, all interest in the Company shall no longer be outstanding and shall
automatically be canceled and retired and shall cease to exist, and each
holder of a certificate representing any such interest shall cease to have
any rights with respect thereto, except the right to receive the Stock
Consideration therefor upon the surrender of such certificate in
accordance with Section 2.2 hereof, without interest.
(d) DISCHARGE OF DEBT. Buyer shall discharge existing Bank debt due
to Sterling Bank N.A. in an amount limited to $40,000.00 plus accrued
interest to the date of Closing.
(e) CASH. Buyer shall retain all cash received after April 30, 1998
and Seller shall retain all cash received prior to that date.
(f) PREPAID ACCOUNTS. Seller shall retain all interest in all
prepaid accounts existing as of the date of Closing.
(g) Assets. All computer equipment of the Company shall be
liquidated and be sold to Bannon Energy Incorporated for the sum of one
dollar ($1) as evidenced by a Bill of Sale attached hereto as Exhibit A-1
and made a part hereof.
Section II.2 EXCHANGE OF CERTIFICATES. (a) On the Closing Date, each
Seller shall surrender to Michael T. McClere, 505 North Belt Suite 140, Houston,
Texas, 77060, President and CEO of the Buyer, all certificates representing
interest in the Company. Upon surrender of the interest certificates in the
Company, such Seller shall be entitled to receive the
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amount of Buyer Common Stock specified in Section 2.1. All shares of Buyer
Common Stock issued upon the surrender for exchange of interest in the Company
in accordance with the terms hereof shall be deemed to have been issued in full
satisfaction of all rights pertaining to such interest in the Company, and there
shall be no further registration of transfers of interest in the Company after
the Effective Time.
Section II.3 AUDIT. Within sixty (60) days of Closing, the interest
holders in the Company shall cooperate at no charge to Buyer, in conducting an
audit of the combined financial statements of the Company as of April 30, 1998
(the "Audit Date"), in accordance with generally accepted auditing standards and
generally accepted accounting principles ("GAAP"). The certificate of such
Accounting Firm having no qualifications or limitations.
Section II.4 SHAREHOLDERS' AGREEMENT. At the Closing, the Sellers
and/or their respective agents, designees and representatives will each enter
into a Shareholders' Agreement which contains provisions concerning the
transferability of stock of the Buyer in substantially the form of Exhibit S,
attached hereto and made a part hereof.
Section II.5 TAXES UPON CONVEYANCE AND TRANSFER. The Sellers shall
pay any and all sales, use, transfer or similar taxes payable in connection with
the sale, transfer and assignment of the interest in the Company to Buyer. The
Company has properly filed or caused to be filed all federal, state, local and
foreign income and other tax returns, reports and declarations that are required
by applicable law to be filed by them, and have paid, or made full and adequate
provisions for the payment of, all federal, state, local and foreign income and
other taxes properly due for the periods covered by such returns, reports and
declarations, particularly for all periods prior to April 30, 1998.
Section II.6 MAIL RECEIVED AFTER CLOSING. Following the Closing,
Buyer may receive and open all mail addressed to the Sellers and, to the extent
that such mail and the contents thereof relate to the Business of the Company,
deal with the contents thereof in its discretion. Buyer shall notify the Sellers
of (and provide the Sellers copies of) any mail that on its face obliges the
Sellers to take any action.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
The Sellers, jointly and severally, represent and warrant to Buyer
the following:
Section III.1 COMPANY STATUS AND GOOD STANDING. The Company is a
limited liability company duly organized, validly existing and in good standing
under the laws of the State of Texas, with full corporate power and authority
under its certificate or articles of organization
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and regulations to own and lease its properties and to conduct the Business. The
Company is duly qualified to do business as a foreign corporation in all states
in which the nature of its business requires such qualification and the failure
to do so would have an adverse effect on the Company or the interest in the
Company.
Section III.2 CAPITAL STRUCTURE. As of the Closing Date, the
interest in the Company is duly authorized, validly issued, fully paid and
non-assessable and is not subject to preemptive rights or rights of any person
to acquire interest in the Company. The interest holders in the Company
represent all of the outstanding interest in the Company and are owned
beneficially and of record by the interest holders, in the amounts listed on
Exhibit A, attached hereto and made a part hereof. The Company has not issued
(i) any securities convertible or exchangeable for interest in the Company; or
(ii) any options, warrants, calls, rights (including preemptive rights),
commitments or agreements to which the Company is bound. As of the Closing Date,
there are no interest holder agreements, voting trusts or other agreements or
understandings to which either of the Sellers or the Company is a party that
will limit in any way the transactions described in the Agreement or the free
and clear ownership of interest in the Company by Buyer.
Section III.3 AUTHORIZATION. Each of the Sellers has full power and
authority to execute and deliver this Agreement and the exhibits hereto, to
consummate the transactions contemplated herein and to take all actions required
to be taken by each of them pursuant to the provisions hereof, and each of the
Sellers agree that this Agreement and the exhibits attached hereto constitutes
the valid and binding obligation of the Sellers and is enforceable in accordance
with its terms. To the extent any spouse or former spouse of the Seller has any
community property interest in the Company, such spouse or former spouse has
executed a counterpart hereof.
Section III.4 NON-CONTRAVENTION. Except as set forth in Exhibit B,
attached hereto and made a part hereof, neither the execution and delivery of
this Agreement or any documents executed in connection herewith, nor the
consummation of the transactions contemplated herein or therein, does or will
violate, conflict with, result in breach of or require notice or consent under
any law, the charter or regulations of the Company or any provision of any
agreement or instrument to which the Company is a party. The Sellers
collectively own 100% of the outstanding interest in the Company. The last
regularly prepared annual income statement for the Company shows revenues of
less than $1,013,700, and the last regularly prepared balance sheet of the
Company shows assets of less than $1,000,000. The Sellers are collectively the
ultimate parent entity of the Company and, assuming the accuracy of the
representation in Section 4.3, no filing under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 (the "HSR Act") is required in connection with the
transactions contemplated by this Agreement.
Section III.5 VALIDITY. There are no pending or threatened judicial
or
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administration actions, proceedings or investigations which question the
validity of this Agreement or any action taken or contemplated by the Company or
the Sellers in connection with this Agreement.
Section III.6 BROKER INVOLVEMENT. The Sellers have not hired,
retained or dealt with any broker or finder in connection with the transactions
contemplated by this Agreement.
Section III.7 LITIGATION. Except as set forth on Exhibit C, attached
hereto and made a part hereof, there is no investigation, claim or proceeding or
litigation of any type pending or threatened involving or that might have an
adverse effect on the Sellers or Buyer as the owner of interest in the Company,
and Sellers are unaware of any claims, judgment, order, writ, injunction or
decree of any court, government or governmental agency, or arbitral tribunal
against or involving Sellers or the Company that might have an adverse effect on
Sellers or Buyer as the owner of interest in the Company.
Section III.8 TITLE. The Sellers are the true and lawful owners of
all interest in the Company, free and clear of any and all liens, encumbrances,
mortgages, options, security interests, restrictions, liabilities, pledges and
assignments of any kind, and each of the Sellers has the full right to sell and
transfer to Buyer good and marketable title to the interest in the Company, free
and clear of any and all liens and encumbrances of any nature or description.
The delivery to Buyer of the instruments of transfer of ownership contemplated
by this Agreement will vest good and marketable title to all interest in the
Company to Buyer, free and clear of all liens and encumbrances of any nature or
description.
Section III.9 CONTINUITY PRIOR TO CLOSING DATE. Except as set forth
on Exhibit D, attached hereto and made a part hereof, from the Letter of Intent
Date to and including the Closing Date, the Company has not conducted its
business otherwise than in the usual and customary manner and in the ordinary
course of business, consistent with its historical practice, and there has not
been:
(a) any sale, lease, distribution, transfer, mortgage, pledge or
subjection to lien of Company's assets, except sales of obsolete or
surplus equipment in the ordinary and usual course of business and the
creation of liens for taxes not yet due and payable, materialmen's,
mechanics', workmen's, repairmen's or other like liens;
(b) any material transaction by the Company not in the ordinary and
usual course of business;
(c) any material damage, destruction or loss to the assets of the
Company or any other assets used in the Business, whether or not covered
by insurance;
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(d) a termination, or a threatened termination, or material
modification, in each case not in the ordinary course of business, of any
material contract or the relationship of the Company with any customer or
supplier;
(e) any change by the Company in accounting methods or principles or
the application thereof or any change in the Company's policies or
practices with respect to items affecting working capital;
(f) any delay or reduction in capital expenditures in contemplation
of this Agreement or otherwise, or any failure to continue to make capital
expenditures in the ordinary course of business consistent with past
practice;
(g) any acceleration of shipments, sales or orders or other similar
action in contemplation of this Agreement or otherwise not in the ordinary
course of business consistent with past practice;
(h) any bonus payments, salary increases, commission increases or
modifications, the execution of any employment agreement, severance
arrangement, consulting arrangement or similar document or agreement, or
other changes in employee benefits or other compensation;
(i) any waiver by the Company of any rights that, singly or in the
aggregate, are material to the Business, the Company member interest, the
assets of the Company or the financial condition or results of operation
of the Company;
(j) any labor strikes, union organizational activities or other
similar occurrence; or
(k) any contract or commitment by the Company to do or cause to be
done any of the foregoing, except in connection with this Agreement and
the transactions contemplated hereby.
Section III.10 CONTRACTS AND COMMITMENTS. Exhibit E, attached hereto
and made a part hereof, lists all agreements, commitments, contracts,
undertakings or understandings to which the Company is a party and which relate
to the Business or the Company, including but not limited to trademark, trade
name or patent license agreements, service agreements, lease, purchase or sale
agreements, supply agreements, distribution or distributor agreements, purchase
orders, customer orders and equipment rental agreements. The Company is not in
breach of or default under any agreement, lease, contract or commitment listed
in Exhibit E, attached hereto and made a part hereof, (collectively, the
"Agreements"). Each Agreement is a valid, binding and enforceable agreement of
the Company and the other parties thereto. There has not occurred any
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breach or default under any Agreement on the part of the other parties thereto,
and no event has occurred which with the giving of notice or the lapse of time,
or both, would constitute a default under any Agreement. There is no dispute
between the parties to any Agreement as to the interpretation thereof or as to
whether any party is in breach or default thereunder, and no party to any
Agreement has indicated its intention to, or suggested it may evaluate whether
to, terminate any Agreement.
Section III.11 TRADEMARKS, TRADE NAMES AND INTELLECTUAL PROPERTY.
Exhibit F, attached hereto and made a part hereof, contains an accurate and
complete list of (i) all patents, pending patent applications and invention
memoranda relating to the Company's Business or the interest in the Company,
(ii) all registered United States and foreign trademarks, trade names, logos and
copyrights owned or used by the Company in connection with its Business or
interest in the Company, and all registrations thereof, and (iii) all
unregistered United States and foreign trademarks, trade names, logos and
copyrights used by the Company in connection with its Business or the interest
in the Company. The Company has the right to use all trademarks, trade names,
logos, copyrights, patents, pending patent applications and invention memoranda
referred to herein. There is no pending or threatened action or claim that would
impair any such right.
Section III.12 FINANCIAL RECORDS.. The unaudited financial
statements of the Company as of and for the year ended December 31, 1997 and as
of and for each month ending April 30, 1998 and attached hereto as Exhibit G and
made a part hereof, delivered to Buyer (the "Financial Statements"), are
accurate and complete, were prepared on a consistent basis (except as set forth
therein) and fairly present the financial condition and results of operations of
the Company. The audited financial statements referred to in Section 2.3 will be
completed within sixty (60) days of the Effective Time, and will be prepared in
accordance with GAAP applied on a consistent basis and will fairly present the
financial condition and results of operations of the Company. Exhibit H,
attached hereto and made a part hereof, reflects all inter-company transactions
between the Company and its interest holders or its affiliates since January 1,
1996.
Section III.13 EMPLOYEES AND RELATED MATTERS. Exhibit I, attached
hereto and made a part hereof, is a complete list of all employees of the
Company, listing the title or position held, base salary, any commissions or
other compensation paid or payable, all employee benefits received by such
employees and any other terms of any oral or written agreement with the Company.
Section III.14 NO MATERIAL CHANGE. There has been no material
adverse change in the interest in the Company or its value or in the Business
from the Letter of Intent Date to and including the Closing Date, and no event
has occurred which could be expected to lead to or cause such a material adverse
change.
Section III.15 INVESTMENT INTENTION. Sellers are acquiring the Buyer
Common
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Stock hereunder for investment, solely for its own account and not with a view
to, or for resale in connection with, the distribution or other disposition
thereof.
Section III.16 COMPLIANCE WITH LAW. The Company is not in violation
of any provision of any law, decree, order, regulation, license, permit,
consent, approval, authorization or qualification or order, including, without
limitation, those relating to health, the environment or Hazardous Substances,
and the Company has received no notice of any alleged violation of such law,
decree, order, regulation, license, permit, consent, approval, authorization or
qualification or order.
Section III.17 GOVERNMENT LICENSES, PERMITS AND RELATED APPROVALS.
Exhibit J, attached hereto and made a part hereof, sets forth a list of all
licenses, permits, consents, approvals, authorizations, qualifications and
orders of governmental authorities required for the conduct of the Business by
the Company as currently conducted, all of which are in full force and effect.
Section III.18 SAFETY REPORTS. Exhibit K, attached hereto and made a
part hereof, sets forth a complete listing of all injury reports, worker's
compensation reports and claims, safety citations and reports, OSHA reports and
all documents relating to any of the foregoing.
Section III.19 TRANSACTIONS WITH CERTAIN PERSONS. Except as set
forth on Exhibit L, attached hereto and made a part hereof, during the past
three years the Company has not, directly or indirectly, purchased, leased or
otherwise acquired any property or obtained any services from, or sold, leased
or otherwise disposed of any property or furnished any services to, or otherwise
dealt with (except with respect to remuneration for services rendered as a
director, officer, interest holder, or employee of the Company), in the ordinary
course of business or otherwise, (i) any officer, director or interest holder of
the Company or any subsidiary thereof or (ii) any person, firm or corporation
which, directly or indirectly, alone or together with others, controls, is
controlled by or is under common control with the Company or any interest holder
of the Company. The Company does not owe any amount to, or have any contract
with or commitment to, any of its interest holders, directors, officers,
employees or consultants (other than compensation for current services not yet
due and payable and reimbursement of expenses arising in the ordinary course of
business not in excess of $2,000 in the aggregate), and none of such persons
owes any amount to the Company.
Section III.20 STUDIES, ETC. Exhibit M, attached hereto and made a
part hereof, sets forth a complete list of all studies, reports, plans, analyses
or similar documents (whether prepared by the Company's employees or others) in
the possession or control of the Company or any affiliate thereof relating to
safety, the environment, Hazardous Substances, as defined in Section 6.1,
intellectual property, markets, competitors, strategic planning, product
liability, warranties or otherwise relating in any way to the Business.
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Section III.21 DISCLOSURE. All schedules to this Agreement are
complete and accurate. No representation or warranty by the Sellers in this
Agreement or in any exhibit to this Agreement, or in any statement or
certificate or other document furnished to Buyer by the Sellers or any
representative of the Sellers, contains or will contain any untrue statement of
a material fact or omits or will omit a material fact necessary to make the
statements therein not misleading.
Section III.22 EMPLOYEE BENEFITS. Exhibit N, attached hereto and
made a part hereof, contains a complete list of "employee welfare plans" (as
that term is defined in Section 3(1) of ERISA) in which active or former
employees of the Company (collectively, the "Affected Employees") participate
(which plans as applied to such Affected Employees are hereinafter referred to
as "Welfare Plans"). Exhibit N also contains a complete list of "employee
pension benefit plans" as that term is defined in Section 3(2) of ERISA in which
Affected Employees participate (which plans as applied to such Affected
Employees are hereinafter referred to as "Pension Plans"). No Affected Employees
participate in any "multiemployer plan" (as that term is defined in Section
3(37) of ERISA). The Welfare Plans and Pension Plans are hereinafter
collectively referred to as "Company's Plans." Each of the Company's Plans is in
compliance with the provisions of all applicable laws, rules and regulations,
including, without limitation, ERISA and the Code. None of the Pension Plans
have incurred any "accumulated funding deficiency" (as defined in Section 412(a)
of the Code). The Company has not incurred any liability to the Pension Benefit
Guaranty Corporation under Sections 4062, 4063 or 4064 of ERISA, or any
withdrawal liability under Title IV of ERISA with respect to any multiemployer
plan. The Company has no employees covered by a collective bargaining agreement.
Section III.23 DISTRIBUTED PRODUCTS. Exhibit O, attached hereto and
made a part hereof, sets forth a complete listing of all products (i)
distributed by the Company (and the manufacturer thereof and the person, if
different, for whom the Company distributes such product) or (ii) manufactured
or sold by the Company and distributed by others (and the name of such
distributor). Such schedule also sets forth the terms of each such distribution
arrangement. The Company has full right to distribute all products referred to
in clause (i) of the preceding sentence.
Section III.24 CUSTOMERS. Exhibit P, attached hereto and made a art
hereof, sets forth a complete listing of the Company's customers. The transfer
of the interest in the Company and the transactions contemplated by this
Agreement will not result in the loss of any of the Company's customers.
Section III.25 ACCOUNTS RECEIVABLE. Exhibit Q, also attached hereto
and made a part hereof, sets forth a complete listing of all accounts receivable
or notes receivable ("Accounts Receivable"). All of the Accounts Receivable are
owned by the Company, free and clear of all liens, and are fully collectible,
with the exception of that $5,000.00 allowance granted to Sellers by Buyer for
the uncollectibility of specific accounts receivable, which are more
particularly
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described in Exhibit Q-1, attached hereto and made a part hereof. It is further
understood that Buyer will own all the Accounts Receivable, free and clear of
all liens, from April 30, 1998 and continuing thereafter.
Section III.26 ACCOUNTS PAYABLE. Exhibit R, attached hereto and made
a part hereof, sets forth a complete listing of all accounts payable and/or
notes payable. ("Accounts Payable"). The Accounts Payable list contains a
complete description of debts validly owed by the Company. Sellers expressly
agree that no charges will be incurred by Buyer for Sellers services or services
provided by interest holders in the Company after April 30, 1998 and that
Exhibit R represents all debts owed by the Company. It is further understood
that Buyer will be liable for Accounts Payable on April 30, 1998 and continuing
thereafter.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to the Sellers the following:
Section IV.1 CORPORATE STATUS AND GOOD STANDING. The Buyer is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware, with full corporate power and authority under its
respective certificate or articles of incorporation and by-laws to conduct its
business as the same exists on the date hereof and on the Closing Date.
Section IV.2 AUTHORIZATION. Each of the Buyer and the Subsidiary has
full corporate power and authority under its respective certificate or articles
of incorporation and by-laws, and its respective board of directors has taken
all necessary corporate action to authorize it to execute and deliver this
Agreement and the exhibits and schedules attached hereto, to consummate the
transactions contemplated herein and to take all actions required to be taken by
it pursuant to the provisions hereof or thereof, and each of this Agreement and
the exhibits attached hereto to which it is a party constitutes the valid and
binding obligation of the Buyer or the Subsidiary, as the case may be,
enforceable in accordance with its terms. The Buyer Common Stock is duly
authorized, validly issued, fully paid and non-assessable.
Section IV.3 NON-CONTRAVENTION. Neither the execution and delivery
of this Agreement and the schedules and exhibits hereto, nor the consummation of
the transactions contemplated herein or therein, does or will violate, conflict
with or result in breach of or require notice or consent under any law, the
charter or bylaws of Buyer of the Subsidiary or any provision of any agreement
or instrument to which it is a party.
Section IV.4 VALIDITY. There are no pending or threatened judicial
or administrative actions, proceedings or investigations which question the
validity of this Agreement or any action taken or contemplated by Buyer in
connection with this Agreement.
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Section IV.5 BROKER INVOLVEMENT. Neither the Buyer nor the
Subsidiary has hired, retained or dealt with any broker or finder in connection
with the transactions contemplated by this Agreement.
Section IV.6 COME ALONG. In the event Buyer agrees to sell all of
the shares of stock owned by it to an unaffiliated third party pursuant to the
terms of a bona fide written offer to acquire all the issued and outstanding
stock for cash, by merger or otherwise, then, upon notice from Buyer, each of
the shareholders of Buyer common stock from this transaction hereby agrees to
sell all of their respective shares of Buyer's common stock to the third party
in accordance with the terms of the offer, and shall take all other action
reasonably necessary in order to effect the sales and exchange of all of the
Buyer s common stock pursuant to the offer.
ARTICLE V
COVENANTS
Section V.1 COVENANT AGAINST COMPETITION. As an essential
consideration for the obligations of the Buyer under this Agreement, the Sellers
hereby agree and covenant that, for a period of three years following the
Closing Date, neither of the Sellers nor any affiliate thereof shall engage in
any manner in providing, marketing or brokering services of the same general
type as those provided or marketed by the Company, or associated services, in
the geographic areas in which the Company has operated since its inception,
unless employed by the Buyer, an affiliate of Buyer or the Company. If Buyer
believes the Sellers or any affiliate has violated the provisions of this
Section 5.1, Buyer shall have the right to seek relief from any court of
competent jurisdiction. The Sellers acknowledge that money damages alone will
not adequately compensate Buyer in the event of a breach of the covenants of
this Section. Therefore, the Sellers agree that in addition to all remedies
available at law, in equity or under this Agreement, Buyer shall be entitled to
injunctive relief for the enforcement of this covenant. Each of the Sellers
agree that the covenants in this Section are reasonable with respect to their
duration, scope and geographical area. If, at the time of enforcement of this
Section, a court should hold that the restrictions herein are unreasonable under
the circumstances then existing or otherwise, the parties agree that the maximum
duration, scope or geographical area legally permissible under such
circumstances will be substituted for the duration, scope or area stated herein.
Section V.2 FURTHER ASSURANCES. The Sellers and the Buyer shall
execute and deliver, at Closing or thereafter, any other instrument which may be
requested by a party and which is reasonably appropriate to perfect or evidence
any of the sales, assignments, transfers, conveyances or other transactions
contemplated by this Agreement or to transfer any interest in the Company after
Closing.
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Section V.3 CONSENTS. After the Closing, the Sellers will use their
best efforts to obtain any consents required in connection with the transactions
contemplated hereby that are requested by Buyer and that have not been
previously obtained.
ARTICLE VI
INDEMNIFICATION
Section VI.1 SELLERS' INDEMNITY OBLIGATIONS. Each of the Sellers
agree to jointly and severally indemnify and hold the Buyer and the Subsidiary
(including their officers, directors, employees and agents) harmless from and
against any and all claims, actions, causes of action, arbitration's,
proceedings, losses, damages, liabilities, judgments and expenses (including,
without limitation, reasonable attorneys' fees) ("Indemnified Amounts") incurred
by the Buyer or the Subsidiary as a result of (a) any error, inaccuracy, breach
or misrepresentation in any of the representations and warranties made by or on
behalf of either of the Sellers in this Agreement, (b) any violation or breach
by either of the Sellers of or default by either of the Sellers under the terms
of this Agreement, (c) any act or omission occurring, or condition or
circumstances existing, prior to the Closing Date, or any condition or
circumstances caused by any act or omission occurring prior to the Closing Date,
by either of the Sellers or with respect to the interest in the Company or the
Business not fully covered by a specific accrual liability or reserve on the
unaudited financial statements, including the items set forth on Exhibit C, (d)
the past or present presence, release, remediation or clean-up of, or exposure
to, Hazardous Substances (as defined below) relating to or located on, within or
under the Assets of the Company, (e) any product liability or other claims
concerning services provided or products sold by the Company prior to the
Closing Date not fully covered by a specific accrual liability or reserve on the
unaudited financial statements and (f) any debts, liabilities or obligations of
Sellers, direct or indirect, fixed, contingent or otherwise, that are not
expressly assumed by Buyer or the Subsidiary in this Agreement. The foregoing is
not an exclusive remedy, and both the Buyer and the Subsidiary shall be entitled
to recover its reasonable and necessary attorneys' fees and litigation expenses
incurred in connection with successful enforcement of its rights under this
Section.
"Hazardous Substances" means any pollutant, toxic substance,
asbestos, hazardous waste, or any constituent of any such substance, waste or
product, whether solid, liquid or gaseous in form, described in or regulated
under RCRA, CERCLA, Superfund or under any other federal, state or local law,
statute, ordinance, rule, regulation, order, judicial decision, arbitration
decision or determination of any governmental authority, and shall include
petroleum, natural gas, natural gas liquids, crude oil and any fraction or
product thereof.
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Section VI.2 BUYER'S INDEMNITY OBLIGATIONS. Buyer shall indemnify
and hold Sellers harmless from and against any and all Indemnified Amounts
incurred by the Sellers as a result of (a) any error, inaccuracy, breach or
misrepresentation in any of the representations and warranties made by or on
behalf of the Buyer in this Agreement, (b) any violation or breach by the Buyer
of or default by the Buyer under the terms of this Agreement, or (c) any
liabilities or obligations of Sellers expressly assumed by Buyer in this
Agreement. The failure of the Buyer to cure, remediate or otherwise repair any
condition or circumstance existing at the Closing or caused by the Sellers shall
not be deemed an "omission" for purposes hereof. The Sellers shall be entitled
to recover its reasonable and necessary attorneys' fees and litigation expenses
incurred in connection with successful enforcement of its rights under this
Section.
Section VI.3 SURVIVAL. The representations, warranties and
indemnities set forth in this Agreement and in any certificate or instrument
delivered in connection herewith shall be continuing and shall survive the
Closing. The covenants and agreements entered into pursuant to this Agreement to
be performed after the Closing shall survive the Closing without limitation.
Section VI.4 INDEMNIFICATION PROCEDURES. All claims for
indemnification under this Agreement shall be asserted and resolved as follows:
(a) A party claiming indemnification under this Agreement (an
"Indemnified Party") shall with reasonable promptness (i) notify the party from
whom indemnification is sought (the "Indemnifying Party") of any third-party
claim or claims asserted against the Indemnified Party ("Third Party Claim") for
which indemnification is sought and (ii) transmit to the Indemnifying Party a
copy of all papers served with respect to such claim (if any) and a written
notice ("Claim Notice") containing a description in reasonable detail of the
nature of the Third Party Claim, an estimate of the amount of damages
attributable to the Third Party Claim to the extent feasible (which estimate
shall not be conclusive of the final amount of such claim) and the basis of the
Indemnified Party's request for indemnification under this Agreement.
Within 15 days after receipt of any Claim Notice (the "Election
Period"), the Indemnifying Party shall notify the Indemnified Party whether the
Indemnifying Party disputes its potential liability to the Indemnified Party
with respect to such Third Party Claim.
If the Indemnifying Party does not dispute its potential liability
to the Indemnified Party within the Election Period, the Indemnified Party shall
give the Indemnifying Party an opportunity to control negotiations toward
resolution of such claim without the necessity of litigation, and if litigation
ensues, to defend the same with counsel reasonably acceptable to the Indemnified
Party, at the Indemnifying Party's expense, and the Indemnified Party shall
extend reasonable cooperation in connection with such defense. The Indemnified
Party shall be entitled to participate in, but not to control, the defense of
any Third Party Claim resulting in litigation, at its own cost and expense;
provided, however, that if the parties to any suit or proceeding shall
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include the Indemnifying Party as well as the Indemnified Party and the
Indemnified Party shall have been advised by counsel that one or more legal
defenses may be available to it that may not be available to the Indemnifying
Party, then the Indemnified Party shall be entitled to participate in the
defense of such suit or proceeding along with the Indemnifying Party, but the
Indemnified Party shall be obligated to bear the fees and expenses of counsel of
the Indemnified Party, which shall be selected by the Indemnified Party in its
complete and sole discretion. If the Indemnifying Party does not dispute its
potential liability to the Indemnified Party within the Election Period and the
Indemnified Party fails to assume control of the negotiations prior to
litigation or to defend such action within a reasonable time, the Indemnifying
Party shall be entitled, but not obligated, to assume control of such
negotiations or defense of such action, and the Indemnifying Party shall be
liable to the Indemnified Party for its expenses reasonably incurred or amounts
paid in connection therewith. If the Indemnifying Party disputes its potential
liability to the Indemnified Party within the Election Period, then the
Indemnified Party shall be entitled to assume control of such negotiations or
defense of action and the liability for the expense thereof, as well as any
liability with respect to such Third Party Claim, shall be determined as
provided in Section 7.5 below.
Neither the Indemnifying Party nor the Indemnified Party shall
settle, compromise, or make any other disposition of any Third Party Claim which
would or might result in any liability to the Indemnified Party or the
Indemnifying Party under this Article VII without the written consent of such
other party.
(b) In the event any Indemnified Party should have a claim against
any Indemnifying Party hereunder that does not involve a Third Party Claim, the
Indemnified Party shall transmit to the Indemnifying Party a written notice (the
"Indemnity Notice") describing in reasonable detail the nature of the claim, an
estimate of the amount of damages attributable to such claim to the extent
feasible (which estimate shall not be conclusive of the final amount of such
claim) and the basis of the Indemnified Party's request for indemnification
under this Agreement. If the Indemnifying Party does not notify the Indemnified
Party within 15 days from its receipt of the Indemnity Notice that the
Indemnifying Party disputes such claim, the claim specified by the Indemnified
Party in the Indemnity Notice shall be deemed a liability of the Indemnifying
Party hereunder.
Section VI.5 GENERAL. The indemnification obligations under this
Article VI shall apply regardless of whether any suit or action results solely
or in part from the active, passive or concurrent negligence of the Indemnified
Party. The rights of the parties to indemnification under this Article VI shall
not be limited due to any investigations heretofore or hereafter made by such
parties or their representatives, regardless of negligence in the conduct of any
such investigations. All representations, warranties and covenants and
agreements made by the parties shall not be deemed merged into any instruments
or agreements delivered in connection with the Closing or otherwise in
connection with the transactions contemplated
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hereby.
ARTICLE VII
ACTIONS TO BE TAKEN AT CLOSING
Section VII.1 ACTIONS TO BE TAKEN BY THE SELLERS AT THE CLOSING. The
Sellers shall take the following actions at the Closing:
(a) Each of the Sellers shall execute and deliver a Shareholder
Agreement.
(b) The Sellers shall endorse and deliver pursuant to Section 2.2
interest certificates conveying all of the interest in the
Company to Buyer.
Section VII.2 ACTIONS TO BE TAKEN BY BUYER AT THE CLOSING. Buyer
shall take the following actions at the Closing:
(a) Buyer shall deliver to Sellers a copy certified by its Secretary
of resolutions duly adopted by the board of directors of Buyer authorizing
and approving the execution and delivery of this Agreement, including the
exhibits and schedules hereto, issuance of the Buyer Common Stock and the
consummation of the transactions contemplated herein.
(b) Buyer shall make the payments of funds specified for payment at
Closing under Section 2.1 above.
ARTICLE VIII
GENERAL PROVISIONS
Section VIII.1 CONFIDENTIALITY; PUBLICITY; BOOKS AND RECORDS. (a)
After the Closing, the Sellers will not, directly or indirectly, disclose or
provide to any other person any non-public information of a confidential nature
concerning the Business, the interest in the Company or the business or
operations of the Company, except as is required in governmental filings or
judicial, administrative or arbitration proceedings. The parties hereto will
promptly advise, and obtain the approval of, the other parties before issuing
any press release with respect to this Agreement or the transactions
contemplated hereby.
(b) For a period of five years after the Closing Date, Buyer will
preserve and retain the books
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and records constituting part of the assets of the Company and make such books
and records available at the then current administrative headquarters of Buyer
to Sellers, upon reasonable prior written notice and at reasonable times,
without cost or expense, it being understood that the requesting party shall be
entitled to make copies of any such books and records as shall be reasonably
necessary.
Section VIII.2 EXPENSES. The parties hereto shall pay their own
respective expenses, including the fees and disbursements of their respective
counsel in connection with the negotiation, preparation and execution of this
Agreement and the consummation of the transactions contemplated herein. The
Company shall not bear the expenses of Sellers.
Section VIII.3 ENTIRE AGREEMENT. This Agreement, including all
schedules and exhibits attached hereto, constitutes the entire agreement of the
parties with respect to the subject matter hereof, and may not be modified,
amended or terminated except by a written instrument specifically referring to
this Agreement signed by all the parties hereto.
Section VIII.4 WAIVERS AND CONSENTS. All waivers and consents given
hereunder shall be in writing. No waiver by any party hereto of any breach or
anticipated breach of any provision hereof by any other party shall be deemed a
waiver of any other contemporaneous, preceding or succeeding breach or
anticipated breach, whether or not similar.
Section VIII.5 NOTICES. All notices and other communications
hereunder shall be in writing and shall be deemed to have been received only if
and when (i) personally delivered or (ii) on the third day after mailing, by
United States mail, first class, postage prepaid, by certified mail return
receipt requested, addressed in each case as follows (or to such other address
as may be specified by like notice):
(a) If to Buyer or the Subsidiary, to:
CLEARWORKS Technologies, Inc.
505 N. Belt, Suite 140
Houston, Texas 77060
Attention: Michael T. McClere
(b) If to Seller, to:
InfraResources
3934 FM 1960 West, Suite 240
Houston, Texas 77068
Attention: Robert D. Johnson
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Section VIII.6 SUCCESSORS AND ASSIGNS. This Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective successors, legal representatives and assigns. No third party shall
have any rights hereunder. No assignment shall release the assigning party.
Section VIII.7 TITLE AND RISK OF LOSS. Title to, liability for and
in connection with, and risk of loss of Company Common Stock shall remain with
the Sellers in every instance until the Closing.
Section VIII.8 LIMITATION ON INTEREST. Regardless of any provision
contained herein or any other document executed in connection with this
Agreement, the parties hereto shall not be obliged to pay, and the parties
hereto shall never be entitled to charge, reserve, receive, collect or apply, as
interest (it being understood that interest shall be calculated as the aggregate
of all charges that are contracted for, charged, reserved, received, collected,
applied or paid that constitute interest under applicable law) payable hereunder
any amount in excess of the maximum nonusurious contract rate of interest
allowed from time to time by applicable law, and in the event any of the parties
hereto ever charges, reserves, receives, collects or applies, as interest, any
such excess, at the option of the payor of such interest, such amount shall be
deemed a partial prepayment of the amount payable hereunder or promptly refunded
to the payor of such interest.
Section VIII.9 CHOICE OF LAW. This Agreement shall be governed by
the laws of the State of Texas (without regard to the choice of law provisions
thereof).
Section VIII.10 SECTION HEADINGS. The section headings and table of
contents contained in this Agreement are for reference purposes only and shall
not affect the meaning or interpretation of this Agreement.
Section VIII.11 COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original and all
of which together shall be deemed to be one and the same instrument.
[THIS SPACE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement
on the date first above written.
CLEARWORKS TECHNOLOGIES, INC.
By:/s/MICHAEL T. MCCLERE
Name: Michael T. McClere
Title:President and CEO
InfraResources, LLC
By:/s/ROBERT D. JOHNSON
Name: Robert D. Johnson
Title: President
Bannon Energy Incorporated
By:/s/ROBERT D. JOHNSON
Name: Robert D. Johnson
Title: President
Johnson Childrens' Trust of 1992
By:/s/SHANNON L. JOHNSON
Name: Shannon L. Johnson, Co-Trustee
By:/s/ROBERT D. JOHNSON
Name: Robert D. Johnson, Individually
By:/s/CARL A. CHASE
Name: Carl A. Chase, Individually
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EXHIBIT S - SHAREHOLDERS AGREEMENT
The Shareholder will acknowledge that the Buyer Common Stock issued to
Shareholder will not be registered with the SEC for resale. As such, these
shares of Common Stock will be subject to SEC Rule 144 limitations on their
sale. Shareholder agrees not to transfer shares of Buyer Common Stock received
in the transaction for the period during which such sale is prohibited.
1. Buyer's Right of First Refusal
In the event that the Shareholder elects to sell any portion of his stock
in Buyer, Buyer shall have the right of first refusal for thirty days
after receiving written notification by Shareholder that Shareholder
wishes to sell any portion of his stock in Buyer. Buyer shall be deemed to
have received notice of such intention no later than three days after
Shareholder mails notice of the same to Buyer. The sales price of any such
shares of stock shall be the price quoted for such stock in the WALL
STREET JOURNAL as of market opening on the date written notification is
mailed or delivered (whichever is sooner) to Buyer. If, after thirty
calendar days from the date of delivery or mailing (whichever is earlier),
the Buyer does not elect to purchase any portion of the stock Shareholder
wishes to sell, or fails to pay the purchase price as provided for below,
Shareholder is free to sell the stock subject to any and all SEC
requirements or restrictions. 2. Payment of Purchase Price The purchase
price for the shares of stock in Buyer owned by Shareholder may be paid by
Buyer as follows: The purchase price for the shares of capital stock in
the Corporation will be satisfied by a cash payment to the Shareholder at
the time of the closing for the full amount of the purchase price. Buyer
agrees to take such acts as are necessary, including but not limited to
adoption or amendment of appropriate articles of incorporation or by-laws,
to effectuate the following: (a) In the event Buyer or its Affiliates
proposes to register an offering of its securities under the federal
securities laws, other than for an employee benefit plan or pursuant to a
plan of merger or acquisition, Buyer shall use their best efforts to cause
Shareholder's securities to be included in the registration so as to
permit the public sale of those securities.
BANNON ENERGY INCORPORATED
By:/s/ROBERT D. JOHNSON
Name: Robert D. Johnson
Title: President
JOHNSON CHILDRENS' TRUST OF 1992
By:/s/SHANNON L. JOHNSON
Name: Shannon L. Johnson, Co-Trustee
By:/s/ANTHONY AUSTIN
Name: Anthony Austin, Individually
By:/s/CARL CHASE
Name: Carl Chase, Individually
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Many pages of copy to follow, no file.
EXHIBIT 10(j)
ASSET PURCHASE AGREEMENT
THIS AGREEMENT, effective as of this 19th day of November, 1998, is
entered into by and between John Diaz d/b/a Vidatel Communications, an
individual residing in Houston, Texas (referred to as "Seller"); and ClearWorks
Technologies, Inc., a Delaware corporation (the "Buyer"). Seller and Buyer are
sometimes herein referred to collectively as the "Parties" and singularly as a
"Party".
WHEREAS, Buyer and Seller have determined that it is in their best
interests for Seller to sell all of its assets to Buyer upon the terms and
subject to the conditions set forth in this Agreement; and
WHEREAS, the Board of Directors of Buyer and Seller has each approved
this Agreement and the consummation of the transactions contemplated hereby and
approved the execution and delivery of this Agreement. NOW, THEREFORE, in
consideration of the foregoing premises and representations, warranties and
agreements contained herein, and for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
1. ASSETS SOLD AND PURCHASED. Subject to the terms and conditions hereof,
Seller hereby sells, assigns, conveys and transfers to Buyer good and marketable
title in all Seller's assets (herein called "Assets") and more particularly
described in Exhibit "A" attached hereto and made a part hereof, and Buyer
hereby accepts from Seller the following:
a. The right, title and interest of Seller in and to the use of certain
tradenames, trademarks, patents, copyrights, logos and other
intellectual and proprietary rights associated with the Business,
including but not limited to the use of such items as listed on Exhibit
A, which is attached hereto and incorporated herein for all purposes;
<PAGE>
b. The tangible assets, including but not limited to equipment, software
and inventory utilized by Seller in the Business, which are listed on
Exhibit "A" attached hereto.
c. ASSIGNMENT OF CUSTOMER ORDERS. In further consideration of the Purchase
Price, on the Closing Date, Seller shall execute and deliver an
Assignment of all regularly scheduled maintenance customers (the
"Assignment") in the form of Exhibit "B" hereto, transferring,
assignment and conveying unto Buyer the right to service all future
Orders now held by Seller for such repetitive customers on the Closing
Date, as well as all those customers which Buyer may receive in the
future from its Customers, it being the intent of the parties for
Seller to close its business at 9:00 a.m. on November 19th, 1998.
Attached hereto as Exhibit "C" is a list of all customers to be
assigned to Buyer.
2. NO ASSUMPTION OF ACCOUNTS PAYABLE AT THE CLOSING BY BUYER. Seller shall pay
its ordinary course of business the Accounts Payable Schedule of Vendors as
reflected and set forth in Exhibit D, attached hereto and incorporated by
reference for all purposes. BUYER DOES NOT ASSUME ANY LIABILITY OR OBLIGATION OF
SELLER. SELLER SHALL INDEMNIFY BUYER FOR ANY FAILURE TO PAY SUCH ACCOUNTS
PAYABLE TIMELY.
3. ASSETS TO BE TRANSFERRED SUBJECT TO NO ENCUMBRANCES. Seller conveys to Buyer
the title to all of Seller's Assets free and clear of all liens, claims,
encumbrances, other reservations whatsoever pursuant to assignments and bills of
sale between Buyer and the Seller.
4. PURCHASE PRICE. The purchase price of the assets is $150,000.00 which shall
be payable through a stock transaction as follows:
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(1) Buyer shall deliver at Closing Buyer Common Stock subject to SEC
144 restrictions having an aggregate value equal to the value of
Seller's assets. (collectively referred to as the "Purchase Price").
The number of shares received by Seller will be determined by taking
the value of Seller's assets, which have been represented to be
$150,000.00 and dividing that amount by Buyer Common Stock valued at
the then current trading market price per share as of 5:00 p.m. CDST
one (1) day prior to Closing; PROVIDED, HOWEVER, that Seller's assets
equal $150,000.00. The number of shares received by Seller will be
reduced appropriately if such representation of known assets is
incorrect.
(a) INVESTMENT INTENT. Seller is acquiring the shares to be exchanged
and delivered to them under this Agreement for investment and not
with a view to the sale or distribution thereof, and the Seller has
no commitment or present intention to sell or otherwise dispose of
the Buyer Common Stock. The Seller shall execute and deliver to
Buyer on the Closing a Subscription Agreement and Shareholder
Agreement attached hereto as Exhibit "E" and "F", respectively,
attached hereto and incorporated herein by reference for all
purpose, acknowledging the "unregistered" and "restricted" nature of
the shares of Buyer being received under the Agreement in exchange
for the Assets.
(b)Seller acknowledges that they have been delivered copies of what
has been represented to be documentation containing all material
information respecting Buyer and its present and contemplated
business operations, potential acquisitions, management and other
factors; that they have had a reasonable opportunity to
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review such documentation and discuss it, to the extent desired,
with their legal counsel, directors and executive officers; that
they have had, to the extent desired, the opportunity to ask
questions of and receive responses from the directors and executive
officers of Buyer; and with the legal and accounting firms of same;
with respect to such documentation; and that to the extent
requested, all questions raised have been answered to their complete
satisfaction.
(2)Buyer shall enter into an Employee Agreement with John Diaz,
substantially in accordance with the terms contained within Exhibit
G.
5. REPRESENTATIONS AND WARRANTIES OF SELLER. Seller represents and warrants
to Buyer that:
a. Seller has good, marketable, and insurable title to the Assets, full
legal authority and power to sell, transfer and assign the Assets to
Buyer, free and clear of all claims, liens and encumbrances of any
nature whatsoever.
b. No event of default has occurred, and no event has occurred which, with
the giving of notice or the passage of time or both, would become an
event of default, that has not been disclosed and that will not be
remedied by Seller.
c. There are no outstanding payments due on any of the Assets.
d. The Assets include most of Seller's physical assets employed in the
operation of the Business.
e. The Asset scheduled on Exhibit "A" is in good working order and repair.
f. Seller does not have any commitments to past or present employees for
expenses, profit sharing, compensation, health care benefits, pension
benefits, employment contracts, etc.
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g. Seller does not have any collective bargaining agreements, nor any
pension, profit sharing or other benefit plans applicable to any of the
employees associates with the Business.
h. Seller is not (and by the performance of this Agreement will not be) in
breach of any term or provision of, in default under, any material
contract or agreement to which Seller is party or to which it may be
subject, except that prior consents may be required for the assignment
of certain equipment leases to Buyer.
i. There are no threatened actions, suits, claims or proceedings pending
or known, at law or in equity, or before any federal state or municipal
or any other government agency against Seller, the resolution of which
would materially adversely affect the Business of the Assets or the
rights or ability of Seller to carry on its business substantially as
it is now conducted that has not heretofore been disclosed by Seller.
j. All material contracts, indentures, leases and other agreements, oral
or written, imposing any obligation in excess of $250.00 on Seller
which are related to the Assets or to which any of the Assets are
subject, are disclosed in this Agreement or in the exhibits hereto.
k. Seller is in compliance with all contractual obligations concerning the
Assets.
l. Seller has in the past and presently complies with all applicable laws,
ordinances, permits, licenses and regulations of every kind whatsoever,
whether federal, state or local in nature, relating to the Assets of
the Business.
m. The execution, delivery and performance of this Agreement and all other
agreements contemplated hereby by Seller have been duly and effectively
authorized by all necessary company action as the case may be, have
been duly executed and delivered
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by Seller and constitute a valid and binding obligation of Seller in
accordance with the terms hereof and thereof.
n. Seller has filed all tax reports and returns, which are required to be
filed and has paid all taxes as shown on said returns and all
assessments received by them to the extent that such taxes become due.
There are no federal, state, local or foreign tax liens upon any of the
Assets. There are no potential tax deficiencies on the part of the
Sellers relating to any tax year which may arise from issues which have
been raised or which would reasonably be expected by Seller to be
raised by the Internal Revenue Service or any other taxing authority
and which might reasonable by expected to have a material adverse
effect on the Assets.
o. The schedule of Assets (Exhibit A) delivered by Seller at Closing are
substantially true and correct in all respects.
p. Seller has provided to Buyer prior to Closing, unaudited monthly
revenue statements of the business which Buyer and/or Buyer's
representative has reviewed prior to the execution of this Agreement.
Buyer relies upon the unaudited monthly revenue statements supplied as
a material inducement to consummate this contract and the obligations
thereunder. Seller has disclosed the accounting problems and
discrepancies that have occurred in the operations of the business, and
Buyer has been made aware of such problems. As such, Seller represents,
warrants and affirms that the unaudited monthly revenue statements are
true and correct the best of Sellers knowledge and belief.
q. INVENTORIES. All Inventories of Seller reflected in the Seller Balance
Sheet, are of a quality and quantity usable and salable in the ordinary
course of business. Items
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included in such Inventories are carried on the books of the Seller,
and are valued on the Seller Balance Sheet, at the lower of cost or
market and, in any event, at not greater than their net realizable
value, on an item basis, after appropriate deduction for costs of
completion, marketing costs, and allocation of overhead.
r. ENVIRONMENTAL MATTERS. Without in any manner limiting any other
representations and warranties set forth in this Agreement:
(1)neither Sellers, nor any real property or facility presently or to
Sellers' knowledge, formerly owned, leased, used, maintained or
operated by Seller, ("Seller Site"), nor any of the other assets of
Seller is in violation of, or has violated, or has been or is in
non-compliance with, in any material respect, any Environmental Laws in
connection with the ownership, use, maintenance or operation of, or
conduct of business related to, Seller, any of the Seller Sites or any
of the other assets of Seller, any of the Seller Sites or any of the
other assets of Seller, and
(2)without in any manner limiting the generality of (1) above:
(i) except in accordance with Environmental Laws (including, without
limitation, the obtaining of necessary Permits), no Materials of
Environmental Concern (as defined below) have been used, generated,
manufactured, stored or treated, or disposed of, landfilled or in
any other way Released (and no Release is threatened), on, under or
about any Seller Corporation Site or transported to or from the
Seller Corporation Site and to the knowledge of any Seller, no
Materials or Environmental Concern have been generated,
manufactured, stored or treated or disposed of, landfilled or in any
other way Released (and
7
<PAGE>
to Release is threatened), on, under, about or from any property
adjacent to any Seller Corporation Site.
(ii) To Seller's knowledge, Seller is not now, and it will not be in
the future, as a result of the operation or condition of its
business or assets prior to or at Closing, subject to any (1)
contingent liability in connection with any Release or threatened
Release of any Materials of Environmental Concern into the
environmental whether on or off a Seller Corporation Site or (2)
reclamation or remediation requirements under Environmental Laws, or
any reporting requirements related thereto.
(iii) To Sellers' knowledge, Seller has not been named as a potentially
responsible party under, and none of the Seller Sites has been
nominated or identified as a facility which is subject to an
existing or potential claim under, CERCLA or comparable
Environmental Laws (as defined below), and none of the Seller Sites
is subject to any Lien arising under Environmental Laws.
(iv) Seller has all environmental and pollution control equipment
necessary for compliance in all material respects with all
Environmental Laws (including, without limitation, all applicable
Permits) and operation of Seller's business as it is presently
conducted,
(v) no Materials of Environmental Concern have been incorporated into
any of the Assets,
(vi) none of the off-site locations where Materials of Environmental
Concern from any Seller Site or form any of the assets of Seller
have been stored, treated, recycled, disposed of or Released has
been nominated or identified as a
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<PAGE>
facility which is subject to an existing or potential claim under
CERCLA or comparable Environmental Laws.
(vii) no Seller has received any notices of any Release or threatened
Releases of Materials or Environmental Concern, or of any violation
of, noncompliance with, or remedial obligation under, Environmental
Laws, relating to the ownership use, maintenance, operation of, or
conduct of business related to, any Seller Site or assets of Seller,
nor is there any basis for any of the foregoing,
(viii) there are no writs, injunctions, decrees, orders or judgments
outstanding, or lawsuits, claims, proceedings, or investigations
pending or, to the knowledge of Sellers, threatened, relating to the
ownership, lease, use, maintenance, operation of, or conduct of
business related to, any Seller Site or assets of Seller, nor is
there any basis for any of the foregoing, and
(ix) there are no obligations, undertakings or liabilities arising out
of or relating to Environmental Laws which Seller has agreed to,
assumed or retained, by contract or otherwise.
As used in this Agreement, (I) "Materials of Environmental Concern" shall mean
any solid or hazardous waste, hazardous substance, pollutant, contaminant oil,
petroleum product, commercial product or other substance (x) which is listed,
regulated or designated as toxic or hazardous (or words of similar meaning or
regulatory effect), or with respect to which remedial obligation may be imposed,
under any Environmental Laws or (y) exposure to which may pose a health or
safety hazard, and (ii) "Environmental Laws" means any applicable federal,
state, or local laws, rules, or regulations, common law or strict liability
provisions, and any judicial or
9
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administrative interpretations thereof, including any judicial or administrative
orders or judgments, relating to health, safety, industrial hygiene, pollution
or environmental matters.
s. EXCLUDED ASSETS. None of Seller's assets not conveyed as part of the Assets
will be needed in the continuing operation of the Business following the
Effective Time of Closing.
t. ABSENCE OF CERTAIN BUSINESS PRACTICES. Neither Seller, nor any employee or
agent of Seller, nor any other Person acting on its behalf, has, directly or
indirectly, within the past five years, given or agreed to give any gift or
similar benefit to any customer, supplier, government employee or other
Person who is or may be in a position to help or hinder the business of
Seller (or to assist Seller in connection with any actual or proposed
transaction) which (1) might subject Seller to any damage or penalty in any
civil, criminal or governmental litigation or proceeding, (2) if not given in
the past, might have had a Material Adverse Effect on the assets, business or
operation of Seller as reflected in the Financial Statements, or (3) if not
continued in the future, might materially adversely effect the assets,
business operations or prospects of Seller or which might subject Seller to
suit or penalty in a private or governmental litigation or proceeding.
u. CUSTOMERS LIST. The Customers List information delivered to Buyer at Closing
sets forth a true and correct list of the regularly scheduled maintenance
customers of Seller as of the Closing Date, and shows the approximate total
sales to each such customer during the indicated accounting periods. There
has not been any material adverse change in the business relationship of
Seller with any customer so named.
6. REPRESENTATIONS WARRANTIES OF BUYER. Buyer represents and warrants as
follows:
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a. Buyer is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and has all the
corporate power, rights, and authority to enter this Agreement and to
perform its obligations under this Agreement; and
b. the execution, delivery and performance of this Agreement and all other
agreements contemplated hereby by Buyer have been duly and effectively
authorized by all necessary corporate action and have been duly
executed and delivered by Buyer and are valid, binding obligations of
Buyer enforceable in accordance with the terms hereof.
7. EMPLOYEES AND OBLIGATIONS RELATING THERETO. Seller will terminate, effective
as of the Closing Date, the employment of all personnel employed by Seller in
connection with the Business (herein Employees"). Seller shall be responsible
for and shall pay, when due, any and all compensation due such terminated
Employees through the Closing Date. Buyer intends that certain Employees
continue to be employed in the Business after the Closing Date but shall have
no obligation to provide employment to such Employees. Any Employment in the
Business continued after the Closing Date shall be on such terms and
conditions as may be specified by Buyer exclusively. Seller will assist Buyer
to encourage such employees to remain employed in the Business.
8. Indemnity.
a. Indemnity.
(1)Seller agrees to indemnify and hold Buyer and Buyer's officers,
directors, shareholders, affiliates, employees and agents ("Buyer
Indemnitees") harmless from any and all damages, losses, which
shall include any diminution in value, shortages, liabilities
(joint or several), payments, obligations, penalties,
11
<PAGE>
claims, litigation, demands, defenses, judgments, suits,
proceedings, costs, disbursements or expenses (including without
limitation, fees, disbursements and expenses of attorneys,
accountants and other professional advisors and of expert
witnesses and costs of investigation and preparation) of any kind
or nature whatsoever (collectively "Damages"), directly or
indirectly resulting from, relating to or arising out of:
(a)any breach of or inaccuracy in any representation or warranty of
Sellers contained in Section 5 or in any Operative Document;
(b)any breach or non-performance, partial or total, by Seller of
any covenant or agreement of Seller (or any affiliate or
subsidiary thereof) contained in this Agreement or in any
Operative Documents;
(c)any actual or threatened violation of or non-compliance with, or
remedial obligation arising under, any Environmental Laws arising
from any event, condition, circumstance, activity, practice,
incident, action or plan existing or occurring prior to the
Effective Time of Closing relating in any way to the assets or
the business of Seller (including without limitation the
ownership, operation or use of the Assets and the conduct of the
business of Seller prior to the Effective Time of Closing; the
presence of any underground storage tanks or any Materials of
Environmental Laws on, in, under or effecting all or any portion
of Seller's properties or any surrounding areas, and any Release
or threatened Release with respect to such Materials of
Environmental Concern; and the storage, disposal or treatment, or
transportation for storage, disposal or treatment, of Materials
of Environmental Concern; but excluding any
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<PAGE>
violation of or non-compliance with, or remedial obligation
arising under, any Environmental Laws that is attributable solely
to a change by Buyer in the structure, use of condition of any of
the Assets after the Effective time of Closing);
(d)the ownership, management or use of the Assets prior to the
Effective Time of Closing; the conduct of the Business prior to
the Effective Time of Closing; all contracts, agreements,
obligations, commitments and liabilities of Seller of every kind
and character relating in any way to the Assets or the business
of Seller other than the Assumed Obligations;
(e)Seller's noncompliance with the bulk transfer provisions of the
Uniform Commercial Code (or any similar law) in connection with
the sale and transfer of the Assets and the Business to Buyer;
and, all pension, retirement, bonuses, severance pay, salaries
and all other compensation and benefits of whatsoever nature
(including all liabilities to any Person under ERISA and all
liabilities to any Governmental Body) attributable to service or
to or employment by Seller Corporation prior to the Effective
Time of Closing; and
(f)any losses or costs of defending against any claims which may be
made against Buyer by and Person claiming violation or any local,
state, or federal laws relating to the employment relationship,
including, but not limited to, wages, hours, concerted activity,
nondiscrimination, occupational health and safety and the payment
and withholding of Taxes, where such claims arise out of
circumstances occurring prior to the Closing Date.
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Notwithstanding any provision to the contrary in this Agreement
Seller shall have no liability to Buyer hereunder to the extent that
the existence of such liability, breach, or falsity of the
representation upon which such liability would be based is disclosed
in any of the contracts, certificates and documents referred to in
this Agreement or the Exhibits attached hereto prior to Closing.
(2) Seller shall retain liability, and shall indemnify Buyer, for the
payment of any tax liabilities with respect to the Assets and the
conduct of the Business during all periods ending as of or prior to
the Effective Time of Closing and the transactions contemplated by
this Agreement other than the liabilities expressly assumed by
Buyer.
b. Notice, and participation
If a claim by a third party is made against a party indemnified pursuant
to this Section 8 ("Indemnitee"), and if such Indemnitee intends to seek
indemnity with respect thereto under this Section, the Indemnitee shall
promptly, and in any event within 60 days, after the assertion of any
claim or the discovery of any fact upon which Indemnitee intends to base a
claim for indemnification under this Agreement ("Claim"), notify the party
or parties from whom indemnification is sought ("Indemnitor") of such
Claim. In the event of any Claim, Indemnitor, at its option, may assume
(with legal counsel reasonably acceptable to the Indemnitee) the defense
of any claim, demand, lawsuit or other proceeding in connection with the
Indemnitee's Claim, and may assert any defense of Indemnitee or
Indemnitor, provided that Indemnitee shall have the right at its own
expense to participate jointly with Indemnitor in the defense of any
claim, demand, lawsuit or other proceeding in connection with the
Indemnitee's Claim and provided
14
<PAGE>
further that failure to give such notice shall not preclude Indemnitee
making any Claim thereon if the failure or delay in giving such notice did
not prejudice Indemnitee. In the event that Indemnitor elects to undertake
the defense of any Claim hereunder, Indemnitee shall cooperate with
Indemnitor to the fullest extent possible in regard to all matters
relating to the Claim (including, without limitation, corrective actions
required by applicable law, assertion of defenses and the determination,
mitigation, negotiation and settlement of all amounts, costs, actions,
penalties, damages and the like related thereto) so as to permit
Indemnitor's management of same with regard to the amount of Damages
payable by the Indemnitor hereunder. Neither Buyer nor any Seller shall be
entitled to settle any Claim without prior written consent of the other,
which consent shall not unreasonably be withheld.
c. INDEMNIFICATION IF NEGLIGENCE OF INDEMNITEE. The Indemnification
provided in this Section shall be applicable whether or not negligence
of the Indemnitee is alleged or proven.
d. REIMBURSEMENT. In the event that the Indemnitor shall undertake,
conduct or control the defense or settlement of any Claim and it is
later determined that such Claim was not a Claim for which the
Indemnitor is required to indemnify the Indemnitor for all its costs
and expenses with respect to such settlement or defense, including
reasonable attorneys' fees and disbursements.
e. OFFSET. Buyer Indemnitee shall have the right to offset any amounts for
which it is entitled to indemnification under this Section against any
amounts payable by any Buyer.
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9. PRORATION OF PERSONAL PROPERTY TAXES. Seller shall pay any and all personal
property taxes through the Closing Date. Buyer shall timely render the
property for taxation purposes. Personal property taxes shall be prorated
through the date of Closing. Seller shall reimburse Buyer for that portion of
the year during which Seller owned said property until the date this
transaction shall close.
10.EFFECT AND SURVIVAL OF WARRANTIES AND REPRESENTATIONS. The representations
and warranties contained herein shall be substantially true and correct on
and as of the Closing Date, with the same effect as if made on the Closing
Date. The warranties, representations, covenants, and agreements contained in
this Agreements shall survive the closing of the transaction contemplated by
this Agreement.
11.SPECIFIC PERFORMANCE. Each of the Parties hereby agree that the transaction
contemplated by this Agreement are unique and that any such Party shall have,
in addition to any other legal or equitable remedy available, the right to
enforce this Agreement by decree of specific performance.
12.SUCCESSORS. This Agreement shall be binding upon and shall insure to the
benefit of the successors and assigns of each Party hereto. However, this
Agreement may not be assigned to any other person without the prior written
consent of the Other Party.
13.WAIVERS AND MODIFICATIONS. No waivers shall be deemed to be made by any
Party hereto of any of its rights hereunder unless the waiver shall be in
writing. This Agreement shall not be changed or modified in any respect
except in writings and signed by the Parties hereto.
14.ENTIRE UNDERSTANDING. This Agreement together with its Exhibits, Assignment,
Shareholders Agreement, Employment Agreement, and Subscription Agreement
executed among the parties and delivered at Closing, sets forth the entire
agreement and understanding among the
16
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Parties hereto as of the date hereof with respect to the transaction
contemplated hereby. This Agreement supersedes all prior terms, conditions,
warranties or representations other than those contained herein.
15.CAPTIONS. All captions are inserted for convenience and shall not be
utilized in construing this Agreement.
16.NOTICES. All notices requests, demands, waivers and other communications
required or permitted to be given under this Agreement shall be in writing
and shall be deemed to have been duly given on the date if delivered
personally, or upon the second business day after it shall have been
deposited by certified or registered mail with postage prepaid, or sent by
telex, telegram or telecopier, as follows (or at such other address or
facsimile number for a party as shall be specified by like notice):
if to SELLER, to it at:
John Diaz d/b/a Vidatel Communications
P.O. Box 691883
Houston, Texas 77269
Fax: 281-894-2517
if to BUYER to it at:
ClearWorks Technologies, Inc.
509 N. Belt, Suite 140
Houston, Texas 77060
Attn.: Michael McClere, CEO
Fax (281) 999-5855
17. FURTHER ASSURANCES. Seller will at any time, upon the request of Buyer,
execute acknowledge and deliver and/or cause to be executed acknowledged
and delivered to Buyer all further bills of sale, assignments, transfers
or conveyances as may be reasonably required for selling, assigning and
transferring the Assets to Buyer.
17
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18. COUNTERPARTS. This Agreement may be executed in several counterpart each
of which is an original. This Agreement and any counterpart so executed
shall be deemed to be one and the same instrument. It shall not be
necessary in making proof of this Agreement or any counterpart hereof to
produce or account for any of the other counterparts.
19. APPLICABLE LAW. This Agreement shall be construed and enforced in
accordance with the laws of the State of Texas, and the Parties
specifically stipulate that venue shall be Houston, Harris County, Texas.
At Buyer's option, any controversy or claim arising out of or relating to
this Agreement, or breach thereof, shall be submitted for final, binding
arbitration to be conducted in Houston, Texas in accordance with the Rules
of American Arbitration Association. Judgment upon award may be entered in
any court having jurisdiction.
20. SEVERABILITY. If any term or provision of this Agreement or the
application thereof to any personal or circumstance shall, to any extent,
be invalid or enforceable there shall be deemed to be made such immaterial
changes as are necessary to make it valid and enforceable. The remainder
of this Agreement or the application of such term or provision to persons
or circumstances other than those as to which it is held invalid or
unenforceable shall not be affected thereby. Each term and provision of
this Agreement shall be valid and shall be enforced to the fullest
permitted by law.
21. BULK SALES COMPLIANCE. Seller will deliver to Buyer at closing a sworn
list of all Creditors. By reason of this list the parties agree that
notice to creditors under the Bulk Sales Act will not be required and need
not be given except with respect to any creditors named on the list.
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22. CLOSING DATE. Closing of this transaction shall occur on November 16, 1998
at 3:00 o'clock p.m. at the offices of ClearWorks Technologies, Inc., 505
N. Belt, Suite 140, Houston, Texas or at such other time and place and on
such other date as Buyer and Seller shall agree.
IN WITNESS WHEREOF, Buyer and Seller have caused this agreement to
be signed by their respective officers hereunto duly authorized, all as of the
date herein listed below.
CLEARWORKS TECHNOLOGIES, INC.
By:/s/MICHAEL T. MCCLERE, CEO
Name: Michael T. McClere
Title: CEO
Date: 11/19/98
JOHN DIAZ DBA VIDATEL COMMUNICATIONS
By:/s/JOHN A. DIAZ
Name: John A. Diaz
Title: Owner Operator
Date: 11/19/98
SPOUSE OF JOHN DIAZ
By:/s/SHEILA S. DIAZ
Name: Sheila S. Diaz
Title:
Date: 11/19/98
19
<PAGE>
Many pages of copy followed, but no file.
EXHIBIT 10(k)
AGREEMENT AND PLAN OF ACQUISITION
BETWEEN
ARCHER-MICKELSON TECHNOLOGIES, L.L.C.
AND
CLEARWORKS TECHNOLOGIES, INC.
Dated: 5-14-99
<PAGE>
TABLE OF CONTENTS
ARTICLE I: ACQUISITION OF COMPANY BY BUYER AND RELATED MATTERS...............1
1.1 THE ACQUISITION........................................................1
1.2 CONVERSION OF STOCK; ACQUISITION CONSIDERATION.........................3
1.3 ADDITIONAL RIGHTS; TAKING OF NECESSARY ACTION; FURTHER ACTION..........3
1.4 NO FURTHER RIGHTS OR TRANSFERS.........................................4
ARTICLE II: THE CLOSING.....................................................4
2.1 CLOSING DATE...........................................................4
2.2 CLOSING TRANSACTIONS...................................................4
ARTICLE III: CERTAIN CORPORATE ACTION.......................................5
3.1 COMPANY SPECIAL MEMBER MEETING.........................................5
3.2 BUYER SPECIAL SHAREHOLDER MEETING......................................6
4............................................................................6
ARTICLE IV: REPRESENTATIONS AND WARRANTIES..................................6
4.1 REPRESENTATIONS AND WARRANTIES OF COMPANY..............................6
4.2 REPRESENTATIONS AND WARRANTIES OF BUYER...............................17
5...........................................................................20
ARTICLE V: AGREEMENTS OF THE PARTIES.......................................20
5.1 ISSUANCE OF MEMBERSHIP INTEREST CERTIFICATES OF COMPANY...............20
5.2 DISCLOSURE DOCUMENTS..................................................21
5.3 ACCESS TO INFORMATION.................................................21
5.4 CONFIDENTIALITY; NO SOLICITATION......................................22
5.5 INTERIM OPERATIONS....................................................24
5.6 CONSENTS..............................................................26
5.7 FILINGS...............................................................26
5.8 ALL REASONABLE EFFORTS................................................27
5.9 PUBLIC ANNOUNCEMENTS..................................................27
5.10 NOTIFICATION OF CERTAIN MATTERS.....................................27
5.11 EXPENSES............................................................27
5.12 DELIVERY OF PROXY BY COMPANY MEMBER.................................28
ARTICLE VI: CONDITIONS TO CONSUMMATION OF THE MERGER.......................28
6.1 CONDITIONS TO COMPANY'S OBLIGATIONS...................................28
6.2 CONDITIONS TO BUYER'S OBLIGATIONS.....................................29
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ARTICLE VII: TERMINATION...................................................30
7.1 TERMINATION...........................................................30
7.2 NOTICE AND EFFECT OF TERMINATION......................................30
7.3 EXTENSION; WAIVER.....................................................31
7.4 AMENDMENT AND MODIFICATION............................................31
ARTICLE VIII: MISCELLANEOUS................................................31
8.1 INDEMNITY OBLIGATIONS.................................................31
8.2 SURVIVAL..............................................................32
9...........................................................................33
ARTICLE VIII: MISCELLANEOUS................................................33
9.1 NOTICES...............................................................33
9.2 ENTIRE AGREEMENT; ASSIGNMENT..........................................33
9.3 BINDING EFFECT; BENEFIT...............................................34
9.4 HEADINGS..............................................................34
9.5 COUNTERPARTS..........................................................34
9.6 GOVERNING LAW.........................................................34
9.7 ARBITRATION...........................................................34
9.8 LIMITATION ON INTEREST................................................35
9.9 TITLE AND RISK OF LOSS................................................35
9.10 SEVERABILITY........................................................35
9.11 REMEDIES CUMULATIVE.................................................35
9.12 CERTAIN DEFINITIONS.................................................35
ii
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EXHIBITS AND SCHEDULES
EXHIBITS SCHEDULES
-------- ---------
2.2(B) Shareholder Agreement
1.2(a) Loans to be Paid at Closing
4.1(a) Articles of Organization and
Regulations of Company
4.1(e) Financial Statements
4.1(f)(i) Location of Leased Property
4.1(f)(ii) Written Notice
4.1(h) Litigation
4.1(j)(i) Employee Benefit Plan
4.1(j)(ii) Employee Benefit Plan
4.1(j)(iv) Material Employment Arrangements,
Contracts, etc.
4.1(m) Investment Banking Fees
4.1(n) Personal Property
4.1(o) Intellectual Property
4.1(p-1) Accounts Receivable
4.1(p-2) Accounts Payable
4.1(q) Material Contracts
4.1(r)(i) Labor Relations; Employees
4.1(r)(ii) List of Employees
4.1(r)(v) Strikes, grievance proceedings,
arbitrations, etc.
4.1(r)(ix) Workers Compensation Reports
4.1(s) Suppliers and Customers
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4.1(t) Conflicts of Interest
4.1(v) Absence of Certain Changes
4.2(a) Articles of Incorporation and Bylaws
of Buyer
4.2(d) Authorized Capital Stock
4.2(g) No Violations
4.2(i) Litigation
4.2(l) Investment Banking Fees
iv
<PAGE>
AGREEMENT AND PLAN OF ACQUISITION
THIS AGREEMENT AND PLAN OF ACQUISITION (the "Agreement"), is made and
entered into as of _____________, 1999, by and among CLEARWORKS TECHNOLOGIES,
INC., a Delaware corporation ("Buyer") and ARCHER-MICKELSON TECHNOLOGIES,
L.L.C., a Texas limited liability company ("Company") and Robert Archer, the
sole membership interest holder of Company (sometimes referred to as the
"Member").
RECITALS
WHEREAS, Buyer and Company have determined that it is in the best
interests of their respective Shareholders and member for Buyer to acquire all
the membership interest of Company so Company may be a wholly owned subsidiary
of Buyer upon the terms and subject to the conditions set forth in this
Agreement;
WHEREAS, the Board of Directors of Buyer and the sole member of Company
has approved this Agreement and the consummation of the transactions
contemplated hereby and approved the execution and delivery of this Agreement;
and
WHEREAS, for federal income tax purposes, it is intended that this
acquisition of membership interest shall qualify as a tax-free reorganization
under the provisions of Section 368 of the Internal Revenue Code of 1986, as
amended (the "Code").
NOW, THEREFORE, in consideration of the foregoing premises and
representations, warranties and agreements contained herein, and for good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
ARTICLE I
ACQUISITION OF COMPANY BY BUYER AND RELATED MATTERS
1.1 THE ACQUISITION.
(a) Upon the terms and conditions of this Agreement, at the
"Effective Time" (as defined herein), COMPANY'S membership interest shall be
acquired by BUYER and COMPANY shall become a wholly owned subsidiary of BUYER
(the "Acquisition") in accordance with the provisions of the Texas Business
Corporation Act (the "TBCA") and the Delaware General Corporation Law ("DGCL").
The COMPANY shall continue as a wholly owned subsidiary of BUYER, and shall
change its business form to that of a corporation and its name to "CLEARWORKS
INTERGRATION SERVICES, INC." in accordance with the provisions of the TBCA.
<PAGE>
(b) The Acquisition shall become effective as of the date of
Closing when consideration is paid to the principals of COMPANY and COMPANY
delivers COMPANY membership interests to Buyer. The date and time when the
Acquisition shall become effective is referred to herein as the "Effective
Time."
(c) At the Effective Time:
(i) the effect of the Acquisition shall be as provided in
the applicable provisions of the TBCA.
(ii) the COMPANY shall continue its existence under the
laws of the State of Texas and its identity, existence, purposes, powers,
objects, franchises, privileges, rights and immunities shall continue unaffected
and unimpaired by the Acquisition until COMPANY'S business form is changed to
that of a corporation and COMPANY'S name is changed to "ClearWorks Integration
Services, Inc.";
(iii) the existence and rights of COMPANY shall continue
unaffected and unimpaired by the Acquisition until COMPANY'S business form is
changed to that of a corporation and COMPANY'S name is changed to "ClearWorks
Integration Services, Inc.";
(iv) all rights, privileges, immunities, franchises, title
and interests to all assets, whether tangible or intangible and any real,
personal and mixed property or property rights owned by COMPANY shall continue
unaffected and unimpaired by the Acquisition until COMPANY'S business form is
changed to that of a corporation and COMPANY'S name is changed to "ClearWorks
Integration Services, Inc.";
(v) the Articles of Organization of COMPANY as in effect
immediately prior to the consummation of the Acquisition, shall continue
unaffected and unimpaired by the Acquisition, until COMPANY'S business form is
changed to that of a corporation and COMPANY'S name is changed to "ClearWorks
Integration Services, Inc.";
(vi) the Bylaws of the BUYER, as in effect immediately
prior to the consummation of the Acquisition, shall continue unaffected and
unimpaired by the Acquisition until thereafter amended as provided by law and
such Bylaws; and
(vii) the Board of Directors and officers of the Surviving
Corporation shall hold office subject to the provisions of the laws of the State
of Texas.
(viii) COMPANY shall pay any and all sales, use, transfer
or similar taxes payable in connection with the sale, transfer and assignment of
the COMPANY Membership Interest to Buyer.
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1.2 CONVERSION OF STOCK; ACQUISITION CONSIDERATION.
At the Effective Time, and without any action on the part of the
parties hereto, the sole member of COMPANY or any other party,:
(a) All of the shares of membership interest of COMPANY ("COMPANY
Membership Interest") that are issued and outstanding as of the Effective Time
shall, by virtue of the Acquisition and without any action on the part of any
holder thereof, be converted into and represent the right to receive, and shall
be exchangeable for, $50,000.00 on the date of Closing and 75,000 shares of
Buyer Common Stock ("BUYER Common Stock") paid at Closing to Robert Archer, sole
member of the Company. Also, BUYER shall discharge existing COMPANY loans in the
amount not to exceed $6,000.00 at the time of closing. Each share of BUYER
Common Stock shall be free of any "Encumbrance" (as defined herein), with all
transfer and stamp taxes, if any, paid thereon by Buyer, and such shares will,
upon their appropriate delivery date, appear as issued and outstanding on the
books and records of BUYER;
(b) Each certificate of capital membership interest of COMPANY
held in treasury as of the Effective Time shall, by virtue of the Acquisition,
be canceled without payment of any consideration therefor and without any
conversion thereof;
(c) BUYER shall pay all charges and expenses, including those of
any exchange agent and the National Association of Securities Dealers, Inc., if
any, in connection with the issuance or exchange of the shares of BUYER Common
Stock for COMPANY Membership Interest;
(d) From and after the Effective Time, there shall be no transfers
on the stock transfer books of the Surviving Corporation of shares of COMPANY
capital membership interest certificates (or any warrants or other rights to
acquire any of the same) that were outstanding immediately prior to the
Effective Time. If, after the Effective Time, certificates of COMPANY capital
membership interest (or any warrants or other rights to acquire any of the same)
that were outstanding immediately prior to the Effective Time and represented to
the Surviving Corporation, shall be canceled and exchanged for the consideration
to be received therefor in connection with the Acquisition as provided in this
Agreement; and
(e) No fractional shares of BUYER Membership Interest shall be
issued in the Acquisition, and each holder of COMPANY Membership Interest
entitled to receive as part of the Acquisition Consideration fractional shares
shall receive that number of shares of BUYER Common Stock rounded to the nearest
whole number.
1.3 ADDITIONAL RIGHTS; TAKING OF NECESSARY ACTION; FURTHER ACTION.
The BUYER and COMPANY, respectively, shall each use its best efforts
to take all such action as may be necessary and appropriate to effect the
Acquisition under the TBCA as promptly as possible. If at any time after the
Effective Time, any further action is necessary or
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desirable to carry out the purposes of this Agreement, the officers of BUYER and
COMPANY are fully authorized in the name of their corporations or otherwise, and
notwithstanding the Acquisition, to take, and shall take, all lawful and
necessary action.
1.4 NO FURTHER RIGHTS OR TRANSFERS.
At and after the Effective Time, the certificates of membership
interest of COMPANY outstanding immediately prior to the Effective Time shall
cease to provide the holders thereof any rights as a member of COMPANY, except
for the right to surrender the certificate or certificates representing such
shares and to receive the consideration to be received in the Acquisition as
provided in this Agreement.
ARTICLE II
THE CLOSING
2.1 CLOSING DATE.
Subject to satisfaction or waiver of all conditions precedent set
forth in Section 6 of this Agreement, the closing of the Acquisition (the
"Closing") shall take place (a) at the offices of Royall & Fleschler, 1331
Lamar, Suite 1375, Houston, Texas 77010, at 10:00 a.m., local time, on May 14,
1999, or (b) at such other time and place and on such other date as BUYER and
COMPANY shall agree. The date of the Closing is referred to herein as the
"Closing Date."
Following Closing, Buyer may receive and open all mail addressed to
COMPANY and, to the extent that such mail and the contents thereof relate to the
COMPANY, deal with the contents thereof in its discretion. Buyer shall notify
COMPANY of (and provide the COMPANY copies of) any mail that on its face obliges
COMPANY to take action.
2.2 CLOSING TRANSACTIONS.
At the Closing:
(a) the holder of COMPANY Membership Interests shall surrender and
deliver to the Buyer, as the parent company, all of such membership interests of
COMPANY.
(b) the holder of COMPANY membership interests shall, to the
extent necessary to comply with applicable federal and state securities laws
(including, if applicable, Rule 145 promulgated under the Securities Act of
1933, as amended), execute and deliver at the
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Closing a copy of a Shareholder Agreement in a form to be mutually agreed by the
parties at that time and attached to this Agreement as Exhibit 2.2(b)
("Shareholder Agreement");
(c) Any outstanding membership agreements relating to COMPANY
capital membership interest other than as contemplated by Section 6.2(c) shall
have been terminated and evidence of such termination satisfactory to BUYER
shall have been delivered to BUYER;
(d) BUYER shall deliver or shall cause to be delivered to the
holder of COMPANY Membership Interest a certificate or certificates representing
the number of shares of BUYER Common Stock as such holder is entitled to receive
in connection with the Acquisition
(e) BUYER shall deliver a check in the amount of $50,000.00,
payable to the order of Robert C. Archer;
(f) BUYER shall deliver three checks to Robert C. Archer drawn in
the following amounts and payable to the order of the following payees in
discharge of existing COMPANY loans:
$2,440.06 payable to the order of Richard F. Archer,
Address: 4302 Meyerwood, Houston, Texas 77096
$1,243.60 payable to the order of Jolynn H. Archer,
Address: 413 Blanco Bend Dr., Wimberley, Texas 78676.
$1,865.40 payable to the order of Yvonne J. Jackson
Address: 807 S. Post Oak Lane #161, Houston, Texas 77056.
ARTICLE III
CERTAIN COMPANY ACTION
3.1 COMPANY SPECIAL MEMBER MEETING.
COMPANY, acting through its sole Member, shall, in accordance with
applicable Texas law, its Articles of Organization and Regulations:
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(a) duly call, give notice of, convene and hold a special meeting
(the "Special Meeting") of its Member as soon as practicable, but in no event
later than thirty (30) days, following the date of this Agreement for the
purpose of considering and approving this Agreement (which shall constitute the
plan of Acquisition under the TBCA with respect to the Acquisition) and at which
COMPANY'S member shall vote all shares of COMPANY owned by him or her in favor
of the Acquisition and in opposition to all other contrary proposals; and
(b) subject to its fiduciary duties to its Member under applicable
law as advised by counsel, include in an information statement with respect to,
the Special Meeting the unanimous recommendation of its that this Agreement be
approved by the COMPANY'S sole member.
3.2 BUYER SPECIAL SHAREHOLDER MEETING.
BUYER, acting through its Board of Directors or by the Unanimous
Consent of the Shareholders, shall, in accordance with applicable DGCL, its
Certificate of Incorporation and Bylaws:
(a) duly call, give notice of, convene and hold a special meeting
of its shareholders as soon as practicable, but in no event later than thirty
(30) days following the date of Closing, for the purpose of considering and
approving this Agreement; and
(b)subject to its fiduciary duties to its shareholders under
applicable law as advised by counsel, include in a proxy statement for, or any
information statement with respect to, the meeting the unanimous recommendation
of its board of directors that this Agreement be approved by the shareholders of
BUYER.
4.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1 REPRESENTATIONS AND WARRANTIES OF COMPANY.
As a material inducement to BUYER to execute this Agreement and
consummate the Acquisition and other transactions contemplated hereby, COMPANY
hereby makes the following representations and warranties to BUYER. For purposes
of the representations and warranties set forth in 4.1 below, COMPANY shall be
deemed to make the following representations and warranties with respect to
COMPANY.
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(A) COMPANY EXISTENCE AND POWER.
(i) COMPANY is a limited liability company duly organized, validly
existing and in good standing under the laws of the State of Texas, and has all
company powers and all governmental licenses, authorizations, consents and
approvals required to carry on its business as now conducted, except where the
failure to have any of the foregoing would not have a Material Adverse Effect.
True, correct and complete copies of the Articles of Organization and
Certificate of Good Standing are attached hereto as Schedule 4.1(a) and are made
a part hereof.
(ii) COMPANY does not have any subsidiary and does not have any
interest in a corporation, partnership, joint venture or other business
association or entity.
(B) COMPANY AUTHORIZATION. The execution, delivery and performance by
COMPANY of the Agreement and the consummation by COMPANY of the transactions
contemplated hereby are within COMPANY'S company powers and have been duly
authorized by all necessary company action. The Agreement constitutes a valid
and binding agreement of COMPANY, enforceable in accordance with its terms. As
of the Effective Time all company action on the part of COMPANY required under
applicable law in order to consummate the Acquisition will have occurred.
(C) NO CONTRAVENTION. The execution and delivery of the Agreement does
not, and the consummation of the transactions contemplated thereby will not: (i)
conflict with or result in any violation of any provision of the Articles of
Organization or Regulations of COMPANY or (ii) conflict with or result in any
violation or default (with or without notice or lapse of time, or both) under,
or give rise to a right of termination, cancellation or acceleration of a right
or obligation or to loss or a benefit under, or any loan or credit agreement,
note, bond, mortgage, indenture, lease or other agreement, instrument, permit,
concession, franchise, incense, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to COMPANY or its properties or assets,
or result in the creation or imposition of any mortgage, lien, pledge, charge or
security interest of any kind ("ENCUMBRANCE") on any asset of COMPANY, except,
only as to clause (ii) above, such as is not reasonably likely to have a
Material Adverse Effect or prevent COMPANY from consummating the transactions
contemplated by this Agreement. No consent, approval, order or authorization of,
or registration, declaration or filing with, any court, administrative agency or
commission or other governmental authority or instrumentality, domestic or
foreign, is required by or with respect to COMPANY in connection with the
execution and delivery of this Agreement by COMPANY or the consummation by
COMPANY of the transactions contemplated hereby. The Member owns 100% of the
outstanding voting membership interest of the COMPANY. Assuming the accuracy of
the representations in the attached financial statements, no filing under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HRS Act") is required
in connection with the transactions contemplated by this Agreement.
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(D) CAPITALIZATION. Except as set forth in this Section 4.1(d), there are
outstanding (A) no membership interest certificates or other voting securities
of COMPANY, (B ) no securities of COMPANY convertible into or exchangeable for
membership interest certificates or voting securities of COMPANY and (C) no
options, warrants or other rights to acquire from COMPANY, and no obligation of
COMPANY to issue, any membership interest certificates, voting securities or
securities convertible into or exchangeable for membership interest certificates
or voting securities of COMPANY, and there are no agreements or commitments to
do any of the foregoing. There are no voting trusts or voting agreements
applicable to any membership interest certificates of COMPANY.
(E) FINANCIAL STATEMENTS. Attached as Schedule 4.1(e) are copies
of the following unaudited financial statements of COMPANY and accompanying
notes, which were compiled by Robert C. Archer and which have previously been
delivered to BUYER on or before the date hereof: Balance Sheet and Income
Statement of COMPANY at and for the year ended December 31, 1998, and the
Balance Sheet and Income Statement of COMPANY at and for the period ended April
30, 1999 (the April 30, 1999 Balance Sheet is hereinafter called the "Warranted
Balance Sheet"). Such financial statements have been prepared in accordance with
generally accepted accounting principles consistently applied throughout the
periods reported upon and fairly present in all material respects the financial
position of COMPANY as of the date thereof and the results of operations for the
periods then ended (subject to normal year-end adjustments).
(F) REAL PROPERTIES.
(i) COMPANY currently leases real property at those
locations identified on Schedule 4.1(f)(i) hereto pursuant to the true, correct
and complete copies of the lease agreements attached to Schedule 4.1(f)(i).
COMPANY owns or leases no other real estate. None of the leasehold interests
held by COMPANY is subject to any Encumbrance, except (a) liens for ad valorem
taxes not yet due or being contested in good faith; and (b) contractual or
statutory mechanics or materialmen's liens or other statutory or common law
Encumbrances relating to obligations of COMPANY that are not delinquent or are
being contested in good faith. There are no Encumbrances which materially
interfere with the present use of such leasehold.
(ii) Except as described on Schedule 4.1(f)(ii) hereto,
COMPANY has not received any written notice from any governmental entity having
jurisdiction over COMPANY or over any of the real property leased by COMPANY of
any violation by COMPANY of any law, regulation or ordinance relating to zoning,
environmental matters, local building or fire codes or similar matters relating
to any of the real property leased by COMPANY or of any condemnation or eminent
domain proceeding.
(iii) Except such as has not had and is not reasonably
likely to have a Material Adverse Effect, all of the buildings leased by COMPANY
and all plumbing, HVAC, electrical, mechanical and similar systems are in good
repair and adequate for their current use, ordinary wear and tear excepted.
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(iv) COMPANY is not a party to any lease, sublease, lease
assignment or other agreement for the use or occupancy of any of the leasehold
premises wherein COMPANY is the landlord, sub-landlord or assignor, whether by
name, as successor-in-interest or otherwise. There are no outstanding agreements
with any party to acquire the leasehold premises or any portion thereof or any
interest therein.
(v) All certificates of occupancy and all other licenses,
permits, authorizations, consents, certificates and approvals required by all
governmental authorities having jurisdiction over the leasehold premises
occupied by COMPANY have been issued, are fully paid for and are in full force
and effect, will survive the Effective Time and will not be invalidated,
violated or otherwise adversely affected by the Acquisition or the other
transactions contemplated by this Agreement.
(G) NO CONTINGENT LIABILITIES. Except as set forth in the
financial statements referred to in Section 4.1(e) above, at the Effective Time,
COMPANY shall have no liabilities, whether related to tax or non-tax matters,
known or unknown, due or not yet due, liquidated or unliquidated, fixed or
contingent, determined or determinable in amount or otherwise and, to the
knowledge of COMPANY after due inquiry, there is no existing condition,
situation or set of circumstances which could reasonably be expected to result
in such a liability, except as and to the extent reflected on: (i) the Warranted
Balance Sheet; (ii) this Agreement or any Schedule or Exhibit hereto; or (iii)
liabilities incurred since the date of the Warranted Balance Sheet solely in the
ordinary course of business and as accurately reflected on the books and records
of COMPANY; provided, however, that no liability shall be incurred from and
after the date hereof which is in contravention of any negative covenant
contained herein and applicable to COMPANY. Although the following costs and
fees will be incurred in COMPANY'S ordinary course of business, for the purpose
of clarity, COMPANY will incur, as the result of the Acquisition, costs and
expenses for legal, accounting and professional services rendered to COMPANY
incident to the Acquisition, the relocation of Tucker Lithographic, Inc.'s
telephone system (currently housed on COMPANY'S leased premises), the relocation
and cabling of Tucker Lithographic, Inc.'s file server (currently housed on
COMPANY'S leased premises), and the removal of the door between COMPANY'S leased
premises and Tucker Lithographic, Inc. and its replacement with a suitable wall.
(H) LITIGATION. Except as described on Schedule 4.1(h) hereto
there is no action, suit, claim, investigation or proceeding (or, to the
knowledge of COMPANY, any basis therefor) pending against, or to the knowledge
of COMPANY threatened, against or affecting COMPANY or any of its properties
before any court or arbitrator or any governmental body, agency or official that
(i) if adversely determined against COMPANY, would have a Material Adverse
Effect or (ii) in any manner challenges or seeks to prevent, enjoin, alter or
materially delay the Acquisition or any of the other transactions contemplated
by the Agreement.
(I) TAXES. COMPANY has timely filed all tax returns required to be
filed by it, or will timely file when due all tax returns required to be filed
by it between the date hereof and the Effective Time. COMPANY has paid in a
timely fashion or will pay when due in a timely fashion, all taxes required to
be paid in respect of the periods covered by such returns, and
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the books and the financial statements of COMPANY reflect, or will reflect,
adequate reserves for all taxes payable by COMPANY which have been, or will be,
accrued but are not yet due. COMPANY is not delinquent in the payment of any
material tax, assessment or governmental charge. No deficiencies for any taxes
have been proposed, asserted or assessed against COMPANY, COMPANY is not aware
of any facts which would constitute the basis for the proposal or assertion of
any such deficiency and there is no action, suit, proceeding, audit or claim now
pending, or to COMPANY'S knowledge, threatened against COMPANY. All taxes which
COMPANY is required by law to withhold and collect have been duly withheld and
collected, and have been timely paid over to the proper authorities to the
extent due and payable. For the purposes of this Agreement, the term "tax" shall
include all federal, state, local and foreign income, payroll, property, sales,
franchise, excise and other taxes of any nature whatsoever. COMPANY has not
granted any extension or waiver of the limitation period applicable to any tax
returns. There are no Encumbrances for taxes upon the assets of COMPANY, except
Encumbrances for current taxes not yet due. There are no tax sharing or tax
allocation agreements to which COMPANY is now or ever has been a party. COMPANY
(A) has not been a member of an affiliated group filing a consolidated federal
income tax return and (B) has no liability for the taxes of any person (other
than COMPANY) under Treasury Regulation Section 1.1502-6 (or any similar
provision of state, local or foreign law), as a transferee or successor, by
contract or otherwise.
(J) HEALTH BENEFITS. (i) Schedule 4.1(j)
(i) identifies the Group Insurance provided by the COMPANY,
which includes Life Insurance, Long Term Disability and Major Medical issued by
Fortis Benefits. All of such policies are in full force and effect and all
premiums payable have been paid in full and COMPANY is in full compliance with
the terms and conditions of such policies. COMPANY has not received any notice
from any issuer of such policies of its intention to cancel or refusal to renew
any policy issued by it or of its intention to renew any such policy based on a
material increase in premium rates other than in the ordinary course of
business. None of such policies are subject to cancellation by virtue of the
Acquisition or the consummation of the other transactions contemplated by this
Agreement.
(K) INSURANCE COVERAGE. COMPANY maintains insurance covering its
assets, business, equipment, properties, operations, employees, officers and
directors with such coverage, in such amounts, and with such deductibles and
premiums as are consistent with insurance coverage provided for other companies
of comparable size and in comparable industries. All of such policies are in
full force and effect and all premiums payable have been paid in full and
COMPANY is in full compliance with the terms and conditions of such policies.
COMPANY has not received any notice from any issuer of such policies of its
intention to cancel or refusal to renew any policy issued by it or of its
intention to renew any such policy based on a material increase in premium rates
other than in the ordinary course of business. Some of such policies,
specifically, the premises liability insurance, may be subject to cancellation
by virtue of the Acquisition or the consummation of the other transactions
contemplated by this Agreement. There is no claim by COMPANY pending under any
of such policies as to which coverage has been questioned or denied.
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(L) COMPLIANCE WITH LAWS. To the best of the knowledge of COMPANY,
COMPANY is not in violation of, and has not violated, any applicable provisions
of any laws, statutes, ordinances or regulations, other than as would not be
reasonably likely to have a Material Adverse Effect or constitute a felony. To
the best of the knowledge of COMPANY, no such laws, statutes, ordinances or
regulations require or are reasonably expected to require capital expenditures
by COMPANY that are reasonably likely to have a Material Adverse Effect. Without
limiting the generality of the foregoing, COMPANY has all licenses, permits,
certificates and authorizations needed or required for the conduct of COMPANY'S
business as presently conducted and for the use of its properties and premises
occupied by it, except where the failure to obtain a license, permit,
certificate or authorization would not have a Material Adverse Effect.
(M) INVESTMENT BANKING FEES. Except as disclosed on Schedule
4.1(m), there is no investment banker, broker, finder or other similar
intermediary which has been retained by, or is authorized by, COMPANY to act on
its behalf who might be entitled to any fee or commission from COMPANY or BUYER
or any of their respective affiliates upon consummation of the transactions
contemplated by this Agreement.
(N) PERSONAL PROPERTY. COMPANY has good and valid title to all of
its personal property, tangible and intangible, reflected on the Warranted
Balance Sheet and to all other personal property owned by it, free and clear of
any Encumbrance, except that certain file server which is to be relocated and
recabled at Tucker Lithographic, Inc.'s leased premises. COMPANY is the owner of
all of its personal property now located in or upon its leased premises and of
all personal property which is used in the operation of its business. All such
equipment, furniture and fixtures and other tangible personal property are in
good operating condition and repair and do not require any repairs other than
normal routine maintenance to maintain such property in good operating condition
and repair. All inventory as reflected on the Warranted Balance Sheet is useable
in the ordinary course of business free from material defects.
(O) INTELLECTUAL PROPERTY; INTANGIBLE PROPERTY. The names of
COMPANY listed on Schedule 4.1(o) are the only names and trademarks which are
used by COMPANY in the operation of its business . Since its organization,
COMPANY has not done business and has not been known by any other name other
than by its Name. COMPANY owns and has the exclusive right to use all
intellectual property presently in use by it and necessary for the operation of
its business as now being conducted, which intellectual property includes trade
secrets, customer lists and other proprietary information. There are no
outstanding licenses or consents granting third parties the right to use any
intellectual property owned by COMPANY. No royalties or fees are payable by
COMPANY to any third party by reason of the use of any of its intellectual
property. All computer software used by COMPANY in the operation of its business
is readily available in a retail purchase pursuant to a "shrink wrap" license.
COMPANY has received no notice of any adversely held patent, invention, trade
mark, copyright, service mark or trade name of any person, or any claims of any
other person relating to any of the intellectual property subject hereto, and to
the knowledge of COMPANY, there is no reasonable basis for any such charge or
claim. There is no presently known threatened use or encroachment of any such
intellectual property.
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(P) ACCOUNTS RECEIVABLE. Schedule 4.1(p-1) sets forth a complete
listing of all accounts receivable and notes payable ("Accounts Receivable").
Each of the Accounts Receivable of COMPANY constitutes a valid claim in the full
amount thereof against the debtor charged therewith on the books of COMPANY to
which each such account is payable and has been acquired in the ordinary course
of business. Each Account Receivable is fully collectible to the extent of the
face value thereof (less the amount of the allowance for the doubtful accounts
reflected on the Warranted Balance Sheet) not later than thirty (30) days after
such account receivable is due, except that a verbal agreement exists between
COMPANY and Houston Cutting Tools which provides that Houston Cutting Tools may,
at its option, choose to pay its invoices within 60 days without penalty. To
COMPANY'S knowledge, no account debtor has any valid setoff, deduction or
defense with respect thereto, and no account debtor has asserted any such
setoff, deduction or defense. No Account Receivable arises pursuant to an
agreement with the United States Government or any agency or instrumentality
thereof. The COMPANY shall also provide BUYER with an accurate list of all
accounts receivable obtained subsequent to the Warranted Balance Sheet Date. The
COMPANY shall provide BUYER with an aging of all accounts and notes receivable
showing amounts due in 30 day aging categories upon the execution of this
Agreement and an updated aging within 5 days prior to the Closing Date. All of
the Accounts Receivable shall be owned by BUYER, free and clear of all liens,
subsequent to the execution of this Agreement Also attached hereto and made a
part hereof as Schedule 4.1(p-2) is a complete listing of all accounts payable
and/or notes payable by Company. ("Accounts Payable"). The Accounts Payable list
contains a complete description of debts validly owed by the Company. ANY
ACCOUNTS PAYABLE AND/OR NOTES PAYABLE, EXCEPT THOSE WHICH HAVE BEEN INCURRED OR
WILL BE INCURRED IN THE ORDINARY COURSE OF BUSINESS SINCE APRIL 30, 1999, WHICH
ARE NOT SPECIFICALLY LISTED ON SCHEDULE 4.1(P-2) SHALL BECOME THE SOLE PERSONAL
LIABILITY OF THE SOLE MEMBER OF THE COMPANY, AND BUYER WILL NOT ASSUME SAME.
(Q) CONTRACTS, LEASES, AGREEMENTS AND OTHER COMMITMENTS. COMPANY
is not a party to or bound by any oral, written or implied contracts,
agreements, leases, powers of attorney, guaranties, surety arrangements or other
commitments excluding equipment and furniture leases entered into in the
ordinary course of business (which do not exceed $30,000 in liabilities or
commitments in the aggregate), except for the following (which are hereinafter
collectively called the "Company Agreements"):
(i) The leases and agreements described on Schedules
4.1(f), 4.1(j)(i) and (ii) and 4.1(r)(i);
(ii) Agreements involving a maximum possible liability or
obligation on the part of COMPANY of less than Twenty-Five Thousand Dollars
($25,000) separately or less than One Hundred Thousand Dollars ($100,000) in the
aggregate; and
(iii) The agreements listed on Schedule 4.1(q).
The Company Agreements constitute all of the agreements and instruments
which are necessary and desirable to operate the business as currently conducted
by COMPANY. True, correct and complete copies of each Company Agreement
described and listed under subsections
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4.1(q)(i) and 4.1(q)(iii) have been made available to BUYER within ten (10)
business days prior to the date hereof. The term " Company Agreement" excludes
purchase orders entered into in the ordinary course for personalty or inventory
which may be returned to the vendor without penalty. All of the Company
Agreements are valid, binding and enforceable against the respective parties
thereto in accordance with their respective terms. All parties to all of the
Company Agreements have performed all obligations required to be performed to
date under such Company Agreements, and no party is in default or in arrears
under the terms thereof, and no condition exists or event has occurred which,
with the giving of notice or lapse of time or both, would constitute a default
thereunder. The consummation of this Agreement and the Acquisition will not
result in an impairment or termination of any of the rights of COMPANY under any
Company Agreement, except that COMPANY'S current casualty and liability
insurance may be cancelled as a result of the Acquisition. None of the terms or
provisions of any Company Agreement materially adversely affects the business,
prospects, financial condition or results of operations of COMPANY.
(R) LABOR RELATIONS; EMPLOYEES.
(i) Set forth on Schedule 4.1(r)(i) is a list of:
(A) All collective bargaining agreements and other
agreements requiring arbitration of employment disputes, and any written
amendments thereto, as well as all arbitration awards decided under any such
agreements, and all oral assurances or modifications, past practices, and/or
arrangements made in relation thereto, to which COMPANY is a party or by which
it is bound; and
(B) All employment agreements, and all severance
agreements which have not been fully performed, to which COMPANY is party or by
which it is bound.
(ii) Set forth on Schedule 4.1(r)(ii) is a list of all
employees of COMPANY, broken down by location, together with their rate of
compensation and title.
(iii) COMPANY has delivered to BUYER at least ten (10)
business days prior to the date hereof or such shorter period as has been agreed
to by BUYER, true and correct copies of all of the documents referred to on
Schedule 4.1(r)(i) hereof and all of the personnel policies, employee and/or
supervisor handbooks, procedures and forms of employment applications relating
to the employees of COMPANY.
(iv) There is no union representing or purporting to
represent any of the employees of COMPANY, and COMPANY is not subject to or
currently negotiating any collective bargaining agreements with any union
representing or purporting to represent the employees of any of the foregoing.
(v) Except as set forth on Schedule 4.1(r)(v) :
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(A) There are no strikes, slow downs or other work
stoppages, grievance proceedings, arbitrations, labor disputes or representation
questions pending or, to the best knowledge of COMPANY, threatened;
(B) COMPANY has, to COMPANY'S knowledge, complied
in all material respects with all laws relating to labor, employment and
employment practices, including without limitation, any provisions thereof
relating to wages, hours and other terms of employment, collective bargaining,
nondiscrimination and the payment of social security, unemployment compensation
and similar taxes, and COMPANY is not (1) liable for any arrearages of wages or
any taxes or penalties for failure to comply with any of the foregoing or (2)
delinquent in the payment of any severance, salary, bonus, commission, expenses
or other direct or indirect compensation for services performed by any employee
to the date hereof, or any amount required to be reimbursed to any employee or
former employee. At the time of closing, if Company is liable for any arrearages
of wages or any taxes or penalties for failure to comply with the foregoing,
such shall be the personal liability of the sole member of Company; and
(C) There are no charges, suits, actions,
administrative proceedings, investigations and/or claims pending or, to the
knowledge of COMPANY, threatened against COMPANY, whether domestic or foreign,
before any court, governmental agency, department, board or instrumentality, or
before any arbitrator (collectively "Actions"), concerning or in any way
relating to the employees or employment practices of COMPANY, including, without
limitation, Actions involving unfair labor practices, wrongful discharge and/or
any other restrictions on the right of COMPANY to terminate its respective
employees, employment discrimination, occupational safety and health, and
workers' compensation.
(vi) There are no express or implied agreements, policies,
practices, or procedures, whether written or oral, pursuant to which any
employee of COMPANY is not terminable at will and except as required by law, no
employee is entitled to any benefit or to participate in any employee benefit
plan of COMPANY following such termination of employment.
(vii) COMPANY is not a party to any oral or written (A)
agreement with any executive officer or other key employee of COMPANY (1) the
benefits of which are contingent, or the terms of which are materially altered,
upon the occurrence of a transaction involving COMPANY of the nature of the
transactions contemplated by this Agreement, (2) providing any term of
employment or compensation guarantee extending for a period longer than one
year, or (3) providing severance benefits or other benefits after the
termination of employment of such executive officer or key employee regardless
of the reason for such termination of employment; or (B) agreement or plan which
will remain in effect after the Closing, including, without limitation, any
stock option plan, stock appreciation right plan, restricted stock plan or stock
purchase plan, any of the benefits of which will be increased, or the vesting of
benefits of which will be accelerated, by the occurrence of any of the
transactions
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contemplated by this Agreement or the value of any of the benefits of which will
be calculated on the basis of any of the transactions contemplated by this
Agreement.
(viii) COMPANY has not taken any action which requires or,
taken together with the transactions contemplated hereby, would require the
giving of any notice under the Worker Adjustment Retraining and Notification Act
or any comparable state or local law or regulation.
(ix) Set forth on Schedule 4.1(r)(ix) is a complete listing
of all injury reports, worker's compensation reports and claims, safety
citations and reports, OSHA reports and all documents relating to any of the
foregoing.
(S) SUPPLIERS AND CUSTOMERS. Schedule 4.1(s) sets forth a complete
listing of COMPANY'S suppliers and customers. Except as noted on Schedule
4.1(s), the relationship of COMPANY with its suppliers and clients are good
commercial working relationships and no supplier or client of COMPANY has
canceled, curtailed or otherwise terminated or, to the knowledge of COMPANY,
threatened to cancel or otherwise terminate, his or its relationship with
COMPANY.
(T) CONFLICTING INTERESTS. Except as set forth on Schedule 4.1(t),
no director, officer, employee or shareholder of COMPANY, and no relative or
affiliate of any of the foregoing (i) sells or purchases goods or services from
COMPANY or has any pecuniary interest in any supplier or customer of any of the
foregoing or in any other business enterprise with which COMPANY conducts
business or with which any of the foregoing is in competition, or (ii) is
indebted to COMPANY except for money borrowed and as set forth on the Warranted
Balance Sheet. With regard to (ii) above, there exist on the books of COMPANY a
certain two loans from COMPANY to Robert C. Archer (in the current amount of
$2,007.83) and to Brian S. Mickelson (in the current amount of $139.96). At or
before the effective time, these loans are to be forgiven in full by COMPANY;
provided that, any and all tax liabilities that arise from or in connection to
such loans shall be the personally tax liability of Robert C. Archer and Brian
S. Mickelson, respectively.
(U) ENVIRONMENTAL PROTECTION. COMPANY has not been notified by any
governmental authority, agency or third party, and COMPANY has no knowledge, of
any violation by COMPANY of any Environmental Statute (as defined below). All
registrations by COMPANY with, licenses from or permits issued by governmental
agencies pursuant to environmental, health and safety laws are in full force and
effect. The term "Environmental Statutes" means all statutes, ordinances,
regulations, orders and requirements of common law concerning discharges to the
air, soil, surface water or groundwater and concerning the storage, treatment or
disposal of any waste or hazardous substance. To COMPANY'S knowledge, there is
no hazardous substance at any premises currently or previously occupied by
COMPANY. COMPANY has not received any notice or any request for information,
notice of claim, demand or other notification that it may be potentially
responsible with respect to any investigation or clean-up of any threatened or
actual release of hazardous substances. To the knowledge of COMPANY, all
hazardous wastes and substances have been stored, treated, disposed of and
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transported in conformance with all requirements applicable to such hazardous
substances and wastes.
(V) ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as and to the
extent set forth on the Warranted Balance Sheet or on Schedule 4.1(v), there has
not been (i) any material adverse change in the business, assets, properties,
results of operations, financial condition or prospects of COMPANY; (ii) any
entry by COMPANY into any material commitment or transaction which is not in the
ordinary course of business; (iii) any change by COMPANY in accounting
principles or methods except insofar as may be required by a change in generally
accepted accounting principles; (iv) any declaration, payment or setting aside
for payment of any dividends or other distributions (whether in cash, stock or
property) in respect of capital membership interest of COMPANY or any
Subsidiary, or any direct or indirect redemption, purchase or any other type of
acquisition by COMPANY of any membership interest or any other securities for an
aggregate sum not in excess of $5,000; (v) any agreement by COMPANY, whether in
writing or otherwise, to take any action which, if taken prior to the date of
this Agreement, would have made any representation or warranty in this Section
4.1 untrue or incorrect; (vi) any acquisition of the assets of COMPANY, other
than in the ordinary course of business and consistent with past practice and
not in excess of $5,000 in the aggregate; or (vii) any execution of any
agreement with any executive officer of COMPANY providing for his or her
employment, or any increase in the compensation or in severance or termination
benefits payable or to become payable by COMPANY to its officers or key
employees, or any material increase in benefits under any collective bargaining
agreement or in benefits under any bonus, pension, profit sharing, deferred
compensation, incentive compensation, stock ownership, stock purchase, stock
option, phantom stock, retirement, vacation, severance, disability, death
benefit, hospitalization, insurance or other plan or arrangement or
understanding (whether or not legally binding) providing benefits to any present
or former employee of COMPANY. Since the date of the Warranted Balance Sheet,
there has not been and, to the knowledge of COMPANY, there is not threatened,
any material adverse change in financial condition, business, results of
operations or prospects of the business or any material physical damage or loss
to any of the properties or assets of the business or to the premises occupied
in connection with the business, whether or not such loss is covered by
insurance.
(W) STATEMENTS AND OTHER DOCUMENTS NOT MISLEADING. Neither this
Agreement, including all exhibits and schedules and other closing documents, nor
any other financial statement, document or other instrument heretofore or
hereafter furnished by COMPANY to in connection with the Acquisition or the
other transactions contemplated hereby, or any information furnished by COMPANY
contains or will contain any untrue statement of any material fact or omit or
will omit to state any material fact required to be stated in order to make such
statement, information, document or other instruments, in light of the
circumstances in which they are made, not misleading. There is no fact known to
COMPANY which may have a Material Adverse Effect on the business, prospects,
financial condition or results of operations of COMPANY or of any of its
properties or assets which has not been set forth in this Agreement as an
exhibit or schedule hereto.
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4.2 REPRESENTATIONS AND WARRANTIES OF BUYER.
As a material inducement to COMPANY to execute this Agreement and
to consummate the Acquisition and the other transactions contemplated hereby,
BUYER covenants and agrees to make the following representations and warranties
to COMPANY at the Effective Time: Material Adverse Effect as used herein shall
be deemed to apply to COMPANY and its Subsidiaries taken as a whole.
(A) CORPORATE EXISTENCE AND POWER. Buyer is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware. The BUYER has all corporate powers and all governmental licenses,
authorizations, consents and approvals required to carry on its business as now
conducted, except where the failure to have any of the foregoing would not have
a Material Adverse Effect. BUYER is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction where the character of
the property owned or leased by it or the nature of its activities makes such
qualification necessary, except for those jurisdictions where the failure to be
so qualified would not, individually or in the aggregate, have a Material
Adverse Effect. True, complete and correct copies of the Certificate of
Incorporation and Bylaws of BUYER as amended to date are attached hereto as
Schedule 4.2(a) and are made a part hereof.
(B) CORPORATE AUTHORIZATION. The execution, delivery and
performance by the BUYER of the Agreement and the consummation by it of the
transactions contemplated hereby are within such organization's corporate powers
and, except for any required approval by BUYER shareholders in connection with
the consummation of the Acquisition, have been duly authorized by all necessary
corporate action. The Agreement constitutes a valid and binding agreement of
BUYER, enforceable in accordance with its terms. As of the Effective Time all
corporate action on the part of BUYER required under applicable law in order to
consummate the Acquisition will have occurred.
(C) NO CONTRAVENTION. The execution and delivery of the Agreement
does not, and the consummation of the transactions contemplated thereby will not
(i) conflict with or result in any violation of any provision of the Certificate
of Incorporation or Bylaws of BUYER or (ii) conflict with or result in any
violation or default (with or without notice or lapse of time, or both) under,
or give rise to a right of termination, cancellation or acceleration of an right
or obligation or to loss or a benefit under, any provision of the charter or
Bylaws of BUYER or any loan or credit agreement, note, bond, mortgage,
indenture, lease or other agreement, instrument, permit, concession, franchise,
incense, judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to BUYER or its properties or assets, or result in the creation or
imposition of any Encumbrance on any asset of BUYER, except, only as to clause
(ii) above, such as is not reasonably likely to have a Material Adverse Effect
or prevent BUYER from consummating the transactions contemplated by this
Agreement. No consent, approval, order or authorization of, or registration,
declaration or filing with, any court, administrative agency or commission or
other governmental authority or instrumentality, domestic or foreign, is
required by or with respect to BUYER in connection with the execution and
delivery of this Agreement by either of them or the consummation by either of
them of the transactions contemplated hereby.
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(D) CAPITALIZATION.
(i) At the Effective Date, the authorized capital stock of
the BUYER is as set forth on Schedule 4.2(d) hereto. All outstanding shares of
capital stock of BUYER have been duly authorized and validly issued and are
fully paid and nonassessable and free of preemptive rights, and upon the
issuance of the shares of BUYER Common Stock to be issued in the Acquisition,
such shares will be duly authorized, validly issued, fully paid and
nonassessable shares of BUYER Common Stock.
(ii) BUYER has a sufficient number of its authorized but
unissued shares of BUYER Common Stock to permit it to issue the number of shares
of BUYER Common Stock due in connection with the Acquisition and the related
transactions, as well as all of BUYER'S other obligations to issue shares of
BUYER Common Stock upon exercise of any option, warrant or other right to
acquire the same.
(E) FINANCIAL STATEMENTS. The financial statements contained
within the SEC Documents, if any, fairly present in all material respects the
results of operations, retained earnings and changes in financial position, as
the case may be, of the BUYER at and for the periods set forth therein (subject,
in the case of unaudited statements, to normal year-end audit adjustments which
will not be material to the BUYER, taken as a whole, in amount or effect), in
each case in accordance with generally accepted accounting principles
consistently applied during the periods involved, except as may be noted
therein. The books and records, financial and other, of the BUYER are, to the
knowledge of the BUYER, in all material respects complete and correct and have
been maintained in accordance with good business and accounting practices.
(F) NO VIOLATIONS. Except as described on Schedule 4.2(g) hereto,
neither BUYER or any of its subsidiaries has received any written notice from
any governmental entity having jurisdiction over it or over any of the real
property leased by it of any violation by BUYER or any of its subsidiaries of
any law, regulation or ordinance relating to zoning, environmental matters,
local building or fire codes or similar matters relating to any of the real
property leased by BUYER or any of its subsidiaries.
(G) NO CONTINGENT LIABILITIES. Except as set forth in the
financial statements referred to in Section 4.2(e) above, at the Effective Time,
BUYER and each of its subsidiaries shall have no liabilities, whether related to
tax or non-tax matters, known or unknown, due or not yet due, liquidated or
unliquidated, fixed or contingent, determined or determinable in amount or
otherwise and, to the knowledge of BUYER after due inquiry, there is no existing
condition, situation or set of circumstances which could reasonably be expected
to result in such a liability except as and to the extent reflected on: (i) this
Agreement or any Schedule or Exhibit thereto; or (iii) liabilities incurred
since the last quarter solely in the ordinary course of business (or in
connection with the transactions contemplated hereby) and as accurately
reflected on the books and records of BUYER; provided however, that no liability
shall be incurred from and after the date hereof which is in contravention of
any negative covenant contained herein and applicable to BUYER.
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(H) LITIGATION. Except as set forth in Schedule 4.2(i), there is
no action, suit, investigation or proceeding (or, to the knowledge of BUYER, any
basis therefor) pending against, or to the knowledge of BUYER threatened,
against or affecting BUYER, any of its subsidiaries or any of their properties
before any court or arbitrator or any governmental body, agency or official that
(i) if adversely determined against BUYER, would have a Material Adverse Effect
on BUYER or COMPANY, taken as a whole, or (ii) in any manner challenges or seeks
to prevent, enjoin, alter or materially delay the Acquisition or any of the
other transactions contemplated by the Agreement.
(I) TAXES. BUYER and each of its subsidiaries have timely filed
all tax returns required to be filed by them, or will timely file when due all
tax returns required to be filed by them between the date hereof and the
Effective Time. BUYER and each of its subsidiaries have paid in a timely fashion
or will pay when due in a timely fashion, all taxes required to be paid in
respect of the periods covered by such returns, and the books and the financial
statements of BUYER and each of its subsidiaries reflect, or will reflect,
adequate reserves for all taxes payable by BUYER and each of its subsidiaries
which have been, or will be, accrued but are not yet due. BUYER and each of its
subsidiaries are not delinquent in the payment of any material tax, assessment
or governmental charge. No deficiencies for any taxes have been proposed,
asserted or assessed against BUYER and each of its subsidiaries, BUYER and each
of its subsidiaries are not aware of any facts which would constitute the basis
for the proposal or assertion of any such deficiency and there is no action,
suit, proceeding, audit or claim now pending, or to BUYER'S knowledge,
threatened against BUYER and each of its subsidiaries. All taxes which BUYER and
each of its subsidiaries are required by law to withhold and collect have been
duly withheld and collected, and have been timely paid over to the proper
authorities to the extent due and payable. For the purposes of this Agreement,
the term "tax" shall include all federal state, local and foreign income,
property, sales, excise and other taxes of any nature whatsoever. Neither BUYER
or any of its subsidiaries nor any member of any affiliated or combined group of
which BUYER is or has been a member has granted any extension or waiver of the
limitation period applicable to any tax returns. There are no Encumbrances for
taxes upon the assets of BUYER or any of its subsidiaries, except Encumbrances
for current taxes not yet due. There are no tax sharing or tax allocation
agreements to which BUYER or any of its subsidiaries is now or ever has been a
party. BUYER will not be required under Section 481(c) of the Internal Revenue
Code of 1986, as amended (the "Code"), to include any material adjustment in
taxable income for any period subsequent to the Acquisition. Neither the BUYER
or its subsidiaries (A) has been a member of an affiliated group filing a
consolidated federal income tax return (other than a group the common parent of
which was BUYER or a subsidiary of BUYER) and (b) has no liability for the taxes
of any person (other than BUYER or any of its subsidiaries) under Treasury
Regulation Section 1.1502-6 (or any similar provision of state, local or foreign
law), as a transferee or successor, by contract or otherwise.
(J) COMPLIANCE WITH LAWS. To the best knowledge of BUYER, neither
BUYER nor any of its subsidiaries is in violation of, and has not violated, any
applicable provisions of any laws, statutes, ordinances or regulations, other
than as would not be reasonably likely to have a Material Adverse Effect on
COMPANY or BUYER and its subsidiaries, taken as a whole, or constitute a felony.
No such laws, statutes, ordinances or regulations require or are
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reasonably expected to require capital expenditures that are reasonably likely
to have a Material Adverse Effect on COMPANY or BUYER and its subsidiaries,
taken as a whole. Without limiting the generality of the foregoing, BUYER have
all licenses, permits, certificates and authorizations needed or required for
the conduct of BUYER business as presently conducted and for the use of its
properties and premises occupied by it, except where the failure to obtain a
license, permit, certificate or authorization would not have a Material Adverse
Effect.
(K) INVESTMENT BANKING FEES. Except as disclosed on Schedule
4.2(l), there is no investment banker, broker, finder or other similar
intermediary which has been retained by, or is authorized by, BUYER to act on
its behalf who might be entitled to any fee or commission from COMPANY or BUYER
or any of their respective affiliates upon consummation of the transactions
contemplated by this Agreement.
(L) STATEMENTS AND OTHER DOCUMENTS NOT MISLEADING. Neither this
Agreement, including all exhibits and schedules and other closing documents, nor
any other financial statement, document or other instrument heretofore or
hereafter furnished by BUYER to COMPANY in connection with the Acquisition or
the other transactions contemplated hereby, or any information furnished by
BUYER taken as a whole contains or will contain any untrue statement of any
material fact or omit or will omit to state any material fact required to be
stated in order to make such statement, information, document or other
instruments, in light of the circumstances in which they are made, not
misleading. There is no fact known to BUYER taken as a whole which may have a
Material Adverse Effect on the business, prospects, financial condition or
results of operations of COMPANY or BUYER taken as a whole or of any of its
properties or assets which has not been set forth in this Agreement as an
exhibit or schedule hereto.
5.
ARTICLE V
AGREEMENTS OF THE PARTIES
5.1 ISSUANCE OF MEMBERSHIP INTEREST CERTIFICATES OF COMPANY.
(a) Between the date hereof and the Effective Time, COMPANY
contemplates that it will issue the following membership interest certificates
all in a manner in compliance with its Articles of Organization, Regulations and
the TBCA and in compliance with applicable federal and state securities laws:
additional membership interest certificates of COMPANY Membership Interest to
its existing Members (and upon the exercise of outstanding options referred to
at subsection (b) hereof) so that upon the Effective Time such existing Members
shall beneficially own no more than the maximum number of authorized outstanding
certificates of COMPANY Membership Interest;
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(b) Prior to the Effective Time, COMPANY shall cause each holder
of a then outstanding option, warrant, or other convertible security to purchase
certificates of COMPANY membership interest to receive notice of the proposed
Acquisition, and COMPANY shall take whatever other action as may be necessary to
cancel such options and warrants on or prior to the Effective Time. At the
Effective Time, any such options, warrants and other convertible securities with
respect to which the holder thereof has not consented to cancellation or has not
otherwise exercised to purchase membership interest certificates of COMPANY will
be canceled. Immediately following the Effective Time, each employee membership
interest option, membership interest bonus, membership interest award plan or
membership interest appreciation right of COMPANY which provides for the
issuance of COMPANY membership interest certificates, and no further membership
interest awards, membership interest bonuses, membership interest options or
membership interest appreciation rights shall be granted thereunder subsequent
to the Effective Time.
5.2 DISCLOSURE DOCUMENTS.
(a) BUYER shall supply to COMPANY the necessary information in
writing, or cause the necessary information to be supplied in writing, relating
to BUYER for inclusion in any document(s) to be prepared in connection with any
documents to be delivered by COMPANY to its Members in connection with the
Acquisition and the member vote with respect to this Agreement as contemplated
by Section 3.1.
(b) COMPANY shall supply to BUYER the necessary information in
writing, or cause the necessary information to be supplied in writing, relating
to or in connection with the transactions contemplated by this Agreement and any
documents to be delivered by BUYER to its shareholders in connection with the
special meeting to be convened to approve the transactions contemplated by this
Agreement.
5.3 ACCESS TO INFORMATION.
At all times prior to the Effective Time or the earlier
termination of this Agreement in accordance with the provisions of Section 7,
and in each case subject to Section 5.8 below each of the parties hereto shall
provide to the other parties (and the other parties' authorized representatives)
full access during normal business hours and upon reasonable prior notice to the
premises, properties, books, records, assets, liabilities, operations,
contracts, personnel, financial information and other data and information of or
relating to such party (including without limitation all written proprietary and
trade secret information and documents, and other written information and
documents relating to intellectual property rights and matters), and will
cooperate with the other party in conducting its due diligence investigation of
such party.
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5.4 CONFIDENTIALITY; NO SOLICITATION.
(A) CONFIDENTIALITY OF BUYER-RELATED INFORMATION. With respect to
information concerning BUYER that is made available to COMPANY pursuant to the
provisions of Sections 5.5 and 5.6, COMPANY agrees that it shall hold such
information in strict confidence, shall not use such information except for the
sole purpose of evaluating the Acquisition and related transactions and shall
not disseminate or disclose any of such information other than to it directors,
officers, employees, shareholders, affiliates, agents and representatives who
need to know such information for the sole purpose of evaluating the Acquisition
and the related transactions (each of whom shall be informed in writing by
COMPANY of the confidential nature of such information and directed by COMPANY
in writing to treat such information confidentially). If this Agreement is
terminated pursuant to the provisions of Section 7, COMPANY shall immediately
return all such information, all copies thereof and all information, all copies
thereof and all information prepared by COMPANY based upon the same, upon
BUYER'S request; provided, however, that one copy of all such material may be
retained by COMPANY'S outside legal counsel for purposes only of resolving any
disputes under this Agreement. The above limitations on use, dissemination and
disclosure shall not apply to information that (i) is learned by COMPANY from a
third party entitled to disclose it; (ii) become known publicly other than
through COMPANY or any party who received the same through COMPANY provided that
COMPANY has no knowledge that the disclosing party was subject to an obligation
of confidentiality; (iii) is required by law or court order to be disclosed by
COMPANY; or (iv) is disclosed with the express prior written consent thereto of
BUYER. COMPANY shall undertake all necessary steps to ensure that the secrecy
and confidentiality of such information will be maintained in accordance with
the provisions of this paragraph (a). Notwithstanding any thing contained herein
to the contrary, in the event a party is required by court order or subpoena to
disclose information which is otherwise deemed to be confidential or subject to
the confidentiality obligations hereunder, prior to such disclosure, the
disclosing party shall: (i) promptly notify the non-disclosing party and, if
having received a court order or subpoena, deliver a copy of the same to the
non-disclosing party; (ii) cooperate with the non-disclosing party, at the
expense of the non-disclosing party, in obtaining a protective or similar order
with respect to such information; and (iii) provide only such of the
confidential information as the disclosing party is advised by its counsel is
necessary to strictly comply with such court order or subpoena.
(B) CONFIDENTIALITY OF COMPANY-RELATED INFORMATION. With respect
to information concerning COMPANY that is made available to BUYER pursuant to
the provisions of Sections 5.5 and 5.6, BUYER agrees that they shall hold such
information in strict confidence, shall not use such information except for the
sole purpose of evaluating the Acquisition and the related transactions and
shall not disseminate or disclose any of such information other than to their
directors, officers, employees, shareholders, affiliates, agents and
representatives who need to know such information for the sole purpose of
evaluating the Acquisition and the related transactions (each of whom shall be
informed in writing by BUYER, as appropriate, of the confidential nature of such
information and directed by such party in writing to treat such information
confidentially). If this Agreement is terminated pursuant to the provisions of
Section 7, BUYER agrees to return immediately all such information, all copies
thereof and all information prepared by either of them based upon the same, upon
COMPANY'S request;
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provided, however, that one copy of all such material may be retained by BUYER'S
general counsel for purposes only of resolving any disputes under this
Agreement. The above limitations on use, dissemination and disclosure shall not
apply to information that (i) is learned by BUYER from a third party entitled to
disclose it; (ii) becomes known publicly other than through BUYER or any party
who received the same through either of them provided that BUYER has no
knowledge that the disclosing party was subject to an obligation of
confidentiality; (iii) is required by law or court order to be disclosed by
BUYER; or (iv) is disclosed with the express prior written consent thereto of
COMPANY. BUYER agrees to undertake all necessary steps to ensure that the
secrecy and confidentiality of such information will be maintained in accordance
with the Provisions of this paragraph (b). Notwithstanding any thing contained
herein to the contrary, in the event a party is required by court order or
subpoena to disclose information which is otherwise deemed to be confidential or
subject to the confidentiality obligations hereunder, prior to such disclosure,
the disclosing party shall: (i) promptly notify the non-disclosing party and, if
having received a court order or subpoena, deliver a copy of the same to the
non-disclosing party; (ii) cooperate with the non-disclosing party, at the
expense of the non-disclosing party, in obtaining a protective or similar order
with respect to such information; and (iii) provide only such of the
confidential information as the disclosing party is advised by its counsel is
necessary to strictly comply with such court order or subpoena.
(C) NONDISCLOSURE. Neither BUYER or COMPANY shall disclose to the
public or to any third party the existence of this Agreement or the transactions
contemplated hereby or any other material non-public information concerning or
relating to the other party hereto, other than with the express prior written
consent of the other party hereto, except as may be required by law or court
order or to enforce the rights of such disclosing party under this Agreement, in
which event the contents of any proposed disclosure shall be discussed with the
other party before release; provided, however, that notwithstanding anything to
the contrary contained in this Agreement, any party hereto may disclose this
Agreement to any of its directors, officers, employees, shareholders,
affiliates, agents and representative who need to know such information for the
sole purpose of evaluating the Acquisition, and to any party whose consent is
required in connection with the Acquisition or this Agreement. The parties
anticipate issuing a mutually acceptable, joint press release announcing the
execution of this Agreement and the consummation of the Acquisition.
(D) NO SOLICITATION. At all times prior to the Effective Time or
the earlier termination of this Agreement in accordance with the provisions of
Section 7, COMPANY will not, directly or indirectly, through any officer,
director, agent or otherwise: (i) solicit, initiate or encourage the submission
of inquiries, proposals or offers from any person or entity relating to any
acquisition or purchase of assets of or any equity interest in COMPANY or any
tender offer (including a self-tender offer), exchange offer, merger,
consolidation, business combination, sale of a substantial amount of assets or
sale of securities, liquidation, dissolution or similar transaction involving
COMPANY (a "Transaction Proposal"); (b) enter into or participate in any
discussions or negotiations regarding a Transaction Proposal, or furnish to any
other person or entity any information with respect to the business, properties
or assets of COMPANY in connection with a Transaction Proposal; or (c) otherwise
cooperate in any way with, or assist or participate in, facilitate or encourage
any effort or attempt by any other person to do or seek a
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Transaction Proposal. COMPANY shall promptly notify BUYER if any such proposal
or offer, or any inquiry or contact with any person or entity with respect
thereto is made.
5.5 INTERIM OPERATIONS.
During the period from the date of this Agreement and continuing
until the Effective Time:
(A) INTERIM OPERATIONS OF COMPANY. COMPANY agrees (except as
expressly contemplated by this Agreement, including any Exhibits and Schedules
hereto, or to the extent that BUYER shall otherwise consent in writing) that as
to COMPANY:
(I) ORDINARY COURSE. COMPANY shall carry on its business in
the usual, regular and ordinary course in substantially the same manner as
heretofore conducted and, to the extent consistent with such business, use all
reasonable efforts to preserve intact its present business organization, keep
available the services of its present officers and employees and preserve its
relationships with customers, suppliers and others having business dealings with
it;
(II) DIVIDENDS; CHANGES IN MEMBERSHIP INTEREST. COMPANY
shall not and shall not propose to (a) declare, set aside or pay any dividend,
on, or make other distributions in respect of, any of its capital membership
interest, (b) split, combine or reclassify any of its capital membership
interest or issue, authorize or propose the issuance of any other securities in
respect of, in lieu of or in substitution for certificates of its membership
interest (c) redeem, repurchase or otherwise acquire any certificates of its
capital membership interest or (d) otherwise change its capitalization.
(III) ISSUANCE OF MEMBERSHIP INTEREST. Except as
contemplated by this Agreement, COMPANY shall not sell, issue, pledge, authorize
or propose the sale or issuance of, pledge or purchase or propose the purchase
of, any membership interest of any class or securities convertible into, or
rights, warrants or options to acquire, any such membership interest
certificates or other convertible securities (other than the issuance of
certificates of COMPANY Membership Interest upon the exercise or conversion, if
any, of currently outstanding COMPANY membership interest options).
(IV) GOVERNING DOCUMENTS. COMPANY shall not amend its
articles of organization or its Regulations.
(V) NO DISPOSITIONS. COMPANY shall not, except for that
certain file server which is to be relocated and recabled at Tucker
Lithographic, Inc.'s leased premises, sell, lease, pledge, encumber or otherwise
dispose of or agree to sell, lease, pledge, encumber or otherwise dispose of,
any of its assets that are material or any other assets except in the ordinary
course of business consistent with prior practice.
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(VI) INDEBTEDNESS. COMPANY shall not incur any indebtedness
for borrowed money or guarantee any such indebtedness or issue or sell any debt
securities of COMPANY or guarantee any debt securities of others other than in
the ordinary course of business consistent with prior practice provided that in
no event shall COMPANY incur or otherwise guaranty any indebtedness in any
aggregate amount in excess of $20,000.
(VII) BENEFIT PLANS; ETC. COMPANY shall not adopt or amend
in any material respect any collective bargaining agreement or Employee Benefit
Plan (as defined herein).
(VIII) EXECUTIVE COMPENSATION. COMPANY shall not grant to
any executive officer any increase in compensation or in severance or
termination pay, or enter into any employment agreement with any executive
officer. With regard to (viii) above, there exist on the books of COMPANY a
certain two loans from COMPANY to Robert C. Archer (in the current amount of
$2,007.83) and to Brian S. Mickelson (in the current amount of $139.96). At or
before the effective time, these loans are to be forgiven in full by COMPANY;
provided that any and all tax liabilities that arise from such loans shall be
the personal liability of Robert C. Archer and Brian S. Mickelson, respectively.
(IX) ACQUISITIONS. COMPANY shall not acquire (by merger,
consolidation or acquisition of membership interest or assets or otherwise) any
corporation, partnership or other business organization or subdivision thereof,
or make any investment by either purchase of stock or securities, contributions
to capital, property transfer or, except in the ordinary course of business,
purchase of any property or assets, of any other individual or entity;
(X) TAX ELECTIONS. COMPANY shall not make any material tax
election or settle or compromise any material federal, state, local or foreign
tax liability;
(XI) WAIVERS AND RELEASES. COMPANY shall not waive,
release, grant or transfer any rights of material value or modify or change in
any material respect any Company Agreement other than in the ordinary course of
business and consistent with past practice.
(XII) OTHER ACTIONS. COMPANY shall not enter into any
agreement or arrangement to do any of the foregoing. COMPANY shall not take any
action, or fail to take any action, that is reasonably likely to result in any
of the representations and warranties of COMPANY set forth in this Agreement
becoming untrue in any material respect.
(B) INTERIM OPERATIONS OF BUYER. BUYER agrees (except as expressly
contemplated by this Agreement, including any Exhibits and Schedules hereto or
to the extent that COMPANY shall otherwise consent in writing) that:
(I) ORDINARY COURSE. BUYER shall carry on its business in
the usual, regular and ordinary course in substantially the same manner as
heretofore conducted and, to the extent consistent with such business, use all
reasonable efforts to preserve intact its present
25
<PAGE>
business organization (provided that such obligation shall not relate to the
officers and employees of BUYER or any of its subsidiaries) and preserve its
relationships with customers, suppliers and others having business dealings with
it.
(II) DIVIDENDS; CHANGES IN STOCK. BUYER shall not (and
shall not propose to) (a) declare or pay any dividend, on, or make other
distributions in respect of, any of its capital stock, (b) split, combine or
reclassify any of its capital stock or issue, authorize or propose the issuance
of any other securities in respect of, in lieu of or in substitution for shares
of its capital stock, (c) repurchase or otherwise acquire any shares of its
capital stock or (d) otherwise change its capitalization.
(iii) NO DISPOSITIONS. BUYER shall not sell, lease, pledge,
encumber or otherwise dispose of, or agree to sell, lease, pledge, encumber or
otherwise dispose of, any of its assets that are material, or any other assets
except in the ordinary course of business consistent with prior practice.
(IV) INDEBTEDNESS. BUYER shall not incur any indebtedness
for borrowed money or guarantee any such indebtedness or issue or sell any debt
securities or guarantee any debt securities of others other than in the ordinary
course of business consistent with prior practice.
(V) OTHER ACTIONS. BUYER shall not enter into any agreement
or arrangement to do any of the foregoing. BUYER shall not take any action, or
fail to take any action, that is reasonably likely to result in any of their
representations and warranties set forth in this Agreement becoming untrue in
any material respect.
5.6 CONSENTS.
BUYER and COMPANY shall cooperate and use their best efforts to
obtain, prior to the Closing Date, all licenses, permits, consents, approvals,
authorizations, qualifications and orders of governmental authorities and
parties to contracts as are necessary for the consummation of the transactions
contemplated by this Agreement; provided, however, that no loan agreement or
contract for borrowed monies shall be repaid and no contract shall be amended
materially to increase the amount payable thereunder or otherwise to be
materially more burdensome in order to obtain any such consent, approval or
authorization without first obtaining the written approval of the other parties
hereto. After the Closing, the sole Member and COMPANY will use their best
efforts to obtain any consents required in connection with the transaction
contemplated hereby that are requested by BUYER and that have not been
previously obtained.
5.7 FILINGS.
BUYER and COMPANY shall, as promptly as practicable, make any
required filing, and any other required submissions, under any law, statute,
order rule or regulation with
26
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respect to the Acquisition and the related transactions and shall cooperate with
each other with respect to the foregoing.
5.8 ALL REASONABLE EFFORTS.
Subject to the terms and conditions of this Agreement and to the
fiduciary duties and obligations of the boards of directors of the parties
hereto to their respective shareholders, as advised by their counsel, each of
the parties to this Agreement shall use all reasonable efforts to take, or cause
to be taken, all action and to do, or cause to be done, all things necessary,
proper or advisable under applicable laws and regulations, or to remove any
injunctions or other impediments or delays, legal or otherwise, as soon as
reasonable practicable, to consummate the Acquisition and the other transactions
contemplated by this Agreement.
5.9 PUBLIC ANNOUNCEMENTS.
BUYER and COMPANY shall consult with each other before issuing any
press release or otherwise making any public statements with respect to the
Acquisition, this Agreement or the other transactions contemplated by this
Agreement and shall not issue any other press release or make any other public
statement without prior consultation with the other parties, except as may be
required by law or, with respect to BUYER, by obligations pursuant to any
listing agreement with an national securities exchange.
5.10 NOTIFICATION OF CERTAIN MATTERS.
COMPANY shall give prompt notice to BUYER, and BUYER shall give
prompt notice to COMPANY, of (a) the occurrence or non-occurrence of any event,
the occurrence or non-occurrence of which would cause any of its representations
or warranties in this Agreement to be untrue or inaccurate in any material
respect, as to COMPANY, at or prior to the Effective Time, and, as to BUYER, at
or prior to the Effective Time and (b) any material failure of COMPANY, on the
one hand, or BUYER, on the other hand, as the case may be, to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied by
it under this Agreement; provided, however, the delivery of any notice pursuant
to this Section shall not limit or otherwise affect the remedies available to
the party receiving such notice under this Agreement as expressly provided in
this Agreement.
5.11 EXPENSES.
Except as otherwise expressly provided herein, all costs and
expenses incurred in connection with the Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expenses whether
or not the Acquisition is consummated.
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5.12 DELIVERY OF PROXY BY COMPANY MEMBER.
The sole Member of COMPANY shall deliver to BUYER or to BUYER'S duly
authorized representative a proxy which shall entitle BUYER or its duly
authorized representative to vote the membership interest certificates of
COMPANY owned by the COMPANY members meeting referred to in Section 3.1 herein,
in favor of the Agreement and in opposition to any other Transaction Proposal,
and which proxy shall be in form and substance reasonably acceptable to the
parties hereto.
ARTICLE VI
CONDITIONS TO CONSUMMATION OF THE ACQUISITION
6.1 CONDITIONS TO COMPANY'S OBLIGATIONS.
The obligations of COMPANY to consummate the Acquisition and the
other transactions contemplated to be consummated by it at the Closing are
subject to the satisfaction (or waiver by COMPANY) at or prior to the Effective
Time (or at such other time prior thereto as may be expressly provided in this
Agreement) of each of the following conditions:
(a) The representations and warranties of BUYER set out in this
Agreement shall be true and correct in all material respects at and prior to the
Effective Time.
(b) BUYER shall have complied in a timely manner and in all
material respects with the respective covenants and agreements set out in this
Agreement.
(c) The shareholders of BUYER shall have approved the Acquisition
in accordance with the provisions of the DGCL.
(d) At the Effective Time the officers of COMPANY shall tender
their immediate resignations from office.
(e) COMPANY shall be reasonably satisfied that the Acquisition
results in a tax-free reorganization under the Code.
(f) Members shall forgive all indebtedness to the COMPANY.
(g) All members, lender, lessor and other parties' consents and
approvals, as well as all filings with, and all necessary consents or approvals
of, all federal, state and local governmental authorities and agencies, as are
required under this Agreement, applicable law or any applicable contract or
agreement (other than as contemplated by this Agreement) to complete the
Acquisition shall have been secured.
28
<PAGE>
(h) No statute, rule, regulation, executive order, decree,
injunction or restraining order shall have been enacted, entered, promulgated or
enforced by any court of competent jurisdiction or governmental authority that
prohibits or restricts the consummation of the Acquisition or the related
transactions.
(i) In the event any condition precedent set forth in this Section
6.1 shall not have been met, the sole remedy of COMPANY shall be either to waive
such failure and proceed to close hereunder, or to terminate this Agreement in
which event neither COMPANY nor BUYER shall have any claim or action against the
other.
6.2 CONDITIONS TO BUYER'S OBLIGATIONS.
The obligations of BUYER to consummate the Acquisition and the
other transactions contemplated to be consummated by it at the Closing are
subject to the satisfaction (or waiver by BUYER) at or prior to the Effective
Time (or at such other time prior thereto as may be expressly provided in this
Agreement) of each of the following conditions:
(a) Holders of not more than five percent (5%) of the outstanding
COMPANY Membership Interest shall have filed with COMPANY, prior to the COMPANY
members meeting at which a vote is to be taken with respect to a proposal to
approve this Agreement, a written objection to such proposed action, as required
by Article 5.12A(l)(a) of the TBCA in order for such member to perfect the right
to dissent from such proposed action.
(b) The representations and warranties of COMPANY set out in this
Agreement shall be true and correct in all material respects at and as of the
Effective Time.
(c) Between the date hereof and the Effective Time, the COMPANY
Options shall be exercised and the appropriate membership interest certificates
of COMPANY Membership Interest shall be issued. In the event any COMPANY Options
remain outstanding, prior to the Effective Time, then COMPANY shall take any and
all actions necessary to cancel such COMPANY Options.
(d) To the extent practicable under the circumstances and time
constraints of this Acquisition, COMPANY shall have complied in a timely manner
and in all material respects with its covenants and agreements set out in this
Agreement.
(e) All managers, members, lender, lessor and other parties'
consents and approvals, as well as all filings with, and all necessary consents
or approvals of, all federal, state and local governmental authorities and
agencies, as are required under this Agreement, applicable law or any applicable
contract or agreement (other than as contemplated by this Agreement) to complete
the Acquisition shall have been secured.
29
<PAGE>
(f) No statute, rule, regulation, executive order, decree,
injunction or restraining order shall have been enacted, entered, promulgated or
enforced by any court of competent jurisdiction or governmental authority that
prohibits or restricts the consummation of the Acquisition or the related
transactions.
(g) COMPANY shall have approved the Acquisition in accordance with
the TBCA and each of the other proposals set forth in the Proxy Statement which
are a condition precedent to the consummation of the Acquisition.
ARTICLE VII
TERMINATION
7.1 TERMINATION.
This Agreement may be terminated and the Acquisition may be
abandoned at any time prior to the Effective Time, whether before or after the
vote of the sole member of COMPANY and the shareholders of BUYER:
(a) by mutual written consent of the board of directors of BUYER
and sole member of COMPANY:
(b) by BUYER or COMPANY:
(i) if any court of competent jurisdiction, or any
governmental body, regulatory or administrative agency or commission having
appropriate jurisdiction shall have issued an order, decree or filing or taken
any other action restraining, enjoining or otherwise prohibiting the
transactions contemplated by this Agreement and such order, decree, ruling or
other action shall have become final and non-appealable;
(c) by COMPANY if any of the conditions specified in Section 6.1
have not been met or waived by COMPANY at such time as such condition can no
longer be satisfied; or
(d) by BUYER if any of the conditions specified in Section 6.2
have not been met or waived by at such time as such condition can no longer be
satisfied.
7.2 NOTICE AND EFFECT OF TERMINATION.
In the event of the termination and abandonment of this Agreement
pursuant to Section 7.1, written notice thereof shall forthwith be given to the
other party or parties specifying
30
<PAGE>
the provision pursuant to which such termination is made, and this Agreement
shall forthwith become void and have no effect without any liability on the part
of any party or its directors, managers, officers, members or shareholders.
Nothing contained in this Section 7.2 shall relieve any party from any liability
for any breach of this Agreement.
7.3 EXTENSION; WAIVER.
Any time prior to the Effective Time, the parties may (a) extend the
time for the performance of any of the obligations or other acts of any other
party under or relating to this Agreement; (b) waive any inaccuracies in the
representations or warranties by any other party or (c) waive compliance with
any of the agreements of any other party or with any conditions to its own
obligations. Any agreement on the part of any other party to any such extension
or waiver shall be valid only if set forth in an instrument in writing signed on
behalf of such party.
7.4 AMENDMENT AND MODIFICATION.
This Agreement may be amended, whether before or after the vote of
the sole member of COMPANY or shareholders of BUYER, by written agreement of
BUYER and COMPANY; provided, however, that after the approval, if any, of this
Agreement by the sole member of COMPANY, no such amendment shall reduce or
change the consideration to be received by the sole member of COMPANY in
connection with the Acquisition as set out in Section 1.3 hereof or shall
otherwise adversely affect the rights under this Agreement of the sole member of
COMPANY without the approval of such adversely affected member. This Agreement
may not be amended except by an instrument in writing signed on behalf of BUYER
and COMPANY.
ARTICLE VIII
INDEMNIFICATION
8.1 INDEMNITY OBLIGATIONS.
COMPANY'S agrees to indemnify and hold the BUYER (including its
officers, directors, employees and agents) harmless from and against any and all
claims, actions, causes of action, arbitrations, proceedings, losses, damages,
liabilities, judgments and expenses (including, without limitation, reasonable
attorneys' fees) ("Indemnified Amounts") incurred by the BUYER as a result of
(a) any error, inaccuracy, breach or misrepresentation in any of the
representations and warranties made by or on behalf of COMPANY in this
Agreement, (b) any violation or breach by COMPANY of or default by COMPANY under
the terms of this Agreement, (c) any act or omission occurring, or condition or
circumstances existing, prior to the Closing Date, or any condition or
circumstances caused by any act or omission occurring prior to the Closing Date,
COMPANY or with respect to the Company Membership Interest or the COMPANY
business not fully covered by a specific accrual liability or reserve on the
unaudited financial
31
<PAGE>
statements, including the items set forth in the attached Schedules (d) any
product liability or other claims concerning services provided or products sold
by the COMPANY prior to the Closing Date not fully covered by a specific accrual
liability or reserve on the audited financial statements and (e) any debts,
liabilities or obligations of COMPANY, direct or indirect, fixed, contingent or
otherwise, that are not expressly assumed by BUYER in this Agreement and not
expressly listed on the Warranted Balance Sheet and Schedule 4.1(p-2)(Accounts
Payable). The foregoing is not an exclusive remedy, and BUYER shall be entitled
to recover its reasonable and necessary attorneys' fees and litigation costs and
expenses incurred in connection with successful enforcement of its rights under
this Section.
BUYER agrees to indemnify and hold COMPANY and MEMBER harmless from
and against any and all claims, actions, causes of action, arbitrations,
proceedings, losses, damages, liabilities, judgments and expenses (including,
without limitation, reasonable attorney's fees) ("Indemnified Amounts") incurred
by the COMPANY or Member as a result of (a) any error, inaccuracy, breach or
misrepresentation in any of the representations and warranties made by BUYER in
this Agreement, (b) any violation or breach by BUYER of or default by BUYER
under the terms of this Agreement, (c) any act or omission occurring, or
condition or circumstances existing, prior to the Closing Date, or any condition
or circumstances caused by any act or omission occurring prior to the Closing
Date, by BUYER or with respect to BUYER business not fully covered by a specific
accrual liability or reserve on the unaudited financial statements, including
the items set forth in the attached Schedules. BUYER agrees to indemnify and
hold COMPANY and Member harmless from any failure by BUYER to discharge fully or
otherwise perform its obligation with regard to all debts, liabilities or
obligations of COMPANY, direct or indirect, fixed, contingent or otherwise, that
are expressly assumed by BUYER in this Agreement. Such debts, liabilities or
obligations of COMPANY include, in addition to those listed on the Warranted
Balance Sheet and Schedule 4.1 (p-2) (Accounts Payable), the COMPANY'S accounts
with or vendor/creditor customer relationships with the following entities:
Intertel (lease purchase of COMPANY telephone system; Morgan Group
(Landlord/Property Manager of COMPANY'S leased premises); Houston, Lighting and
Power; Southwestern Bell (telephone service including ISDN line); Fortis (Group
Insurance, including Life Insurance Provider); Insync (companies internet
service provider); Sparkletts (Water machine and delivery service). The
foregoing is not an exclusive remedy, and COMPANY and/or Member shall be
entitled to recover his reasonable and necessary attorney's fees and litigation
costs and expenses incurred in connection with successful enforcement of their
rights under this Section.
8.2 SURVIVAL
The representations, warranties and indemnities set forth in this
Agreement and in any certificate or instrument delivered in connection herewith
shall be continuing and shall survive the Closing. The covenants and agreements
entered into pursuant to this Agreement to be performed after the Closing shall
survive the Closing without limitation.
32
<PAGE>
9.
ARTICLE IX
MISCELLANEOUS
9.1 NOTICES.
All notices requests, demands, waivers and other communications
required or permitted to be given under this Agreement shall be in writing and
shall be deemed to have been duly given on the date delivered, if delivered
personally, or upon the second business day after it shall have been deposited
by certified or registered mail with postage prepaid, or sent by telex, telegram
or telecopier, as follows (or at such other address or facsimile number for a
party as shall be specified by like notice):
if to COMPANY, to it at:
Archer-Mickelson Technologies, L.L.C.
5003 Mimosa
Houston, TX 77401
Attn: Robert Archer
if to BUYER to it at:
ClearWorks Technologies, Inc.
2450 Fondren, Suite 200B
Houston, Texas 77063
Attn: Shannon D. McLeroy, President
Fax (713) 334-6565
9.2 ENTIRE AGREEMENT; ASSIGNMENT.
This Agreement, including all Exhibits and Schedules hereto, (a)
constitutes the entire agreement among the parties with respect to its subject
matter and supersedes all prior agreements and understandings, both written and
oral, among the parties or any of them with respect to such subject matter and
(b) shall not be assigned by operation of law or otherwise, provided that,
subject to any approvals required by applicable law, BUYER may assign its
respective rights and obligations to any majority-owning or owned, direct or
indirect, parent, subsidiary or subsidiaries of BUYER, but no such assignment
shall relieve BUYER of its obligations under this Agreement.
33
<PAGE>
9.3 BINDING EFFECT; BENEFIT.
This Agreement shall inure to the benefit of and be binding upon
the parties and their respective successors and assigns. Nothing in this
Agreement is intended to confer on any person other than the parties to this
Agreement or their respective successors and assigns any rights, remedies,
obligations or liabilities under or by reason of this Agreement.
9.4 HEADINGS.
The descriptive headings of the sections of this Agreement are
inserted for convenience only, do not constitute a part of this Agreement and
shall not affect in any way the meaning or interpretation of this Agreement.
9.5 COUNTERPARTS.
This Agreement may be executed in two or more counterparts and
delivered via facsimile, each of which shall be deemed to be an original, and
all of which together shall be deemed to be one and the same instrument.
9.6 GOVERNING LAW.
This agreement shall be governed by and construed in accordance
with the laws of the State of Texas, without regard to the laws that might
otherwise govern under principles of conflicts of laws applicable thereto.
9.7 ARBITRATION.
If a dispute arises as to the interpretation of this Agreement, it
shall be decided finally by three arbitrators in an arbitration proceeding
conforming to the Rules of the American Arbitration Association applicable to
commercial arbitration. The arbitrators shall be appointed as follows: one by
COMPANY, one by the BUYER and the third by the said two arbitrators, or, if they
cannot agree, then the third arbitrator shall be appointed by the American
Arbitration Association. The third arbitrator shall be chairman of the panel and
shall be impartial. The arbitration shall take place in Houston, Texas. The
decision of a majority of the Arbitrators shall be conclusively binding upon the
parties and final, and such decision shall be enforceable as a judgment in any
court of competent jurisdiction. Each party shall pay the fees and expenses of
the arbitrator appointed by it, its counsel and its witnesses. The parties shall
share equally the fees and expenses of the impartial arbitrator.
34
<PAGE>
COPY DOES NOT MATCH FROM HERE TO END OF FILE.
<PAGE>
9.8 LIMITATION ON INTEREST.
Regardless of any provision contained herein or any other document
executed in connection with this Agreement, the parties hereto shall not be
obliged to pay, and the parties hereto shall never be entitled to charge,
reserve, receive, collect or apply, as interest (it being understood that
interest shall be calculated as the aggregate of all charges that are contracted
for, charged, reserved, received, collected, applied or paid that constitute
interest under applicable law) payable hereunder any amount in excess of the
maximum nonusurious contract rate of interest allowed from time to time by
applicable law, and in the event any of the parties hereto ever charges,
reserves, receives, collects or applies, as interest, any such excess, at the
option of the payor of such interest, such amount shall be deemed a partial
prepayment of the amount payable hereunder or promptly refunded to the payor of
such interest.
9.9 TITLE AND RISK OF LOSS.
Title to, liability for and in connection with, and risk of loss of
COMPANY Membership Interest shall remain with the Member in every instance until
the Closing.
9.10 SEVERABILITY.
If any term, provision, covenant or restriction of this Agreement is
held by a court of competent jurisdiction or other authority to be invalid,
void, unenforceable or against its regulatory policy, the remainder of this
Agreement shall remain in full force and effect and shall in no way be affected,
impaired or invalidated.
9.11 REMEDIES CUMULATIVE.
No right or election given by any term of this Agreement shall be deemed
exclusive but each shall be cumulative with all other rights, remedies and
elections available at law or equity.
36
<PAGE>
9.12 CERTAIN DEFINITIONS.
As used herein:
(A) "AFFILIATE" shall have the meanings ascribed to such term in
Rule 12b-2 of the General Rules and Regulations under the Securities Exchange
Act of 1934, as amended to date (the "Exchange Act");
(B) "BUSINESS DAY" shall mean any day other than a Saturday,
Sunday or a day on which federally chartered financial institutions are not open
for business in the City of Houston, Texas;
(C) "KNOWLEDGE" shall mean the actual current knowledge of the
executive management of the party to this Agreement to whom knowledge is
ascribed together with the knowledge such executive management should reasonably
be expected to have in the performance of its duties and responsibilities.
(D) "MATERIAL ADVERSE EFFECT" shall mean any adverse effect on the
business, condition (financial or otherwise) or results of operation of the
relevant party and its subsidiaries, if any, which is material to such party and
its subsidiaries, if any, taken as a whole;
(E) "PERSON" means any individual, corporation, partnership,
association, trust or other entity or organization, including a governmental or
political subdivision or any agency or institution thereof; and
(F) "SUBSIDIARY" shall mean, when used with reference to an
entity, any corporation, a majority of the outstanding voting securities of
which is owned directly or indirectly, or a majority of the board of directors
of which may be elected, by such entity.
IN WITNESS WHEREOF, BUYER and COMPANY have caused this Agreement to
be signed by their respective officers hereunto duly authorized, all as of the
date first written above.
CLEARWORKS TECHNOLOGIES, INC.
By: ______________________________
Name: _______________________
Title: _______________________
ARCHER-MICKELSON TECHNOLOGIES, L.L.C.
By: ______________________________
Name: _______________________
Title: _______________________
37
EXHIBIT 21
DESCRIPTION OF SUBSIDIARIES OF THE REGISTRANT
ClearWorks.net, Inc. (the "Registrant") has three wholly owned subsidiaries:
1. ClearWorks Structured Wiring Services, Inc., a Texas corporation.
2. ClearWorks Communications, Inc., a Texas Corporation; and
3. ClearWorks Integration Services, Inc, a Texas Corporation.
ClearWorks Communications, Inc. has a wholly owned subsidiary, Northpointe
Telecom Services, L.L.C., a Texas limited liability Company.
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<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> YEAR 3-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1999
<PERIOD-END> DEC-31-1998 MAR-31-1999
<CASH> 161,957 452,956
<SECURITIES> 0 0
<RECEIVABLES> 205,608 462,286
<ALLOWANCES> 0 0
<INVENTORY> 12,000 33,558
<CURRENT-ASSETS> 384,773 1,036,230
<PP&E> 253,387 679,225
<DEPRECIATION> (13,240) (23,533)
<TOTAL-ASSETS> 807,984 1,858,828
<CURRENT-LIABILITIES> 291,699 248,821
<BONDS> 0 0
0 0
0 0
<COMMON> 11,460 15,538
<OTHER-SE> 490,712 1,577,022
<TOTAL-LIABILITY-AND-EQUITY> 807,984 1,858,828
<SALES> 1,090,215 430,442
<TOTAL-REVENUES> 1,090,215 430,442
<CGS> 1,054,116 134,090
<TOTAL-COSTS> 1,277,964 249,437
<OTHER-EXPENSES> 0 0
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<INCOME-PRETAX> (187,749) 181,005
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (187,749) 181,005
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