<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FIRST AMENDED 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
PALWEB CORPORATION
(Name of small business issuer in its charter)
DELAWARE 75-1984048
- -------------------------------------- ----------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1607 WEST COMMERCE STREET DALLAS, TEXAS 75208
- -------------------------------------- ----------------------------------------
(Address of principal executive offices) (City, State, and Zip Code)
(214) 698-8330
---------------------------
(Issuer's telephone number)
Securities to be registered under Section 12(b) of the Act:
Title of each class Name of each exchange on which
to be so registered each class is to be registered
None None
------------------- ------------------------------
Securities to be registered under Section 12(g) of the Act:
Common stock, $0.10 par value
-----------------------------
(Title of class)
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PALWEB CORPORATION
FIRST AMENDED FORM 10-SB
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Item 1. Description of Business................................................ 3
Item 2. Management's Discussion and Analysis or Plan of Operation ............. 4
Item 3. Description of Property................................................ 5
Item 4. Security Ownership of Certain Beneficial Owners and Management......... 6
Item 5. Directors, Executive Officers, Promoters and Control Persons........... 7
Item 6. Executive Compensation................................................. 7
Item 7. Certain Relationships and Related Transactions ........................ 8
Item 8. Legal Proceedings...................................................... 9
Item 9. Market for Common Equity and Related Stockholder Matters .............. 10
Item 10. Recent Sales of Unregistered Securities ............................... 11
Item 11. Description of Securities.............................................. 12
Item 12. Indemnification of Directors and Officers ............................. 12
Item 13. Financial Statements................................................... 13
Item 14. Changes in and Disagreements With Accountants on Accounting
and Financial Disclosure ........................................... 14
Item 15. Financial Statements and Exhibits ..................................... 14
Exhibits Attached are:
Certificate of Incorporation and Amendments
Bylaws
</TABLE>
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<PAGE> 3
INFORMATION REQUIRED IN
REGISTRATION STATEMENT
Item 1. Description of Business
PalWeb Corporation, the registrant herein, is a Delaware corporation
that was incorporated on February 24, 1969. PalWeb Corporation's former name was
Cabec Energy Corp. f/k/a Browning Enterprises, Inc., and was originally named
Permaspray Manufacturing Corporation.
From April 1993 to December 1997, PalWeb Corporation, hereinafter
referred to as "PalWeb," engaged in the business of exploration, production, and
development of oil and gas properties in the continental United States and the
operation of related service businesses. In November 1997 contract for a reverse
acquisition, PalWeb acquired all of the issued and outstanding stock of Plastic
Pallet Production, Inc., a Florida corporation that has been converted into a
Texas corporation, in exchange for a majority of the issued and outstanding
stock of PalWeb, then known as Cabec Energy Corp. Immediately subsequent to the
finalization of the reverse acquisition contract, all of the assets, contract
rights, and liabilities of PalWeb that relate in any way to the oil and gas
business were transferred to The Union Group, Inc., a subsidiary of PalWeb.
Shortly thereafter, PalWeb distributed all of the issued and outstanding stock
of The Union Group, Inc. to its stockholders (other than the former shareholders
of Plastic Pallet Production, Inc.) on a pro rata basis.
Following the acquisition of all of the issued and outstanding stock of
Plastic Pallet Production, Inc., PalWeb's primary business is (i) manufacturing
and selling plastic pallets, and (ii) the custom design, manufacture, and sale
of large plastic injection molding machines and systems. PalWeb is currently a
development stage company.
PalWeb holds several patents for the original design of various types
of plastic pallets, and has several patents pending for the original design of
other types of plastic pallets. These newly designed plastic pallets are much
more durable and sanitary than traditional wood pallets. Further, the widespread
use of plastic pallets could greatly reduce the destruction of trees on a
worldwide basis. It is anticipated that as of November 1999, PalWeb will have
the capability to produce approximately 4,000 plastic pallets per month, will
have the capability to produce 50,000 plastic pallets per month by June 2000,
and will have the capability to produce 100,000 plastic pallets per month by
June 2001.
PalWeb has patents pending on a new concept in the construction of
functional, operational plastic injection molding machines. These new type
machines are approximately 20% to 30% of the length of a traditional style
plastic injection molding machine, use approximately one-third of the
electricity used by a traditional style machine, use approximately 10% of the
oil (circulated) used by a traditional style machine, and can be profitably sold
to the end user at a cost that is substantially less than the cost of a
traditional style machine.
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PalWeb's patents on its plastic pallet designs and its plastic
injection molding machines, along with appropriate pricing of its products,
should give it a competitive sales advantage with respect to its competition.
The principal raw material used in manufacturing plastic pallets is
high and low density polyethylene plastic, both of which are in abundant supply,
and some of this material may be obtained from recycled soft drink bottles.
In the past two years, approximately $2,000,000 has been spent on the
development of PalWeb's business by designing plastic pallets, and building
prototypes of the plastic injection molding machines that will be manufactured
by PalWeb for its own use in manufacturing plastic pallets and for resale to
industrial users of plastic injection molding systems.
At the present time, all of the business of PalWeb is being conducted
through Plastic Pallet Production, Inc., one of PalWeb's wholly owned
subsidiaries. Plastic Pallet Production, Inc., hereinafter referred to as "PPP,"
leases its employees from Accord Human Resources, Inc., an independent employee
leasing company, including PalWeb's President, Ronald G. Hale, who is also the
President of PPP. PalWeb, through PPP, leases its employees from Accord Human
Resources, Inc. because at a low number of employees it is more cost effective
than having its own employees due to the costs of maintaining the accounting
staff necessary.
PalWeb has a total of six wholly owned subsidiaries, but the only one
that is active is PPP. The other subsidiaries currently are inactive and have no
employees. They were formed as part of the business planning process so they
would be in existence at the time that they become needed. A list of PalWeb's
wholly owned subsidiaries is set forth below:
Plastic Pallet Production, Inc., a Texas corporation
Plastic Pallet Support Equipment, Inc., a Texas corporation
Modular Plastic Pallets, Inc., a Texas corporation
PP Financial, Inc., a Texas corporation
PP Transport, Inc., a Texas corporation
PP Systrans, Inc., a Texas corporation
Item. 2. Management's Discussion and Analysis or Plan of Operation
PalWeb has recently transferred all of its energy related assets,
contract rights, and liabilities to The Union Group, Inc., a Nevada corporation
that was formerly a wholly owned subsidiary of PalWeb. Shortly following this
transfer, all of the issued and outstanding stock of The Union Group, Inc. was
distributed to the stockholders of PalWeb (other than the former
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<PAGE> 5
shareholders of PPP) as a dividend. As a result, PalWeb is essentially in the
position of being a start-up business by and through its wholly owned
subsidiary, PPP. PPP is engaged in the design and development of a plastic
pallet that will compete with traditional wood pallets.
Until recently, the cash needed by PalWeb to fund its operations came
from (a) advances from entities affiliated with Paul A. Kruger ($659,600), and
(b) funds received by PPP as a down payment on the sale of a plastic injection
molding system to Pace Plastic Pallets, Inc., an Oklahoma corporation that has
assigned all of its property to Hidalgo Trading Co., L.C. Currently, PalWeb is
obtaining the cash required for its operations by means of loans from Paul A.
Kruger. Mr. Kruger is the Chairman of the Board of Directors of PalWeb and is
the sole owner of Hidalgo Trading Co., L.C. and PaceCo Financial Services, Inc.
PalWeb has just obtained a $400,000 line of credit for its operations.
The molds needed for PalWeb to manufacture plastic pallets have just
been completed. These molds will be modified slightly and PalWeb will then be
able to begin producing plastic pallets commercially. PalWeb also plans to
continue development of its plastic injection molding system and make any
improvements that are possible. Using its prototype plastic injection molding
system, PalWeb anticipates producing approximately 4,000 plastic pallets per
month beginning November 1999.
The revenue that will be generated from the sale of plastic pallets,
along with the proceeds of PalWeb's recently obtained line of credit should
provide its cash operational needs for 12 months or more.
It is anticipated that PalWeb will have three management employees and
it is anticipated that the manufacturing personnel, currently seven leased
employees, will increase to ten or more. Additionally, there will be a sales
distribution network that will be comprised of self employed persons or
entities.
PalWeb is currently attempting to raise $7,000,000 of operating funds
by means of a private placement offering of Preferred Stock. Such Preferred
Stock is being offered for sale at $1.00 per share. Each share of Preferred
Stock is convertible into Common Stock on a 1-for-7 basis. This means that the
holders of the Preferred Stock may each convert one share of such Preferred
Stock into seven shares of the Common Stock of PalWeb.
PalWeb plans to rapidly become a dominant force in the pallet industry.
According to various industry sources, between 400,000,000 and 670,000,000 new
wood and plastic pallets are purchased in the United States each year. At an
overall average selling price of $9/pallet, the pallet manufacturing and sales
business is a $4,000,000,000 - $6,000,000,000 industry. The trend that appears
to be emerging is a switch from wood to plastic, with the only limiting factor
being price. Therefore, PalWeb will target both wood and plastic pallet users
during its market introduction phase.
Pallets are used in virtually all United States industries in which
products are broadly distributed, including, but not limited to, the automotive,
chemical, consumer products, grocery,
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produce and food production, paper and forest products, retailing, and steel and
metals industries. Forklifts, pallet trucks, and pallet jacks are used to move
loaded pallets, reducing the need for costly loading and unloading at
distribution centers and warehouses.
Pallets come in a wide range of shapes and sizes. However, the grocery
industry, which accounts for about one-third of the demand for new pallets, uses
a standard 40 inch by 48 inch pallet and this has become the standard in most
industries. Some industries, however, have developed specialized pallet sizes.
Block edge, rackable pallets are heavy duty pallets with 9 blocks
between the pallet decks, to allow true four-way entry by forklifts, pallet
trucks, and pallet jacks. Block edge, rackable pallets are often used to
transport goods from manufacturers to distribution centers.
Nestable pallets have "feet" on them so that they can be easily
stacked. Nestable pallets are often used to transport goods between distribution
centers and retail stores.
Until very recently, plastic pallets had not penetrated the market
significantly, due in part to their cost. Heavy duty plastic pallets cost
$46-$100, heavy duty wood pallets typically cost approximately $26, and less
sturdy wood pallets typically cost $8-$11. Wood pallets have an estimated useful
life of 4-5 trips before repair or recycling is required [a trip, or cycle, is
defined as the movement of a pallet under a load from a manufacturer to a
distributor (or from a distributor to a retailer) and the movement of the empty
pallet back to the manufacturer]. Heavy duty plastic pallets, as currently
manufactured, have a useful life of 50 or more trips, on average.
It is estimated that the United States wood pallet industry is served
by approximately 3,600 companies, most of which are small, privately held firms
that operate in only one location. The industry is generally comprised of
companies that (a) manufacture new pallets or (b) repair and recycle pallets.
New pallet manufacturing generates about 60%-65% of the industry's revenues. The
U.S. Forest Service estimates that approximately 1,900,000,000 wood pallets are
in circulation in the United States today, that approximately 400,000,000 new
wooden pallets are produced annually, and that roughly 1,000,000,000 of the wood
pallets currently in circulation were newly manufactured. Approximately
175,000,000 wood pallets are recycled through a process of retrieval, repair,
remanufacturing, and secondary marketing, approximately 225,000,000 are sent to
landfills, and approximately 100,000,000 are burned, lost, abandoned, or leave
the country.
The pallet industry has experienced significant change and growth
during the past several years. These changes are partly due to the focus of
large and small businesses on improving the logistical efficiency of their
manufacturing and distribution systems, including the use of just-in-time
procurement, manufacturing, and distribution systems. With the adoption of these
systems, expedited product movement has become increasingly important and the
demand has increased for a high-quality source of pallets distributed through an
efficient, more sophisticated system. It is believed that product damage
resulting from faulty wood pallets is between $1,000,000,000 and $2,000,000,000
annually. This damage is caused by pallets breaking under load, splinters and
nails from the pallets, worker injury, and other myriad causes. In addition,
environmental
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concerns (plastic is recyclable) and product sanitation concerns (plastic
pallets can be sanitized, wood pallets cannot) have created a strong potential
demand for cost-effective plastic pallets.
PalWeb intends to stay on the "cutting edge" of the market by
constantly conducting research on pallet design, plastic injection molding
system design, and source materials composition (the materials used to make the
plastic pallets).
Carving a niche in an industry as competitive as the pallet business
requires more than just capital and equipment. PalWeb's current and future
success will depend in large part on the strategic planning done by its
Management.
PalWeb has just applied for patents on its 40 inch by 48 inch rackable
plastic pallet and its plastic injection molding system and plans to apply for
additional patents on different plastic pallet styles in the next twelve months.
PalWeb's business is relatively clean and does not produce hazardous
waste. As a result, no expenditures will be necessary in order to comply with
applicable environmental laws.
Successful completion of the preferred stock offering described above
will provide the funding necessary to build eight plastic injection molding
systems for PalWeb's use in manufacturing plastic pallets. These new machine
systems will give PalWeb a production capacity of approximately 50,000 pallets
per month. The projected time for the construction, installation, and set-up of
the injection molding systems is six months from the date of beginning.
Item 3. Description of Property
PalWeb currently leases approximately five acres of land in an
industrial area of Dallas, Texas that is improved with 138,000 square feet of
manufacturing and warehouse space, and approximately 6,500 square feet of office
space.
PalWeb has sufficient office equipment, such as computers, printers,
copiers, etc., to operate effectively. Of the eight employees leased from Accord
Human Resources, Inc., which includes PalWeb's President, Mr. Hale, has need of
typical office equipment. PalWeb has six computer stations, five printers, and
one copy machine in good working order.
The warehouse/manufacturing facility is sufficiently equipped and
designed to accommodate the manufacturing of plastic pallets and plastic
injection molding systems. The ceilings are very high which will allow for the
use of cranes, if needed. The warehouse currently has four heavy duty cranes
installed above the work areas, and is situated on an operational railroad spur.
Further, the warehouse has three-phase (heavy-duty), 240 volt electrical wiring.
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Item 4. Security Ownership of Certain Beneficial Owners and Management
a. Security ownership of certain beneficial owners.
The following table sets forth certain information regarding the
176,537,738 shares of Common Stock (out of the 250,000,000 shares of Common
Stock authorized) and the 4,968,890 shares of original issue Preferred Stock
(convertible to Common Stock on a 1-for-1 basis) beneficially owned as of August
31, 1999, by (i) each person known by PalWeb to beneficially own five percent
(5%) or more of the outstanding Common Stock of the Company (or preferred stock
convertible into Common Stock), (ii) each current director and executive
officer, and (iii) all current directors and executive officers as a group.
<TABLE>
<CAPTION>
Shares
Name Beneficially Owned Percent Owned
---- ------------------ -------------
<S> <C> <C>
PaceCo Financial Services, Inc.* ............ 43,500,000 23.97%
Hidalgo Trading Co., L.C.* .................. 1,830,000 1.01%
Courtney Beth Kruger** ...................... 250,000 0.14%
Garrett Paul Kruger** ....................... 250,000 0.14%
Jan C. Von Halle ............................ 3,000,000 1.65%
Jan C. Von Halle, Trustee of the
CMT Trust ................................ 16,145,725 8.89%
Margarete Jung .............................. 15,000,000 8.26%
All Other Shareholders as a Group ........... 101,530,903 55.94%
----------- -----------
Totals ...................................... 181,506,628 100.00%
</TABLE>
* Ownership of 10% or more held by Paul A. Kruger, Chairman of the Board
** Minor children of Paul A. Kruger, Chairman of the Board
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b. Security ownership of management.
<TABLE>
<CAPTION>
Shares
Name Beneficially Owned Percent Owned
---- ------------------ -------------
<S> <C> <C>
Paul A. Kruger, Chairman .................... -0- -0-%
Ronald G. Hale, President, Secretary,
Treasurer, & Director .................... 2,000,000 1.10%
PaceCo Financial Services, Inc.* ............ 43,500,000 17.91%
Hidalgo Trading Co., L.C.* .................. 1,830,000 1.01%
Courtney Beth Kruger** ...................... 250,000 0.14%
Garrett Paul Kruger** ....................... 250,000 0.14%
------------ ------------
Totals ...................................... 47,830,000 26.35%
</TABLE>
* Ownership of 10% or more held by Paul A. Kruger, Chairman o f the Board
** Minor children of Paul A. Kruger, Chairman of the Board
<TABLE>
<CAPTION>
Shares
Name Beneficially Owned Percent Owned
---- ------------------ -------------
<S> <C> <C>
Directors & Officers as a Group 47,830,000 26.35%
All Other Shareholders as a Group 133,676,628 73.65%
------------- ------------
Totals....................................... 181,506,628 100.00%
</TABLE>
c. Changes in control. There are currently no plans for any arrangement
or acquisition which would change ownership of a controlling interest in the
common stock of PalWeb.
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Item 5. Directors, Executive Officers, Promoters and Control Persons
DIRECTORS:
<TABLE>
<S> <C>
NAME AND ADDRESS POSITION
---------------- --------
Paul A. Kruger Director (Chairman of the Board)
1607 West Commerce Street
Dallas, Texas 75208
Ronald G. Hale Director
1607 West Commerce Street
Dallas, Texas 75208
OFFICERS:
---------
Ronald G. Hale President
Ronald G. Hale Secretary
Ronald G. Hale Treasurer
</TABLE>
<TABLE>
<CAPTION>
Shares
Name Beneficially Owned Percent Owned
---- ------------------ -------------
<S> <C> <C>
Paul A. Kruger, Chairman .................... -0- -0-%
Ronald G. Hale, President, Secretary,
Treasurer, & Director .................... 2,000,000 1.10%
PaceCo Financial Services, Inc.* ............ 43,500,000 17.91%
Hidalgo Trading Co., L.C.* .................. 1,830,000 1.01%
Courtney Beth Kruger** ...................... 250,000 0.14%
Garrett Paul Kruger** ....................... 250,000 0.14%
---------- -------
Totals ...................................... 47,830,000 26.35%
</TABLE>
* Ownership of 10% or more held by Paul A. Kruger, Chairman of the Board
** Minor children of Paul A. Kruger, Chairman of the Board
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<TABLE>
<CAPTION>
Shares
Name Beneficially Owned Percent Owned
---- ------------------ -------------
<S> <C> <C>
Directors & Officers as a Group 47,830,000 26.35%
All Other Shareholders as a Group 133,676,628 73.65%
------------- -------
Totals................................ 181,506,628 100.00%
</TABLE>
PAUL A. KRUGER
CHAIRMAN OF THE BOARD OF DIRECTORS
Mr. Kruger, age 45, earned a Bachelor of Business Administration degree
in accounting from Cameron University, Lawton, Oklahoma, and earned a Juris
Doctor degree from the University of Oklahoma City Law School. He has 25 years
of experience in the financial services industry. Mr. Kruger co-founded United
Bank Club Association, Inc. ("UBCA"), Norman, Oklahoma, in 1980, and served as
its President and CEO until February 1996, when UBCA was sold. Mr. Kruger
supervised and participated in every facet of UBCA's business, including
strategic planning, sales, marketing, operations, and service quality. Under Mr.
Kruger's leadership, UBCA grew to more than 350 employees, and had operational
and sales branches in Michigan, Florida, Arizona, Texas, and Mexico. At the time
UBCA was sold, it provided financial enhancement services to more than 200
client institutions serving more than 6,000,000 individual customers throughout
the United States, Puerto Rico, the U.S. Virgin Islands, and Mexico.
In 1997, Mr. Kruger became the Chairman of the Board of Directors of
PaceCo Financial Services, Inc. ("PaceCo"). Mr. Kruger also serves as the
Chairman of the Board of Directors of Universal Marketing Services, Inc. His
responsibilities and contributions to these companies include assisting in the
development, implementation, and execution of strategic planning.
RONALD G. HALE
DIRECTOR AND SOLE OFFICER
Mr. Hale, age 55, earned a mechanical engineering degree from Wichita
State University, Wichita, Kansas. He has 29 years of experience in the plastic
molding and plastic composition business. Mr. Hale worked for the Coleman
Company in Wichita, Kansas from 1971 to 1972, supervising its plastic blow
molding operations, assembly lines, and other production related departments.
Mr. Hale worked for Conoco, Inc. from 1972 to 1982 where he served as a Senior
Technical Service Representative for the Chemical Research Division, where he
was responsible for developing compounds and applications for PVC resins. While
working for Conoco, Mr. Hale developed a true expertise in compounding,
formulating, and blending PVC resins and in plastic injection molding, blow
molding, and extrusion, and was recognized as "Conoco's Top Field Service
Representative" as a result of successfully assisting customers in solving
processing problems. Mr. Hale worked for Synthetic Products Company, Cleveland,
Ohio, from 1982 to
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1986, where he acted as a Senior Territory Manager and developed a sales
territory in the central and Southeast regions of the United States. Mr. Hale
worked for Colormatrix Corporation, Cleveland, Ohio, from 1986 to 1990 as a
sales representative. At Colormatrix, he sold liquid color and chemical
dispersion to the plastics industry in Oklahoma, Arkansas, and Kansas. From 1990
to 1999, Mr. Hale worked as an independent engineering consultant in the
plastics industry. One of his more substantial clients was Evcon Industries,
Wichita, Kansas.
Item 6. Executive Compensation
Mr. Hale is paid a salary of $72,000.00 per year. He is paid by PPP in
consideration of the services performed by him as the President of PPP. Mr. Hale
is not paid additional compensation for serving as a director of PalWeb and
acting as PalWeb's sole officer. No other parties receive executive
compensation.
Item 7. Certain Relationships and Related Transactions
In November 1997, PalWeb, then known as Cabec Energy Corp., acquired
all of the issued and outstanding stock of Plastic Pallet Production, Inc. from
Michael John, the former Chairman of the Board of Director and President, who
held all of the stock of PPP for the benefit of himself and others. PalWeb
issued Mr. John and other parties a total of 119,145,725 shares of its common
stock, a clear majority of the voting control.
PPP purchased two milling machines from Machine Tool, Inc. on November
1, 1996 for the sum of $225,000.00.
PPP purchased some older plastic injection molding machines and some
related equipment from Dray Manufacturing, Inc. by assuming a $350,000.00
promissory note owed to Heller Financial.
PPP purchased some plastic pallet molds from Robert V. Daigle for
$135,000.00 and the assignment of the right to receive 5,000,000 shares of the
common stock of PalWeb following the acquisition of the stock of PPP by PalWeb.
Item 8. Legal Proceedings
There is one legal proceeding pending against PalWeb. This is a lawsuit
is a third party cross action filed by Cooper Manufacturing Corp., an Oklahoma
corporation ("Cooper Oklahoma"), against Cooper Manufacturing Corp., a Texas
corporation ("Cooper Texas"), and Cabec Energy Corp. n/k/a PalWeb Corporation,
Case No. 98-7935-NO(D), filed in the 46th Judicial Circuit Court of Otsego
County, Michigan, and styled James Dunevant and Shanda Dunevant, James Dunevant,
Jr., Kaylynn Dunevant, and Katie Dunevant, Minors, by their Next Friend, Shanda
Dunevant, Plaintiffs, vs. Welltech Eastern, Inc. d/b/a Key Energy Drilling, a
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<PAGE> 13
Delaware corporation, Mercury Exploration Company, Inc., a Texas corporation,
and Cooper Manufacturing Corp., an Oklahoma corporation.
The Plaintiffs' claim is based on an injury suffered by James
Dunevant that was allegedly caused, among other things, by a design flaw in an
oil well drilling rig allegedly built by Cooper Oklahoma. Cooper Oklahoma's
third party cross action against PalWeb is based on a contractual indemnity
claim. It is PalWeb's position that Cooper Oklahoma is not entitled to be
indemnified from loss by PalWeb in this matter. Further, even if PalWeb is
liable to the Plaintiffs, The Union Group, Inc. is contractually obligated to
indemnify PalWeb from any loss it may incur in connection with any energy
related matter.
Item 9. Market for Common Equity and Related Stockholder Matters
PalWeb's common stock currently trades on the Over-the-Counter Bulletin
Board Exchange, with "PAEB" as its trading symbol.
From June 1, 1997 to September 17, 1999, the Bid price of the common
stock has been as high as $0.73 and as low as $0.05.
As of September 17, 1999, PalWeb had approximately 1,249 common
stockholders.
PalWeb paid no cash dividends to its common stockholders during the
last two fiscal years and does not plan to pay any cash dividends in the near
future. PalWeb plans to use any profits made to purchase additional plastic
injection molding systems and plastic pallet molds.
Item 10. Recent Sales of Unregistered Securities
During the past three years, the registrant has sold the following
securities without registering the securities under the Securities Act of 1933:
<TABLE>
<CAPTION>
Name Class No. of Shares Date Consideration
---- ----- ------------- ---- -------------
<S> <C> <C> <C> <C>
Steve Bright Common 25,000 07/07/97 Legal Services
Don Sauders, TTE Common 400,000 07/14/97 Consulting Services
Richard Wood Common 50,000 07/14/97 Consulting Services
Ronald Siler Common 40,000 08/27/97 Accounting Services
Jay Ungerman Common 220,000 08/27/97 Legal Services
Electric & Gas Tech-
nology, Inc. Common 1,000,000 12/08/97 Consulting Services
John Gourley Common 300,000 12/19/97 Consulting Services
James Bradshaw Common 300,000 12/19/97 Consulting Services
John Gourley Common 100,000 12/23/97 Consulting Services
Michael John, et al Common 101,000,000 01/09/98 Stock Exchange
John Poe Common 30,000 03/06/98 Consulting Services
Robert Seago Common 30,000 03/06/98 Consulting Services
Margarete Jung Common 15,000,000 03/13/98 Stock Exchange
</TABLE>
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<PAGE> 14
<TABLE>
<S> <C> <C> <C> <C>
Michael Young &
Partners, Inc. Common 1,028,907 03/25/98 Note Conversion
Jan C. von Halle,
Trustee Common 16,145,725 07/16/98 Stock Exchange
Jan C. von Halle Common 2,000,000 07/16/98 Stock Exchange
Ralph Curton, Jr. Common 2,000,000 08/11/98 Management Services
Alan Haliburton Common 100,000 08/26/98 Public Relations Services
Robert V. Daigle Common 1,000,000 02/03/99 Consulting Services
USGT Investors, L.P. Common 25,000 03/05/99 Consulting Services
PaceCo Financial
Services, Inc. Common 32,500,000 04/30/99 Consulting Services
Julie Smith Barksdale Common 250,000 04/30/99 Consulting Services
Arlin Plender Common 2,860,000 04/30/99 Consulting Services
Ron Hale Common 2,000,000 04/30/99 Consulting Services
Brett Wimberley Common 500,000 04/30/99 Consulting Services
Mark R. Kidd Common 500,000 04/30/99 Consulting Services
Courtney Beth Kruger Common 250,000 04/30/99 Consulting Services
Garret Paul Kruger Common 250,000 04/30/99 Consulting Services
Hidalgo Trading Co., L.C. Common 830,000 04/30/99 Consulting Services
Chadwick Presten, L.L.C. Common 400,000 04/30/99 Consulting Services
K-P Sullivan, L.L.C. Common 120,000 04/30/99 Consulting Services
Litchfield, L.L.C. Common 180,000 04/30/99 Consulting Services
Leach, Sullivan & Watkins Common 360,000 04/30/99 Consulting Services
F. Edwin Smith, Jr.,
Trustee Preferred 100,000 12/10/97 Consulting Services
Jo Ann R. Cox Preferred 10,000 12/10/97 Management Services
F. Edwin Smith, Jr.,
Trustee Preferred 450,000 01/05/98 Consulting Services
Jo Ann R. Cox Preferred 50,000 01/05/98 Management Services
Randall C. McCleskey Preferred 400,000 07/26/99 Consulting Services
John Gourley Preferred 500,000 07/26/99 Consulting Services
Stan Haddock Preferred 25,000 07/26/99 Consulting Services
Ronald A. Siler Preferred 250,000 07/26/99 Accounting Services
Les Kroger Preferred 100,000 07/26/99 Consulting Services
Kenneth Graves Preferred 150,000 07/26/99 Accounting Services
Connie L. Gadt Preferred 80,000 07/26/99 Accounting Services
Jo Ann R. Cox Preferred 25,000 07/26/99 Management Services
Bruce Meador Preferred 25,000 07/26/99 Consulting Services
The BWCC Corporation Preferred 100,000 07/26/99 Consulting Services
The Margrett Corporation Preferred 100,000 07/26/99 Consulting Services
Clair Spencer Preferred 500,000 07/26/99 Consulting Services
Mary Eveyn Soble, Trustee
of the Triad Trust Preferred 866,945 07/26/99 Consulting Services
Donna Lee, Trustee
of the Unity Trust Preferred 866,945 07/26/99 Consulting Services
F. Edwin Smith, Jr.,
Trustee of the TJS
Trust Preferred 100,000 07/26/99 Consulting Services
</TABLE>
PalWeb relied on the exemption set forth in Section 4(2) of the Securities Act
of 1933, as amended, in connection with the issuances of stock set forth above.
There was no underwriting and no commissions were paid to any party upon the
issuance of such stock.
Page -14-
<PAGE> 15
Item 11. Description of Securities
As of September 17, 1999, (i) there were 176,981,046 shares of common
stock issued and outstanding, and (ii) there were 4,968,890 shares of original
series preferred stock issued and outstanding.
When PalWeb was originally organized, a total of five hundred thousand
(500,000) shares of common voting stock were issued to eight hundred (800)
shareholders.
PalWeb (known as Permaspray Manufacturing Corporation at that time)
then issued three hundred thousand (300,000) shares of common stock in exchange
for assets.
PalWeb later issued common stock for the assets of Permaspray
Manufacturing of Pennsylvania.
PalWeb later issued common and preferred stock (as set forth below) for
the assets and common stock of Cabec Energy Corp., a Texas corporation, pursuant
to the terms of that certain Plan and Agreement of Merger of Cabec Energy Corp.
into Browning Enterprises, Inc. dated November 4, 1992. On the date of the
consummation of the merger, April 28, 1993, PalWeb issued five million
(5,000,000) shares of common voting stock (restricted under Rule 144) and four
million (4,000,000) shares of voting, no coupon preferred stock (restricted
under Rule 144). The original series preferred stock may be converted to common
voting stock by its holders on a 1-for-1 basis at any time following April 28,
1995.
Subsequent to the merger with Cabec Energy Corp., a Texas corporation,
PalWeb has issued additional shares of common stock for the acquisition of
numerous assets, operating capital, and services rendered, and additional shares
of original issue preferred stock were issued for services rendered. The most
notable recent acquisition by the registrant occurred as of November 11, 1997,
when the stockholders approved the acquisition of all of the issued and
outstanding stock of Plastic Pallet Production, Inc., a Florida corporation
(that has just recently been converted into a Texas corporation) in exchange for
119,145,725 shares of PalWeb's common stock.
On September 1, 1999, PalWeb authorized a new class of Series C
Preferred Stock. This Series C Preferred Stock may be converted into common
stock on a 1-for-7 basis (1 share of Series C Preferred Stock converts into 7
shares of common stock) by the holder.
PalWeb's common stock is its only security that is traded on an
exchange.
Item 12. Indemnification of Directors and Officers
Page -15-
<PAGE> 16
Under the registrant's Bylaws, it is required to indemnify its officers
and directors to the extent allowed and permitted by Section 145 of the General
Corporation Law of the State of Delaware.
Item 13. Financial Statements
Set forth below are audited financial statements of the registrant for
fiscal years May 31, 1997, 1998, and 1999. Such financial statements were
prepared under Generally Accepted Accounting Practices and audited under
Generally Accepted Auditing Practices.
Item 14. Changes in and Disagreements With Accountants on Accounting
and Financial Disclosure.
There are no disagreements with accountants on accounting and financial
disclosure.
Item 15. Financial Statements and Exhibits
Page -16-
<PAGE> 17
INDEPENDENT AUDITOR'S REPORT
Board of Directors
PalWeb Corporation
Dallas, Texas
We have audited the accompanying consolidated balance sheets of PalWeb
Corporation and subsidiaries as of May 31, 1999, 1998, and 1997 and the related
consolidated statements of operations, stockholders' deficit, and cash flows for
the year then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material aspects, the financial position of PalWeb Corporation and
subsidiaries as of May 31, 1999, 1998, and 1997 and the results of their
operations and their cash flows for the years then ended in conformity with
generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. The Company is in the development
stage and has suffered significant losses from operations. Substantial
additional funding will be required to implement its business plan and to attain
profitable operations. The lack of adequate funding to maintain working capital
and stockholders' deficits at May 31, 1999, raise substantial doubt about its
ability to continue as a going concern. Management's plans in regard to these
matters are described in Note 2. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
HULME RAHHAL HENDERSON,INC.
September 15, 1999
Ardmore, Oklahoma
Page -17-
<PAGE> 18
PALWEB CORPORATION
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
May 31,
-------------------------------------
ASSETS 1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
CURRENT ASSETS:
Cash $ 710 $ - $ 6,641
Inventory 9,938 33,687 54,068
Assets held for resale - 74,995 -
----------- ----------- -----------
Total current assets 10,648 108,682 60,709
PROPERTY, PLANT AND EQUIPMENT, NET
of accumulated depreciation 1,819,216 2,437,900 1,408,649
OTHER ASSETS:
Patent costs, net 60,749 56,072 31,731
Deposits and other 30,173 29,353 24,000
----------- ----------- -----------
Total other assets 90,922 85,425 55,731
----------- ----------- -----------
TOTAL ASSETS $ 1,920,786 $ 2,632,007 $ 1,525,089
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
CURRENT LIABILITIES:
Notes payable $ 50,000 $ 963,807 $ 472,827
Mortgage payable - related party - 1,350,000 -
Accounts payable 352,733 428,524 295,308
Accrued expenses 119,938 349,779 53,996
Payable to related parties 2,222,992 1,812,623 1,540,500
Customer deposits 300,000 - -
----------- ----------- -----------
Total current liabilities 3,045,663 4,904,733 2,362,631
Lease Finance Obligation 1,766,958 - -
STOCKHOLDERS' DEFICIENCY:
Preferred stock, $.0001 par,
20,000,000 shares authorized -
outstanding - 880,000,
380,000 and -0-, respectively 88 38 -
Common stock, $.10 par value,
250,000,000 authorized, outstanding -
217,981,046, 166,856,046 and
119,145,725, respectively 9,206,888 3,863,938 491,976
Additional paid-in capital - - -
Deficit accumulated during
development stage (12,098,811) (6,136,702) (1,329,518)
----------- ----------- -----------
Total stockholders' deficiency (2,891,835) (2,272,726) (837,542)
----------- ----------- -----------
TOTAL LIABILITIES AND
STOCKHOLDERS DEFICIENCY $ 1,920,786 $ 2,632,007 $ 1,525,089
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of this consolidated financial
statement.
Page -18-
<PAGE> 19
PALWEB CORPORATION
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
From Inception
(November 20, 1995)
Year Ended May 31, To May 31,
-------------------------------- --------------------------------
1999 1998 1997 1999
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
SALES $ 51,510 $ 37,863 $ 3,321 $ 92,694
OTHER INCOME (EXPENSE):
Scrap sales and other 3,573 7,486 92,346 103,405
Rental income 70,600 59,440 43,740 173,780
-------------- -------------- -------------- --------------
Total other income 74,173 66,926 136,086 277,185
EXPENSES:
Research and development -- -- 406,943 406,943
Salaries and benefits 298,414 448,176 247,516 994,106
Depreciation and
amortization 154,587 157,656 96,871 409,114
Other general and
administrative 5,461,643 660,383 685,695 6,807,721
Impairment investment -- 3,456,231 -- 3,456,231
Interest expense 241,764 189,527 31,900 463,191
-------------- -------------- -------------- --------------
Total expense 6,156,408 4,911,973 1,468,925 12,537,306
-------------- -------------- -------------- --------------
LOSS BEFORE
EXTRAORDINARY ITEMS (6,030,725) (4,807,184) (1,329,518) (12,167,427)
EXTRAORDINARY GAIN 68,616 -- -- 68,616
-------------- -------------- -------------- --------------
NET LOSS $ (5,962,109) $ (4,807,184) $ (1,329,518) $ (12,098,811)
============== ============== ============== ==============
LOSS PER COMMON SHARE:
Loss before
extraordinary item $ (.03) $ (.04) $ (.01)
Extraordinary gain -- -- --
-------------- -------------- --------------
Total $ (.03) $ (.04) $ (.01)
============== ============== ==============
WEIGHTED AVERAGE SHARES
Outstanding 183,189,000 127,020,000 119,145,725
============== ============== ==============
</TABLE>
The accompanying notes are an integral part of this consolidated financial
statement.
Page -19-
<PAGE> 20
PALWEB CORPORATION
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIENCY
<TABLE>
<CAPTION>
Common Stock
Preferred Stock -------------------------- Additional
------------------------ Paid-in Accumulated Stockholders; Total
Shares Amount Shares Amount Capital Deficit Deficit
--------- ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Proceeds from sale of stock -- $ -- 119,145,725 $ 491,976 $ -- $ -- $ 491,976
Net Loss -- -- -- -- -- (1,329,518) (1,329,518)
--------- ------------ ------------ ------------ ------------ ------------ ------------
BALANCES, May 31, 1997 -- -- 119,145,725 491,976 -- (1,329,518) (837,542)
Common stock held by minority
stockholders of PalWeb in
connection with reverse
acquisition 530,000 -- 31,960,321 -- -- -- --
Issuance of stock for services 600,000 60,000 162,000 -- 222,000
Issuance of stock for
investment -- -- 15,000,000 1,500,000 1,650,000 -- 3,150,000
Preferred stock converted
to common (150,000) (15) 150,000 15,000 (14,985) -- --
Reclassification of paid
in capital -- 53 -- 1,796,962 (1,797,015) -- --
Net loss for the period -- -- -- -- -- (4,807,184) (4,807,184)
--------- ------------ ------------ ------------ ------------ ------------ ------------
BALANCES, May 31, 1998 380,000 38 166,856,046 3,863,938 -- (6,136,702) (2,272,726)
Issuance of stock for services 500,000 50 48,125,000 4,812,500 200,450 -- 5,013,000
Stock issued for debt -- -- 3,000,000 300,000 30,000 -- 330,000
Reclassification of paid
in capital -- -- -- 230,450 (230,450) -- --
Net loss -- -- -- -- -- (5,962,109) (5,962,109)
--------- ------------ ------------ ------------ ------------ ------------ ------------
BALANCES, May 31, 1999 880,000 $ 88 217,981,046 $ 9,206,888 $ -- $(12,098,811) $ (2,891,835)
========= ============ ============ ============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of this consolidated financial
statement.
Page -20-
<PAGE> 21
PALWEB CORPORATION
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FROM INCEPTION
(November 20, 1995)
Year Ended May 31, To May 31,
--------------------------- ---------------------------
1999 1998 1997 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (5,962,109) $ (4,807,184) $ (1,329,518) $(12,098,811)
Adjustments to reconcile net loss to
cash used by operating activities:
Depreciation and amortization 154,587 157,656 96,871 409,114
Extraordinary gain on debt
retirement (68,616) -- -- (68,616)
Consulting services paid by
issuance of common stock 5,013,000 222,000 -- 5,235,000
Impairment of investment -- 3,145,000 -- 3,145,000
Loss of disposition of property -- 311,231 -- 311,231
Changes in inventory 23,749 20,381 (54,068) (9,938)
Changes in other assets (8,726) (26,380) (58,031) (93,137)
Changes in payable to related
party 410,369 272,123 1,540,500 2,222,992
Changes in accounts payable
and accrued expenses 244,600 428,999 349,304 1,022,903
Increase in customer deposits 300,000 -- -- 300,000
------------ ------------ ------------ ------------
Net cash provided by (used)
Operating activities 106,854 (276,174) 545,058 375,738
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (140,906) (1,571,447) (1,503,220) (3,215,573)
Proceeds from sale of equipment 74,995 -- -- 74,995
Proceeds from lease finance
obligation 149,517 -- -- 149,517
------------ ------------ ------------ ------------
Net cash provided by (used)
investing activities 83,606 (1,571,447) (1,503,220) (2,991,061)
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in notes
payable (189,750) 490,980 472,827 774,057
Proceeds from mortgage payable -
related party -- 1,350,000 -- 1,350,000
Proceeds from issuance of
common stock -- -- 491,976 491,976
------------ ------------ ------------ ------------
Net cash provided (used) by
financing activities (189,750) 1,840,980 964,803 2,616,033
------------ ------------ ------------ ------------
NET INCREASE (DECREASE) IN CASH 710 (6,641) 6,641 710
CASH, beginning of period -- 6,641 -- --
------------ ------------ ------------ ------------
CASH, end of period $ 710 $ -- $ 6,641 $ 710
============ ============ ============ ============
</TABLE>
SUPPLEMENTAL INFORMATION (Note 10)
The accompanying notes are an integral part of this consolidated financial
statement.
Page -21-
<PAGE> 22
PALWEB CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
In December, PalWeb Corporation (Company), formerly Cabec Energy
Corporation, was acquired in a reverse acquisition by the stockholders
of Plastic Pallet Production, Inc. (PPP). The assets and liabilities of
the Company prior to the transaction were distributed into a new
company to be owned by the stockholders of the Company prior to the
reverse acquisition. Upon completion of the acquisition, the
stockholders of PPP owned approximately 78% of the outstanding stock of
the company.
Effective with the reverse acquisition, the Company and its wholly
owned subsidiary PPP will pursue the manufacture and marketing of
plastic pallets and the related equipment to produce plastic pallets.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts
of the Company and its subsidiaries. All material intercompany accounts
and transactions have been eliminated.
Development Stage Company
PPP from its inception, November 20, 1995, has pursued the development
of a plastic pallet which will compete with traditional wood pallets.
Additionally, PPP has designed an injection molding machine which it
anticipates can be built and operated more economically than
competitive equipment. At May 31, 1999, both products are in the
development stage. PPP expects these products to become commercially
marketable during the next year.
Statement of Cash Flows
The Company considers all short-term investments with an original
maturity of three months or less to be cash equivalents.
Use of Estimates
The preparation of the Company's financial statements in conformity
with generally accepted accounting principles requires the Company's
management to make estimates and assumptions that affect the amounts
reported in these financial statements and accompanying notes. Actual
results could differ materially from those estimates.
Page -22-
<PAGE> 23
PALWEB CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Inventory
Inventory consists of finished pallets and is stated at the lower of
cost (first-in, first-out) or market value.
Property, Plant and Equipment
The Company's property, plant and equipment is stated at cost.
Depreciation expense is computed on the straight-line method over the
estimated useful lives, as follows:
<TABLE>
<S> <C>
Plant building 20 years
Plant improvements 7 years
Production machinery and
equipment 5-10 years
Office equipment 3- 5 years
Furniture and fixtures 5 years
</TABLE>
Gains and losses from retirements and dispositions of fixed assets are
recorded in the period incurred.
Investment in Vimonta AG
The Company's 20% ownership in Vimonta AG is valued at cost since
management has no board representation, financial information or other
influence on the operation of Vimonta AG.
Patents
Amortization expense for the costs incurred by the Company to obtain
the patents on the modular pallet system and accessories is computed on
the straight-line method over the estimated life of 17 years.
Recognition of Revenues
Revenue is recognized at the time a sale is completed.
Income Taxes
The Company accounts for income taxes under the liability method, which
requires recognition of deferred tax assets and liabilities for the
expected future tax consequences of events that have been included in
the financial statements or tax returns. Under this method, deferred
tax assets and liabilities are determined based in the difference
between the financial statements and tax bases of assets and
liabilities using enacted tax rates in effect for the year in which the
differences are expected to reverse.
Page -23-
<PAGE> 24
PALWEB CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Research and Development Costs
Research and Development costs are charged to operations in the period
incurred.
Loss Per Share
Loss per share is computed based on weighted average number of shares
outstanding. Convertible preferred stock and stock options are not
considered as their effect is antidilutive.
Accounting Changes
During the year ended May 31, 1998, the company adopted Statement of
Financial Accounting Standards 128, "Earnings per Share" and Statement
of Financial Accounting Standards 129 "Disclosure of Information About
an Entity's Capital Structure". Statement 128 provides for the
calculation of "basic" and "diluted" earnings per share. Basic earnings
per share includes no dilution and is computed by dividing income
available to common shareholders by the weighted average number of
common shares outstanding for the period. Diluted earnings per share
reflects the potential dilution of securities that could share in the
earnings of an entity, similar to fully diluted earnings per share. The
implementation of these standards does not have a material effect on
the Company's consolidated financial statements.
During the year ended May 31, 1999, the Company adopted Statement of
Financial Accounting Standards 130, "Reporting Comprehensive Income"
which establishes standards for reporting and display of comprehensive
income, its components and accumulated balances. Comprehensive income
is defined to include all changes in equity except those resulting from
investments by owners and distributions to owners. Among other
disclosures, Statement 130 requires that all items that are required to
be recognized under current accounting standards as components of
comprehensive income be reported in a financial statement that is
presented with the same prominence as other financial statements. The
implementation of this standard does not have a material effect on the
Company's consolidated financial statements.
Page -24-
<PAGE> 25
PALWEB CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. CONTINUATION AS A GOING CONCERN
The accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. The Company is in the
development stage and has suffered significant losses from operations.
To date, the Company has received substantial advances from investors
but will require additional substantial funding in order to implement
its business plan and have an opportunity to achieve profitable
operations. Management plans to meet this funding need through a short
term bank loan of approximately $400,000 and the pursuit of a
$7,000,000 preferred stock offering. Neither the receipt of additional
funding in adequate amounts nor the successful implementation of its
business plan can be assured. The combination of these factors raise
substantial doubt about the Company's ability to continue as a going
concern. It is management's opinion that the funding required to reach
necessary production levels will be obtained and, based upon
expressions of interest from potential customers, the Company will
obtain adequate sales to reach a profitable status, and will continue
as a going concern.
3. PROPERTY, PLANT AND EQUIPMENT
A summary of the property, plant and equipment as of and May 31 is as
follows:
<TABLE>
<CAPTION>
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
Land $ 85,000 $ 691,057 $ 412,057
Plant building 1,166,127 1,166,127 -
Plant improvements 141,791 141,791 131,296
Production machinery and equipment 254,367 254,368 600,115
Office equipment 94,282 73,941 66,098
Furniture and fixtures 33,654 33,654 33,654
Work in Progress 417,761 299,370 260,000
---------- ---------- ----------
2,192,982 2,660,308 1,503,220
Less accumulated depreciation (373,766) (222,408) (94,571)
---------- ---------- ----------
$1,819,216 $2,437,900 $1,408,649
========== ========== ==========
</TABLE>
The work-in-progress consists of the construction of a prototype
injection molding machine and molds for the manufacture of plastic
pallets.
Depreciation expense for the periods was $151,358, $155,970 and
$94,571, respectively.
Page -25-
<PAGE> 26
PALWEB CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. NOTES PAYABLE
A summary of the notes payable as of May 31 are as follows:
<TABLE>
<CAPTION>
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Note payable to bank, interest at 2% over
prime, due May 2000 $ 50,000 $ -- $ --
Note payable to several organizations and
individuals, interest at 8.5%, principal
and accrued interest due at maturity of
December 1997, collateralized by land -- 339,077 339,077
Note payable to finance company, interest at 10%, principal and accrued
interest due at maturity of January 1998, collateralized
by certain production machinery and equipment -- 133,750 133,750
Note payable to individual, interest imputed at 10%, principal and
interest, due in November 1998, collateralized by mortgages on certain
portions of the plant building
and land and a guarantee by a stockholder -- 490,980 --
------------ ------------ ------------
Current portion 50,000 963,807 472,827
------------ ------------ ------------
Long-term debt $ -- $ -- $ --
============ ============ ============
</TABLE>
The note payable in the amount of $339,077 at May 31, 1998 and secured
by land was in default. During 1999 the creditor foreclosed on the land
in satisfaction of the debt. A loss of $76,155 resulted from the
foreclosure which is classified as an extraordinary item.
During 1999, the Company negotiated a settlement on the note payable to
individual in the amount of $490,980 at May 31, 1998, plus accrued
interest, by issuance of 2,000,000 shares of its common stock, cash
payment of $110,000 and transfer of title to certain undeveloped land
valued at approximately $193,000. The result is classified as an
extraordinary gain of $22,350.
5. RELATED PARTY TRANSACTIONS
The Company's subsidiary PPP has received substantial funding from
certain investors. The investors advanced operating funds totaling
$2,222,922, $1,812,623 and $1,540,500 as of May 31, 1999, 1998, and
1997. These advances are non-interest bearing.
As of May 31, 1998, the Company had a mortgage payable to the investor
of $1,350,000 which bears interest at 12.35% and is due on demand. This
note is collateralized by a first mortgage on a portion of the plant
and land in Dallas, Texas.
Page -26-
<PAGE> 27
PALWEB CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. EXTRAORDINARY GAIN
During 1999, the Company negotiated settlement and incurred foreclosure
on certain notes payable, see note 4. Additionally, issued 1,000,000
shares of common stock in settlement of an account payable totaling
$183,993. The net gain from these transactions totaled $68,616.
7. IMPAIRMENT OF INVESTMENT
In March 1998, the Company issued 15,000,000 of common stock for a 20%
investment in Vimonta AG valued at $3,150,000 based on the market value
of the Company's common stock. The transaction was principally to
assist the Company in marketing its products in Europe. Management has
been unable to obtain reliable financial information regarding Vimonta
AG and does not believe Vimonta has material assets or net worth.
Accordingly, the Company has recorded a charge to income in the amount
of $3,145,000.
The Company sold certain plant equipment in June 1998. Additionally,
certain molds for plastic products that were deemed obsolete. The
combined loss in the amount of $311,231 was recorded in the year ended
May 31,1998.
8. FEDERAL INCOME TAXES
Deferred taxes as of May 31, are as follows:
<TABLE>
<CAPTION>
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Net operating loss $ 3,093,356 $ 1,028,260 $ 471,963
Loss on impairment of
investment 1,151,070 1,151,070 --
Gain on sale of plant
for tax purposes 160,681 -- --
Loss on equipment -- 46,207 --
------------ ------------ ------------
4,405,107 2,225,537 471,963
Less: Valuation allowance (4,405,107) (2,225,537) (471,963)
------------ ------------ ------------
Total $ -- $ -- $ --
============ ============ ============
</TABLE>
Management has provided a valuation allowance for the full amount of the
deferred tax asset as the Company has yet to progress beyond the development
stage of its operations. While management projects that the products being
developed will be profitable and the deferred asset will ultimately be realized,
the Company has not yet reached such stage in its development to place
reasonable reliability on product acceptance and marketablility.
Page -27-
<PAGE> 28
PALWEB CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. FEDERAL INCOME TAXES - continued
The net change in deferred taxes is as follows:
<TABLE>
<CAPTION>
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Net operating loss $ 2,065,096 $ 556,297 $ 471,963
Loss on impairment of
investment -- 1,151,070 --
Gain on sale of plant
for tax purposes 160,681 -- --
Loss on sale of equipment (46,207) 46,207 --
Change in Valuation
allowance (2,179,570) (1,753,574) (471,963)
----------- ----------- -----------
Tax Benefit $ -- $ -- $ --
=========== =========== ===========
</TABLE>
The Company's effective tax rate differs from the federal statutory rate as
follows:
<TABLE>
<CAPTION>
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Tax benefit using
statutory tax rate $ 2,027,117 $ 1,634,442 $ 452,036
Effect of state tax rates 155,015 124,987 34,567
Net change in valuation (2,179,571) (1,753,574) (471,963)
allowance
Other deductions (2,561) (5,855) (14,640)
----------- ----------- -----------
Tax benefit, per financial
statements $ -- $ -- $ --
=========== =========== ===========
</TABLE>
The Company has a net operating loss (NOL) for Federal income tax
purposes as of May 31, 1999, 1998, and 1997 of $8,451,791 as follows:
<TABLE>
<CAPTION>
Amount Expiration
------ ----------
<S> <C>
$1,289,518 2012
$ 556,297 2018
$2,065,096 2019
</TABLE>
9. LEASE FINANCING OBLIGATION
In April 1999, a related party acquired the Company's plant in Dallas,
Texas based on an appraisal and the buyer assumed the mortgage payable
- related party in the amount of $1,350,000. The Company executed a one
year lease at $12,235 per month to occupy the facility. Management
expects to rent the property on a month to month basis at the same rate
after the expiration of the initial term.
Page -28-
<PAGE> 29
PALWEB CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
9. LEASE FINANCING OBLIGATION - continued
The Company also has a three year option to purchase the property for
$2,700,000. Due to the existence of the Company's option to repurchase
the property, the transaction has been accounted for as a financing
arrangement whereby the plant continues to be maintained as an asset
and depreciated. The gain plus the related debt is classified as a
lease financing obligation during the term of the option.
10. STOCKHOLDERS' EQUITY
The Company issued 3,000,000 shares of common stock to retire certain
liabilities during the year ended May 31, 1999, as discussed in Notes 4
and 6.
The Company also issued shares of common stock and preferred during the
years ended May 31, 1999 and 1998 for services. These shares were
valued at market value.
Preferred stock is convertible into common stock at a ratio of one to
one. Preferred stock converted into common stock during the period
ended May 31, 1998 totaled 150,000.
At the time of the reverse acquisition by PPP, there were outstanding
certain options to purchase common stock of the Company. At May 31,
1999, the outstanding options are as follows:
<TABLE>
<CAPTION>
Price
Number of shares Per Share Expiration Date
---------------- --------- ---------------
<S> <C> <C>
120,000 $.10 July 31, 2003
160,000 .10 July 31, 2004
200,000 .10 July 31, 2005
240,000 .10 July 31, 2006
600,000 .50 None
1,000,000 .10 August 31, 2002
</TABLE>
11. FINANCIAL INSTRUMENTS
The Company's financial instruments consist principally of accounts
payable, accrued liabilities and notes and mortgages payable.
Management estimates the market value of the notes and mortgage payable
based on expected cash flows and believes these market values
approximate carrying values at May 31,1999, 1998 and 1997.
Page -29-
<PAGE> 30
PALWEB CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12. SUPPLEMENTAL INFORMATION OF CASH FLOWS
Non-cash investing and financing activities are as follows:
<TABLE>
<CAPTION>
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Property and equipment released
in foreclosure or negotiated
settlement of debt $ 608,232 $ -- $ --
Common stock issuances in exchange for:
Consulting services 5,013,000 222,000 --
Retirement of debt through
issuance of common stock 330,000 -- --
Investment in securities -- 3,150,000 --
Conversion of preferred stock -- 15,000 --
Reduction of debt and accrued
interest through foreclosure,
negotiated settlement or
issuance of common stock (1,006,848) -- --
Interest paid -- -- --
</TABLE>
14. SUBSEQUENT EVENTS
The following events occurred subsequent to May 31, 1999 not otherwise
disclosed herein:
In September 1999, the Company obtained a $20,000,000 default judgement
against a stockholder/investor. Additionally, the judgement canceled
41,443,308 shares of common stock held by the investor. The investor
has four years from the date of judgement to file an action seeking to
set aside the judgement.
In July 1999, the Company issued 4,088,890 shares of preferred stock in
exchange for services.
In July 1999, the outstanding stock options to purchase the Company's
common stock were waived.
Page -30-
<PAGE> 31
EXHIBITS
1. Certificate of Incorporation and Amendments
2. Bylaws
Page -31-
<PAGE> 1
EXHIBIT 1
STATE OF DELAWARE
OFFICE OF THE SECRETARY OF STATE PAGE 1
------------------------------------
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 "PERMASPRAY MANUFACTURING CORPORATION", FILED IN THIS OFFICE
ON THE TWENTY-FOURTH DAY OF FEBRUARY, A.D. 1969, AT 10 O'CLOCK A.M.
/s/ EDWARD J. FREEL
[SEAL] -----------------------------------
Edward J. Freel, Secretary of State
0703509 8100 AUTHENTICATION: 8682662
971331762 DATE: 10-02-97
<PAGE> 2
CERTIFICATE OF INCORPORATION
for
PERMASPRAY MANUFACTURING CORPORATION
* * * * *
FIRST. The name of the corporation is PERMASPRAY MANUFACTURING CORPORATION.
SECOND. The address of its registered office in the State of Delaware is
No. 100 West Tenth Street, in the City of Wilmington, County of New Castle. The
name of its registered agent at such address is The Corporation Trust Company.
THIRD. The nature of the business or purposes to be conducted or promoted
is:
To engage in and to do any lawful act concerning any or all lawful
business for which corporations may be incorporated under the General
Corporation Law of Delaware.
FOURTH. The total number of shares of stock which the corporation shall
have authority to issue is five million (5,000,000) shares and the par value of
each of such shares is Ten Cents (10 cents) amounting in the aggregate to Five
Hundred Thousand Dollars ($500,000.00).
FIFTH. The name and mailing addresses of each incorporator is as follows:
<TABLE>
<CAPTION>
NAME MAILING ADDRESS
---- ---------------
<S> <C>
Randee Nelson 1510 The Fidelity Building
Philadelphia, Pennsylvania 19109
Louise Costes 1510 The Fidelity Building
Philadelphia, Pennsylvania 19109
Susan Evans 1510 The Fidelity Building
Philadelphia, Pennsylvania 19109
</TABLE>
<PAGE> 3
SIXTH. The Corporation is to have perpetual existence.
SEVENTH. The private property of the stockholders shall not be subjected to
the payment of corporate debts to any extent whatever.
EIGHTH. The corporation shall indemnify its officers, directors, employees,
and agents to the extent permitted by the General Corporation Law of Delaware.
NINTH. In furtherance and not in limitation of the powers conferred by
statute, the Board of Directors is expressly authorized:
To make, alter or repeal the by-laws of the corporation.
TENTH. Meetings of stockholders my be held outside the State of Delaware,
if the by-laws so provide. The books of the corporation may be kept (subject to
any provision contained in the statutes) outside the State of Delaware at such
place or places as may be designated from time to time by the Board of Directors
or in the by-laws of the corporation. Elections of directors need not be by
ballot unless the by-laws of the corporation shall so provide.
WE, THE UNDERSIGNED, being each of the incorporators hereinbefore named,
for the purpose of forming a corporation pursuant to the General Corporation Law
of the State of Delaware, do make this certificate, hereby declaring and
certifying that this is our act and deed and the facts herein stated are true,
and accordingly have hereunto set our hands this 20th day of February, 1969.
/s/ RANDEE NELSON
--------------------------------
/s/ LOUISE COSTES
--------------------------------
/s/ SUSAN EVANS
--------------------------------
2
<PAGE> 4
COMMONWEALTH OF PENNSYLVANIA )
) SS:
COUNTY OF PHILADELPHIA )
BE IT REMEMBERED that on this 20 day of February A.D., 1969,
personally came before me, a Notary-Public for the Commonwealth of
Pennsylvania, Randee Nelson, Louise Costes and Susan Evans, all of the parties
to the foregoing certificate of incorporation, known to me personally to be
such, and severally acknowledged the said certificate to be the act and deed of
the signers respectively and that the facts stated therein are true.
GIVEN under my hand and seal of office the day and year aforesaid.
/s/ HELEN R. BARDSLEY
----------------------------------
Notary Public
[SEAL]
HELEN R. BARDSLEY, Notary Public
PHILADELPHIA, PHILADELPHIA CO., PA
My Commission Expires March 6, [ILLEGIBLE]
3
<PAGE> 5
STATE OF DELAWARE
OFFICE OF THE SECRETARY OF STATE PAGE 1
--------------------------------
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 "PERMASPRAY MANUFACTURING CORPORATION", CHANGING ITS NAME FROM "PERMASPRAY
MANUFACTURING CORPORATION" TO "BROWNING ENTERPRISES, INC.,", FILED IN THIS
OFFICE ON THE TWENTY-SIXTH DAY OF APRIL, A.D. 1982, AT 9 O'CLOCK A.M.
/s/ EDWARD J. FREEL
[SEAL] -----------------------------------
Edward J. Freel, Secretary of State
0703509 8100 AUTHENTICATION: 8682661
971331762 DATE: 10-02-97
<PAGE> 6
CERTIFICATE OF AMENDMENT
[STAMP]
OF
CERTIFICATE OF INCORPORATION
****
Permaspray Manufacturing Corporation, a corporation organized and existing
under and by virtue of the General Corporation Law of the State of Delaware,
DOES HEREBY CERTIFY:
FIRST: That at a meeting of the Board of Directors of Permaspray
Manufacturing Corporation resolutions were duly adopted setting forth a
proposed amendment of the Certificate of Incorporation of said corporation,
declaring said amendment to be advisable and calling a meeting of the
stockholders of said corporation for consideration thereof. The resolution
setting forth the proposed amendment is as follows:
RESOLVED, that the Certificate of Incorporation of this corporation be
amended by changing the Article thereof numbered "FIRST" so that, as
amended said Article shall be and read as follows:
"FIRST. THE NAME OF THE CORPORATION IS BROWNING ENTERPRISES, INC."
SECOND: That thereafter, pursuant to resolution of its Board of
Directors, a special meeting of the stockholders of said corporation was duly
called and held, upon notice in accordance with Section 222 of the General
Corporation Law of the State of Delaware at which meeting the necessary number
of shares as required by statute were voted in favor of the amendment.
THIRD: That said amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
FOURTH: That the capital of said corporation shall not be reduced under
or by reason of said amendment.
IN WITNESS WHEREOF, said PERMASPRAY MANUFACTURING CORPORATION has caused
its corporate seal to be hereunto affixed and this certificate to be signed by
BOB E. BROWNING its President, and NORMAN A. JACKSON, its Secretary, this 30th
day of MARCH, 1982.
By /s/ BOB E. BROWNING
---------------------
President
[SEAL]
By /s/ NORMAN A. JACKSON
---------------------
Secretary
<PAGE> 7
STATE OF DELAWARE
OFFICE OF THE SECRETARY OF STATE PAGE 1
--------------------------------
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 RENEWAL
OF "BROWNING ENTERPRISES, INC.", FILED IN THIS OFFICE ON THE FOURTEENTH DAY OF
SEPTEMBER, A.D. 1992, AT 9:39 O'CLOCK A.M.
[SEAL] /s/ EDWARD J. FREEL
-----------------------------------------
Edward J. Freel, Secretary of State
AUTHENTICATION: 8682660
DATE: 10-02-97
<PAGE> 8
[STAMP]
CERTIFICATE
FOR RENEWAL AND REVIVAL OF CHARTER
BROWNING ENTERPRISES INC.
- --------------------------------------------------, a corporation organized
under the laws of Delaware, the charter of which was voided for non-payment of
taxes, now desires to procure a restoration, renewal and revival of its
charter, and hereby certifies as follows:
1. The name of this corporation is Browning Enterprises, Inc.
-------------------------------------------
- -------------------------------------------------------------------------------
2. Its registered office in the State of Delaware is located at Corporate Trust
Center, 1209 Orange Street
- --------------------------------, City of Wilmington Zip Code 19801 County of
---------- --------
New Castle
- ---------- the name and address of its registered agent is
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street
- ---------------------------------------------------------------------------
Wilmington, Delaware 19801
- --------------------------
3. The date of filing of the original Certificate of Incorporation in Delaware
February 24, 1969
was _____________________
4. The date when restoration, renewal, and revival of the charger of this
company is to commence is the ______ 28th day of February 1985, same being prior
to the date of the expiration of the charter. This renewal and revival of the
charger of this corporation is to be perpetual.
5. This corporation was duly organized and carried on the business authorized
by its charter until the 1st day of March A.D. 1985, at which time its charter
became inoperative and void for non-payment of taxes and this certificate for
renewal and revival is filed by authority of the duly elected directors of the
corporation in accordance with the laws of the State of Delaware.
IN TESTIMONY WHEREOF, and in compliance with the provisions of Section 312
of the General Corporation Law of the State of Delaware, as amended, providing
for the renewal, extension and restoration of charters, Homer G. Ritchie
-------------------, the
last and acting Secretary of BROWNING ENTERPRISES, INC.
-----------------------------------------, have
hereunto set their hands to this certificate this 17th day of July, 1991
---- ----------
[SEAL]
Homer G. Ritchie
/s/ JANET E. Hill -------------------------
Tarrant County, Texas Last and Acting President
ATTEST:
Omer H. Ritchie
-------------------------
Last and Acting Secretary
<PAGE> 9
STATE OF DELAWARE
OFFICE OF THE SECRETARY OF STATE PAGE 1
------------------------------
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:
"CABEC ENERGY CORP.", A TEXAS CORPORATION,
WITH AND INTO "BROWNING ENTERPRISES, INC." UNDER THE NAME OF "CABEC ENERGY
CORP.", A CORPORATION ORGANIZED AND EXISTING UNDER THE LAWS OF THE STATE OF
DELAWARE, AS RECEIVED AND FILED IN THIS OFFICE THE THIRTIETH DAY OF JUNE, A.D.
1993, AT 10:16 O'CLOCK A.M.
[SEAL] /S/ EDWARD J. FREEL
----------------------------------------
Edward J. Freel, Secretary of State
AUTHENTICATION: 8682659
DATE: 10-02-97
<PAGE> 10
[STAMP]
ARTICLES OF MERGER
COME NOW, Cabec Energy Corp., ("Cabec"), a Texas corporation, and Browning
Enterprises, Inc. f/k/a Permaspray Manufacturing Corporation ("Browning"), a
Delaware corporation, and file these Articles of Merger pursuant to the
requirements of the Texas Business Corporation Act and the General Corporation
Law of the State of Delaware, and as required therein would show the following:
1. On November 4, 1992, that certain Plan and Agreement of Merger of
Cabec Energy Corp. into Browning Enterprises, Inc. (the "Merger Agreement") was
entered into by and between Cabec and Browning. Under the terms and conditions
of said Merger Agreement, Cabec is merged into Browning.
2. The name of the Surviving Corporation shall be Cabec Energy Corp., a
Delaware corporation.
3. The Merger Agreement has been approved, adopted, certified, executed
and acknowledged by each of the constituent corporations (Cabec and Browning)
in accordance with Section 252 of the General Corporation Law of the State of
Delaware.
4. The Merger Agreement is on file at the principal place of business of
the Surviving Corporation.
5. A copy of the Merger Agreement will be furnished by the Surviving
Corporation, on request and without cost, to any stockholder of any constituent
corporation.
6. As to Cabec, the number of shares of common stock authorized is
500,000, and 450,000 of such authorized shares of common stock are issued and
outstanding. The only class of Cabec's stock issued and outstanding is common
stock. The par value of such common stock is $0.02 per share. No shares of any
class are entitled to vote as a class.
As to Browning, the number of shares of common stock authorized is
5,000,000, and 5,000,000 of such authorized shares of common stock are issued
and outstanding. The only class of Browning's stock issued and outstanding is
common stock. The par value of such common stock is $0.10 per share. No shares
of any class are entitled to vote as a class.
7. As to Cabec, 450,000 shares of common stock voted for the Plan of
Merger and no shares voted against such Plan. No shares of any class were
entitled to vote as a class.
As to Browning, 4,089,257 shares voted for the Plan of Merger and no shares
voted against such Plan. No shares of any class were entitled to vote as a
class.
ARTICLES OF MERGER -- Page 1
<PAGE> 11
IN WITNESS WHEREOF, these Articles of Merger are executed on the 27th day
of April, 1993 by Cabec Energy Corp., a Texas corporation, and Browning
Enterprises, Inc., a Delaware corporation, each acting by and through their
duly authorized officers.
CABEC:
CABEC ENERGY CORP.,
a Texas corporation
By: /s/ C. KYLE SMITH
-------------------------------------
C. Kyle Smith, President
And: /s/ MARK S. WOODWARD
-------------------------------------
Mark S. Woodward, Secretary
BROWNING:
BROWNING ENTERPRISES, INC.,
a Delaware corporation
By: /s/ HOMER G. RITCHIE
-------------------------------------
Homer G. Ritchie, President
And: /s/ OMER H. RITCHIE
-------------------------------------
Omer H. Ritchie, Secretary
ARTICLES OF MERGER -- Page 2
<PAGE> 12
STATE OF TEXAS )
)
COUNTY OF GREGG )
Before me, a notary public, on this day personally appeared C. Kyle Smith,
known to me to be the person whose name is subscribed to the foregoing document
and, being by me first duly sworn, declared that the statements contained
therein are true and correct.
Given under my hand and seal of office this 28 day of April, 1993.
/s/ CONNIE L. GADT
------------------------
Notary Public in and for
The State of Texas
My Commission Expires:
10-5-94 [SEAL]
- ------------------------
STATE OF TEXAS )
)
COUNTY OF GREGG )
Before me, a notary public, on this day personally appeared Mark S.
Woodward, known to me to be the person whose name is subscribed to the
foregoing document and, being by me first duly sworn, declared that the
statements contained therein are true and correct.
Given under my hand and seal of office this 28 day of April, 1993.
/s/ CONNIE L. GADT
------------------------
Notary Public in and for
The State of Texas
My Commission Expires:
10-5-94 [SEAL]
- ------------------------
ARTICLES OF MERGER -- Page 3
<PAGE> 13
STATE OF TEXAS )
)
COUNTY OF TARRANT )
Before me, a notary public, on this day personally appeared Homer G.
Ritchie, known to me to be the person whose name is subscribed to the foregoing
document and, being by me first duly sworn, declared that the statements
contained therein are true and correct.
Given under my hand and seal of office this 27 day of April, 1993.
/s/ SANDRA D. PEEPLES
------------------------
Notary Public in and for
The State of Texas
My Commission Expires:
03-08-97 [SEAL]
STATE OF TEXAS )
)
COUNTY OF TARRANT )
Before me, a notary public, on this day personally appeared Omer H.
Ritchie, known to me to be the person whose name is subscribed to the foregoing
document and, being by me first duly sworn, declared that the statements
contained therein are true and correct.
Given under my hand and seal of office this 27 day of April, 1993.
/s/ SANDRA D. PEEPLES
------------------------
Notary Public in and for
The State of Texas
My Commission Expires:
03-08-97 [SEAL]
ARTICLES OF MERGER -- Page 4
<PAGE> 14
STATE OF DELAWARE
OFFICE OF THE SECRETARY OF STATE PAGE 1
--------------------------------
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
RENEWAL OF "CABEC ENERGY CORP.", FILED IN THIS OFFICE ON THE THIRTEENTH DAY OF
NOVEMBER, A.D. 1995, AT 9 O'CLOCK A.M.
[SEAL] /s/ EDWARD J. FREEL
-----------------------------------
Edward J. Freel, Secretary of State
AUTHENTICATION: 8682658
DATE: 10-02-97
<PAGE> 15
[STAMP]
CERTIFICATE
FOR RENEWAL AND REVIVAL OF CHAPTER
Cabec Energy Corp., a corporation organized under the laws of Delaware, the
charter of which was voided for non-payment of taxes, now desires to procure a
restoration, renewal and revival of its charter, and hereby certifies as
follows:
1. The names of this corporation is Cabec Energy Corp.
2. Its registered office in the State of Delaware is located at 1209
Orange Street, City of Wilmington, DE Zip Code 19801 County of New Castle, the
name and address of its registered agent is The Corporation Trust Company.
3. The date of filing of the original Certificate of Incorporation in
Delaware was February 24, 1969.
4. The date when registration, renewal, and revival of the charter of
this company is to commence is the 28th day of February, 1995, same being prior
to the date of the expiration of the charter. This renewal and revival of the
charter of this corporation is to be perpetual.
5. This corporation was duly organized and carried on the business
authorized by its charter until the 1st day of March A.D. 1995 at which time
its charter became inoperative and void for non-payment of taxes and this
certificate for renewal and revival is filed by authority of the duly elected
directors of the corporation in accordance with the laws of the State of
Delaware.
IN TESTIMONY WHEREOF, and in compliance with the previsions of Section 312
of the General Corporation Law of the State of Delaware, as amended, providing
for the renewal, extension and restoration of charters, Ralph Curton, Jr., the
last and selling President, and Ralph Curton, Jr., the last and acting Secretary
of Cabec Energy Corp., have hereunto set their hands to this certificate
this 3rd day of August, 1995.
/s/ RALPH CURTON, JR.
---------------------------------------
Last and Acting President and Secretary
ATTEST:
/s/ RALPH CURTON, JR.
---------------------------------------
Last and Acting Secretary
<PAGE> 16
STATE OF DELAWARE
OFFICE OF THE SECRETARY OF STATE
PAGE 1
--------------------------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO
HEREBY CERTIFY THAT ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
CORRECTION OF "CABEC ENERGY CORP.", FILED IN THIS OFFICE ON THE TWENTY-NINTH DAY
OF NOVEMBER, A.D. 1995, AT 9 O'CLOCK A.M.
[SEAL]
/s/ EDWARD J. FREEL
-----------------------------------
Edward J. Freel, Secretary of State
AUTHENTICATION: 8682657
DATE: 10-02-97
<PAGE> 17
[STAMP]
CORRECTED CERTIFICATE OF MERGER OF CABEC ENERGY CORP.
COMES NOW, Cabec Energy Corp. (the "COMPANY"), a Delaware corporation
formerly known as Browning Enterprises, Inc., and files this Corrected
Certificate of Merger of Cabec Energy Corp.
Be it known that on June 30, 1993, Cabec Energy Corp. (the "Texas
Corporation"), a Texas corporation, and Browning Enterprises, Inc. (the
Company's prior name), a Delaware corporation, filed (with the Delaware
Secretary of State) that certain document entitled "Articles of Merger", dated
April 27, 1993, which document was filed for the purpose of evidencing the fact
that the Texas Corporation had been merged into the Company pursuant to the
agreement and majority vote of the stockholders of each of said constituent
corporations.
Be it known that the document described above and entitled "Articles
of Merger" contained certain errors and omissions. The document attached to
this Certificate of Correction of Cabec Energy Corp. and entitled "Corrected
Certificate of Merger" is the document that should have been filed on June 30,
1993.
Therefore, the Company hereby files this Corrected Certificate of
Merger of Cabec Energy Corp. to be effective as of June 30, 1993, for the
purpose of correcting the inaccuracies of the Company's Articles of Merger
(which should have been entitled Certificate of Merger), filed on June 30,
1993, which evidences the merger of the Texas Corporation into the Company.
IN WITNESS WHEREOF, this Corrected Certificate of Merger of Cabec
Energy Corp. is executed on the 15 day of November, 1995, to be effective as
of the 30th day or June, 1993, by Cabec Energy Corp., a Delaware corporation,
acting by and through its duly authorized officers.
CABEC ENERGY CORP.
a Delaware corporation
By: /s/ RALPH CURTON, JR.
---------------------------------
Ralph Curton, Jr. President
And: /s/ RALPH CURTON
--------------------------------
Ralph Curton Secretary
CORRECTED CERTIFICATE OF MERGER OF CABEC ENERGY CORP. -- PAGE 1
<PAGE> 18
STATE OF TEXAS )
)
COUNTY OF TARRANT )
Before me, a notary public, on this day personally appeared Ralph
Curton, Jr., known to me and to be the person whose name is subscribed to the
foregoing document and, being by me first duly sworn, declared that the
statements contained therein are true and correct.
Given under my hand and seal of office this 15th day of November, 1995.
/s/ DIANE [ILLEGIBLE]
--------------------------------
Notary Public in and for
The State of Texas
My Commission Expires:
10-14-96 [STAMP]
- ----------------------------------
--Page 2
<PAGE> 19
CERTIFICATE OF MERGER
COME NOW, Cabec Energy Corp. ("Cabec"), a Texas corporation, and
Browning Enterprises, Inc. f/k/a Permaspray Manufacturing Corporation
("Browning"), a Delaware corporation, and file this Certificate of Merger
pursuant to the requirements of the Texas Business Corporation Act and the
General Corporation Law of the State of Delaware, and as required therein would
show the following:
1. On November 4, 1992, that certain Plan and Agreement of
Merger of Cabec Energy Corp. into Browning Enterprises, Inc. (the "Merger
Agreement") was entered into by and between Cabec and Browning. Under the terms
and conditions of said Merger Agreement, Cabec is merged into Browning.
2. The name of the surviving corporation of the merger shall be
Browning Enterprises, Inc., a Delaware corporation.
3. The Merger Agreement has been approved, adopted, certified,
executed, and acknowledged by each of the constituent corporations (Cabec and
Browning) in accordance with Section 252(c) of the General Corporation Law of
the State of Delaware.
4. The Certificate of Incorporation, as amended of Browning
Enterprises, Inc., a Delaware corporation, shall be the Certificate of
Incorporation of the surviving corporation without any change therein, except
that Articles First and Fourth thereof shall be amended to read in their
entirety as set forth in paragraphs 10 and 11 of this Certificate of Merger.
5. The Merger Agreement is on file at the principal place of
business of the Surviving Corporation. The address of said principal place of
business is 1203-A N.W. Loop 281, Longview, Texas 75604.
6. A copy of the Merger Agreement will be furnished by the
Surviving Corporation, on request and without cost, to any stockholder of any
constituent corporation.
7. As to Cabec, the number of shares of common stock authorized
is 500,000, and 450,000 of such authorized shares of common stock are issued
and outstanding. The only class of Cabec's stock issued and outstanding is
common stock. The par value of such common stock is $0.02 per share. No shares
of any class are entitled to vote as a class.
As to Browning, the number of shares of common stock authorized is
5,000,000, and 5,000,000 of such authorized shares of common stock are issued
and outstanding. The only class of Browning's stock issued and outstanding is
common stock. The par value of such common stock is $0.10 per share. No shares
of any
CERTIFICATE OF MERGER -- Page 1
<PAGE> 20
class are entitled to vote as a class.
8. As to Cabec, 450,000 shares of common stock voted for the Plan of
Merger and no shares voted against such Plan. No shares of any class were
entitled to vote as a class.
As to Browning, 4,089,257 shares voted for the Plan of Merger and no shares
voted against such Plan. No shares of any class were entitled to vote as a
class.
9. At the Browning stockholders' meeting held to approve the Plan of
Merger and related matters, the stockholders (by the affirmative vote of
4,089,257 shares, with no shares opposing) authorized a 1-for-5 reverse split
of the issued and outstanding common stock. Such reverse stock split had the
effect of reducing the authorized shares of common stock to 1,000,000 and
increasing the par value from $0.10 per share to $0.50 per share.
10. Following the authorization of the reverse stock split as described
above, the stockholders (by the affirmative vote of 4,089,257 shares, with no
shares opposing) voted to amend Article "FIRST" of the Certificate of
Incorporation in its entirety and said Article "FIRST" shall hereafter read as
follows:
The name of the corporation is Cabec Energy Corp.
11. Following the authorization of the reverse stock split as described
above, the stockholders (by the affirmative vote of 4,089,257 shares, with no
shares opposing) voted to amend Article "FOURTH" of the Certificate of
Incorporation in its entirety and said Article "FOURTH" shall hereafter read as
follows:
The total authorized capital stock of the corporation is:
50,000,000 shares of common stock, with a par value of $0.10 per share
20,000,000 shares of preferred stock, with a par value of $0.0001 per
share, with voting rights, and that may be convertible to common stock
of the corporation
Such stock may be issued from time to time without action by the
stockholders for such consideration as may be determined, from time to
time, by the Board of Directors, and such shares so issued shall be deemed
fully paid stock, and the holders of such stock shall not be liable for any
further payments thereon. Further, the preferred stock may be issued in one
or more series, from time to time, at the discretion of the Board of
Directors without stockholder approval, with each such series to consist of
such number of shares and to have such voting powers (whether full or
limited, or no voting powers) and such designations, powers, preferences,
and relative, participating, optional, redemption, conversion, exchange, or
CERTIFICATE OF MERGER--Page 2
<PAGE> 21
other special rights, and such qualifications, limitations, or restrictions
thereof, as shall be stated in the resolution or resolutions providing for
the issuance of such series adopted by the Board of Directors, and the
Board of Directors is hereby expressly vested with the authority, to the
full extent now or hereafter provided by law, to adopt any such resolution
or resolutions. Each share of any series of preferred stock shall be
identical with all other shares of such series, expect as to the date from
which dividends, if any, shall accrue.
IN WITNESS WHEREOF, this Certificate of Merger is executed on the 13 day of
November, 1995, to be effective as of the 27th day of April, 1993, with
effective filing date as of the 30th day of June, 1993, by Cabec Energy Corp.,
a Texas corporation, and Browning Enterprises, Inc., a Delaware corporation,
each acting by and through their duly authorized officers.
CABEC:
CABEC ENERGY CORP.,
a Texas corporation
By: /s/ C. KYLE SMITH
-------------------------------
C. Kyle Smith, President
And: /s/ MARK S. WOODWARD
------------------------------
Mark S. Woodward, Secretary
BROWNING:
BROWNING ENTERPRISES, INC.,
a Delaware corporation
By: /s/ HOMER G. RITCHIE
-------------------------------
Homer G. Ritchie, President
And: /s/ OMER H. RITCHIE
------------------------------
Omer H. Ritchie, Secretary
CERTIFICATE OF MERGER -- Page 3
<PAGE> 22
STATE OF TEXAS )
)
COUNTY OF GREGG )
Before me, a notary public, on this day personally appeared C. Kyle Smith,
known to me to be the person whose name is subscribed to the foregoing document
and, being by me first duly sworn, declared that the statements contained
therein are true and correct.
Given under my hand and seal of office this 3rd day of November, 1995.
/s/ SHANNON L. RHODES
[NOTARY SEAL] ------------------------------------
Notary Public in and for
The State of Texas
My Commission Expires:
July 23, 1997
- ----------------------
STATE OF TEXAS )
)
COUNTY OF TARRANT )
Before me, a notary public, on this day personally appeared Mark S.
Woodward, known to me to be the person whose name is subscribed to the foregoing
document and, being by me first duly sworn, declared that the statements
contained therein are true and correct.
Given under my hand and seal of office this 13th day of November, 1995.
/s/ DIANE GATTI
-----------------------------------
Notary Public in and for
The State of Texas
My Commission Expires:
[NOTARY SEAL]
10-14-96
- ---------------------
CERTIFICATE OF MERGER -- Page 4
<PAGE> 23
STATE OF TEXAS )
)
COUNTY OF TARRANT )
Before me, a notary public, on this day personally appeared Homer G.
Ritchie, known to me to be the person whose name is subscribed to the foregoing
document and, being by me first duly sworn, declared that the statements
contained therein are true and correct.
Given under my hand and seal of office this 13th day of November, 1995.
/s/ AMY RAGBY
-------------------------------------------
Notary Public in and for
The State of Texas
AMY RAGBY
Notary Public
[SEAL] STATE OF TEXAS
My Commission Expires
JUNE 08, 1996
My Commission Expires:
- ----------------------
STATE OF TEXAS )
)
COUNTY OF TARRANT )
Before me, a notary public, on this day personally appeared Omer H.
Ritchie, known to me to be the person whose name is subscribed to the foregoing
document and, being by me first duly sworn, declared that the statements
contained therein are true and correct.
Given under my hand and seal of office this 13th day of November, 1995.
/s/ AMY RAGBY
-------------------------------------------
Notary Public in and for
The State of Texas
AMY RAGBY
Notary Public
[SEAL] STATE OF TEXAS
My Commission Expires
JUNE 08, 1996
My Commission Expires:
- ----------------------
CERTIFICATE OF MERGER -- Page 5
<PAGE> 24
PAGE 1 [STATE OF DELAWARE INVOICE LETTERHEAD] 971440882
9265242 12-22-97
T. ALAN OWEN
ONE ARLINGTON CENTRE, SUITE 420
1112 EAST COPELAND ROAD
ARLINGTON TX 76011
ATTN: T ALLEN OWEN X
<TABLE>
<CAPTION>
- ----------------------------------------------------------------- ----------
DESCRIPTION AMOUNT
- ------------------------------------------------------------------ ----------
<S> <C>
CABEC ENERGY CORP.
0703509 0240S Amendment; Stock
Stock Amendment Fee 1,499.88
Receiving/Indexing 50.00
Data Entry Fee 20.00
Surcharge Assessment-New Castle 6.00
Page Assessment-New Castle Count 27.00
Expedite Fee, Same Day 100.00
FILING TOTAL 1,702.88
TOTAL PAYMENTS 1,793.88
CHARGED TO ACCOUNT 91.00CR
</TABLE>
<PAGE> 25
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 09:21 AM 12/22/1997
971440882 - 0703509
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
CABEC ENERGY CORP.
Cabec Energy Corp., a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware, DOES HEREBY
CERTIFY:
FIRST: That by consent of the Sole Director of Cabec Energy Corp.,
resolutions were duly adopted setting forth a proposed amendment to the
Certificate of Incorporation of said corporation, declaring said amendment to be
advisable and requesting the stockholders of said corporation to consider and
approve same. The Resolution setting forth the proposed amendment states as
follows:
RESOLVED, That the Certificate of Incorporation of this corporation
be amended by changing the Fourth Article thereof so that, as amended said
Article shall be and read as follows:
"ARTICLE FOURTH
"The total authorized capital stock of the corporation is:
200,000,000 share of common stock, with a par value of $0.10 per
share; and
20,000,000 shares of preferred stock, with a par value of
$0.0001 per share, with voting rights, and that may be
convertible to common stock of the corporation.
Such stock may be issued from time to time without action by the
stockholders for such consideration as may be determined, from time to time, by
the Board of Directors and such shares so issued shall be deemed fully paid
stock, and the holders of such stock shall not be liable for any further
payments thereon. Further, the preferred stock may be issued in one or more
series, from time to time, at the discretion of the Board of Directors without
stockholder approval, with each such series to consist of such number of shares
and to have such voting powers (whether full or limited or no voting powers)
and such designations, powers, preferences, and relative, participating,
optional, redemption, conversion, exchange, or other special rights, and such
qualifications, limitation, or restrictions thereof, as shall be stated in the
resolution or resolutions providing for the issuance of such series adopted by
the Board of Directors, and the Board of Directors is hereby expressly vested
with the authority, to the full extent now or hereafter provide by law, to adopt
any such resolution or resolutions. Each share of any series of such series
except as to date from which dividends, if any shall accrue."
CERTIFICATE OF AMENDMENT OF
CERTIFICATE OF INCORPORATION -- Page 1
<PAGE> 26
SECOND: That thereafter, stockholders of the corporation, owning in excess
of 50% of the outstanding capital stock of the corporation consented to the
said amendment to Article Fourth, in accordance with Section 228 of the General
Corporation Law of the State of Delaware.
THIRD: That said amendment was duly adopted in accordance with provisions
of Section 242 of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, said Cabec Energy Corp. Has caused this certificate to
be signed by Michael John, its President, on this the 17 day of December,
1997.
CABEC ENERGY CORP.,
a Delaware corporation
By: /s/ MICHAEL JOHN
--------------------------------------
Michael John, President
ATTEST:
/s/ RALPH CURTON, JR.
- ---------------------------------------
Ralph Curton, Jr., Secretary
CERTIFICATE OF AMENDMENT OF
CERTIFICATE OF INCORPORATION -- Page 2
<PAGE> 27
[STAMP]
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
CABEC ENERGY CORP.
Cabec Energy Corp., a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware, DOES HEREBY
CERTIFY:
FIRST: That by a Unanimous Consent of the Board of Directors of Cabec
Energy Corp., resolutions were duly adopted setting forth proposed amendments
to the Certificate of Incorporation of said corporation, declaring said
amendments to be advisable and requesting the stockholders of said corporation
to consider and approve same. The Resolution setting forth the proposed
amendment states as follows:
RESOLVED, That the Certificate of Incorporation of this corporation
be amended by changing ARTICLE FIRST thereof so that, as amended, said
Article shall be and read as follows:
ARTICLE FIRST
The name of the corporation is PalWeb Corporation.
RESOLVED, That the Certificate of Incorporation of this corporation be
amended by changing the ARTICLE FOURTH thereof so that, as amended,
said Article shall be and read as follows:
ARTICLE FOURTH
The total authorized capital stock of the corporation is:
250,000,000 shares of common stock, with a par value of $0.10 per
share; and
20,000,000 shares of preferred stock with a par value of $0.0001 per
share, with voting rights, and that may be convertible to common stock
of the corporation.
Such stock may be issued from time to time without action by the
stockholders for such consideration as may be determined, from time to
time, by the Board of Directors and such shares so issued shall be
deemed fully paid stock, and the holders of such stock shall not be
CERTIFICATE OF AMENDMENT OF
CERTIFICATE OF INCORPORATION--Page 1
CEC-Certificate of Amendment (CEC-5)
<PAGE> 28
liable for any further payments thereon. Further, the preferred stock
may be issued in one or more series, from time to time, at the
discretion of the Board of Directors without stockholder approval,
with each such series to consist of such number of shares and to have
such voting powers (whether full or limited or no voting powers) and
such designations, powers, preferences, and relative, participating,
optional, redemption, conversion, exchange, or other special rights,
and such qualifications, limitation, or restrictions thereof, as
shall be stated in the resolution or resolutions providing for the
issuance of such series adopted by the Board of Directors, and the
Board of Directors is hereby expressly vested with the authority, to
the full extent now or hereafter provide by law, to adopt any such
resolution or resolutions. Each share of any series of such series
except as to date from which dividends, if any shall accrue.
SECOND: That thereafter, stockholders of the corporation, owning in excess
of 50% of the outstanding capital stock of the corporation consented to the
said amendments to ARTICLES FIRST and FOURTH, in accordance with Section 228 of
the General Corporation Law of the State of Delaware.
THIRD: That said amendments were duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
IN WITNESS WHEREOF, said Cabec Energy Corp. has caused this certificate to
be signed by Michael John, its President, on this the 30th day of December,
1998.
CABEC ENERGY CORP.,
a Delaware Corporation
By: /s/ MICHAEL JOHN
-------------------------------
Michael John, President
ATTEST:
/s/ MARK POTTS
- -------------------------------
Mark Potts, Secretary
CERTIFICATE OF AMENDMENT OF
CERTIFICATE OF INCORPORATION -- Page 2
<PAGE> 1
EXHIBIT 2
BYLAWS
OF
PALWEB CORPORATION
ARTICLE I
OFFICES
Section 1. The principal office shall be located at 1607 West Commerce
Street, Dallas, Dallas County, State of Texas.
Section 2. The corporation may also have offices at such other places
within or without the State of Texas as the Board of Directors may from time to
time determine, or as the business of the corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Meetings of the stockholders shall be held at such place
within or without the State of Texas as shall be specified in the notice of the
meeting or in a waiver thereof.
Section 2. An annual meeting of the stockholders shall be held on the
second Saturday of each year, unless such day is a legal holiday, in which case
such meeting shall be held at the specified time on the first business day
thereafter which is not a legal holiday. At such meeting the stockholders
entitled to vote thereat shall elect by a majority vote a Board of Directors,
and may transact such other business as may properly be brought before the
meeting.
Section 3. Special meetings of the stockholders may be called: (1) by
the Chairman of the Board of Directors, the President, or the Board of
Directors; or (2) by the holders of at least ten percent (10%) of the shares
entitled to vote at the proposed special meeting, unless the Certificate of
Incorporation provide for a number of shares greater than or less than ten
percent (10%), in which event special meetings of the stockholders may be called
by the holders of at least the percentage of shares so specified in the
Certificate of Incorporation. The record date for determining stockholders
entitled to call a special meeting is the date the first stockholder signs the
notice of that meeting.
Section 4. Written or printed notice stating the place, day, and hour
of the meeting and, in the case of a special meeting, the purpose or purposes
for which the meeting is called, shall be delivered not less than ten (10) nor
more than sixty (60) days before the date of the meeting, either personally or
by mail, by or at the direction of the President, the Secretary, or the officer
or person calling the meeting, to each stockholder at his address as it appeared
on the stock transfer books of the corporation with postage thereon prepaid.
Page -1-
<PAGE> 2
Section 5. Any notice required to be given to any stockholder, under
any provision of the General Corporation Laws of the State of Delaware, the
Certificate of Incorporation, or these Bylaws, need not be given to the
stockholder if (1) notice of two consecutive annual meetings and all notices of
meetings held during the period between those annual meetings, if any, or (2)
all (but in no event less than two) payments (if sent by first class mail) of
distributions or interest on securities during a 12-month period have been
mailed to that person, addressed at his address as shown on the records of the
corporation, and have been returned undeliverable. Any action or meeting taken
or held without notice to such a person shall have the same force and effect as
if the notice had been duly given and, if the action taken by the corporation is
reflected in any Certificate or document filed with the Secretary of State,
those Certificate or that document may state that notice was duly given to all
persons to whom notice was required to be given. If such a person delivers to
the corporation a written notice setting forth his then current address, the
requirement that notice be given to that person shall be reinstated.
Section 6. Only business within the purpose or purposes described in
the notice of any special meeting of stockholders may be conducted at such
special meeting.
Section 7. The holders of a majority of the shares entitled to vote,
represented in person or by proxy, shall constitute a quorum at meetings of
stockholders except as otherwise provided in the Certificate of Incorporation.
If, however, a quorum shall not be present or represented at any meeting of the
stockholders, the stockholders present in person, or represented by proxy, shall
have power to adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present or represented. At
such adjourned meeting at which a quorum shall be present or represented, any
business may be transacted which may have been transacted at the meeting as
originally notified.
Section 8. The vote of the holders of a majority of the shares entitled
to vote and 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 or by the Certificate of Incorporation.
Section 9. A stockholder may vote either in person or by proxy executed
in writing by the stockholder or by his duly authorized attorney-in-fact. No
proxy shall be valid after eleven (11) months from the date of its execution,
unless otherwise provided in the proxy. Each proxy shall be revocable unless the
proxy form conspicuously states that the proxy is irrevocable and the proxy is
coupled with an interest.
Section 10. The officer or agent having charge of the stock transfer
books shall make, at least ten (10) 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 and the
number of shares held by each, which list, for a period of ten (10) days prior
to such meeting, shall be kept on file at the registered office of the
corporation, and shall be subject to inspection by any stockholder at any time
during usual business hours. Such list shall also be produced and kept open at
the time and place of the meeting, and shall be subject to the inspection of any
stockholder during the whole time of the meeting. The original stock transfer
book shall be prima facie evidence as to who are the stockholders entitled to
examine such list or transfer books or to vote at any such meeting of
stockholders.
Section 11. Any action required by law to be taken at a meeting of the
stockholders, or any action which may be taken at a meeting of the stockholders,
may be taken without a meeting if a consent in writing, setting forth the action
so taken, shall be signed by all of the stockholders entitled to vote with
respect to the subject matter thereof.
Page -2-
<PAGE> 3
ARTICLE III
DIRECTORS
Section 1. (a) The number of directors of the corporation shall be not
less than one (1) nor more than nine (9). The directors shall be elected at the
annual meeting of stockholders, except as provided in Sections 2, 3, 4, or 5 of
this Article III, and each director elected shall hold office until his
successor is elected and qualified. Directors need not be residents of the
States of Texas or Delaware or stockholders of the corporation.
(b) Any director may be removed with cause by the affirmative
vote of the holders of a majority of the shares represented at any stockholders'
meeting at which a quorum is present; provided, that the proposed removal is
stated in the notice of the meeting.
(c) This Section 1 may not be amended in absence of a
unanimous vote of the Board of Directors.
Section 2. Any vacancy occurring in the Board of Directors shall be
filled in accordance with Section 5 of this Article III or may be filled by the
affirmative vote of a majority of the remaining directors though less than a
quorum of the Board of Directors. A director elected to fill a vacancy shall be
elected for the unexpired term of his predecessor in office.
Section 3. A directorship to be filled by reason of an increase in the
number of directors may be filled in accordance with Section 5 of this Article
III or may be filled by the Board of Directors for a term of office continuing
only until the next election of one (1) or more directors by the stockholders;
provided, that the Board of Directors may not fill more than two (2) such
directorships during the period between any two (2) successive annual meetings
of the stockholders.
Section 4. Notwithstanding Sections 2 and 3 above, whenever the holders
of any class or series of shares are entitled to elect one or more directors by
the provisions of the Certificate of Incorporation, any vacancies in such
directorships and any newly created directorships of such class or series to be
filled by reason of an increase in the number of such directors shall be filled
in accordance with the provisions of the General Corporation Laws of the State
of Delaware.
Section 5. Any vacancy occurring in the Board of Directors or any
directorship to be filled by reason of an increase in the number of directors
may be filled by election at an annual or special meeting of stockholders called
for that purpose.
Section 6. The business and affairs of the corporation shall be managed
by its Board of Directors which may exercise all such powers of the corporation
and do all such lawful acts and things as are not by law or by the Certificate
of Incorporation or by these Bylaws directed or required to be exercised or done
by the stockholders.
Section 7. Meetings of the Board of Directors, regular or special, may
be held either within or without the State of Delaware.
Section 8. The first meeting of each newly elected Board of Directors
shall be held at such time and place as shall be fixed by the vote of the
stockholders at the annual meeting, and no notice of such meeting shall be
necessary to the newly elected directors in order legally to constitute the
meeting,
Page -3-
<PAGE> 4
providing a quorum shall be present. In the event of the failure of the
stockholders to fix the time and place of such a first meeting of the newly
elected Board of Directors, or in the event such meeting is not held at the time
and place so fixed by the stockholders, the meeting may be held at such time and
place as shall be specified in a notice given as hereinafter provided for
special meetings of the Board of Directors, or as shall be specified in a
written waiver signed by all of the directors.
Section 9. Regular meetings of the Board of Directors may be held
without notice at such time and at such place as shall from time to time be
determined by the Board.
Section 10. Special meetings of the Board of Directors may be called by
the Chairman of the Board of Directors or the President, and shall be called by
the Secretary on the written request of two directors. Written notice of special
meetings of the Board of Directors shall be given to each director at least
three (3) days before the date of the meeting. Neither the business to be
transacted at, nor the purpose of, any regular or special meeting of the Board
of Directors need be specified in the notice or waiver of notice of such
meeting.
Section 11. A majority of the directors shall constitute a quorum for
the transaction of business, and the act of the majority of the directors
present at the meeting at which a quorum is present shall be the act of the
Board of Directors, unless a greater number is required by the Certificate of
Incorporation or elsewhere in these Bylaws. If a quorum shall not be present at
any meeting of the Board of Directors, the directors present thereat may adjourn
the meeting from time to time, without notice other than announcement at the
meeting, until a quorum shall be present.
Section 12. The Board of Directors, by resolution adopted by a majority
of the whole Board, may designate one or more directors to constitute an
executive committee and one or more other committees, each of which, to the
extent provided in such resolution, shall have and may exercise all of the
authority of the Board of Directors in the business and affairs of the
corporation except as otherwise provided by law. Vacancies in the membership of
any such committee shall be filled by the Board of Directors at a regular or
special meeting of the Board of Directors. The committees shall keep regular
minutes of their proceedings and report the same to the Board when required. 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.
Section 13. Any action required or permitted to be taken at a meeting
of the Board of Directors or any committee may be taken without a meeting if a
consent in writing, setting forth the action so taken, is signed by all the
members of the Board of Directors or committee, as the case may be.
ARTICLE IV
NOTICES
Section 1. Notices to directors and stockholders shall be in writing,
shall specify the time and place of the meeting, and shall be delivered
personally or mailed to the directors or stockholders at their addresses
appearing on the books of the corporation. Notice by mail shall be deemed to be
given at the time when same shall be mailed. Notice to directors may also be
given by telegram.
Page -4-
<PAGE> 5
Section 2. Whenever any notice is required to be given to any
stockholder or director under the provisions of any laws or of the Certificate
of Incorporation or these Bylaws, a waiver thereof in writing, signed by the
person or persons entitled to such notice, whether before or after the time
stated therein, shall be equivalent to the giving of such notice.
Section 3. Attendance of a director at a meeting shall constitute a
waiver of notice of such a meeting, except where a director attends a meeting
for the express purpose of objecting to the transaction of any business on the
ground that the meeting is not lawfully called or convened.
ARTICLE V
OFFICERS
Section 1. The officers of the corporation shall consist of a President
and a Secretary, and may include one or more Vice Presidents, a Treasurer, and a
Chairman of the Board, each of whom shall be elected by the Board of Directors.
Any two or more offices may be held by the same person.
Section 2. The Board of Directors, at its first meeting after each
annual meeting of stockholders, shall choose a President and a Secretary and may
choose one or more Vice Presidents and a Treasurer, none of whom need be a
member of the Board, and may appoint one of their number Chairman of the Board.
Section 3. Such other officers and assistant officers and agents as may
be deemed necessary may be elected or appointed by the Board of Directors.
Section 4. The salaries of all officers and agents of the corporation
shall be fixed by the Board of Directors.
Section 5. The officers of the corporation shall hold office until
their successors are chosen and qualify. Any officer or agent or member of the
executive committee elected or appointed by the Board of Directors may be
removed by the Board of Directors whenever in its judgement 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. Any vacancy
occurring in any office of the corporation by death, resignation, removal, or
otherwise shall be filled by the Board of Directors.
Chairman of the Board and President
Section 6. The Board of Directors may designate whether the Chairman of
the Board, if such an officer shall have been appointed, or the President, shall
be the chief executive officer of the corporation. In the absence of a contrary
designation, the President shall be the chief executive officer. The chief
executive officer shall preside at all meetings of the stockholders and the
Board of Directors, and shall have such other powers and duties as usually
pertain to such office or as may be delegated by the Board of Directors. The
President shall have such powers and duties as usually pertain to such office,
except as the same may be modified by the Board of Directors. If the Board of
Directors shall not have appointed a Treasurer, then all the duties and powers
set forth in Sections 11 through 14 of this Article V to be performed or
exercised by such an officer shall be performed or exercised by the President.
Unless the Board of Directors shall otherwise delegate such duties, the
President shall have general and active management of the business of the
corporation, and shall see that all orders and resolutions of the Board of
Directors are carried into effect.
Page -5-
<PAGE> 6
Section 7. The President shall execute bonds, mortgages, and other
contracts requiring a seal, under the seal of the corporation, except where
required or permitted by law to be otherwise signed and executed, and except
where the signing and execution thereof shall be expressly delegated by the
Board of Directors to some other officer or agent of the corporation.
Vice President
Section 8. The Vice Presidents, if any such officers shall have been
appointed, in the order of their seniority, unless otherwise determined by the
Board of Directors, shall, in the absence or disability of the President,
perform the duties and exercise the powers of the President. They shall perform
such other duties and have such other powers as the Board of Directors shall
prescribe.
Secretary
Section 9. The Secretary shall attend all meetings of the Board of
Directors and all meetings of the stockholders, and record all the proceedings
of the meetings of the corporation and of the Board of Directors in a book to be
kept for that purpose. He shall give, or cause to be given, notice of all
meetings of the stockholders and special meetings of the Board of Directors, and
shall perform such other duties as may be prescribed by the Board of Directors
or the President, under whose supervision he shall be. He shall keep in safe
custody the seal of the corporation, and, when authorized by the Board of
Directors, affix the same to any instrument requiring it, and, when so affixed,
it shall be attested by his signature or the signature of the Treasurer, an
Assistant Secretary, or an Assistant Treasurer.
Section 10. The Assistant Secretaries, if any such officers shall have
been appointed, in the order of their seniority, unless otherwise determined by
the Board of Directors, shall, in the absence or disability or the Secretary,
perform the duties and exercise the power of the Secretary. They shall perform
such other duties and have such other powers as the Board of Directors may from
time to time prescribe.
Treasurer
Section 11. The Treasurer, if such an officer shall have been
appointed, shall have the custody of the corporate funds and securities, and
shall keep full and accurate accounts of receipts and disbursements in books
belonging to the corporation and shall deposit all moneys and other valuable
effects in the name and to the credit of the corporation in such depositories as
may be designated by the Board of Directors.
Section 12. The Treasurer shall disburse the funds of the corporation
as may be ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the President and the Board of Directors at
its regular meetings, or when the Board of Directors so requires, an account of
all his transactions as Treasurer, and of the financial condition of the
corporation.
Section 13. If required by the Board of Directors, the Treasurer shall
give the corporation a bond in such sum and with such surety or sureties as
shall be satisfactory to the Board of Directors for the faithful performance of
the duties of his office and for the restoration to the corporation, in case of
his death, resignation, retirement, or removal from office, of all books,
papers, vouchers, money, and other property of whatever kind in his possession
or under his control belonging to the corporation.
Page -6-
<PAGE> 7
Section 14. The Assistant Treasurers, if any such officers shall have
been appointed, in the order of their seniority, unless otherwise determined by
the Board of Directors, shall, in the absence or disability of the Treasurer,
perform the duties and exercise the powers of the Treasurer. They shall perform
such other duties and have such other powers as the Board of Directors may from
time to time prescribe.
ARTICLE VI
CERTIFICATE FOR SHARES
Section 1. The corporation shall deliver certificates representing all
shares to which stockholders are entitled; and such certificates shall be signed
by the President or the President and a Vice President, the Secretary, or an
Assistant Secretary of the corporation, and may be sealed with the seal of the
corporation or a facsimile thereof. No certificate shall be issued for any share
until the consideration therefor has been fully paid. Each certificate
representing shares shall state upon the face thereof that the corporation is
organized under the laws of the State of Delaware, the name of the person to
whom issued, the number and class and the designation of the series, if any,
which such certificate represents, and the par value of each share represented
by such certificate or a statement that shares are without par value.
Section 2. The signature of the President or the President and a Vice
President, the Secretary, or an Assistant Secretary, as the case may be, upon a
certificate may be facsimiles. In case any officer who has signed or whose
facsimile signature has been placed upon such certificate shall have ceased to
be such officer before such certificate is issued, it may be issued by the
corporation with the same effect as if he were such officer at the date of the
issuance.
Section 3. The Board of Directors may direct a new certificate or
certificates to be issued in place of any certificate or certificates
theretofore issued by the corporation alleged to have been lost or destroyed,
upon the making of an affidavit of the fact by the person claiming the
certificate of stock to be lost or destroyed. When authorizing such issue of a
new certificate or certificates, the Board of Directors may, in its discretion
and as a condition precedent to the issuance thereof, require the owner of such
lost or destroyed certificate or certificates, or his legal representative, to
advertise the same in such manner as it shall require and/or to give the
corporation a bond in such sum as it may direct as indemnity against any claim
that may be made against the corporation with respect to the certificate alleged
to have been lost or destroyed.
Section 4. Upon surrender to the corporation, or the transfer agent of
the corporation, of a certificate for shares duly endorsed or accompanied by
proper evidence of succession, assignment, or authority to transfer, it shall be
the duty of the corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate, and record the transaction upon its books.
Section 5. For the purpose of determining stockholders entitled to
notice of or to vote at any meeting of stockholders or any adjournment thereof,
or entitled to receive a distribution by the corporation (other than a
distribution involving a purchase or redemption by the corporation of any of its
own shares) or a share dividend, or in order to make a determination of
stockholders for any other proper purpose, the Board of Directors may provide
that the stock transfer books shall be closed for a stated period but not to
exceed, in any case, sixty (60) days. If the stock transfer books shall be
closed for the purpose of determining stockholders entitled to notice of or to
vote at a meeting of stockholders, such books shall be closed for at least ten
(10) days immediately preceding such meeting. In lieu of closing the stock
transfer books, the Board of Directors may fix in advance a date as the record
date for any such determination of
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stockholders, such date in any case to be not more than sixty (60) days, and, in
the case of a meeting of stockholders, not less than ten (10) days, prior to the
date on which the particular action requiring such determination of stockholders
is to be taken. If the stock transfer books are not closed and no record date is
fixed for the determination of stockholders entitled to notice of or to vote at
a meeting of stockholders, or stockholders entitled to receive a distribution
(other than a distribution involving a purchase or redemption by the corporation
of any of its own shares) or a share dividend, the date on which notice of the
meeting is mailed or the date on which the resolution of the Board of Directors
declaring such distribution or share dividend is adopted, as the case may be,
shall be the record date for such determination of stockholders. When a
determination of stockholders entitled to vote at any meeting of stockholders
has been made as provided in this Section, such determination shall apply to any
adjournment thereof, except where the determination has been made through the
closing of stock transfer books and the stated period of closing has expired.
Section 6. Distributions of cash or property (tangible or intangible)
made or payable by the corporation, whether in liquidation or from earnings,
profits, assets, or capital, including all distributions that were payable but
not paid to the registered owner of the shares, his heirs, successors, or
assigns but that are now being held in suspense by the corporation or that were
paid or delivered by it into an escrow account or to a trustee or custodian,
shall be payable by the corporation, escrow agent, trustee, or custodian to the
person registered as owner of the shares in the corporation's stock transfer
books as of the record date determined for that distribution as provided in
Section 5 of this Article VI, his heirs, successors, or assigns. The person in
whose name the shares are or were registered in the stock transfer books of the
corporation as of the record date shall be deemed to be the owner of the shares
registered in his name at that time. Neither the corporation nor any of its
officers, directors, or agents shall be under any liability for making such a
distribution to a person in whose name shares were registered in the stock
transfer books as of the record date or to the heirs, successors, or assigns of
the person, even though the person, or his heirs, successors, or assigns, may
not possess a certificate for shares.
Section 7. The corporation shall be entitled to recognize the exclusive
rights of a person registered on its books as the owner of shares to receive
distributions or share dividends, and to vote as such owner, and shall not be
bound to recognize any equitable or other claim to or interest in such share or
shares on the part of any other person, whether or not it shall have express or
other notice thereof, except as otherwise provided by the laws of the State of
Delaware or these Bylaws.
Section 8. When shares are registered on the books of the corporation
in the names of two or more persons as joint owners with the right of
survivorship, after the death of a joint owner and before the time that the
corporation receives actual written notice that parties other than the surviving
joint owner or owners claim an interest in the shares or any distributions
thereon, the corporation may record on its books and otherwise effect the
transfer of those shares to any person, firm, or corporation (including that
surviving joint owner individually) and pay any distributions made in respect of
those shares, in each case as if the surviving joint owner or owners were the
absolute owner(s) of the shares. The corporation by permitting such a transfer
by and making any distribution to such a surviving joint owner or owners before
the receipt of written notice from other parties claiming an interest in those
shares or distributions is discharged from all liability for the transfer or
payment so made; provided, however, that the discharge of the corporation from
liability and the transfer of full legal and equitable title of the shares in no
way affects, reduces, or limits any cause of action existing in favor of any
owner of an interest in those shares or distributions against the surviving
owner or owners.
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ARTICLE VII
GENERAL PROVISIONS
Section 1. The Board of Directors may authorize and the corporation may
(1) make distributions or (2) pay share dividends, subject to any restrictions
in its Certificate of Incorporation and to the limitations set forth in the
General Corporation Laws of the State of Delaware.
Section 2. The Board of Directors may by resolution create a reserve or
reserves out of its surplus or designate or allocate any part or all of surplus
in any manner for any proper purpose or purposes, and may increase, decrease, or
abolish any such reserve, designation, or allocation in the same manner.
Section 3. The Board of Directors must, when requested by the holders
of at least twenty five percent (25%) of the outstanding shares of the
corporation, present written reports of the situation and amount of business of
the corporation.
Section 4. All checks or demands for money and notes of the corporation
shall be signed by such officer or officers or such other person or persons as
the Board of Directors may from time to time designate.
Section 5. The fiscal year of the corporation shall be fixed by
resolution of the Board of Directors.
Section 6. The corporate seal shall have inscribed thereon the name of
the corporation and may be in such form as the Board of Directors may determine,
and may be used by causing it or a facsimile thereof to be impressed or affixed
or in any other manner reproduced.
ARTICLE VIII
INDEMNIFICATION OF OFFICERS AND DIRECTORS
The corporation shall indemnify directors, officers, employees, and
agents of the corporation to the extent required by the General Corporation Laws
of the State of Delaware and shall indemnify such individuals to the extent
permitted by the General Corporation Laws of the State of Delaware. The
corporation may purchase and maintain liability insurance, or make other
arrangements for such obligations or otherwise, to the extent permitted by the
General Corporation Laws of the State of Delaware.
ARTICLE IX
AMENDMENTS
The Board of Directors may amend or Repeal the Bylaws of the
corporation or adopt new Bylaws, unless: (1) the Certificate of Incorporation or
the General Corporation Laws of the State of Delaware reserves the power
exclusively to the stockholders in whole or in part; or (2) the stockholders in
amending, repealing, or adopting a particular bylaw expressly provide that the
Board of Directors may not amend or repeal that bylaw. Unless the Certificate of
Incorporation or a bylaw adopted by the stockholders provides otherwise as to
all or some portion of the Bylaws, the stockholders may amend, repeal, or adopt
the Bylaws even though the Bylaws may also be amended, repealed, or adopted by
the Board of Directors.
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