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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
THIRD 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 of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
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
THIRD AMENDED FORM 10-SB
INDEX
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Page
PART I
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Item 1. Description of Business.........................................................3
Item 2. Management's Discussion and Analysis or Plan of Operation......................16
Item 3. Description of Property........................................................22
Item 4. Security Ownership of Certain Beneficial Owners and Management.................23
Item 5. Directors, Executive Officers, Promoters and Control Persons...................24
Item 6. Executive Compensation.........................................................26
Item 7. Certain Relationships and Related Transactions.................................27
Item 8. Description of Securities......................................................27
PART II
Item 1. Market for Common Equity and Related Stockholder Matters.......................29
Item 2. Legal Proceedings..............................................................30
Item 3. Changes in and Disagreements With Accountants on Accounting
and Financial Disclosure..............................................31
Item 4. Recent Sales of Unregistered Securities........................................31
Item 5. Indemnification of Directors and Officers......................................35
PART F/S.........................................................................................36
PART III
Item 1. Index to Exhibits..............................................................36
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INFORMATION REQUIRED IN
REGISTRATION STATEMENT
PART I.
ITEM 1. DESCRIPTION OF BUSINESS
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
This registration statement on Form 10-SB contains "forward-looking"
statements regarding potential future events and developments affecting the
business of PalWeb Corporation, a Delaware corporation ("PalWeb"). Such
statements relate to, among other things: future operations of PalWeb, the
development of distribution channels and product sales and the introduction of
new products into the market. Forward-looking statements may be indicated by
the words "expects," "estimates," "anticipates," "intends," "predicts,"
"believes" or other similar expressions. Forward-looking statements appear in
a number of places in this Form 10-SB and may address the intent, belief or
current expectations of PalWeb and its Board of Directors and management with
respect to PalWeb and its business. The forward-looking statements are subject
to various risks and uncertainties described in this registration statement.
For these reasons, PalWeb's actual results may vary materially from the
forward-looking statements.
RISK FACTORS
PALWEB IS A DEVELOPMENT STAGE COMPANY AND MAY NOT ACHIEVE PROFITABILITY.
PalWeb was incorporated on February 24, 1969. From April 1993 to
December 1997, PalWeb was primarily engaged in various businesses, including
the business of exploration, production, and development of oil and gas
properties in the continental United States and the operation of related
service business. In January 1998, PalWeb spun off its oil and gas activities
and acquired all of the issued and outstanding stock of Plastic Pallet
Production, Inc. and its principal business changed to selling plastic pallets
and plastic injection molding machines. As of April 31, 2000, PalWeb was using
a prototype plastic injection molding machine to produce plastic pallets.
PalWeb is still in the process of building a fully operational plastic
injection molding machine. PalWeb is in the development stage, it has incurred
significant losses from operations and there is no assurance that it will
achieve profitability or obtain funds to finance continued operations.
PALWEB HAS LIMITED EXPERIENCE IN MANUFACTURING AND MARKETING.
PalWeb's business strategy relies primarily on its success in
manufacturing and marketing, an area in which PalWeb has limited experience.
The success of its business strategy should be considered in light of the
risks, expenses and difficulties frequently encountered in entering into
industries characterized by intense competition. There can be no assurance
that PalWeb will be able to manufacture or market its products or proposed
products, maintain or
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expand its market share or achieve commercial revenues from its products or
proposed products in the future. In addition, certain aspects of PalWeb's
business strategy can only be implemented if PalWeb successfully secures
additional capital. Some of the foregoing factors are not within PalWeb's
control, and there can be no assurance that PalWeb will be able to implement
its business strategy, or that PalWeb's business strategy will result in
profitability.
PALWEB'S BUSINESS COULD BE AFFECTED BY CHANGES IN AVAILABILITY OF RAW
MATERIALS.
PalWeb uses a proprietary mix of raw materials to produce its plastic
pallets. Such raw materials are generally readily available and some may be
obtained from recycled plastic containers. At the present time, these
materials are being purchased from local suppliers. The availability of
PalWeb's raw materials could change at any time for various reasons. For
example, the market demand for PalWeb's raw materials could suddenly increase
or the rate at which plastic materials are recycled could decrease, affecting
both availability and price. Additionally, the laws and regulations governing
the production of plastics and the recycling of plastic containers could
change and, as a result, affect the supply of PalWeb's raw materials. Any
interruption in the supply of raw materials or components could have a
material adverse effect on PalWeb. Furthermore, certain potential alternative
suppliers may have pre-existing exclusive relationships with competitors of
PalWeb and others that may preclude PalWeb from obtaining its raw materials
from such suppliers.
THE MARKET MAY NOT ACCEPT PALWEB'S PRODUCTS.
Any unexpected developmental, regulatory or manufacturing problems
could delay the commercialization of PalWeb's proposed products and may have a
material adverse effect on PalWeb and its prospects. In addition, the market
acceptance of any of PalWeb's plastic pallets will be substantially dependent
on the ability of PalWeb to demonstrate to the business community the
capabilities and benefits of PalWeb's plastic pallets as well as to sell
commercial quantities of the plastic pallets at acceptable prices. There can
be no assurance that PalWeb will be able to gain market acceptance for its
plastic pallets.
PALWEB MAY NOT BE ABLE TO SECURE ADDITIONAL FINANCING NECESSARY TO SUSTAIN AND
GROW ITS OPERATIONS.
PalWeb's financial statements have been qualified on a going concern
basis principally due to lack of long term financing to achieve its goal of
producing and marketing plastic pallets to compete with wood pallets. PalWeb
has funded its operations to date primarily through equity and debt
financings. PalWeb may need additional debt or capital in order to begin
generating a sufficient cash flow to sustain operations for the foreseeable
future. PalWeb will need to raise substantial additional funds to continue to
fund operating expenses or its expansion strategy. There can be no assurance
that additional financing will be available, or, if available, that such
financing will be on terms favorable to PalWeb. Failure to obtain such
additional financing would have a material adverse effect on PalWeb.
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PALWEB'S BUSINESS COULD BE AFFECTED BY COMPETITION AND RAPID TECHNOLOGICAL
CHANGE.
PalWeb currently faces competition from many companies that produce
wooden pallets at prices that are substantially lower than PalWeb anticipates
its plastic pallets will be priced. It is anticipated that the plastic pallet
industry will be subject to intense competition and rapid technological
change. PalWeb could potentially face competition from recycling and plastics
companies, many of which have substantially greater financial and other
resources than PalWeb and, therefore, are able to spend more than PalWeb in
areas such as product development, manufacturing and marketing. Although a
company with greater resources will not necessarily be able to bring a new
product to market before its smaller competitors, substantial resources enable
a company to support many new products simultaneously, thereby improving the
likelihood of at least some of its new products being among the first to make
it to market. PalWeb's revenues and profitability could be adversely affected
by technological change. Competitors may develop products that render PalWeb's
products or proposed products uneconomical or result in products being
commercialized that may be superior to PalWeb's products. In addition,
alternatives to plastic pallets could be developed, which would have a
material adverse effect on PalWeb.
PALWEB MAY NOT BE ABLE TO EFFECTIVELY PROTECT ITS PATENTS AND PROPRIETARY
RIGHTS.
PalWeb relies on a combination of patents and trade secrets to
protect its proprietary technology, rights and know-how. There can be no
assurance that such patent rights will not be infringed upon, that PalWeb's
trade secrets will not otherwise become known to or independently developed by
competitors, that non-disclosure agreements will not be breached, or that
PalWeb would have adequate remedies for any such infringement or breach.
Litigation may be necessary to enforce proprietary rights of PalWeb or to
defend PalWeb against third-party claims of infringement. Such litigation
could result in substantial cost to, and a diversion of effort by, PalWeb and
its management and may have a material adverse effect on PalWeb. PalWeb's
success and potential competitive advantage is dependent upon its ability to
exploit the technology under these patents. There can be no assurance that
PalWeb will be able to exploit the technology covered by these patents or that
it will be able to do so exclusively. PalWeb currently has certain patent
applications pending. There can be no assurance that patent applications will
result in patents being issued, or that, if issued, the patents will afford
protection against competitors with similar technology.
Although PalWeb is not aware of any claim against it for
infringement, there can be no assurances that parties will not bring claims
against PalWeb for infringement in the future. PalWeb's ability to
commercialize its products and proposed products depends, in part, on its
ability to avoid claims for infringement brought by other parties. Laws
regarding the enforceability of intellectual property vary from jurisdiction
to jurisdiction. There can be no assurance that intellectual property issues
will be uniformly resolved, or that local laws will provide PalWeb with
consistent rights and benefits. In addition, there can be no assurance that
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competitors will not be issued patents that may prevent the manufacturing or
marketing of PalWeb's products or proposed products.
PALWEB'S BUSINESS COULD BE AFFECTED BY NEW LEGISLATION REGARDING ENVIRONMENTAL
MATTERS.
The business operations of PalWeb and the ownership and operations of
real property by PalWeb are subject to extensive and changing federal, state
and local environmental laws and regulations pertaining to the discharge of
materials into the environment, the handling and disposition of wastes
(including solid and hazardous wastes) or otherwise relating to the protection
of the environment. As is the case with manufacturers in general, if a release
of hazardous substances occurs on or from PalWeb's properties or any
associated off-site disposal location, or if contamination from prior
activities is discovered at any of PalWeb's properties, PalWeb may be held
liable. No assurances can be given that additional environmental issues will
not require future expenditures.
Both the plastics industry, in general, and PalWeb are subject to
existing and potential federal, state, local and foreign legislation designed
to reduce solid wastes by requiring, among other things, plastics to be
degradable in landfills, minimum levels of recycled content, various recycling
requirements, disposal fees and limits on the use of plastic products. In
addition, various consumer and special interest groups have lobbied from time
to time for the implementation of these and other such similar measures.
Although PalWeb believes that the legislation promulgated to date and such
initiatives to date have not had a material adverse effect on PalWeb, there
can be no assurance that any such future legislative or regulatory efforts or
future initiatives would not have a material adverse effect on PalWeb.
PALWEB'S BUSINESS WILL BE SUBJECT TO POTENTIAL PRODUCT LIABILITY CLAIMS.
The testing, manufacturing and marketing of PalWeb's products and
proposed products involve the inherent risks of product liability claims or
similar legal theories against PalWeb, some of which may cause PalWeb to incur
significant defense costs. Although PalWeb currently maintains product
liability insurance coverage that it believes is adequate, there can be no
assurance that the coverage limits of its insurance are adequate or that all
such claims will be covered by insurance. In addition, these policies
generally must be renewed every year. While PalWeb has been able to obtain
product liability insurance in the past, there can be no assurance it will be
able to obtain insurance in the future on its products or proposed products.
Product liability insurance varies in cost, is difficult to obtain and may not
be available in the future on terms acceptable to PalWeb, if at all. A
successful product liability claim or other judgment against PalWeb in excess
of its insurance coverage could have a material adverse effect upon PalWeb.
PALWEB CURRENTLY DEPENDS ON CERTAIN KEY PERSONNEL.
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PalWeb is dependent on the experience, abilities and continued
services of its current management personnel. In particular, Mr. Kruger, its
Chairman of the Board and President, and Ron Hale, Vice President
(Engineering), Secretary and Treasurer of PalWeb and the President of PalWeb's
wholly owned subsidiary, Plastic Pallet Production, Inc., have played
significant roles in the development and management of PalWeb. The loss or
reduction of services of Mr. Kruger, Mr. Hale or any other key employee could
have a material adverse effect on PalWeb. There is no assurance that
additional managerial assistance will not be required. PalWeb's future success
depends in large part upon its ability to attract and retain highly qualified
personnel. PalWeb faces competition for such personnel from other companies
and organizations, many of which have significantly greater resources than
PalWeb. There can be no assurance that PalWeb will be able to attract and
retain the necessary personnel on acceptable terms or at all.
PALWEB'S STOCK TRADES IN A LIMITED PUBLIC MARKET, IS SUBJECT TO PRICE
VOLATILITY AND THERE CAN BE NO ASSURANCE THAT AN ACTIVE TRADING MARKET WILL BE
SUSTAINED.
There has been a limited public trading market for PalWeb's Common
Stock and there can be no assurance that an active trading market will be
sustained. There can be no assurance that the Common Stock will trade at or
above any particular price in the public market, if at all. The trading price
of the Common Stock could be subject to significant fluctuations in response
to variations in quarterly operating results or even mild expressions of
interest on a given day. Accordingly, the Common Stock should be expected to
experience substantial price changes in short periods of time. Even if PalWeb
is performing according to its plan and there is no legitimate
company-specific financial basis for this volatility, it must still be
expected that substantial percentage price swings will occur in PalWeb's
securities for the foreseeable future.
CERTAIN RESTRICTED SHARES OF PALWEB WILL BE ELIGIBLE FOR SALE IN THE FUTURE
AND COULD AFFECT THE PREVAILING MARKET PRICE OF PALWEB'S COMMON STOCK.
Certain of the outstanding shares of Common Stock are "restricted
securities" under Rule 144 of the Securities Act, and (except for shares
purchased by "affiliates" of PalWeb as such term is defined in Rule 144) would
be eligible for sale as the applicable holding periods expire. In the future,
these shares may be sold only pursuant to a registration statement under the
Securities Act or an applicable exemption, including pursuant to Rule 144.
Under Rule 144, a person who has owned Common Stock for at least one year may,
under certain circumstances, sell within any three-month period a number of
shares of Common Stock that does not exceed the greater of 1% of the then
outstanding shares of Common Stock or the average weekly trading volume during
the four calendar weeks prior to such sale. In addition, a person who is not
deemed to have been an affiliate of PalWeb at any time during the three months
preceding a sale, and who has beneficially owned the restricted securities for
the last two years is entitled to sell all such shares without regard to the
volume limitations, current public information requirements, manner of sale
provisions and notice requirements. Sales or the expectation of sales of a
substantial number of shares of Common Stock in the public market by selling
stockholders could adversely affect the prevailing market price of the Common
Stock, possibly having a depressive
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effect on any trading market for the Common Stock, and may impair PalWeb's
ability to raise capital at that time through additional sale of its equity
securities.
PALWEB DOES NOT EXPECT TO DECLARE OR PAY ANY DIVIDENDS IN THE FORESEEABLE
FUTURE.
PalWeb has not declared or paid any dividends on its Common Stock.
PalWeb currently intends to retain future earnings to fund the development and
growth of its businesses, to repay indebtedness and for general corporate
purposes, and, therefore, does not anticipate paying any cash dividends in the
foreseeable future.
PALWEB'S COMMON STOCK MAY BE SUBJECT TO SECONDARY TRADING RESTRICTIONS RELATED
TO PENNY STOCKS.
Certain transactions involving the purchase or sale of Common Stock
of PalWeb may be affected by a Securities and Exchange Commission rule for
"penny stocks" that imposes additional sales practice burdens and requirements
upon broker-dealers that purchase or sell such securities. For transactions
covered by this penny stock rule, broker-dealers must make certain disclosures
to purchasers prior to the purchase or sale. Consequently, the penny stock
rule may impede the ability of broker-dealers to purchase or sell PalWeb's
securities for their customers and the ability of persons now owning or
subsequently acquiring PalWeb's securities to resell such securities.
HISTORY
PalWeb Corporation is a Delaware corporation that was incorporated on
February 24, 1969 under the name Permaspray Manufacturing Corporation. It
changed its name to Browning Enterprises Inc. in April of 1982, to Cabec
Energy Corp. in June of 1993 and became PalWeb Corporation in April of 1999.
From April 1993 to December 1997 PalWeb was engaged in various
businesses, including 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 December 1997, PalWeb acquired all of the
issued and outstanding stock of Plastic Pallet Production, Inc. or "PPP," a
Texas corporation, in exchange for a majority of the issued and outstanding
stock of PalWeb. Pursuant to the terms of the reverse acquisition contract,
all of the assets, contract rights and liabilities of PalWeb that related in
any way to the oil and gas business were transferred to The Union Group, Inc.,
a Nevada corporation (the "Union Group"). In November 1998, PalWeb distributed
all of the issued and outstanding stock of the Union Group to its stockholders
(other than the former shareholders of Plastic Pallet Production, Inc.).
Since 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
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systems. PalWeb is currently a development stage company. As of April 31,
2000, PalWeb has not sold any plastic injection molding machines and sales of
plastic pallets have been limited.
Michael John served as Chairman of the Board and President of PPP
prior to its acquisition by PalWeb in December 1997. In October 1998, PPP
entered into an agreement for sale of a plastic injection molding machine with
Pace Plastic Pallets, Inc. ("Pace") that was intended to provide for the sale
of specified machinery to Pace to permit Pace to manufacture pallets for sale
to PPP for further distribution by PPP under patent licenses granted by PPP to
Pace. In exchange for Pace's agreement to purchase the machinery and make an
earnest money deposit of $300,000, 10 million shares of PalWeb were
transferred to Pace. At the time of this transaction, Pace was principally
owned by Paul Kruger. The terms of this transaction were entered into on an
arm's length negotiated basis.
PPP encountered difficulties in connection with the manufacturing of
the machinery required by this agreement due to the absence of available
funding and other reasons. As a result, in January 1999, PalWeb and PPP
entered into a consulting agreement with PaceCo Financial Services, Inc.
("PFS"), an entity owned by Mr. Kruger, to engage PFS to provide comprehensive
management assistance to PPP in exchange for the issuance of 41 million shares
of PalWeb Common Stock.
On July 9, 1999, Paul Kruger became Chairman of PalWeb and Michael
John resigned as Chairman and as an Executive Officer. Subsequent to that
date, Mr. Kruger has been actively involved in the day to day management of
PalWeb and PPP in order to further its business plan. Mr. Kruger or his
affiliated entities have provided in excess of $1,500,000 in funding for the
operation of PalWeb in the form of cash advances or consulting services and
have been issued an additional 15,375,000 shares of common stock.
Subsequent to becoming more active in management, Mr. Kruger
discovered various transactions and agreements that had been entered into by
prior management that were detrimental to PalWeb. One of these involved the
issuance of 41,443,308 shares of PalWeb Common Stock to Wolfgang Ullrich and
Rosarin Chaisayan in January 1998 for consideration that was never received.
In January 1999, PalWeb initiated an action against these parties in the
District Court of Dallas County, Texas, seeking a judgment for monetary
damages and cancellation of the shares issued to them. On September 16, 1999,
PalWeb was granted a default judgment awarding damages in the amount of $20
million and ordering the return and cancellation of the stock certificates for
the 41,443,308 shares issued as well as awarding attorney's fees. Such shares
have been canceled on PalWeb's books.
In another action in the District Court of Dallas County, Texas,
PalWeb and PPP obtained a default judgment against affiliated entities of
Wolfgang Ullrich named Chartex AG and New Inter HKB, AG ("NIH") on March 17,
2000. Chartex AG was issued 6 million shares of common stock in PalWeb as
additional consideration for an alleged $1.35 million loan made to PPP by
Chartex. In addition, PPP had an obligation of $1.6 million to NIH and had
issued
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7,413,384 shares to NIH in PalWeb. As a result of the relationship between
Ullrich and Chartex AG and NIH, the Court ordered that PPP could offset $1.6
million owed to NIH against the $20 million judgment against Ullrich and also
ordered that defendants Chartex AG and NIH return to PalWeb a total of
13,413,384 shares of PalWeb common stock and ordered that PPP's liability to
Chartex in the amount of $1.35 million secured by a mortgage be canceled.
These shares have been reflected as canceled on the Company's records as of
March 31, 2000. PalWeb does not expect that any of the money damages will be
recovered.
The current management of PalWeb is reviewing and will continue to
review other past transactions involving PalWeb to determine if any corrective
actions need to be taken for the benefit of PalWeb's shareholders.
CURRENT BUSINESS
PalWeb's principal subsidiary, Plastic Pallet Production, Inc. or
"PPP", is the entity through which PalWeb conducts its business of selling
plastic pallets and plastic injection molding machines. PPP holds several
patents for the original design of various types of plastic pallets, and has
recently received approval for a patent relating to the original design of a
materials handling plastic pallet in April 2000.
PalWeb's plastic pallets are much more durable and sanitary than
traditional wood pallets. PalWeb's new plastic pallet design has been
subjected to standard industry tests known as ASTM (American Society for
Testing and Materials) Standard D 1185-98a (a strength test) and D 4728-91 (a
vibration test), which were conducted by Container Technologies Laboratory,
Inc., Lenexa, Kansas, an independent testing facility. Container Technologies
Laboratory, Inc. certified PalWeb's plastic pallet as having passed the above
referenced tests. The testing procedures found the pallet to be stronger and
more versatile than the typical hardwood pallet.
PPP has fabricated an operational prototype plastic injection molding
system. PPP is currently producing pallets with its prototype equipment at the
rate of approximately 500 pallets per month. It is anticipated that production
will increase to approximately 4,000 pallets within the first fiscal quarter
of 2000. 4,000 pallets per month is the maximum capacity of PPP's
research/prototype plastic injection molding system.
PalWeb is currently exploring methods to raise funds through various
means including, but not limited to, the private placement of equity
securities. PalWeb plans to use future funding to fabricate a plastic
injection molding system comprised of multiple plastic injection molding
machines with integrated material feed lines. If successful, the addition of
these machines will permit PalWeb to expand its production of pallets. Should
PalWeb successfully increase its production levels, it will need to employ
additional production and supervisory employees.
In the past two years, approximately $2 million has been spent on the
development of PalWeb's business by designing plastic pallets and building
prototypes of the plastic injection
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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.
Carving a niche in an industry as competitive as the pallet business
will require more than just capital and equipment. PalWeb's future success
will depend in large part on the strategic planning of its management. PalWeb
has received very strong indications of interest from a number of extremely
large users of pallets now that the material handling pallet has been
successfully tested under applicable industry standards. This has
substantially increased the level of interest and has greatly increased the
viability of PalWeb's pallet being a large volume seller. However, there is no
assurance that PalWeb or PPP will be successful in marketing the pallets
commercially.
The principal raw materials used in manufacturing PalWeb's plastic
pallets are in abundant supply, and some of these materials may be obtained
from recycled plastic containers. At the present time, these materials are
being purchased from local suppliers and the supply is readily available.
PALLET INDUSTRY
According to the U. S. Forest Service, as printed in the National
Wooden Pallet and Container Association publication, approximately 400 million
new wood pallets are purchased in the United States each year, and some
research sources estimate that even more than 400 million new pallets are
purchased each year. At an overall average selling price of $9/pallet, the
pallet manufacturing and sales business is approximately a $4 billion
industry. 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 manufacture new pallets or repair and recycle
pallets. New pallet manufacturing generates about 60%-65% of the industry's
revenues. The U.S. Forest Service estimates that approximately 1.9 billion
wood pallets are in circulation in the United States today and that roughly
400 million of the wood pallets currently in circulation were newly
manufactured. On an annual basis, approximately 175 million wood pallets are
recycled through a process of retrieval, repair, re-manufacturing and
secondary marketing, approximately 225 million are sent to landfills, and
approximately 100 million 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. The June 1996 issue of Modern
Material Handling states that product damage resulting from faulty wood
pallets is between $1 - $2 billion annually. This damage is caused by pallets
breaking under load, splinters and nails from the pallets, worker injury and
other causes. In
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addition, environmental 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.
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, 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 hand 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 pallet size in most industries in the United States. Some industries,
however, have developed specialized pallet sizes. PalWeb's pallet is 40 inches
by 48 inches in size.
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. As stated in an article in the July
1996 issue of Material Handling Engineering, wood pallets have an estimated
useful life of 7-10 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 60 or more trips, on average.
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.
PalWeb intends to stay on the "cutting edge" of the market by
constantly conducting research on pallet design, plastic injection molding
system design and the materials used to make the plastic pallets.
EMPLOYEES
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PalWeb through PPP leases its employees from Accord Human Resources,
Inc., an independent employee leasing company, including PalWeb's Vice
President in charge of Engineering & Design, Ronald G. Hale, who is also the
President of PPP. PalWeb decided to lease its employees because, considering
the small number of employees currently required by PalWeb's level of
operations, it is more cost effective than hiring its own employees. PalWeb's
management has determined that leasing the present number of employees saves
approximately $1,500 per month. The cost of leasing the employees from Accord
Human Resources, Inc., over and above the actual cost of payroll, is
approximately 2.0% of payroll, which is approximately $500 per month. If
PalWeb decided to hire its own employees, it would also need to hire a
full-time human resource employee, which would cost approximately $2,000 per
month. After management made this determination, PalWeb's former President,
Michael John, negotiated the Employee Lease Agreement with Accord Human
Resources, Inc. and executed such Agreement on behalf of PPP.
When PalWeb increases production levels to 4,000 pallets per month,
it will need to employ a total of eleven to thirteen production employees and
three to four supervisory/staff employees. Should PalWeb successfully
increase its production levels to 50,000 pallets per month, it will need to
employ a total of twenty to thirty production employees and five to seven
supervisory/staff employees. If PalWeb successfully increases its production
levels to 100,000 pallets per month, it will need to employ a total of
thirty-five to forty production employees and ten to fifteen supervisory/staff
employees.
MARKETING
PPP plans to distribute its pallets and its plastic injection molding
systems through a combination of a network of independent contractor
distributors and sales by PalWeb officers and employees. PalWeb believes that
PPP's patents on its plastic pallet designs and its plastic injection molding
machines, along with appropriate pricing of its products, should give PalWeb a
sales advantage with respect to its competition. PalWeb hopes to gain product
acceptance by marketing the concept that the widespread use of plastic pallets
could greatly reduce the destruction of trees on a worldwide basis.
In March 1998, prior management of PalWeb entered into an alleged
agreement with Vimonta AG, a Swiss based company ("Vimonta"), purporting to
grant Vimonta the exclusive right to use PalWeb's technology in Europe, Russia
and Asia. At or around the same time, PalWeb entered into a separate agreement
with a shareholder of Vimonta, Margarete Jung, pursuant to which PalWeb issued
15 million of its shares of Common Stock and received in exchange a 20%
interest in Vimonta. As of April 30, 2000 existing management had met with
the Vimonta representatives on two occasions and has requested financial
information on Vimonta, and copies of all documents which Vimonta alleges
comprise the agreement between PalWeb and Vimonta. When the documents
comprising the agreement are received, PalWeb will consider what obligations,
if any, PalWeb has to Vimonta. PalWeb considers the European market to be a
significant market for plastic pallets due to the regulations proposed by the
European economic community to require use of plastic pallets in such market.
PATENTS
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<PAGE>
PPP currently holds the following patents:
1. Interlocking Modular Pallet Application and Method of
Construction
Application No. 08/779,372
Filing Date: November 26, 1996
U.S. Patent No. 5,860,369 issued on January 19, 1999
Expiration Date: January 18, 2016
2. Modular Pallet with Interlocking Apparatus
Application No. 08/795,856
Filing Date: February 6, 1997
U.S. Patent No. 5,887,529 issued on March 30, 1999
Expiration Date: March 29, 2016
3. Vertical Interlocking Modular Pallet Application and Method of
Construction
Application No. 08/796,571
Filing Date: February 6, 1997
U.S. Patent No. 5,809,905 issued on September 22, 1998
Expiration Date: September 21, 2015
PalWeb is currently in the process of securing a patent on its new
materials handling pallet. The application for the patent on this materials
handling pallet was filed on October 19, 1999 under application No. 09/421,766
and was allowed and granted in April 2000 but has not been finalized.
PPP also has a patent pending on a new concept in the construction of
functional, operational plastic injection molding machines. These 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. However, it must be noted that there is no assurance that PalWeb will
be able to sell any of the newly designed plastic injection molding machines.
Under United States patent law, patents that are approved are valid for 17
years from the date of issuance unless they are amended and extended.
PPP's pallets and plastic injection molding machines have a broad
spectrum of possible applications. As a result, it is not foreseen that sales
will be dependent on one or a few major customers.
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ACQUISITION OF PACECO FINANCIAL
On January 21, 2000, PalWeb entered into an agreement to acquire
PaceCo Financial Services, Inc. ("PFS") by means of a merger of PFS's parent
company, Pace Holding, Inc., into a wholly owned subsidiary of PalWeb, PP
Financial, Inc. This acquisition was consummated on April 3, 2000. In the
acquisition, PalWeb issued 50 million shares of its common stock in exchange
for all the outstanding stock of Pace Holding and PFS became an indirect
wholly owned subsidiary of PalWeb. All of the outstanding stock of Pace
Holding was owned by Paul Kruger, the Chairman and Chief Executive Officer of
PalWeb. PFS, in addition to its other assets, owned 43.5 million shares of
PalWeb common stock, which by virtue of the acquisition, are treated as
treasury stock on PalWeb's records and, accordingly, the acquisition resulted
in the issuance of an additional 6.5 million shares of PalWeb common stock.
PFS has been in business since 1952 and is engaged in the business of
making consumer and small business loans primarily in Oklahoma and is
regulated as an "investment certificate issuer" by the Oklahoma Securities
Department. For its last fiscal year ended September 30, 1999, PFS had
revenues of $790,000, net loss of $2,400,000 and total assets and
stockholder's deficiency of $6,700,000 and $1,700,000, respectively. For the
six months ended March 31, 1999, PFS had revenues of $300,000, net loss of
$850,000 and at such date had total assets of $6,100,000 and stockholder's
deficiency of $2,600,000.
PFS expects to enter into an agreement with the Oklahoma Securities
Department pursuant to which the status of PFS as an "investment certificates
issuer" will be terminated within two years. This agreement will require that
during such period PFS find additional sources of funding for its activities
other than the sale of investment certificates. At March 31, 1999, PFS had
$6,700,000 in investment certificates outstanding.
PalWeb intends to use PFS as a vehicle to offer financing to buyers
of its plastic pallets and injection molding equipment.
SUBSIDIARIES
PalWeb has six wholly owned subsidiaries and one indirect wholly
owned subsidiary. All of the subsidiaries, except PPP and PP Financial, Inc.,
currently are inactive and have no employees.
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The inactive subsidiaries 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 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;
PaceCo Financial Services, Inc., a wholly owned
subsidiary of PP Financial, Inc.;
PP Transport, Inc., a Texas corporation; and
PP Systrans, Inc., a Texas corporation.
ITEM. 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
PLAN OF OPERATIONS AND LIQUIDITY
On November 10, 1999, PalWeb transferred all of its energy services
related assets, contract rights and liabilities to the Union Group. Shortly
following this transfer, all of the issued and outstanding stock of the Union
Group was distributed to the stockholders of PalWeb (other than the former
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. As stated above, PPP is engaged in the design, development
and marketing of a new style of plastic pallet that will compete with
traditional wood pallets, and the design, development and marketing of a new
style of plastic injection molding machine that is smaller and more efficient
than a traditional style of plastic injection molding machine.
PalWeb's financial statements have been qualified on a going concern
basis principally due to lack of long term financing to achieve its goal of
producing and marketing plastic pallets to compete with wood pallets. During
the period from January 1999 to December 1999, the cash needed by PalWeb to
fund its operations came from cash advances from Paul A. Kruger and
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<PAGE>
entities affiliated with him, totaling $882,479, and $300,000 received by PPP
as a down payment on the sale of a plastic injection molding system to Pace
Plastic Pallets, Inc., an Oklahoma corporation ("Pace").
The total sale price under the terms of the contract between PPP and
Pace was $3,408,000. Subsequent to entering into this contract, Pace was
dissolved and all of its assets were assigned to Hildalgo Trading Co., L.C.,
an Oklahoma limited liability company ("Hildalgo"), which is 100% owned by
Paul A. Kruger. The agreement for the sale of the plastic injection molding
system to Pace by PPP was entered into in October 1998. At such time, neither
Paul A. Kruger nor any of his related entities, including Pace, were
affiliated with or related to PalWeb or any of its subsidiaries. However, in
April 1999, Mr. Kruger, through several of his closely held entities, acquired
a significant ownership position in PalWeb's common stock, which caused him to
then be classified as a related party with respect to PalWeb. Mr. Kruger
became the Chairman of the Board of PalWeb on July 9, 1999 and became
President on January 22, 2000. The value of the plastic injection molding
system was determined through negotiations between the former President of
PalWeb and the management of Pace. No gain has been recognized on the sale of
equipment to Pace as the sale has never been consummated due to the fact that
PalWeb has not yet begun commercially producing plastic injection molding
systems. In January 2000, PalWeb issued 3,000,000 shares to Hildalgo in
exchange for Hildalgo's cancellation of the $300,000 of indebtedness related
to the down payment on the sale of the plastic injection molding system and
the contract between PalWeb and Hildalgo was canceled.
On December 1, 1999, PalWeb obtained a $500,000 line of credit loan
for its operations from Ralph Curton, Jr., an individual that is not an
officer or director of PalWeb or otherwise related to PalWeb, but who does own
2.2% of the issued and outstanding shares of common stock of PalWeb. In
exchange for the $500,000 line of credit loan, PalWeb issued Mr. Curton a
convertible debenture that grants Mr. Curton the right, on or after June 1,
2000, to convert the principal of the convertible debenture into fully paid
and non-assessable shares of PalWeb's Common Stock at the rate of one share
for each $0.10 of the principal amount that is then due and owing by PalWeb to
Mr. Curton at the time of such conversion. The loan interest rate is 8.5% per
annum and the maturity date is December 1, 2001. Funds from the credit line
were available at the rate of $100,000 per month beginning December 1999.
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<PAGE>
The funds made available to PalWeb by means of the line of credit
loan from Ralph Curton, Jr. are expected to satisfy the cash requirements for
all operations until May 31, 2000. Additionally, the loan proceeds will
provide the funds necessary to complete modifications of the existing
prototype plastic injection molding system as discussed in the following
paragraph, and begin appropriate marketing programs that will lead to the sale
of plastic pallets in quantities that are sufficient to provide revenues
needed for PalWeb's operations. Once production capacity of 4,000 pallets per
month is achieved, it is believed that sales of product will be generating
sufficient cash flow to sustain current operations.
The molds needed for PalWeb to manufacture plastic pallets were
completed in October 1999 and necessary fine-tuning modifications to the molds
were completed in late December 1999. A new raw material feeding system, known
as a hot runner system, is currently being installed on the prototype plastic
injection molding system. This will enable the prototype equipment to begin
producing plastic pallets at full capacity, approximately 4,000 pallets per
month. PalWeb plans to continue to review the performance of the prototype
equipment and make any improvements that are possible and economical.
RESULTS OF OPERATIONS
GENERAL
Sales reflected for all periods presented are occasional sales of
prototype plastic pallets of a design that did not meet development standards.
Sales represent initial sales of PalWeb's tested product. However, PalWeb has
not commenced commercial production of plastic pallets. PalWeb has for the
most part completed the development of its plastic pallet that will compete
with wood pallets. PalWeb is in the final stages of development of its
injection molding system to produce its plastic pallets. PalWeb has obtained
short-term financing to meet its working capital needs and is seeking
long-term financing to acquire the equipment needed to produce plastic pallets
on a large-scale commercial basis.
The basic development of PalWeb's prototype plastic injection molding
system is complete and it is fully functional as of April 30, 2000. However,
the injection molding system's full capacity of 4,000 pallets per month will
not be reached until the hot runner system is installed and tested. Management
anticipates that continued engineering updates and refinements of all plastic
injection molding systems will be necessary to
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maintain high efficiency levels and plans for this to be an ongoing process.
PalWeb has from time to time engaged the services of professionals to
perform various services through the issuance of both Common and Preferred
Stock (see Part II, Item 4, Recent Sales of Unregistered Securities). The
services paid for in this fashion have primarily included business transaction
origination and brokerage services, accounting services unrelated to audits of
PalWeb, legal services, and marketing and financing consulting services.
PalWeb has been compelled to use both Common and Preferred stock to secure
these services due to its limited sources of cash. The consideration was
largely based on a negotiated number of shares in relation to the type of
service and the nature of the restricted stock rather than specific dollar
amounts. Accordingly, management determined that the most reasonable method of
valuing the services is the stock value.
For all periods presented, PalWeb's effective tax rate is 0%. PalWeb
has generated net operating losses since inception that would normally reflect
a tax benefit in the statement of operations and a deferred asset on the
balance sheet. However, because of the current uncertainty as to PalWeb's
ability to achieve profitability, a valuation reserve has been established
that offsets the amount of any tax benefit available for each period presented
in the consolidated statement of operations.
PROSPECTS FOR FUTURE
Management anticipates that upon completion of all refinements to its
prototype equipment, which is in its final stages as of April 2000, operating
losses will cease due to the sales revenue that will be generated. As stated
above, the United States market for new pallets is, at minimum, approximately
400,000,000 annually. Management's initial sales projections of 4,000 pallets
per month, or 48,000 pallets per year, is less than 1/100th of 1% of the total
new pallet market, and it appears that the market trend is moving toward the
use and purchase of plastic pallets. If PalWeb's sales projections are
accurate, management estimates operating losses will cease on or before July
30, 2000. It is anticipated that approximately 4% - 5% of annual gross
revenues will be expended for product research, development and marketing.
NINE MONTH PERIOD ENDED FEBRUARY 29, 2000 COMPARED TO THE NINE MONTH PERIOD
ENDED FEBRUARY 28, 1999
General and administrative expenses for the nine months ended
February 29, 2000 decreased $2,907,522 over February 28,
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1999 primarily due to a lower cost of consulting services. Consulting costs
were $1,596,000 for the nine months ended February 29, 2000, which is a
decrease of $2,767,000 from the nine months ended February 28, 1999.
Interest expense declined $61,338 from $199,287 for the nine months
ended February 28, 1999 to $137,949 for the nine months ended February 29,
2000. The decrease is attributable to the reduction in notes payable.
Management negotiated a settlement of certain delinquent notes payable in the
prior period through foreclosure proceedings, cash payments or part cash, part
common stock.
Other income in the nine months ended February 28, 1999 was primarily
rental income from leasing a portion of its plant facilities. The plant was
sold to a related party in April 1999 and PalWeb leases back only that portion
of the facility it utilizes. Because PalWeb holds an option expiring April
2002 to repurchase the property, the transaction was recorded as a financing
arrangement wherein the plant remains an asset on the balance sheet until such
time as the option expires without being exercised. The significant item in
other income in the nine months ended February 29, 2000, is a gain on
settlement of outstanding liabilities.
Principally as a result of the above, PalWeb had a net loss of
$2,337,079 for the nine months ended February 29, 2000 compared to $5,152,322
for the nine months ended February 28, 1999, a decrease of $2,815,243.
YEAR ENDED MAY 31, 1999 COMPARED TO THE YEAR ENDED MAY 31, 1998
Salaries and benefits were $298,414 in 1999 compared to $448,176 in
1998, for a decrease of $149,762. The decrease is principally due to the
termination of a marketing person who was employed during 1998. Other general
and administrative expenses increased $4,801,226 from $660,383 in 1998 to
$5,461,643 in 1999. This increase is primarily due to third-party consulting
costs which were $5,013,000 in 1999 and $222,000 in 1998 for an increase of
$4,791,000. Consulting costs were payments principally through the issuance of
common stock to individuals to assist the company in attaining its goals of
product development and the financing to achieve commercial production levels.
In 1998, the Company incurred a charge to operations to write down
certain investments due to impairment for a total of $3,456,231. There was no
corresponding charge in 1999.
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<PAGE>
Interest expense increased $52,237 from $189,527 in 1998, to $241,744
in 1999. The increase is primarily due to the issuance of long-term notes
payable for the acquisition of the plant and other real estate.
Because of the above, the loss before discontinued operations and
extraordinary gain increased $1,223,538 from a loss of $4,807,184 in 1998 to a
loss of $6,030,725 in 1999.
In January 1998, PalWeb acquired PPP in a reverse acquisition whereby
the stockholders of PPP gained majority control of PalWeb through the exchange
of stock. Under the terms of the reverse acquisition contract, the prior
assets of PalWeb, primarily engaged in the business of energy services, were
to be spun off to the previous stockholders of PalWeb. PPP was engaged in the
development of plastic pallets and plastic injection molding systems and the
primary interest in the acquisition was to acquire a shell corporation that
was publicly held. However, the energy services were distributed to PalWeb's
stockholders, by a distribution of the stock of the Union Group on a pro rata
basis, on November 10, 1998. Because the operation of energy services was a
different segment from the continuing operations of PalWeb/PPP, the operations
of energy services is classified as discontinued operations. The loss for 1998
totaled $849,761 which, included estimated closing costs of $130,688.
PalWeb was obligated on two promissory notes payable totaling
$830,057 as of May 31, 1998. During 1999, PalWeb negotiated settlements on
these debts through cash payments, issuance of common stock, and foreclosure
resulting in a gain of $68,616. This gain is classified as an extraordinary
gain.
As a result of all of the foregoing, the net loss of $5,969,405 in
1999 was an increase of $312,464 over the net loss of $5,656,945 in 1998.
YEAR ENDED MAY 31,1998 COMPARED TO THE PERIOD FROM INCEPTION (NOVEMBER 20,
1995) TO MAY 31, 1997
Research and development expenses were $406,943 in 1997 and $0 in
1998. In 1997, PPP engaged a design engineer to design and oversee the
development of an injection molding system process including molds to produce
plastic pallets. This phase was complete as of May 31, 1997.
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Salaries and benefits in 1998 totaled $448,176, compared to $247,516
in 1997, an increase of $200,660. The increase was primarily attributable to
the addition of a marketing person.
Depreciation expense in 1998 was $157,656, compared to $96,871 in
1997, an increase of $60,785. The expense in 1997 generally reflects a
one-half year's depreciation since it is the primary acquisition year.
Other general and administrative expenses for 1998 and 1997 were
$660,383 and $685,695, respectively. The net change was not significant.
In 1998, PalWeb recognized impairment losses of $3,456,231.
Management determined that the molds for the original pallet design were
obsolete due to design deficiencies in the product and recognized an
impairment charge of $184,982 to operations. In addition, a loss in the amount
of $126,249 was recognized to write down a milling machine that was sold in
June 1998 to net realizable value. PalWeb also recognized impairment in the
amount of $3,145,000 on its investment in 20% of the issued and outstanding
stock of Vimonta AG, a Swiss corporation, that is a marketing logistics
company. This adjustment was made after current management reviewed this
acquisition and determined that Vimonta AG was a startup company with no
material assets or tangible net worth. The original valuation of the stock of
Vimonta AG, made by PalWeb's prior management at the time of the acquisition,
was based on Vimonta's income potential, as perceived by the Board of
Directors at that time.
Primarily because of all of the foregoing factors, loss before
discontinued operations increased $3,477,666, from $1,329,518 in 1997 to
$4,807,184 in 1998.
ITEM 3. DESCRIPTION OF PROPERTY
PalWeb, through PPP, currently leases approximately five acres of
land in an industrial area of Dallas, Texas that is improved with 119,000
square feet of manufacturing and warehouse space, and approximately 6,500
square feet of office space. This leased space was originally owned by PPP,
but was sold to Onward, L.L.C., an entity owned by Paul A. Kruger in April
1999, and the portion of the facility needed for operations was leased back.
The lease contains a 3-year option to repurchase the property. For accounting
purposes, this property is still treated as being owned by PPP and carried on
its books as an asset. This accounting treatment will continue until the
option to repurchase is exercised, canceled or expires.
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PalWeb has sufficient office equipment, such as computers, printers,
copiers, etc., to operate effectively. Of the eight employees leased from
Accord Human Resources, Inc., only Ronald G. Hale, PalWeb's Vice President in
charge of Engineering & Design, and a draftsman employed by PPP, have need of
typical office equipment. PalWeb has six computer stations, five printers, and
two copy machines 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.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the
shares of Common Stock and the shares of original issue Preferred Stock
beneficially owned as of April 5, 2000, by (i) each person known by PalWeb to
beneficially own five percent (5%) or more of the outstanding Common Stock or
Preferred Stock, (ii) each current director and executive officer and (iii)
all current directors and executive officers as a group. The original issue
Preferred Stock is considered the equivalent of Common Stock, since it is
voting and convertible into Common Stock on a share for share basis. As of
April 5, 2000, PalWeb had 205,456,628 shares of Common Stock and 2,885,000 of
Preferred Stock outstanding.
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY PERCENT
NAME OWNED OWNED(1)
---- ------------ --------
<S> <C> <C>
Paul A. Kruger, Chairman of the Board and President
................................................. 78,102,778(2) 37.49%
Lyle W. Miller, Director and Vice President (Marketing)
................................................. 7,500,000 3.60%
Mark R. Kidd, Director
............................................ 500,000 0.24%
</TABLE>
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<TABLE>
<CAPTION>
SHARES
BENEFICIALLY PERCENT
NAME OWNED OWNED(1)
---- ------------ --------
<S> <C> <C>
Ronald G. Hale, Vice President
(Engineering), Secretary and
Treasurer
............................ 2,000,000 0.96%
All Directors & Officers as a
Group (4 persons) 88,102,778(2) 42.29%
</TABLE>
- ----------------------------
(1) Percent owned calculated based on combined total shares of Common Stock and
Preferred Stock outstanding.
(2) Total includes 16,897,778 shares of Common and Preferred Stock of which
Paul A. Kruger only holds the power to vote pursuant to proxies.
There are currently no plans for any arrangement or acquisition which
would change ownership of a controlling interest in the common stock of PalWeb.
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
The following lists the directors and executive officers of PalWeb.
Directors of PalWeb are elected annually at each annual meeting of
shareholders. Executive officers serve at the pleasure of the Board of
Directors.
<TABLE>
<CAPTION>
TERM AS
NAME POSITION DIRECTOR EXPIRES
---- -------- ----------------
<S> <C> <C>
Paul A. Kruger Director, President and Chairman of the Board 2001
Lyle W. Miller Director and Executive Vice President (Marketing) 2001
Mark R. Kidd Director 2001
Ronald G. Hale Vice President (Engineering), Secretary and Treasurer of
PalWeb and President of PPP 2001
</TABLE>
PAUL A. KRUGER
CHAIRMAN OF THE BOARD OF DIRECTORS AND PRESIDENT
Mr. Kruger, age 46, 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
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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 2,000 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 Foresight, Inc. His responsibilities and
contributions to these companies include assisting in the development,
implementation and execution of strategic planning.
Mr. Kruger also currently holds managing officer positions in both
Hildalgo, L.C. and Onward, L.L.C.
Mr. Kruger became a director of PalWeb on July 9, 1999 and became
President on January 22, 2000.
LYLE W. MILLER
DIRECTOR AND EXECUTIVE VICE PRESIDENT (MARKETING)
Mr. Miller, age 56, earned a Bachelor of Business Administration
degree from Michigan State University and attended Michigan State University's
Master's program in Finance. For the past six years, Mr. Miller has been the
President and a Director of McMiller Holding Company, Northern Leasing &
Sales, Inc. and Northern Connections, Inc., which are based in Lansing,
Michigan. Each of these companies are privately held and are engaged in the
real estate business. Additionally, Mr. Miller is a partner in MahMill Acres,
a closely held real estate development partnership, and serves as the
President and a Director of Servco Incorporated, Lansing, Michigan, and
Lansing Ice & Gymnastic Center, Inc., a privately held corporation that
operates the Lansing Ice & Gymnastic Center and Landings Restaurant in
Lansing, Michigan.
Mr. Miller became a director of PalWeb and Vice President of
Marketing on January 22, 2000.
MARK R. KIDD
DIRECTOR
Mr. Kidd, age 33, earned a Bachelor of Business Administration in
Accounting from Southern Methodist University, Dallas, Texas, in 1988 . Mr.
Kidd began his career at the accounting firm of Arthur Andersen, L.L.P. where
he earned the designation of Certified Public Accountant. He worked at Arthur
Andersen for eight years where he served financing services clients ranging in
size from less than $10,000,000 to greater than $2,000,000,000. Mr. Kidd
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served as the Chief Financial Officer for Republic Bank of Norman, Oklahoma, a
financial institution with over $100,000,000 in assets. Mr. Kidd has served as
the Executive Vice President and Chief Financial Officer of Foresight, Inc. in
Norman, Oklahoma since 1997. Foresight, Inc. is a marketing company that
develops membership and loyalty programs for companies that are designed to
solidify and enhance customer relationships. Foresight, Inc. services over
250,000 customers nationwide through relationships with companies in numerous
industries including rent-to-own, banking, and financial services.
Mr. Kidd became a director of PalWeb on January 22, 2000.
RONALD G. HALE
VICE PRESIDENT (ENGINEERING), SECRETARY AND TREASURER OF PALWEB AND
PRESIDENT OF PPP
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 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.
Mr. Hale became the Vice President of Engineering, Secretary and
Treasurer of PalWeb on January 22, 2000 and became the President of PPP on
July 9, 1999.
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.
Mr. Kruger is paid a salary of $12,000 per year.
No other parties receive executive compensation.
26
<PAGE>
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
For a related party transaction that occurred in February 2000 in
connection with PalWeb's acquisition of PaceCo Financial Services, Inc., see
Part I, Item 1, of this registration statement.
On January 10, 2000, PalWeb issued the following number of shares of
unregistered Common Stock to the following parties as consideration for the
cancellation of the debt set forth opposite of such parties' name:
<TABLE>
<CAPTION>
DEBT OWED NO. OF SHARES ISSUED IN
PARTIES' NAME BY PALWEB CANCELLATION OF SUCH DEBT
------------- --------- -------------------------
<S> <C> <C>
Hildalgo Trading Co., L.C. $761,000.00 7,610,000
Onward, L.L.C. 312,428.64 3,124,786
Paul A. Kruger 174,000.00 1,740,000
</TABLE>
Hildalgo Trading Co., L.C. and Onward, L.L.C. are wholly owned by Paul A.
Kruger.
Also on January 10, 2000, PalWeb issued 3,025,214 shares of
unregistered Common Stock of PalWeb to Hildalgo Trading Co., L.C. as
consideration for $302,512 in contributions of equipment to PalWeb by Hildalgo
Trading Co., L.C.
In a related party transaction in April 1999, Pace Plastic Pallets,
Inc. distributed 8,500,000 shares of Common Stock it received pursuant to an
Agreement for Sale of Machinery by and between Plastic Pallet Production, Inc.
and Pace Plastic Pallets, Inc. to certain parties related to Paul A. Kruger,
including Ron Hale, Mark Kidd.
For certain related party transactions whereby PalWeb issued Common
and Preferred Stock to officers and directors in exchange for such officers'
and directors' management services as well as for consideration in other
transactions, see Recent Sales of Unregistered Securities, Part II, Item 4 of
this registration statement.
ITEM 8. DESCRIPTION OF SECURITIES
The authorized capital stock of PalWeb consists of 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.
COMMON STOCK
27
<PAGE>
There were 205,456,628 shares of Common Stock issued and outstanding
as of April 4, 2000, excluding shares classified as treasury stock owned by
PalWeb's subsidiary, PFS.
Holders of the Common Stock do not have preemptive rights to purchase
additional shares of Common Stock or other subscription rights. The Common
Stock carries no conversion rights and is not subject to redemption or to any
sinking fund provisions. All shares of Common Stock are entitled to share
equally in dividends from sources legally available therefor when, as and if
declared by the Board of Directors and, upon liquidation or dissolution of
PalWeb, whether voluntary or involuntary, to share equally in the assets of
PalWeb available for distribution to stockholders after any distributions have
been made to preferred stockholders. The Board of Directors is authorized to
issue additional shares of Common Stock on such terms and conditions and for
such consideration as the Board may deem appropriate without further
stockholder action. Reference is made to PalWeb's Certificate of Incorporation
and Bylaws that are exhibits to this registration statement, as well as to the
applicable statutes of the State of Delaware for a more complete description
concerning the rights and liabilities of common stockholders.
Each holder of Common Stock is entitled to one vote per share, either
in person or by proxy, on all matters that may be voted on by the owners
thereof at meetings of the stockholders. Since the shares of Common Stock do
not have cumulative voting rights, the holders of more than 50% of the shares
voting for the election of directors can elect all the directors and, in such
event, the holders of the remaining shares will not be able to elect any
person to the Board of Directors.
PREFERRED STOCK
There were 2,885,000 shares of preferred stock of PalWeb (the
"Preferred Stock") issued and outstanding as of April 4, 2000.
Holders of the Preferred Stock do not have rights to preferential
dividends, preemptive rights to purchase additional shares of Preferred Stock
or other subscription rights. Holders of the Preferred Stock have the number
of votes per share equal to the number of shares of Common Stock into which
the Preferred Stock is convertible at any meeting of the stockholders of
PalWeb. The shares of Preferred Stock are convertible, at the option of the
holder, into Common Stock at the rate of one share of Common Stock for each
share of Preferred Stock surrendered for conversion.
The remaining terms of the Preferred Stock have not been finally
determined. However, the Board of PalWeb is considering amending the
Certificate of Incorporation of PalWeb to establish the following terms of the
Preferred Stock. The Preferred Stock may be redeemed, solely at the option of
PalWeb, at a redemption price of $0.10 per share. The Preferred Stock is not
subject to any sinking fund provisions and is not entitled to the payment of
dividends. Upon
28
<PAGE>
the liquidation or dissolution of PalWeb, the holders of the Preferred Stock
shall be entitled to receive out of assets of PalWeb available for
distribution to shareholders, before any distribution of assets is made to
holders of Common Stock or any series of preferred stock ranking junior to the
Preferred Stock as to proceeds of liquidation, liquidating distributions in
the amount of $0.10 per share.
The Board of Directors is authorized to issue additional shares of
Preferred Stock on such terms and conditions and for such consideration as the
Board may deem appropriate without further stockholder action. Reference is
made to PalWeb's Certificate of Incorporation and By-laws that are exhibits to
this registration statement, as well as to applicable statutes of the State of
Delaware for a more complete description concerning the rights and liabilities
of preferred stockholders.
TRANSFER AGENT
The current registrar and transfer agent for the Common and Preferred
Stock is Continental Stock Transfer and Trust Company, located at 2 Broadway,
19th Floor, New York, NY 10004. Plans are being made to change the registrar
and transfer agent to UMB Bank, N.A., 928 Grand Boulevard, Kansas City,
Missouri 64106.
PART II
ITEM 1. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
From August 1997 through October 6, 1999 PalWeb's Common Stock traded
on the National Association of Securities Dealers Automatic Quotation (NASDAQ)
over-the-counter bulletin board system, with "CBNR" as its trading symbol from
August 1997 through April 1999, "PAEB" as its trading symbol from April 1999
through September 13, 1999 and "PAEBE" as its trading symbol from September
13, 1999 through October 6, 1999. The following table sets forth the range of
high and low bid prices for PalWeb's Common Stock during the time periods
indicated. Prices, as reported by NASDAQ, reflect quotations between dealers
without adjustment for retail mark-up, mark-down or commission and may not
represent actual transactions.
<TABLE>
<CAPTION>
QUARTER ENDING HIGH BID LOW BID
-------------- -------- -------
<S> <C> <C>
Aug. 31, 1997 $0.26125 $0.10
Nov. 30, 1997 0.65 0.18
Feb. 28, 1998 0.38 0.17
May 31, 1998 0.45 0.16
29
<PAGE>
QUARTER ENDING HIGH BID LOW BID
-------------- -------- -------
Aug. 31, 1998 0.23 0.04
Nov. 30, 1998 0.17 0.06
Feb. 28, 1999 0.16 0.06
May 31, 1999 0.36 0.08
Aug. 31, 1999 0.27 0.12
Nov. 30, 1999(1) 0.175 0.70
</TABLE>
- ------------------------
(1) Information presented for the period ended November 30, 1999 is high and
low bid prices up until PalWeb was de-listed from the NASDAQ over-the-counter
bulletin board system on October 6, 1999.
On October 6, 1999, PalWeb's Common Stock was de-listed from the
NASDAQ over-the-counter bulletin board system. PalWeb's common stock currently
trades on the NASDAQ over-the-counter pink sheet system, with "PAEB" as its
trading symbol. The following table sets forth the range of high and low prices
at which PalWeb's Common Stock traded during the time periods indicated, as
reported by NASDAQ.
<TABLE>
<CAPTION>
QUARTER ENDING HIGH LOW
-------------- ---- ---
<S> <C> <C>
Nov. 30, 1999(1) $0.16 $0.07
Feb. 29, 2000 0.25 0.02
</TABLE>
- ------------------------
(1) Information presented for the period ended November 30, 1999 is high and
low prices from the date when PalWeb was de-listed from the NASDAQ
over-the-counter bulletin board system (October 6, 1999) through the end of
the quarter on November 30, 1999.
As of April 4, 2000, PalWeb had approximately 1,274 common stockholders of
record.
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 2. 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
30
<PAGE>
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 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 is contractually obligated to
indemnify PalWeb from any loss it may incur in connection with any energy
related matter. However, the collection of an indemnity claim from the Union
Group could prove to be difficult, if not impossible.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.
There are no disagreements with accountants on accounting and financial
disclosure.
ITEM 4. 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>
NO. OF
NAME CLASS SHARES DATE CONSIDERATION
---- ----- ------ ---- -------------
<S> <C> <C> <C> <C>
Steve Bright Common 25,000 07/07/97 Legal services valued at $2,500
Don Saunders, TTE Common 400,000 07/14/97 Brokerage services relating to
the Fleur-David Corporation
acquisition valued at $40,000
Richard Wood Common 50,000 07/14/97 Finder's fee relating to
acquisition of Cooper
Manufacturing Corp. valued at
$5,000
Ronald Siler Common 40,000 08/27/97 Accounting services valued at
$4,000
31
<PAGE>
NO. OF
NAME CLASS SHARES DATE CONSIDERATION
---- ----- ------ ---- -------------
<S> <C> <C> <C> <C>
Jay Ungerman Common 220,000 08/27/97 Legal services valued at
$22,000
Electric & Gas Common 1,000,000 12/08/97 Settlement of debt owed by
Technology, Inc Cooper Mfg. Corp. when
acquired by PalWeb in the
amount of $100,000
John Poe Common 30,000 12/10/97 Finder's fee relating to
acquisition of Wyoming Pipe &
Tool Co. valued at $3,000
Robert Seago Common 30,000 12/10/97 Finder's fee relating to
acquisition of Wyoming Pipe &
Tool Co. valued at $3,000
Michael Young & Partners, Common 1,028,907 12/10/97 Note conversion pursuant to
Inc. terms of Note in the amount of
$102,891
John Gourley Common 300,000 12/19/97 Brokerage services relating to
acquisition of Cooper Mfg.
Corp. valued at $110,000
James Bradshaw Common 300,000 12/19/97 Finder's Fee relating to
acquisition of Plastic Pallet
Production, Inc. valued at
$110,000
Michael John, et al Common 101,000,000 01/09/98 Stock exchange relating to
(Shareholders of Plastic acquisition of Plastic Pallet
Pallet Production, Inc.) Production, Inc. valued at
$11,914,573
Margarete Jung Common 15,000,000 03/13/98 Stock exchange relating
acquisition of 20% of Vimonta
AG valued at $3,150,000
32
<PAGE>
NO. OF
NAME CLASS SHARES DATE CONSIDERATION
---- ----- ------ ---- -------------
<S> <C> <C> <C> <C>
Ralph Curton, Jr. Common 2,000,000 08/11/98 Management services for
serving as an Officer and
Director valued at $200,000
Alan Haliburton Common 100,000 08/26/98 Public relations services and
research relating thereto
valued at $10,000
Robert V. Daigle Common 1,000,000 02/03/99 Settlement of lawsuit claiming
damages for patent design work
valued at $100,000
USGT Investors, L.P. Common 25,000 03/05/99 Finder's fee relating to
acquisition of Wyoming Pipe &
Tool Co. valued at $5,000
Michael John Common 2,000,000 04/01/99 Reimbursement of stock
advanced to Mack Long in a
real estate transaction valued
at $230,000
PaceCo Financial Common 41,000,000 04/30/99 $189,000 cash and engineering,
Services, Inc. and Assigns financial, and marketing
services valued at $3,911,00
Michael John Common 5,000,000 05/14/99 Management services for
serving as an Officer and
Director valued at $650,000
Gibralt Holdings, Ltd. Common 360,000 08/17/99 Satisfaction of debt in the
amount of $62,280
Craig Adamson Common 100,000 08/17/99 Satisfaction of debt in the
amount of $17,300
33
<PAGE>
NO. OF
NAME CLASS SHARES DATE CONSIDERATION
---- ----- ------ ---- -------------
<S> <C> <C> <C> <C>
Crescent Road Corporation Common 6,500,000 12/01/99 Public relations and Investor
Relations Services valued at
$650,000
Consolidated Capital Common 4,500,000 12/01/99 Public relations and investor
Group, Inc. relations services valued at
$450,000
Hildalgo Trading Co., Common 7,610,000 01/10/00 Satisfaction of debt in the
L.C. amount of $761,000
Onward, L.L.C. Common 3,124,786 01/10/00 Satisfaction of debt in the
amount of $312,478.64
Hildalgo Trading Co., L.C. Common 2,900,214 01/10/00 Contribution of equipment
valued at $290,021
Paul A. Kruger Common 1,740,000 01/10/00 Satisfaction of debt in the
amount of $174,000
F. Edwin Smith, Jr. and Preferred 110,000 12/10/97 Legal services valued at
Assigns $13,200
F. Edwin Smith, Jr. and Preferred 500,000 01/05/98 Legal Services valued at
Assigns $60,000
Randall C. McCleskey Preferred 400,000 07/26/99 Management services for
serving as an Officer and
Director valued at $60,000
John Gourley Preferred 500,000 07/26/99 Brokerage services relating to
acquisition of Cooper Mfg.
Corp. valued at $75,000
Stan Haddock Preferred 25,000 07/26/99 Finder's fee relating to
acquisition of Cooper
Manufacturing Corp.
34
<PAGE>
NO. OF
NAME CLASS SHARES DATE CONSIDERATION
---- ----- ------ ---- -------------
<S> <C> <C> <C> <C>
valued at $3,750
Ronald A. Siler Preferred 250,000 07/26/99 Accounting services valued at
$37,500
Kenneth Graves Preferred 150,000 07/26/99 Accounting services valued at
$22,500
Connie L. Gadt Preferred 80,000 07/26/99 Accounting services valued at
$12,000
Ralph Curton, Jr. and Preferred 2,558,890 07/26/99 Management services for
Assigns serving as an Officer and
Director and Expense
Reimbursement valued at
$383,834
</TABLE>
There were no issuances of either Common or Preferred Stock of
PalWeb to any of PalWeb's independent accountants.
On December 1, 1999, PalWeb issued a convertible debenture in the
aggregate principal amount of $500,000, interest payable at the rate of 8.5%
per annum, to Ralph Curton, Jr. in exchange for Mr. Curton's agreement to
loan PalWeb up to $500,000 on a revolving line of credit basis. On or after
June 1, 2000, Mr. Curton shall have the right to convert the principal of the
convertible debenture into fully paid and non-assessable shares of PalWeb's
common stock at the rate of one (1) share for each $0.10 of principal amount
that is then due and owing by PalWeb to Mr. Curton at the time of such
conversion.
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. All parties listed above are sophisticated persons or
entities, performed services for PalWeb or personally knew members of
PalWeb's management staff at the time of the transactions listed above. There
was no underwriting and no commissions were paid to any party upon the
issuance of such stock.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Under Section EIGHT of PalWeb's Certificate of Incorporation and
Article VIII of its Bylaws, PalWeb 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. As a result of the PalWeb's
Certificate of Incorporation, Bylaws and Delaware law, stockholders may have
35
<PAGE>
more limited rights to recover against directors for breach of fiduciary duty
than as compared to the standard of care imposed upon a director in the state
where the investor resides.
PART F/S
Set forth beginning at page F-1 are the financial statements required
for Form 10-SB. The historical financial statements of Pace Holding, Inc. and
the pro forma financial information required by Section 310 of Regulation SB
will be provided on or before June 17, 2000 in accordance with Item 7,
subparts (a)(4) and (b) of Form 8-K.
PART III
ITEM 1. INDEX TO EXHIBITS
The following exhibits are filed as a part of this report immediately
following the financial statements.
EXHIBIT NO. DESCRIPTION
2.1 Stock Exchange Agreement dated September 26, 1997 by and
among Plastic Pallet Production, Inc., the shareholders of
Plastic Pallet Production, Inc. and Cabec Energy Corp., as
amended
2.2 Agreement and Plan of Reorganization by and among PalWeb
Corporation, PP Financial, Inc. and Pace Holding, Inc.
dated January 21, 2000
3.1 Certificate of Incorporation of PalWeb Corporation
3.2 By-laws of PalWeb Corporation
10.1 Loan Agreement by and between Mr. Ralph Curton, Jr. and
PalWeb Corporation dated December 1, 1999
10.2 Personnel Staffing Agreement by and between Accord Human
Resources, Inc. and Plastic Pallet Production Company, Inc.
dated January 19, 1999
10.3 First Supplement to the Stock Purchase Exchange Agreement of
March 11, 1998 dated August 3, 1998 and Executive Agreement
between Plastic Pallet Production, Inc. and Vimonta AG dated
December 10, 1998 (both documents were translated from
German to English)
10.4 Stock Purchase/Exchange Agreement by and among Dr. Michael
Hoenig, Margaret Jung and Cabec Energy Corp. dated March 11,
1998
36
<PAGE>
10.5 Lease Agreement by and between Onward, L.L.C. and Plastic
Pallet Production, Inc. dated April 5, 1999
10.6 Indemnity Agreement by and between The Union Group, Inc. and
Cabec Energy Corp. dated August 31, 1998
21.1 Subsidiaries of PalWeb Corporation
99.1 Default Judgment for Cabec Energy Corp vs. Wolfgang Ullrich
and Rosarin Chaisayan, No. DV-99-00110-E, District Court,
Dallas County, Texas, 101st Judicial District
99.2 Default Judgment for Pallet Production, Inc., PalWeb
Corporation and Onward, L.L.C. vs. Chartex AG and New Inter
HKB AG, No. 99-10249-B, District Court, Dallas County,
Texas, 44th Judicial District
In accordance with Section 12 of the Securities Exchange Act of 1934,
the registrant caused this registration statement to be signed on its behalf
by the undersigned, thereunto duly authorized.
PALWEB CORPORATION
By: /s/ Paul A. Kruger
-----------------------------------
Paul A. Kruger
Chairman of the Board and President
37
<PAGE>
<TABLE>
<CAPTION>
INDEX TO FINANCIAL STATEMENTS
<S> <C>
Independent Auditor's Report.................................................F-1
Consolidated Balance Sheet...................................................F-3
Consolidated Statements of Operations (Unaudited)............................F-5
Consolidated Statements of Operations........................................F-6
Consolidated Statements of Changes in Stockholders' Deficiency...............F-7
Consolidated Statements of Cash Flows (Unaudited)............................F-9
Consolidated Statements of Cash Flows.......................................F-11
Notes to Consolidated Financial Statements..................................F-12
</TABLE>
38
<PAGE>
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' deficiency, and
cash flows for the years ended May 31, 1999 and 1998 and the period from
inception (November 20, 1995) to May 31, 1997. 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 ended May 31, 1999 and 1998 and
the period from inception (November 20, 1995) to May 31, 1997 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
F-1
<PAGE>
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,
except for Note 14,
as to which the date
is January 24, 2000
Ardmore, Oklahoma
F-2
<PAGE>
PALWEB CORPORATION
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
MAY 31,
February 29, -------------------------------------
ASSETS 2000 1999 1998 1997
------ ----------- ----------- ----------- -----------
(unaudited)
<S> <C> <C> <C> <C>
CURRENT ASSETS:
Cash $ 322 $ 710 $ - $ 6,641
Accounts receivable 3,852 - - -
Inventory 9,778 9,938 33,687 54,068
Assets held for resale - - 74,995 -
----------- ----------- ----------- -----------
Total current assets 13,952 10,648 108,682 60,709
PROPERTY, PLANT AND EQUIPMENT, NET
of accumulated depreciation 1,835,472 1,819,216 2,437,900 1,408,649
OTHER ASSETS:
Net assets, discontinued operations - 437,673 -
Patent costs, net 57,749 60,749 56,072 31,731
Deposits and other 30,173 30,173 29,353 24,000
----------- ----------- ----------- -----------
Total other assets 87,922 90,922 523,098 55,731
----------- ----------- ----------- -----------
TOTAL ASSETS $ 1,937,346 $ 1,920,786 $ 3,069,680 $ 1,525,089
=========== =========== =========== ===========
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
CURRENT LIABILITIES:
Notes payable $ 50,000 $ 50,000 $ 963,807 $ 472,827
Mortgage payable - related party - - 1,350,000 -
Accounts payable 343,273 1,026,667 1,102,458 295,308
Accrued expenses 118,506 119,938 349,779 53,996
Payable to related parties 1,619,422 2,222,992 1,812,623 1,540,500
Customer deposits - 300,000 - -
----------- ----------- ----------- -----------
Total current liabilities 2,131,201 3,719,597 5,578,667 2,362,631
LONG-TERM DEBT 340,000 - - -
LEASE FINANCE OBLIGATION 1,757,958 1,766,958 - -
STOCKHOLDERS' DEFICIENCY:
Preferred stock, $.0001 par,
20,000,000 shares authorized -
outstanding - 2,885,000, 880,000,
380,000 and -0-, respectively 289 88 38 -
F-3
<PAGE>
February 29, -------------------------------------
ASSETS 2000 1999 1998 1997
------ ----------- ----------- ----------- -----------
(unaudited)
Common stock, $.10 par value,
250,000,000 authorized, outstanding -
205,456,628, 217,981,046, 166,856,046
and 119,145,725, respectively 20,545,663 21,798,105 16,685,605 11,914,572
Additional paid-in capital 6,798,890 2,027,465 1,797,015 -
Deficit accumulated during
development stage (29,636,655) (27,391,427) (20,991,645) (12,752,114)
----------- ----------- ----------- -----------
Total stockholders' deficiency (2,291,813) (3,565,769) (2,508,987) (837,542)
----------- ----------- ----------- -----------
TOTAL LIABILITIES AND
STOCKHOLDERS DEFICIENCY $ 1,937,346 $ 1,920,786 $ 3,069,680 $ 1,525,089
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of this consolidated financial
statement.
F-4
<PAGE>
PALWEB CORPORATION
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
From Inception
Nine Month Period (November 20, 1995)
Ended February 29/28, To February 29,
------------------------- ---------------
2000 1999 2000
----------- ----------- ---------------
<S> <C> <C> <C>
SALES $ 6,091 $ 41,510 $ 98,785
EXPENSES:
Research and development - - 406,943
General and administrative
expenses 2,050,117 4,957,639 9,851,944
Depreciation expense 131,943 115,555 541,057
Impairment - - 3,456,231
Interest expense 137,949 199,287 601,140
----------- ----------- ------------
Total expenses 2,320,009 5,272,481 14,857,315
----------- ----------- ------------
OTHER INCOME (EXPENSE):
Gain on settlement of
liabilities 75,027 - 75,027
Other (6,337) 51,573 270,848
----------- ----------- ------------
Total other income (expense) 68,690 51,573 345,875
----------- ----------- ------------
LOSS BEFORE DISCONTINUED OPERATIONS
AND EXTRAORDINARY ITEMS (2,245,228) (5,179,398) (14,412,655)
LOSS FROM DISCONTINUED OPERATION (7,300) (857,061)
EXTRAORDINARY GAIN - 46,266 68,616
----------- ----------- ------------
NET LOSS $(2,245,228) $(5,140,432) $(15,201,100)
=========== =========== ============
LOSS PER COMMON SHARE:
Loss before discontinued operations
and extraordinary loss $ (0.01) (0.03)
Loss from discontinued operation - -
Extraordinary loss - -
----------- -----------
Loss per common share $ (0.01) $ (0.03)
=========== ===========
WEIGHTED AVERAGE SHARES OUTSTANDING 184,316,000 174,998,000
=========== ===========
</TABLE>
The accompanying notes are an integral part of this consolidated financial
statement.
F-5
<PAGE>
PALWEB CORPORATION
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
From Inception
(November 20, 1995) To
Year Ended May 31, May 31, May 31,
------------------------ ----------- ------------
1999 1998 1997 1999
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
SALES $ 51,510 $ 37,863 $ 3,321 $ 92,694
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 of 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
----------- ----------- ----------- ------------
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
----------- ----------- ----------- ------------
LOSS BEFORE DISCONTINUED OPERATIONS
AND EXTRAORDINARY ITEMS (6,030,725) (4,807,184) (1,329,518) (12,167,427)
LOSS FROM DISCONTINUED OPERATIONS (7,300) (367,805) - (375,105)
EXTRAORDINARY GAIN (LOSS) 68,616 - - 68,616
----------- ----------- ----------- ------------
NET LOSS, as previously reported (5,969,409) (5,174,989) (1,329,518) (12,473,916)
PRIOR PERIOD ADJUSTMENT (Note 13) - (481,956) (481,956)
----------- ----------- ----------- ------------
NET LOSS $(5,969,409) $(5,656,945) $(1,329,518) $(12,955,872)
=========== =========== =========== ============
LOSS PER COMMON SHARE:
Loss before discontinued
operations & extraordinary gain $ (.03) $ (.04) $ (.01)
Discontinued operations - (.01) -
Extraordinary gain - - -
----------- ----------- -----------
Total $ (.03) $ (.05) $ (.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.
F-6
<PAGE>
PALWEB CORPORATION
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIENCY
<TABLE>
<CAPTION>
Preferred Stock Common Stock Additional
------------------ ------------------------- Paid-in
Shares Amount Shares Amount Capital
--------- ------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C>
BALANCES, November 20, 1995 - $ - - $ - $ -
Proceeds from sale of stock - - 119,145,725 11,914,572 -
Net Loss - - -
---------- ------- ----------- ----------- ----------
BALANCES, May 31, 1997 - - 119,145,725 11,914,572 -
Common stock held by minority stockholders
of PalWeb in connection with reverse acquisition 530,000 53 31,960,321 3,196,033 -
Issuance of stock for services 600,000 60,000 162,000
Issuance of stock for investment - - 15,000,000 1,500,000 1,650,000
Preferred stock converted to common (150,000) (15) 150,000 15,000 (14,985)
Net loss - - - - -
---------- ------- ----------- ----------- ----------
Balances, May 31, 1998, as adjusted (Note 14) 380,000 38 166,856,046 16,685,605 1,797,015
Issuance of stock for services 500,000 50 48,125,000 4,812,500 200,450
Stock issued for debt - - 3,000,000 300,000 30,000
Distribution of energy services
segment to minority stockholders - - - - -
Prior period adjustment (Note 14) - - - - -
Net loss - - - - -
---------- ------- ----------- ----------- ----------
BALANCES, May 31, 1999, as adjusted (Note 14) 880,000 88 217,981,046 21,798,105 2,027,465
Issuance of stock for services and equipment* 125,000 13 14,500,210 1,450,021 18,737
Contribution of debt to capital - - - - 189,000
<CAPTION>
Total
Accumulated Stockholders'
Deficit Deficiency
------------- ------------
<S> <C> <C>
BALANCES, November 20, 1995 $ - $ -
Proceeds from sale of stock (11,422,596) 491,976
Net Loss (1,329,518) (1,329,518)
------------ -----------
BALANCES, May 31, 1997 (12,752,114) (837,542)
Common stock held by minority stockholders
of PalWeb in connection with reverse acquisition (2,582,586) 613,500
Issuance of stock for services - 222,000
Issuance of stock for investment - 3,150,000
Preferred stock converted to common - -
Net loss (5,656,945) (5,656,945)
------------ -----------
Balances, May 31, 1998, as adjusted (Note 14) (20,991,645) (2,508,987)
Issuance of stock for services - 5,013,000
Stock issued for debt - 330,000
Distribution of energy services
segment to minority stockholders (238,395) (238,395)
Prior period adjustment (Note 14) (191,978) (191,978)
Net loss (5,969,409) (5,969,409)
------------ -----------
BALANCES, May 31, 1999, as adjusted (Note 14) (27,391,427) (3,565,769)
Issuance of stock for services and equipment* - 1,468,771
Contribution of debt to capital - 189,000
F-7
<PAGE>
Stock issued in satisfaction of debt* 3,963,890 396 12,334,790 1,233,479 627,538
Preferred stock converted to common* (2,083,890) (208) 2,083,890 208,389 (208,181)
Cancellation of common stock* - - (41,443,308) (4,144,331) 4,144,331
Net loss* - - - - -
---------- ------- ----------- ----------- ----------
BALANCES, February 29, 2000* 2,885,000 289 205,456,628 $20,545,663 $6,798,890
=========== ======= =========== =========== ==========
<CAPTION>
Stock issued in satisfaction of debt* - 1,861,413
Preferred stock converted to common* - -
Cancellation of common stock* - -
Net loss* (2,245,228) (2,245,228)
------------ -----------
BALANCES, February 29, 2000* $(29,636,655) $(2,291,813)
============ ===========
</TABLE>
* Denotes unaudited transactions.
The accompanying notes are an integral part of this consolidated financial
statement.
F-8
<PAGE>
PALWEB CORPORATION
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
From Inception
Nine Month Period (November 20, 1995)
Ended February 29/28, To February 29,
------------------------- ---------------
2000 1999 2000
----------- ----------- ---------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(2,245,228) $(5,140,432) $(15,201,100)
Adjustments to reconcile net loss to
cash used by operating activities:
Depreciation and amortization 131,943 115,554 571,857
Extraordinary gain on debt retirement - (46,266) (61,616)
Consulting services paid by
issuance of common stock 1,468,771 4,363,000 6,703,771
Impairment of investment - - 3,145,000
Loss of disposition of property 6,337 - 317,568
Changes in accounts receivable (3,852) - (3,852)
Changes in inventory 160 14,999 (9,778)
Changes in other assets - (820) (85,837)
Changes in payable - related party 375,030 208,614 2,598,022
Changes in accounts payable
and accrued expenses 86,987 369,759 1,928,851
Increase in customer deposits - 300,000 300,000
---------- ----------- -----------
Net Cash Provided by (Used)
Operating Activities (179,852) 184,408 195,886
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (169,536) (115,653) (3,385,109)
Proceeds from sale of equipment 18,000 74,995 92,995
Proceeds from lease finance
obligation - - 149,517
----------- ----------- -----------
Net cash used by Investing Activities (151,536) (40,658) (3,142,597)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes and mortgages payable 340,000 - 1,353,807
Payments on notes payable - (143,750) (239,750)
Proceeds from mortgage note - related party - - 1,350,000
Proceeds from issuance of common stock - - 491,976
Other (9,000) - (9,000)
----------- ----------- -----------
Net cash provided by (Used)
financing activities 331,000 (143,750) 2,947,033
----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH (388) - 322
CASH, beginning of period 710 - -
----------- ----------- -----------
CASH, end of period $ 322 $ - $ 322
=========== =========== ===========
F-9
<PAGE>
Nine Month Period
Ended February 29/28,
-------------------------
2000 1999
----------- -----------
SUPPLEMENTAL INFORMATION:
Non-cash investing activities -
Property released in foreclosure $ - $ 415,232
Net discontinued assets distri-
buted to certain stockholders - 430,373
Non-cash financing activities -
Common and preferred stock
issued for services & equipment 1,468,771 4,363,000
Common and preferred stock
issued for debt 673,934 100,000
Common stock issued for debt
of related party 1,187,479 -
Common stock issued on con-
version of preferred stock 208,389 -
Debt contributed to additional
paid in capital by related party 189,000 -
Common stock held by related party
canceled by default judgement 4,144,331 -
</TABLE>
The accompanying notes are an integral part of this consolidated financial
statement.
F-10
<PAGE>
PALWEB CORPORATION
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
From Inception
(November 20, 1995) To
-------------------------
Year Ended May 31, May 31, May 31,
------------------------ ----------- ------------
1999 1998 1997 1999
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(5,969,409) $(5,656,945) $(1,329,518) $(12,955,872)
Adjustments to reconcile net loss to
cash used by operating activities:
Depreciation and amortization 154,587 188,456 96,871 439,914
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 (1,426) (26,380) (58,031) (85,837)
Changes in payable - related party 410,369 272,123 1,540,500 2,222,992
Changes in accounts payable
and accrued expenses 244,600 1,247,960 349,304 1,841,864
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:
Proceeds from notes payable 50,000 490,980 472,827 1,013,807
Payments on notes payable (239,750) - - (239,750)
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
=========== =========== =========== ============
SUPPLEMENTAL INFORMATION (Note 10)
</TABLE>
The accompanying notes are an integral part of this consolidated financial
statement.
F-11
<PAGE>
PALWEB CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Effective December 12, 1997, PalWeb Corporation ("PalWeb"), formerly
Cabec Energy Corporation, was acquired in a reverse acquisition by the
stockholders of Plastic Pallet Production, Inc. ("PPP") whereby the
stockholders of PPP became majority owners of PalWeb. Pursuant to the
agreement, PalWeb exchanged its common stock for the outstanding common
stock of PPP and the assets and liabilities of PalWeb and its
subsidiaries as of the effective date were to be transferred into a new
company whose stock was to be distributed to the stockholders of
PalWeb, other than the new stockholders resulting from the PPP stock
transfer. This latter distribution was effected November 10, 1998.
PPP shareholders received 119,145,725 shares of common stock for an
ownership of approximately 78% of PalWeb in exchange for its shares of
PPP. The outstanding shares of PalWeb just prior to the acquisition
were 31,960,321 shares of common stock and 530,000 shares of
convertible preferred stock resulting in an ownership retained by the
pre-acquisition shareholders of PalWeb of approximately 22%. The basis
for the number of PalWeb common shares issued to the PPP shareholders
was to effect the agreed upon interest ownership levels based on the
then outstanding shares of PalWeb.
The business of PalWeb as of December 12, 1997 is principally involved
in energy services. The accounting for the reverse acquisition is a
purchase and the net assets of PalWeb acquired are valued at fair value
of the of the underlying assets for a total of $613,500 based on
managements assessment therein. Goodwill of approximately $1,233,000 is
amortized by the straight line method over 40 years. The operating
results for the period from June 1, 1997 to December 12, 1997 is not
significant. Since the disposition of the energy services net assets
was approved at the time of approval of the PPP stock exchange, these
net assets, including the aforementioned goodwill, are accounted for in
the accompanying financial statements as discontinued operations.
Further, the distribution effected as of November 10, 1998 is accounted
for as a spin off in accordance with APB Opinion No. 29, "Accounting
for Nonmonetary Transactions."
The consolidated balance sheet and consolidated statements of
operations and cash flows as of and for the period ended May 31, 1997
are the
F-12
<PAGE>
PALWEB CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
consolidated accounts of Plastic Pallet Production, Inc. and its
subsidiaries. Similarly, the activity for the period June 1, 1997
through December 12, 1997, the effective date of the reverse
acquisition, included in the consolidated statements of operations and
cash flows for the year ended May 31, 1998, represent the consolidated
accounts of PPP.
PalWeb and its wholly owned subsidiary PPP will pursue the manufacture
and marketing of plastic pallets and the related injection molding
equipment necessary to produce plastic pallets.
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts
of PalWeb 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
PalWeb considers all short-term investments with an original maturity
of three months or less to be cash equivalents.
USE OF ESTIMATES
The preparation of PalWeb's financial statements in conformity with
generally accepted accounting principles requires PalWeb'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.
INVENTORY
F-13
<PAGE>
PALWEB CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Inventory consists of finished pallets and is stated at the lower of
cost (first-in, first-out) or market value.
PROPERTY, PLANT AND EQUIPMENT
PalWeb'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:
Plant building 20 years
Plant improvements 7 years
Production machinery equipment 5-10 years
Office equipment & furniture & fixtures 3- 5 years
Upon sale, retirement or other disposal, the related costs and
accumulated depreciation of items of property, plant or equipment are
removed from the related accounts and any gain or loss is recognized.
When events or changes in circumstances indicate that assets may be
impaired, an evaluation is performed comparing the estimated future
undiscounted cash flows associated with the asset to the assets
carrying amount. If the asset carrying amount exceeds the cash flows, a
write-down to market value or discounted cash flow value is required.
INVESTMENT IN VIMONTA AG
PalWeb'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 PalWeb 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 when the product is shipped.
INCOME TAXES
F-14
<PAGE>
PALWEB CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PalWeb 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.
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, PalWeb 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
PalWeb's consolidated financial statements.
ACCOUNTING CHANGES - CONTINUED
During the year ended May 31, 1999, PalWeb 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
F-15
<PAGE>
PALWEB CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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
PalWeb's consolidated financial statements.
2. CONTINUATION AS A GOING CONCERN
The accompanying financial statements have been prepared assuming that
PalWeb will continue as a going concern. PalWeb is in the development
stage and has suffered significant losses from operations. To date,
PalWeb 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 private placement
of equity securities. 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 PalWeb'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, PalWeb 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 is as follows:
<TABLE>
<CAPTION>
February 29, May 31,
------------ ----------------------------------
2000 1999 1998 1997
---------- ---------- ---------- ----------
(Unaudited)
<S> <C> <C> <C> <C>
Land $ 85,000 $ 85,000 $ 691,057 $ 412,057
Plant building 1,166,127 1,166,127 1,166,127 -
Plant improvements 141,791 141,791 141,791 131,296
Production machinery and equipment 175,410 254,367 254,368 600,115
Office equipment 94,282 94,282 73,941 66,098
Furniture and fixtures 33,654 33,654 33,654 33,654
Work in Progress 605,413 417,761 299,370 260,000
---------- ---------- ---------- ----------
2,301,677 2,192,982 2,660,308 1,503,220
Less: accumulated depreciation (466,205) (373,766) (222,408) (94,571)
---------- ---------- ---------- ----------
$1,835,472 $1,819,216 $2,437,900 $1,408,649
========== ========== ========== ==========
</TABLE>
F-16
<PAGE>
PALWEB CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The work-in-progress consists of the construction of a prototype
injection molding machine and molds for the manufacture of plastic
pallets.
Depreciation expense from continuing operations for the years ended May
31, 1999, 1998 and 1997 is $151,358, $155,970 and $94,571, respectively
and $128,943 and $103,720 for the unaudited periods ended February
29/28, 2000 and 1999.
4. NOTES PAYABLE
A summary of the notes payable as of May 31 are as follows:
<TABLE>
<CAPTION>
May 31,
February 29, ----------------------------------
2000 1999 1998 1997
------------ ---------- ---------- ----------
(Unaudited)
<S> <C> <C> <C> <C>
Note payable to bank, interest at 2% over
prime, due May 2000 $ 50,000 $ 50,000 $ - $ -
Note payable to individual under a
$500,000 line of credit, interest at
8.5%, due December 1, 2001 340,000 - - -
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 -
---------- --------- --------- ---------
390,000 50,000 963,807 472,827
Current portion 50,000 50,000 963,807 472,827
---------- --------- --------- ---------
Long-term debt $ 340,000 $ - $ - $ -
========== ========= ========= =========
</TABLE>
F-17
<PAGE>
PALWEB CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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, PalWeb 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
PalWeb'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, PalWeb 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.
6. EXTRAORDINARY GAIN
During 1999, PalWeb negotiated settlement and incurred foreclosure on
certain notes payable, see note 4. Additionally, PalWeb 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, PalWeb 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 PalWeb 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, PalWeb has recorded a charge to income in the amount of
$3,145,000.
During the year ended May 31, 1998, PalWeb recorded an impairment loss
in the amount of $126,249 on certain plant equipment designated for
resale to reduce the carrying value to the asset's net realizable
value. Additionally, certain molds for plastic products were deemed
obsolete and
F-18
<PAGE>
PALWEB CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
an impairment charge in the amount of $184,982 was recorded in the year
ended May 31,1998.
8. FEDERAL INCOME TAXES
Deferred taxes as of May 31, are as follows:
<TABLE>
<CAPTION>
February 29, May 31,
------------ ----------------------------------
2000 1999 1998 1997
------------ ---------- ---------- ----------
(Unaudited)
<S> <C> <C> <C> <C>
Net operating loss $3,915,986 $3,093,355 $ 944,407 $ 471,963
Loss on impairment
of investment 1,151,070 1,151,070 1,151,070 -
Accrued liabilities - - 83,852 -
Gain on sale of plant
for tax purposes 160,681 160,681 - -
Loss on equipment - - 46,207 -
---------- ---------- ---------- ----------
5,227,737 4,405,106 2,225,536 471,963
Less: Valuation
allowance (5,227,737) (4,405,106) (2,225,536) (471,963)
---------- ---------- ---------- ----------
Total $ - $ - $ - $ -
========== ========== ========== ==========
</TABLE>
Management has provided a valuation allowance for the full amount of
the deferred tax asset as PalWeb 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, PalWeb has not yet reached such stage in its
development to place reasonable reliability on product acceptance and
marketability.
The net change in deferred taxes is as follows:
<TABLE>
<CAPTION>
Nine Months
Ended February 29/28,
---------------------
2000 1999
--------- ---------
(unaudited) (unaudited)
<S> <C> <C>
Net operating loss $ 822,631 $1,883,454
Loss on impairment of
investment - (83,852)
Accrued liabilities -
F-19
<PAGE>
PALWEB CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Nine Months
Ended February 29/28,
---------------------
2000 1999
--------- ---------
(unaudited) (unaudited)
Gain on sale of plant
for tax purposes - -
Loss on sale of equipment - (46,207)
Change in Valuation
allowance (822,631) (1,753,395)
--------- ----------
Tax Benefit $ - $ -
========= ==========
</TABLE>
<TABLE>
<CAPTION>
Year Ended May 31,
-----------------------------------
1999 1998 1997
--------- ---------- ----------
<S> <C> <C> <C>
Net operating loss $2,148,948 $ 472,444 $ 471,963
Loss on impairment of
investment - 1,151,070 -
Accrued liabilities (83,852) 83,852
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) (1,753,573) (471,963)
---------- ---------- ----------
Tax Benefit $ - $ - $ -
========== ========== ==========
</TABLE>
PalWeb's effective tax rate differs from the federal statutory rate as
follows:
<TABLE>
<CAPTION> Nine Months
Ended February 29/28,
---------------------
2000 1999
-------- ---------
(unaudited) (unaudited)
<S> <C> <C>
Tax benefit using statutory
tax rate $ 763,377 $1,747,747
Effect of state tax rates 59,254 135,707
Net change in valuation
allowance (822,631) (1,883,454)
---------- -----------
Tax benefit, per financial
statements $ - $ -
========== ==========
</TABLE>
<TABLE>
<CAPTION>
Year Ended May 31,
---------------------------------
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
Tax benefit using statutory
tax rate $2,029,599 $1,759,496 $ 452,036
Effect of state tax rates 155,015 146,105 34,567
Net change in valuation
allowance (2,179,570) (1,753,573) (471,963)
F-20
<PAGE>
PALWEB CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended May 31,
---------------------------------
1999 1998 1997
---------- ---------- ----------
Other deductions (5,044) (152,028) (14,640)
---------- ---------- ----------
Tax benefit, per financial $ - $ - $ -
statements ========== ========== ==========
</TABLE>
PalWeb 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:
Amount Expiration
---------- ----------
$1,289,518 2012
$1,290,830 2018
$5,871,443 2019
9. LEASE FINANCING OBLIGATION
In April 1999, a related party acquired PalWeb'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. PalWeb 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.
PalWeb also has a three year option to purchase the property for
$2,700,000. Due to the existence of PalWeb's option to repurchase the
property, the transaction has been accounted for as a financing
arrangement whereby the plant with a net book value of $1,049,515 at
May 31, 1999, continues to be maintained as an asset and depreciated
and the related debt in the amount of $1,766,958 at May 31, 1999
(including the mortgage payable of $1,350,000), is classified as lease
financing obligation in the balance sheet during the term of the
option.
10. STOCKHOLDERS' EQUITY
PalWeb 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.
During the years ended May 31, 1999 and 1998, PalWeb also issued shares
of common stock and preferred stock for services. The services were
valued at the market value of the common stock as the preferred is
convertible into common on a one-to-one basis.
F-21
<PAGE>
PALWEB CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 PalWeb. At May 31, 1999 and
1998, the outstanding options are as follows (PPP had no options
outstanding as of May 31, 1997):
<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
PalWeb'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.
12. DISCONTINUED OPERATIONS
Information relating to discontinued operations is as follows:
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
Net sales $ 381,330 $ 542,012
Cost of sales 219,894 268,133
---------- ----------
Gross profit 161,436 273,879
Operating costs 169,854 511,737
Costs of disposal - 130,688
Nonoperating income 1,118 741
---------- ----------
Loss, as previously reported (7,300) (367,805)
Prior period adjustment (481,956)
---------- ----------
Net loss $ (7,300) $ (849,761)
========== ==========
</TABLE>
F-22
<PAGE>
PALWEB CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
13. SUPPLEMENTAL INFORMATION OF CASH FLOWS
Non-cash investing and financing activities are as follows:
<TABLE>
<CAPTION>
Year Ended May 31,
-----------------------------------
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:
Reverse acquisition of PalWeb Corporation - 613,500 -
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 settle-
ment or issuance of common stock 1,006,848 - -
Distribution of energy services
segment to minority stockholders 430,373 - -
Interest paid - - -
</TABLE>
14. PRIOR PERIOD ADJUSTMENT
F-23
<PAGE>
PALWEB CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The financial statements have been restated to reflect the effects of a
prior period adjustment to correct the effects of an error in
accounting for discontinued operations. In July, 1999 and August, 1999,
the company issued preferred and common stock as compensation for
consulting services. Further information indicated that the services
related to settlement of liabilities accrued, $191,978, as well as
liabilities occurring during the year ended May 31, 1998 and not
accrued, $481,956. The adjustment does not affect income before
extraordinary items and discontinued operations. The effect on the
deficit account is as follows:
<TABLE>
<CAPTION>
May 31,
----------------------------------------
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Deficit, as previously
reported $(26,717,493) $(20,509,689) $(12,752,114)
Prior period adjustment (673,934) (481,956) -
------------ ------------ ------------
Deficit, as adjusted $(27,391,427) $(20,991,645) $(12,752,114)
============ ============ ============
</TABLE>
15. SUBSEQUENT EVENTS
The following events occurred subsequent to May 31, 1999 not otherwise
disclosed herein:
In September 1999, PalWeb 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 March 2000, PalWeb obtained a default judgement against certain
related parties, Chartex AG and New Inter HKB AG, causing the
cancellation of 13,413,384 shares of common stock and a $1,619,422 loan
classified in the financial statements as "Loans from related party."
PalWeb issued shares of preferred and common stock as follows:
<TABLE>
<CAPTION>
Date Type No. Shares Purpose
------------ --------- ---------- ---------------
<S> <C> <C> <C>
July, 1999 Preferred 3,963,890 Satisfaction of
Liabilities
July, 1999 Preferred 125,000 Services
August, 1999 Common 460,000 Satisfaction of
Liabilities
F-24
<PAGE>
PALWEB CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Date Type No. Shares Purpose
-------------- --------- ---------- ---------------
December, 1999 Common 11,000,000 Services
January, 2000 Common 11,874,790 Satisfaction of
Liabilities
January, 2000 Common 3,500,210 Equipment and Services
</TABLE>
In July 1999, the outstanding stock options to purchase PalWeb's common
stock were canceled.
PalWeb is named in a lawsuit against Cooper Manufacturing Corporation,
an investment distributed in the spin off as discussed in Note 1,
Organization. The claim is based on product liability and PalWeb is
named based on a contractual indemnity claim. Management is unable to
estimate the amount of any possible loss. Further, management does not
believe that Cooper Manufacturing is entitled to be indemnified from
any loss. In addition, The Union Group, Inc., being the spin off
company for energy services, is contractually obligated to indemnify
PalWeb for any loss of an energy related matter. Management believes
that the resolution of this lawsuit will not have a material effect on
PalWeb's financial condition, results of operation or cash flows.
Effective December 1, 1999, PalWeb entered into a line of credit with
Ralph Curton, Jr., an individual that is not a related party, in the
amount of $500,000 with an interest rate of 8.5%, payable December 1,
2001.
Effective April 3, 2000, PalWeb acquired Pace Holding, Inc. and its
wholly-owned subsidiary PaceCo Financial Services, Inc. through a stock
a stock exchange with the chairman of PalWeb board of directors whereby
PalWeb issued 50,000,000 shares of its common stock in exchange for the
outstanding common stock of Pace Holding, Inc.
F-25
<PAGE>
EXHIBIT 2.1
STOCK EXCHANGE AGREEMENT
This Agreement (the "Agreement"), dated as of September 26, 1997, among
Plastic Pallet Production, Inc., a Florida corporation (the "Corporation"), the
shareholders of the Corporation listed on the signature pages of this Agreement
(collectively referred to herein as the "Sellers"), and Cabec Energy Corp., a
Delaware corporation (the "Purchaser").
WITNESSETH
WHEREAS, Sellers hold all of the issued and outstanding shares of the
capital stock of the Corporation (the "Stock") and desire to sell, and Purchaser
desires to purchase the Stock; and
WHEREAS, the Corporation desires to join in the execution of this
Agreement for the purpose of evidencing its consent to the consummation of the
foregoing transaction and for the purpose of making certain representations and
warranties to and covenants and agreements with Purchaser; and
WHEREAS, it is the intent of the Purchase and the Sellers that this
transaction qualify as a tax free reorganization pursuant to Section
368(a)(1)(B) of the Internal Revenue Code.
NOW, THEREFORE, in consideration of the mutual representations,
warranties and covenants herein contained, and on the terms and subject to the
conditions herein set forth, the parties hereto hereby agree as follows:
ARTICLE I
PURCHASE AND SALE; CLOSING DATE
SECTION 1.01. PURCHASE AND SALE OF STOCK. Subject to and upon the terms and
conditions contained herein, at the Closing, Sellers shall sell, transfer,
assign, convey and deliver to
PAGE 1
<PAGE>
Purchaser, free and clear of all adverse claims, security interests, liens,
claims and encumbrances and Purchaser shall purchase, accept and acquire from
Sellers, the Stock.
SECTION 1.02. PURCHASE PRICE AND PAYMENT. In consideration of the sale of the
Stock to Purchaser, Purchaser shall deliver to the Sellers at the Closing an
aggregate of 94,320,000 shares (the "Purchaser Shares") of Common Stock, $0.10
par value per share, of Purchaser ("Purchaser Common Stock"). Each of the
Sellers, his assigns or designees shall receive the number of Purchaser Shares
as listed opposite his name on Schedule 1.02.
SECTION 1.03. CLOSING. The exchange of shares contemplated herein (the
"Closing") shall take place at the offices of the Corporation on September 30,
1997, or at such other time or place as may be mutually agreed upon by the
parties. The date on which the Closing occurs shall be referred to herein as the
"Closing Date".
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE CORPORATION AND SELLERS
The Corporation and Sellers jointly and severally represent and warrant
that the following are true and correct as of the date hereof and will be true
and correct through the Closing Date as if made on that date:
SECTION 2.01. OWNERSHIP OF STOCK. Sellers own, beneficially and of record,
good and marketable title to the Stock, which constitutes all of the issued
and outstanding capital stock of the Corporation. At the Closing, Sellers
will convey to Purchaser good and marketable title to all of the issued and
outstanding capital stock of the Corporation, free and clear of all adverse
claims, security interests, liens, claims and encumbrances.
PAGE 2
<PAGE>
SECTION 2.02. ORGANIZATION AND GOOD STANDING QUALIFICATION. The Corporation is a
corporation duly organized, validly existing and in good standing under the laws
of its state of incorporation, with all requisite corporate power and authority
to carry on the business in which it is engaged, to own the properties it owns,
to execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The Corporation is duly qualified and licensed to do
business and is in good standing in all jurisdictions where the nature of its
business makes such qualification necessary.
SECTION 2.03. CAPITALIZATION. The authorized capital stock of the Corporation
consists of 2,000,000 shares of common stock, par value $0.02 per share, of
which 2,000,000 shares are issued and outstanding. All of the issued and
outstanding shares of capital stock of the Corporation are duly authorized,
validly issued, fully paid and nonassessable. There exists no options, warrants,
subscriptions or other rights to purchase, or securities convertible into or
exchangeable for, the capital stock of the Corporation. No shares of capital
stock of the Corporation have been issued or disposed of in violation of the
preemptive rights of any of the Corporation's shareholders. All accrued
dividends on the capital stock of the Corporation, whether or not declared, have
been paid in full.
SECTION 2.04. CORPORATE RECORDS. The copies of the Articles of Incorporation and
all amendments thereto and the Bylaws of the Corporation that have been
delivered or made available to Purchaser are true, correct and complete copies
thereof, as in effect on the date hereof. The minute books of the Corporation,
copies of which have been delivered or made available to Purchaser, contain
accurate minutes of all meetings of, and accurate consents to all
PAGE 3
<PAGE>
actions taken without meetings by, the Board of Directors (and any committees
thereof) and the shareholders of the Corporation since the formation of the
Corporation.
SECTION 2.05. AUTHORIZATION AND VALIDITY. The execution, delivery and
performance by the Corporation of this Agreement and any other agreements
contemplated hereby, and the consummation of the transactions contemplated
hereby and thereby, have been duly authorized by the Corporation and Sellers.
This Agreement and any other agreement contemplated hereby have been or will be
as of the Closing Date duly executed and delivered by the Corporation and
Sellers and constitutes or will constitute legal, valid and binding obligations
of the Corporation and Sellers, enforceable against the Corporation and Sellers
in accordance with their respective terms, except as may be limited by
applicable bankruptcy, insolvency or similar laws affecting creditors' rights
generally or the availability of equitable remedies. The sale of the Stock by
Sellers to Purchaser will not impair the ability or authority of the Corporation
to carry on its business as now conducted in any respect.
SECTION 2.06. SUBSIDIARIES. The Corporation does not own, directly or
indirectly, any interest in the capital stock of any other corporation or any
equity, profit sharing, participation or other interest in any corporation,
partnership, joint venture or other entity except as set forth on Schedule 2.06
hereto. All references herein to the Corporation shall include its subsidiaries
listed on Schedule 2.06.
SECTION 2.07. NO VIOLATION. Neither the execution, delivery or performance of
this Agreement or any other agreement contemplated hereby nor the consummation
of the transactions contemplated hereby or thereby will (i) conflict with, or
result in a violation or breach of the
PAGE 4
<PAGE>
terms, conditions or provisions of, or constitute a default under, the
Articles of Incorporation or Bylaws of the Corporation or any agreement,
indenture or other instrument under which the Corporation is bound or to
which the stock or any of its assets of the Corporation are subject, or
result in the creation or imposition of any security interest, lien, charge
or encumbrance upon the Stock or any of the assets of the Corporation, or
(ii) violate or conflict with any judgment, decree, order, statute, rule or
regulation of any court or any public, governmental or regulatory agency or
body having jurisdiction over the Corporation, the Stock or the assets of the
Corporation. To the best of the Corporation's knowledge, the Corporation has
complied with all laws, regulations and licensing requirements and has filed
with the proper authorities all necessary statements and reports.
SECTION 2.08. CONSENTS. No authorization, consent, approval, permit or license
of, or filing with, any governmental or public body or authority, any lender or
lessor or any other person, or entity is required to authorize, or is required
in connection with, the execution, delivery or performance of this Agreement or
the other agreements contemplated hereby on the part of the Corporation or
Sellers.
SECTION 2.09. INVESTMENT INTENT. The Sellers are acquiring the Purchaser Shares
for their own respective accounts for investment and not with a view to, or for
sale or other disposition in connection with, any distribution of all or any
part thereof, except (i) in an offering covered by a registration statement
filed with the Securities and Exchange Commission under the Securities Act
covering the Purchaser Shares, or (ii) pursuant to an applicable exemption under
the Securities Act. In acquiring the Purchaser Shares, the Sellers are not
offering or selling, and will not offer or sell, for Purchaser in connection
with any distribution of the Purchaser Shares, and
PAGE 5
<PAGE>
the Sellers do not and will not have a participation in any such underwriting
of such an undertaking except in compliance with applicable federal and state
securities laws.
SECTION 2.10. DISCLOSURE OF INFORMATION. The Sellers acknowledge that they or
their representatives have been furnished with substantially the same kind of
information regarding Purchaser and its business, assets, results of operations,
and financial condition as set forth in a prospectus meeting the statutory
requirements of the Securities Act for use in connection with a public sale of
the Purchaser Shares. The Sellers further represent that they have had an
opportunity to ask questions of and receive answers from Purchaser regarding
Purchaser and its business, assets, results of operation, and financial
condition and the terms and conditions of the issuance of the Purchaser Shares.
The foregoing, however, does not limit or modify the representations and
warranties of Purchaser in Article III, does not limit the rights of the Sellers
prior to and in anticipation of any issuance of the Purchasers Shares pursuant
hereto, and does not limit the disclosure requirements of applicable federal and
state securities laws. Sellers acknowledge that Purchaser and its
representatives have provided all of the information and documentation
concerning Purchaser, its business, operations, management, financial statements
and prospects and the Purchaser Shares requested by Sellers and are fully
satisfied with such information and documentation. Further, Sellers acknowledge
that Purchaser's financial statements provided to Sellers (as indicated in
Section 3.08 below) are all unaudited, in-house financial statements. Further,
Sellers acknowledge that the Purchaser does not and is not required to file
periodic reports with the US Securities and Exchange Commission.
SECTION 2.11. FINANCIAL STATEMENTS. On or before Closing the Sellers will
have furnished to the Purchaser the Corporation's unaudited consolidated
balance sheet and related unaudited
PAGE 6
<PAGE>
consolidated statements of income, retained earnings and cash flows for the
period from inception to a date immediately prior to the Closing Date,
including the notes thereto (collectively, the "Corporation Financial
Statement"). The Corporation Financial Statements will be true, correct and
complete, in accordance with the books and records of the Corporation, will
fairly present the financial condition and results of operations of the
Corporation as of the dates and for the periods indicated and will have been
prepared in conformity with generally accepted accounting principles applied
on a consistent basis with prior periods.
SECTION 2.12. LIABILITIES AND OBLIGATIONS. The Corporation Financial Statements
reflect all of the liabilities of the Corporation, accrued, contingent or
otherwise (known or unknown and asserted or unasserted), arising out of
transactions effected or events occurring on or prior to the date hereof. All
reserves, if any, shown in the Corporation Financial Statements are appropriate,
reasonable and sufficient to provide for losses thereby contemplated. Except as
set forth in the Corporation Financial Statements, the Corporation is not liable
upon or with respect to, or obligated in any other way to provide funds in
respect of or to guarantee or assume in any manner, any debt, obligation or
dividend of any person, corporation, partnership, joint venture or other entity,
and the Sellers do not know of any basis for the assertion of any other claims
or liabilities of any nature or in any amount.
SECTION 2.13. ADVERSE AGREEMENTS. The Corporation is not a party to any
agreement or instrument or subject to any charter or other corporate restriction
or any judgment, order, writ, injunction, decree, rule or regulation that
materially and adversely affects, or so far as the Corporation and Sellers can
now foresee, may in the future materially and adversely affect, the
PAGE 7
<PAGE>
condition (financial or otherwise), operations, assets, liabilities, business
or prospects of the Corporation.
SECTION 2.14. ABSENCE OF CERTAIN CHANGES. Since the inception of the
Corporation, (i) there has not been any material adverse change in the business,
assets, results of operations, or financial condition of the Corporation; (ii)
the business of the Corporation has been conducted only in the ordinary course
consistent with past practice, (iii) the Corporation has not incurred any
material liability, engaged in any material transaction, or entered into any
material agreement outside the ordinary course of business consistent with past
practice; and (iv) the Corporation has not suffered any material loss, damage,
destruction, or other casualty to any of its assets (whether or not covered by
insurance).
SECTION 2.15. INVESTMENT EXPERIENCE. The Sellers acknowledge that they are able
to fend for themselves, can bear the economic risk of their investment in the
Purchaser Shares, including a total loss of their investment, and have such
knowledge and experience in financial and business matters that they are capable
of evaluating the merits and risks of an investment in the Purchaser Shares. The
Sellers represent that they have not been organized for the purpose of acquiring
the Purchaser Shares.
SECTION 2.16. RESTRICTED SECURITIES. The Sellers understand that the Purchaser
Shares will not have been registered pursuant to the Securities Act or any
applicable state securities laws, that the Purchaser Shares will be
characterized as "restricted securities" under federal securities laws, and that
under such laws and applicable regulations the Purchaser Shares cannot be sold,
pledged, hypothecated or otherwise disposed of without registration under the
Securities Act or
PAGE 8
<PAGE>
an exemption therefrom. In this connection, the Sellers represent that they
are familiar with Rule 144 promulgated under the Securities Act, as currently
in effect, and understand the resale limitations imposed thereby and by the
Securities Act. Stop transfer instructions may be issued to the transfer
agent for securities of the Purchaser (or a notation may be made in the
appropriate records of Purchaser) in connection with the Purchaser Shares.
SECTION 2.17. LEGEND. It is agreed and understood by the Sellers that the
certificates representing the Purchaser Shares shall each conspicuously set
forth on the face or back thereof a legend in substantially the following form:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED
IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE
SECURITIES UNDER SAID ACT OR PURSUANT TO AN EXEMPTION FROM REGISTRATION
OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED.
SECTION 2.18. BROKER'S FEE. Neither the Corporation nor the Sellers has incurred
any obligation for any finder's, broker's or agent's fee in connection with the
transactions contemplated hereby, except as set forth in Schedule 2.18.
SECTION 2.19. ACCURACY OF INFORMATION FURNISHED. All information furnished to
Purchaser by the Corporation or the Sellers hereby or in connection with the
transactions contemplated hereby is true, correct and complete in all respects.
Such information states all facts required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, true, correct and complete.
PAGE 9
<PAGE>
SECTION 2.20. PATENTS. The Corporation owns all of the rights and titles to
and interests in, free and clear of all liens and encumbrances, the United
States Patents listed and described on Schedule 2.20 hereto.
SECTION 2.21. REPRESENTATIONS AND WARRANTIES ON CLOSING DATE. The
representations and warranties made in this Article II will be true and correct
in all material respects on and as of the Closing Date with the same force and
effect as if such representations and warranties had been made on and as of the
Closing Date.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
SECTION 3.01. ORGANIZATION AND GOOD STANDING. The Purchaser is a corporation
duly organized, validly existing and in good standing under the laws of its
state of incorporation, with all requisite corporate power and authority to
carry on the business in which it is engaged, to own the properties it owns, to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby.
SECTION 3.02. CAPITALIZATION. The authorized capital stock of the Purchaser will
consist on the Closing Date of (i) 200,000,000 shares of common stock, $0.10 par
value per share, of which 26,590,000 shares will be issued and outstanding (the
"Outstanding Purchaser Stock") and (ii) 20,000,000 shares of preferred stock,
par value $0.0001 per share of which not more than 4,410,000 shares will be
issued and outstanding. All of the issued and outstanding shares of capital
stock of the Purchaser are duly authorized, validly issued, fully paid and
nonassessable. Except as set forth above and as referenced in Section 5.01(c),
there exists no other options,
PAGE 10
<PAGE>
warrants, subscriptions or other rights to purchase, or securities
convertible into or exchangeable for, the capital stock of the Purchaser. The
Purchaser is not a party to or bound by, nor does it have any knowledge of,
any agreement, instrument, arrangement, contract, obligation, commitment or
understanding of any character, whether written or oral, express or implied,
related to the sale, assignment, encumbrance, conveyance, transfer or
delivery of any capital stock of the Purchaser. No shares of capital stock of
the Purchaser have been issued or disposed of in violation of the preemptive
rights of any of the Purchaser's shareholders.
SECTION 3.03. CORPORATE RECORDS. The copies of the Articles of Incorporation and
all amendments thereto and the Bylaws of the Purchaser that have been delivered
or made available to Sellers are true, correct and complete copies thereof, as
in effect on the date hereof. The minute books of the Purchaser, copies of which
have been delivered or made available to Sellers, contain accurate minutes of
all meetings of, and accurate consents to all actions taken without meetings by,
the Board of Directors (and any committees thereof) and the shareholders of the
Purchaser since the formation of the Purchaser.
SECTION 3.04. AUTHORIZATION AND VALIDITY. The execution, delivery and
performance by the Purchaser of this Agreement and the other agreements
contemplated hereby, and the consummation of the transactions contemplated
hereby and thereby, have been duly authorized by the Purchaser. This Agreement
and each other agreement contemplated hereby have been or will be as of the
Closing Date duly executed and delivered by the Purchaser and constitute or will
constitute legal, valid and binding obligations of the Purchaser enforceable
against the Purchaser in accordance with their respective terms, except as may
be limited by applicable bankruptcy, insolvency or similar laws affecting
creditors' rights generally, or the availability of
PAGE 11
<PAGE>
equitable remedies. The sale of the Purchaser Shares by Purchaser will not
impair the ability or authority of the Purchaser to carry on its business as
now conducted in any respect.
SECTION 3.05. SUBSIDIARIES. The Purchaser does not own, directly or indirectly,
any interest in the capital stock of any other corporation or an equity, profit
sharing, participation or other interest in any corporation, partnership or
joint venture or other entity except as listed on Schedule 3.05 hereto. All
references herein to the Purchaser shall include its subsidiaries listed on
Schedule 3.05 (the "Purchaser Subsidiaries").
SECTION 3.06. NO VIOLATION. Neither the execution, delivery or performance of
this Agreement or the other agreements contemplated hereby nor the consummation
of the transactions contemplated hereby or thereby will (i) conflict with, or
result in a violation or breach of the terms, conditions or provisions of, or
constitute a default under, the Articles of Incorporation or Bylaws of the
Purchaser or any agreement, indenture or other instrument under which the
Purchaser is bound or to which the stock or any of its assets of the Purchaser
are subject, or result in the creation or imposition of any security interest,
lien, charge or encumbrance upon the Purchaser Common Stock or any of the assets
of the Purchaser, or (ii) violate or conflict with any judgment, decree, order,
statute, rule or regulation or any court or public, governmental or regulatory
agency or body having jurisdiction over the Purchaser, the Purchaser Common
Stock or the assets of the Purchaser. To the best of Purchaser's knowledge, the
Purchaser has complied with all laws, regulations and licensing requirements and
has filed with the proper authorities all necessary statements and reports.
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SECTION 3.07. CONSENTS. No authorization, consent, approval, permit or license
of, or filing with, any governmental or public body or authority, any lender or
lessor or any other person or entity is required to authorize, or is required in
connection with, the execution, delivery or performance of this Agreement or the
other agreements contemplated hereby on the part of the Purchaser.
SECTION 3.08. DISCLOSURE OF INFORMATION. The Purchaser acknowledges that it or
its representatives have been furnished with substantially the same kind of
information regarding the Corporation and its business, assets, results of
operations, and financial condition as set forth in a prospectus meeting the
statutory requirements of the Securities Act for use in connection with a public
sale of the Stock. The Purchaser further represents that it has had an
opportunity to ask questions of and receive answers from the Corporation and the
Sellers regarding the Corporation and its business, assets, results of
operation, and financial condition and the terms and conditions of the exchange
of the Stock. The foregoing, however, does not limit or modify the
representations and warranties of the Corporation and Sellers in Article II,
does not limit the right of Purchaser prior to and in anticipation of any
issuance of the Stock pursuant hereto, and does not limit the disclosure
requirements of applicable federal and state securities laws. Purchaser
acknowledges that Sellers and the Corporation have provided all of the
information and documentation concerning the Corporation, its businesses,
operations, management, financial statements and prospects and the Stock
requested by Purchaser and is fully satisfied with such information and
documentation. Further, Purchaser acknowledges that the Corporation's financial
statements provided to Purchaser (as indicated in Section 2.11 above) are all
unaudited, in-house financial statements.
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<PAGE>
SECTION 3.09. FINANCIAL STATEMENTS. On or before Closing, the Purchaser will
have furnished to the Corporation and the Sellers the unaudited consolidated
balance sheet and related unaudited consolidated statements of income, retained
earnings and cash flows for the twelve-month period ending May 31, 1996,
including the notes thereto and the Purchaser's 1996 federal income tax return
(collectively, the "Purchaser Financial Statements"). The Purchaser Financial
Statements are true, correct and complete, are in accordance with the books and
records of the Purchaser, fairly present the financial condition and results of
operations of the Purchaser as of the dates and for the periods indicated and
have been prepared in conformity with generally accepted accounting principals
applied on a consistent basis with prior
SECTION 3.10. LIABILITIES AND OBLIGATIONS. The Purchaser Financial Statements
reflect all of the liabilities of Purchaser, accrued, contingent or otherwise
(known or unknown and asserted or unasserted), arising out of transactions
effected or events occurring on or prior to the date hereof. All reserves, if
any, shown in the Purchaser Financial Statements are appropriate, reasonable and
sufficient to provide for losses thereby contemplated. Except as set forth in
the Purchaser Financial Statements, the Purchaser is not liable upon or with
respect to, or obligated in any other way to provide funds in respect of or to
guarantee or assume in any manner, any debt, obligation or dividend of any
person, corporation, partnership, joint venture or other entity, and the
Purchaser does not know of any basis for the assertion of any other claims or
liabilities of any nature or in any amount.
SECTION 3.11. ADVERSE AGREEMENT. The Purchaser is not a party to any agreement
or instrument or subject to any charter or other corporate restriction or any
judgment, order, writ, injunction, decree, rule or regulation that materially
and adversely affects, or so far as the Purchaser can now
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foresee, may in the future materially and adversely affect, the condition
(financial or otherwise), operations, assets, liabilities, business or
prospects of the Purchaser.
SECTION 3.12. ABSENCE OF CERTAIN CHANGES. Since May 31, 1997, (i) there has not
been any material adverse change in the business, assets, results of operations,
or financial condition of the Purchaser; (ii) the business of the Purchaser has
been conducted only in the ordinary course consistent with past practice; (iii)
the Purchaser has not incurred any material liability, engaged in any material
transaction, or entered into any material agreement outside the ordinary course
of business consistent with past practice; and (iv) the Purchaser has not
suffered any material loss, damage, destruction, or other casualty to any of its
assets (whether or not covered by insurance).
SECTION 3.13. BROKER'S FEE. The Purchaser has not incurred any obligation for
any finder's, broker's or agent's fee in connection with the transactions
contemplated hereby, except as set forth in Schedule 3.13.
SECTION 3.14. ACCURACY OF INFORMATION FURNISHED. All information furnished to
the Corporation or the Sellers by Purchaser hereby or in connection with the
transactions contemplated hereby is true, correct and complete in all respects.
Such information states all facts required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, true correct and complete.
SECTION 3.15. REPRESENTATIONS AND WARRANTIES ON CLOSING DATE. The
representations and warranties made in this Article III will be true and correct
in all material respects on and as of the
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Closing Date with the same force and effect as if such representations and
warranties had been made on and as of the Closing Date.
ARTICLE IV
COVENANTS OF SELLERS
SECTION 4.01. COVENANTS.
A. Sellers each acknowledge and agree that on or after the
Closing Date, the capital stock or assets of the Purchaser subsidiaries will be
spun off or sold and the proceeds distributed to the shareholders of record of
the Outstanding Purchaser Stock other than the Seller and not to the Sellers (or
their permitted assigns) with respect to the Purchaser Shares, and Sellers
further agree to authorize and consent to such transactions.
B. Sellers each agree not to interfere with or exercise, directly
or indirectly, control of the Purchaser subsidiaries or to remove, change, or
add to the respective boards of directors, officers or management of the
Purchaser subsidiaries at any time on or after the Closing Date.
C. In further consideration of their acquisition of the Purchaser
Shares provided for by this Agreement, Sellers will contribute to the capital of
the Corporation the sum of US $150,000 on or before the execution of this
Agreement and an additional $100,000 on each of January 1, February 1, March 1,
1998, to fund cash flow and other requirements of the Corporation.
PAGE 16
<PAGE>
ARTICLE V
CONDITIONS TO OBLIGATIONS OF PURCHASER
All obligations of the Purchaser under this Agreement are subject to
the fulfillment on or before the Closing Date, of each of the following
conditions (any one or more of which may, in the absolute discretion of the
Purchaser, be waived by Purchaser):
SECTION 5.01. DOCUMENTS DELIVERED TO PURCHASER. At the Closing, the following
documents shall be delivered to Purchaser: (i) Certificates representing the
Stock, duly endorsed or accompanied by duly executed stock powers; (ii) A
certificate executed by each of the Sellers dated on or before the Closing Date,
certifying in such detail as Purchaser may request that:
(A) The representations and warranties of the Sellers contained in
this Agreement are then true in all respects; and
(B) Sellers have complied with all agreements and conditions
required by this Agreement to be performed or complied with by it.
(C) Purchaser shall have entered into Employment Agreements with
Ralph Curton and Randall McCleskey, substantially in the form attached hereto as
Schedule 5.01(c).
PAGE 17
<PAGE>
ARTICLE VI
CONDITIONS TO THE OBLIGATIONS OF SELLERS
All obligations of the Sellers under this Agreement are subject to the
fulfillment on or before the Closing Date, of each of the following conditions
(any one or more of which may, in the absolute discretion of the Sellers, be
waived by Sellers):
SECTION 6.01 DOCUMENTS DELIVERED TO SELLERS. At the Closing, the following
documents shall be delivered to Sellers: (i) Certificates representing the
Purchaser Shares to be delivered pursuant to this Agreement with the
certificates bearing the names of the Sellers; (ii) A certificate executed by
the Purchaser dated the Closing Date, certifying in such detail as Sellers may
request that:
(A) The representations and warranties of the Purchaser contained
in this Agreement are then true in all respects; and
(B) Purchaser has complied with all agreements and conditions
required by this Agreement to be performed or complied with by it.
ARTICLE VII
INDEMNIFICATION
SECTION 7.01. INDEMNIFICATION BY SELLERS. The Sellers hereby agree to indemnify
and hold harmless Purchaser and its officers, directors and consultants and
their successors and assigns for the full amount of all losses, claims, expenses
or liabilities (including without limitation reasonable attorney's fees) arising
from or relating to (i) any breach of the representations and
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warranties made by the Corporation and Sellers in this Agreement or (ii) any
failure of Sellers duly to perform any covenant in this Agreement to be
performed by Sellers.
SECTION 7.02. INDEMNIFICATION BY PURCHASER. Purchaser hereby agrees to indemnify
and hold harmless the Sellers for the full amount of all losses, claims,
expenses or liabilities (including without limitation reasonable attorneys' fee)
arising from or relating to (i) any breach of the representations and warranties
made by the Purchaser in this Agreement or (ii) any failure of Purchaser duly to
perform any covenant in this Agreement to be performed by it.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01. AMENDMENT. This Agreement may be amended, modified, or
supplemented only by an instrument in writing executed by all the parties
hereto.
SECTION 8.02. ASSIGNMENT. Neither this Agreement nor any right created hereby or
in any agreement entered into in connection with the transactions contemplated
hereby shall be assignable by any party hereto.
SECTION 8.03. PARTIES IN INTEREST; NO THIRD PARTY BENEFICIARIES. Except as
otherwise provided herein, the terms and conditions of this Agreement shall
inure to the benefit of and be binding upon the respective heirs, legal
representatives, successors and assigns of the parties hereto. Neither this
Agreement nor any other Agreement contemplated hereby shall be deemed to confer
upon any person not a party hereto or thereto any rights or remedies hereunder
or thereunder.
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SECTION 8.04. ENTIRE AGREEMENT. This Agreement and the agreements contemplated
hereby constitute the entire agreement of the parties regarding the subject
matter hereof, and supersede all prior agreements and understandings, both
written and oral, among the parties, or any of them, with respect to the subject
matter hereof.
SECTION 8.05. SEVERABILITY. If any provision of this Agreement is held to be
illegal, invalid or unenforceable under present or future laws effective during
the term hereof, such provision shall be fully severable and this Agreement
shall be construed and enforced as if such illegal, invalid or unenforceable
provision never comprised a part hereof; and the remaining provisions hereof
shall remain in full force and effect and shall not be affected by the illegal,
invalid or unenforceable provision or by its severance here from. Furthermore,
in lieu of such illegal, invalid or unenforceable provision, there shall be
added automatically as part of this Agreement a provision as similar in its
terms to such illegal, invalid, or unenforceable provision as may be possible
and be legal, valid and enforceable.
SECTION 8.06. SURVIVAL OR REPRESENTATION, WARRANTIES AND COVENANTS. The
representations, warranties and covenants contained herein shall survive the
Closing and all statements contained in any certificate, exhibit or other
instrument delivered by or on behalf of the Corporation, Sellers or Purchaser,
as the case may be, and, notwithstanding any provision in this Agreement to the
contrary, shall survive the Closing for a period of one year.
SECTION 8.07. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF
THE PARTIES HERETO SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE
WITH THE SUBSTANTIVE LAWS
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(BUT NOT THE RULES GOVERNING CONFLICTS OF LAWS) OF THE STATE OF TEXAS.
SECTION 8.08. CAPTION. The captions in this Agreement are for convenience of
reference only and shall not limit or otherwise affect any of the terms or
provisions hereof.
SECTION 8.09. GENDER AND NUMBER. When the context requires, the gender of all
words used herein shall include the masculine, feminine and neuter and the
number of all words shall include the singular and plural.
SECTION 8.10. REFERENCE TO AGREEMENT. Use of the words "herein", "hereof",
"hereto" and the like in this Agreement shall be construed as references to this
Agreement as a whole and not to any particular Article, Section or provision in
this Agreement, unless otherwise noted.
SECTION 8.11. NOTICE. Any notice or communication hereunder or in any agreement
entered into in connection with the transactions contemplated hereby must be in
writing and given by depositing the same in the United States mail, addressed to
the party to be notified, postage prepaid and registered or certified with
return receipt requested, or by delivering the same in person. Such notice shall
be deemed received on the date on which it is hand delivered or on the third
business day following the date on which it is to be mailed. For purposes of
notice, the addresses of the parties shall be:
If to Seller: Michael John
Plastic Pallet Production, Inc.
1607 W. Commerce Street
Dallas, Texas 75208
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If to Purchaser: Ralph Curton
Cabec Energy Corporation
P.O. Box 7027
Dallas, Texas 75209
Any party may change its address for notice by written notice given to the other
parties in accordance with this Section.
Signed this 26th day of September 1997.
PURCHASER:
CABEC ENERGY CORP.
By: /s/ Ralph Curton
------------------------------------
Ralph Curton, President
SELLER:
By: /s/ Michael John
------------------------------------
Michael John
CORPORATION:
PLASTIC PALLET PRODUCTION, INC.
By: /s/ Michael John
------------------------------------
Michael John, President
PAGE 22
<PAGE>
SCHEDULE 2.06 - SUBSIDIARIES OF PLASTIC PALLET PRODUCTIONS, INC.
1) MMP, Inc., a Florida corporation
2) PPSE, Inc., a Florida corporation
3) PP Systrans, Inc., a Texas corporation
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<PAGE>
SCHEDULE 2.18 - BROKERS RETAINED BY CORPORATION AND SELLERS
PAGE 24
<PAGE>
SCHEDULE 2.20 - PATENTS OWNED BY PLASTIC PALLET PRODUCTION, INC.
PAGE 25
<PAGE>
SCHEDULE 3.05 - SUBSIDIARIES OF CABEC ENERGY CORP.
1) Fleur-David Corporation, a Texas corporation
2) Wyoming Pipe and Tool, Inc., a Wyoming corporation
3) Cooper Manufacturing Corporation, a Texas corporation
4) CEC Operating
PAGE 26
<PAGE>
SCHEDULE 3.13 - BROKERS RETAINED BY PURCHASER
PAGE 27
<PAGE>
AMENDMENT TO STOCK EXCHANGE AGREEMENT
THIS AMENDMENT TO STOCK EXCHANGE AGREEMENT (the "Amendment") is made
and entered into this 10th day of December, 1997, by and among Cabec Energy
Corp. ("Purchaser"), a Delaware corporation, Michael John, ("Seller"), and
Plastic Pallet Production, Inc. (the "Corporation"), a Florida corporation.
WHEREAS, by that certain Stock Exchange Agreement (the "Agreement")
dated to be effective as of December 1, 1997 Seller agreed to sell and convey to
Purchaser, upon the terms and conditions therein contained, all of the issued
and outstanding stock of the Corporation, which Agreement is fully incorporated
herein by reference for all purposes; and
WHEREAS, the parties hereto desire to amend and modify the Agreement as
set forth herein.
NOW, THEREFORE, for and in consideration of the sum of Ten and No/100
Dollars ($10.00) and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged and confessed, the parties hereby
agree as follows:
1. The Agreement is hereby amended by deleting the first
paragraph of said Agreement in its entirety and substituting therefor the
following:
This Agreement (the "Agreement"), dated as of
December 1, 1997, by and among Plastic Pallet Production,
Inc., a Florida corporation (the "Corporation"), Michael John
("Seller"), the sole shareholder of the Corporation, and Cabec
Energy Corp., a Delaware corporation (the "Purchaser").
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<PAGE>
2. The Agreement is hereby amended by deleting Section 1.02 in
its entirety and substituting therefor the following:
SECTION 1.02 PURCHASE PRICE AND PAYMENT. In consideration of the sale
of the Stock to Purchaser, Purchaser shall deliver to the Seller at the
Closing an aggregate of 101,000,000 shares (the "Purchaser Shares") of
its Common Stock, $0.10 par value per share ("Purchaser Common Stock").
3. The Agreement is hereby amended by deleting Section 1.03 in
its entirety and substituting therefor the following:
SECTION 1.03. CLOSING. The exchange of shares contemplated herein (the
"Closing") shall take place at the offices of the Corporation on
December 10, 1997, or at such other time or place as may be mutually
agreed upon by the parties. The date on which the Closing occurs shall
be referred to herein as the "Closing Date".
4. The Agreement is hereby amended by adding the following
sentence to the end of Section 2.06:
Notwithstanding any other provision to the contrary contained herein,
the Seller and the Corporation shall be liable for any and all debts,
obligations, taxes, and/or any other assessable costs (including, but
not limited to, lawsuits, ad valorem taxes, and other matters) related
to the Corporation and/or any of the Corporation's subsidiaries up to
and through the Closing Date.
5. The Agreement is hereby amended by deleting the last sentence
of Section 2.07 in its entirety and substituting therefor the following:
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To the best of Seller's and the Corporation's knowledge, the
Corporation has complied with all laws, regulations, and licensing
requirements and has filed with the proper authorities all necessary
statements and reports.
6. The Agreement is hereby amended by deleting Section 3.02 in
its entirety and substituting therefor the following:
SECTION 3.02 CAPITALIZATION. The authorized capital stock of the
Purchaser will consist, on the Closing Date, of (i) 200,000,000 shares
of common stock, $0.10 par value per share, of which 31,900,321 shares
will be issued and outstanding (the "Outstanding Purchaser Stock"), and
(ii) 20,000,000 shares of preferred stock, par value $0.0001 per share,
of which 5,036,607 shares will be issued and outstanding. All of the
issued and outstanding shares of capital stock of the Purchaser are
duly authorized, validly issued, fully paid, and nonassessable. Except
as set forth above, as referenced in Section 5.01 (c), and in the
Purchaser's corporate records, there exists no other options, warrants,
subscriptions, or other rights to purchase, or securities convertible
into or exchangeable for, the capital stock of the Purchaser. The
Purchaser is not a party to or bound by, nor does it have any knowledge
of, any agreement, instrument, arrangement, contract, obligation,
commitment, or understanding of any character, whether written or oral,
express or implied, related to the sale, assignment, encumbrance,
conveyance, transfer, or delivery of any capital stock of the
Purchaser. No shares of capital stock of the Purchaser have been issued
or disposed of in violation of the preemptive rights of any of the
Purchaser's shareholders.
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<PAGE>
7. The Agreement is hereby amended by adding the following
sentence to the end of Section 3.05:
Notwithstanding any other provision to the contrary contained herein,
the Purchaser and/or its subsidiaries shall be liable for any and all
debts, obligations, taxes, and/or any other assessable costs
(including, but not limited to, lawsuits, ad valorem taxes, and other
matters) related to any of the Purchaser's subsidiaries up to and
through the Closing Date.
8. The Agreement is hereby amended by deleting the last sentence
of Section 3.06 in its entirety and substituting therefor the following:
To the best of the Purchaser's knowledge, the Purchaser has complied
with all laws, regulations, and licensing requirements and has filed
with the proper authorities all necessary statements and reports.
9. The Agreement is hereby amended by deleting Subsection A of
Section 4.01 in its entirety and substituting therefor the following:
A. Seller acknowledges and agrees that on or
after the Closing Date, the capital stock or assets
of the Purchaser subsidiaries (Fleur-David
Corporation, Wyoming Pipe & Tool Corp., Cooper
Manufacturing Corporation and any related interest,
and CEC Operating Corp. as shown on Schedule 3.05)
will be spun off or sold (the format of such spin off
or sale shall be at the sole and absolute discretion
of the Purchaser) and the proceeds distributed to the
shareholders of record of the Outstanding Purchaser
Stock and not to the Seller (or his permitted
assigns) with
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respect to the Purchaser Shares, and Seller
further agrees to authorize and consent to such
transactions.
10. The Agreement, amended hereby, embodies the entire agreement
between the parties hereto, supersedes all prior agreements and understandings,
if any, relating to the subject matter hereof, and may be amended or
supplemented only by an instrument in writing executed by the party against whom
enforcement is sought.
11. The Agreement and the Amendment shall be governed by and
construed in accordance with the laws of the State of Texas.
12. This Amendment shall be binding upon and shall inure to the
benefit of the parties hereto and their respective heirs, executors,
administrators, legal representatives, successors, and assigns.
13. This Amendment has been executed in multiple counterparts,
each copy of which is deemed to be an original and constitute collectively one
document.
EXECUTED to be effective as of the date first above written.
PURCHASER:
CABEC ENERGY CORP.,
a Delaware corporation
By: /s/ Ralph Curton, Jr.
------------------------------------
Ralph Curton, Jr.
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SELLER:
/s/ Michael John
------------------------------------
MICHAEL JOHN
CORPORATION:
PLASTIC PALLET PRODUCTION,
a Florida corporation
By: /s/ Michael John
------------------------------------
Michael John, President
PAGE 6
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EXHIBIT 2.2
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
PALWEB CORPORATION,
PP FINANCIAL, INC.
AND
PACE HOLDING, INC.
Dated as of January 21, 2000
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION ("Agreement"), dated as of
the 21st day of January, 2000, is entered into by and among Palweb Corporation,
a Delaware corporation ("Palweb"), PP Financial, Inc., a Texas corporation and
wholly owned subsidiary of Palweb ("Sub"), Pace Holding, Inc., an Oklahoma
corporation ("Target") and the Shareholder. Palweb, Sub, Target and the
Shareholder are referred to collectively herein as the "Parties" and
individually as a "Party."
RECITALS
A. The board of directors of each of Palweb, Sub and Target have
determined that it is in the best interests of Palweb, Sub and Target, and their
respective shareholders, to approve the merger of Target with and into Sub with
Sub being the surviving corporation, upon the terms and subject to the
conditions set forth in this Agreement (the "Merger") and have approved and
adopted the Merger upon the terms and conditions set forth in this Agreement.
B. For federal income tax purposes, it is intended that the
Merger qualify as a "reorganization" within the meaning of Section 368(a)(1)(A)
and Section 368(a)(2)(D) of the Code, and that this Agreement constitute a plan
of reorganization for purposes of Section 368(a).
C. The Parties desire to make certain representations,
warranties, covenants and agreements in connection with the Merger and to
prescribe various conditions to the Merger.
D. Terms capitalized but not otherwise defined herein have the
meanings ascribed to them in Section 13.
TERMS AND CONDITIONS
In consideration of the foregoing recitals and the mutual covenants,
representations and warranties contained in this Agreement, and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Parties hereby agree as follows:
1. THE MERGER.
1.1 THE MERGER. Subject to the terms and conditions set forth in
this Agreement, at the Effective Time, Target shall be merged with and into Sub
in accordance with the provisions of this Agreement.
1.2 EFFECT OF THE MERGER. Upon the effectiveness of the Merger,
the separate existence of Target shall cease and Sub, as the surviving
corporation in the Merger (the "Surviving Corporation"), shall continue its
corporate existence under the laws of the State of Texas. The Merger shall have
the effects specified in this Agreement, the TBCA and the OGCA.
<PAGE>
1.3 GOVERNING INSTRUMENTS, DIRECTORS AND OFFICERS OF SURVIVING
CORPORATION.
(a) The certificate of incorporation of Sub, as in effect
immediately prior to the Effective Time, shall be the certificate of
incorporation of the Surviving Corporation until duly amended in
accordance with its terms and applicable law.
(b) The by-laws of Sub, as in effect immediately prior to
the Effective Time, shall be the by-laws of the Surviving Corporation
until duly amended in accordance with their terms and applicable law.
(c) The directors and officers of Sub at the Effective
Time shall be the directors and officers, respectively, of the
Surviving Corporation from the Effective Time until their respective
successors have been duly elected or appointed in accordance with the
certificate of incorporation and by-laws of the Surviving Corporation
and applicable law.
1.4 EFFECT ON SECURITIES.
(a) PALWEB AND SUB SECURITIES. At the Effective Time, by
virtue of the Merger and without any action on the part of the holder
thereof, each share of Palweb Common Stock and all other securities of
Palweb outstanding immediately prior to the Effective Time and each
share of Sub Common Stock and all other securities of Sub outstanding
immediately prior to the Effective Time shall remain outstanding and
continue unaffected by the Merger, and each certificate or other
instrument evidencing ownership of any such shares or other securities
shall continue to evidence ownership of the same number of shares or
other securities of Palweb and Sub.
(b) TARGET SECURITIES.
(i) TARGET COMMON STOCK. At the Effective Time, by
virtue of the Merger and without any action on the part of any
holder thereof, each share of Target Common Stock that is
issued and outstanding immediately prior to the Effective Time
shall be converted into the right to receive 655.265 shares of
validly issued, fully paid and nonassessable Palweb Common
Stock (for a total of 50,000,000 shares of Palweb Common
Stock). Each share of Target Common Stock, when so converted,
shall automatically be canceled and retired, shall cease to
exist and shall no longer be outstanding, and the holder of
any certificate representing any such shares shall cease to
have any rights with respect thereto, except the right to
receive the shares of Palweb Common Stock, to be issued in
exchange therefor.
(ii) TARGET TREASURY STOCK. At the Effective Time, by
virtue of the Merger, any and all shares of Target Common
Stock that are issued and held as treasury stock shall be
canceled and retired and shall cease to exist, and no shares
of
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<PAGE>
Palweb Common Stock or other consideration shall be paid or
payable in exchange therefor.
(iii) NO OTHER SECURITIES. At the Effective Time, the
provisions of any other plan, program or arrangement providing
for the issuance or grant of any other interest in respect of
the capital stock of the Target or any Subsidiary of Target
shall become null and void, and Target shall take all
necessary actions to ensure that, following the Effective
Time, no holder of rights or any participant in any plan,
program or arrangement shall have any right thereunder to
acquire any equity securities of Target, Sub, Palweb or any
direct or indirect Subsidiary thereof.
1.5 PAYMENT OF THE MERGER CONSIDERATION. Certificates representing
the Palweb Common Stock constituting the Merger Consideration shall be delivered
by Palweb to the Shareholder at the Closing (against surrender by the
Shareholder of certificates representing Target Common Stock) or as otherwise
provided in Section 1.6 below. The Palweb Common Stock issued in connection with
this Agreement will be "restricted securities" under the Securities Act and Rule
144 promulgated thereunder and may only be sold or otherwise transferred by the
holder thereof pursuant to an effective registration statement under the
Securities Act or an exemption from the registration requirements of the
Securities Act. Certificates representing the Palweb Common Stock shall bear a
legend indicating such restrictions.
1.6 EXCHANGE OF CERTIFICATES; DISTRIBUTIONS WITH RESPECT TO
UNEXCHANGED SHARES. Target shall use reasonable efforts to cause the Shareholder
to deliver for cancellation at the Closing all certificates representing Target
Common Stock. Until surrendered as provided in this Agreement, each certificate
representing Target Common Stock shall be deemed at any time after the Effective
Time to represent solely the right to receive upon such surrender the Merger
Consideration as provided by this Agreement. No dividends or other distributions
will be paid by Palweb to the holder of any unsurrendered certificate
representing Target Common Stock until such certificate or agreement has been
duly surrendered. Subject to the effect, if any, of applicable escheat and other
laws, following surrender of any certificate representing Target Common Stock,
Palweb shall cause to be delivered to the Person entitled thereto, without
interest, the amount of dividends or other distributions theretofore paid with
respect to the Palweb Common Stock so withheld as of any date subsequent to the
Effective Time and prior to such date of delivery.
1.7 EFFECTIVE TIME OF THE MERGER. The Merger shall become
effective immediately when the certificates of merger ("Certificates of Merger")
in accordance with the TBCA and the OGCA are accepted for filing by the
respective Secretaries of State of Texas and Oklahoma or at such time thereafter
as is provided in the Certificates of Merger (the "Effective Time"). The
Certificates of Merger shall be filed, and the Effective Time shall occur, on
the Closing Date immediately after the Closing.
1.8 TAKING OF FURTHER ACTION. If, at any time after the Effective
Time, any further action is necessary or desirable to carry out the purposes of
this Agreement and to vest the Surviving
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<PAGE>
Corporation with full right, title and possession to all assets, property,
rights, privileges, powers and franchises of either of Sub or Target, the
officers and directors of the Surviving Corporation are fully authorized, in
the name of the Surviving Corporation or otherwise to take, and shall take,
all such lawful and necessary action.
2. REPRESENTATIONS AND WARRANTIES OF TARGET. As a material inducement to
Palweb and Sub to enter into this Agreement and consummate the transactions
contemplated herein, Target represents and warrants to Palweb and Sub, as of the
date of this Agreement, as follows:
2.1 ORGANIZATION, POWER AND QUALIFICATION. Target and its
Subsidiary are each a corporation duly incorporated, validly existing and in
good standing under the laws of the State of Oklahoma. Except as provided on
SCHEDULE 2.1, Target and its Subsidiary are duly authorized to conduct business
and are in good standing under the law of each jurisdiction where such
qualification is required, except where the lack of such qualification would not
have a material adverse effect on the financial condition of the Target and its
Subsidiary taken as a whole or on the ability of the Parties to consummate the
transactions contemplated by this Agreement. Except as provided on SCHEDULE 2.1,
Target and its Subsidiary have all requisite corporate power and authority to
own, lease and operate its Assets and to carry on its business or businesses as
presently conducted. Target has delivered to Palweb complete and correct copies
of the Organizational Documents of Target and its Subsidiary, as currently in
effect.
2.2 AUTHORITY; POWER; BINDING EFFECT. The execution, delivery and
performance of this Agreement by Target have been authorized by all necessary
action on the part of Target and the Shareholder and no other proceedings
(corporate or other) on the part of Target are necessary to authorize the
execution, delivery and performance of this Agreement. Target has the requisite
right, power, authority and capacity to execute and deliver this Agreement and
to carry out the transactions contemplated hereby and to take any and all other
actions required to be taken by it pursuant to this Agreement. This Agreement
has been duly executed and delivered by Target and, assuming the due execution
and delivery of this Agreement by Palweb and Sub, constitutes the legal, valid
and binding obligation of Target enforceable against Target in accordance with
its terms and conditions.
2.3 NO VIOLATION; CONSENTS. Neither the execution and delivery of
this Agreement, nor the consummation of the transactions contemplated hereby, by
Target will, directly or indirectly, with or without notice or the passage of
time, except as contemplated by this Agreement or as set forth in SCHEDULE 2.3:
(a) violate or conflict with any provision of the Organizational Documents of
Target or its Subsidiary; (b) violate any provision of any law of any
Governmental Entity applicable to Target or its Subsidiary; (c) conflict with,
violate or result in a breach of or constitute (with due notice or lapse of
time) a default under any contract, lease, loan agreement, mortgage, security
agreement, indenture, or other agreement or instrument to which Target or its
Subsidiary is a party or by which Target or its Subsidiary is bound or to which
any of their Assets are subject; (d) result in the imposition of any Encumbrance
on Target or its Subsidiary or any of their Assets; or (e) require any
authorization, consent, approval or other action by or notice to or filing with
any Person or Governmental Entity.
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2.4 OWNERSHIP OF TARGET'S CAPITAL STOCK. To Target's Knowledge,
the Shareholder is the lawful record and beneficial owner of all of Target's
issued and outstanding capital stock comprised solely of 76,305 shares of common
stock, par value $0.01 per share (referred to herein as the "Target Common
Stock"), free and clear of any Encumbrances except as set forth on SCHEDULE 2.4,
and all of such shares have been duly authorized and are validly issued, fully
paid and nonassessable. There are no outstanding or authorized options,
warrants, purchase rights, subscription rights, conversion rights, exchange
rights or other contracts or commitments that could require the Target to issue,
sell or otherwise cause to become outstanding any of its capital stock.
2.5 FINANCIAL STATEMENTS. True and complete copies of the audited
consolidated balance sheets and statements of income, changes in stockholders'
equity, and cash flow of Target and its Subsidiary, as of and for the years
ended September 30, 1997, and 1998 (the "Audited Financial Statements"), are
attached hereto as SCHEDULE 2.5(A). True and complete copies of the unaudited
consolidated balance sheet and statement of income, changes in stockholders'
equity, and cash flow of Target and its Subsidiary, as of and for the year ended
September 30, 1999 (the "Unaudited Financial Statements"), are attached hereto
as SCHEDULE 2.5(B). The unaudited interim consolidated balance sheet and
statement of income, changes in stockholders' equity and cash flow of Target and
its Subsidiary (the "Interim Balance Sheet") as of and for the two months ended
November 30, 1999 (the "Interim Balance Sheet Date") (collectively, the "Interim
Financial Statements") are attached hereto as SCHEDULE 2.5(C). The Audited
Financial Statements and the Unaudited Financial Statements fairly present the
financial condition of Target and its Subsidiary as of their respective dates
and fairly present the results of operations and cash flows of Target and its
Subsidiary for the periods indicated (subject, in the case of the Interim
Financial Statements, to non-material changes resulting from audit and customary
year-end adjustments).
2.6 ABSENCE OF UNDISCLOSED LIABILITIES. Neither Target nor its
Subsidiary has any Liabilities (whether known or unknown, whether asserted or
unasserted, whether absolute or contingent, whether accrued or unaccrued,
whether liquidated or unliquidated, and whether due or to become due), including
any liability for taxes, except for (i) Liabilities set forth on the face of the
Interim Balance Sheet (excluding the notes thereto); (ii) Liabilities arising in
the Ordinary Course of Business under any agreement, contract, commitment, lease
or plan specifically set forth in SCHEDULE 2.6 (or not required to be disclosed
under Section 2.6 because of the term or amount involved); and (iii) current
Liabilities incurred in the Ordinary Course of Business since the Interim
Balance Sheet Date.
2.7 CONTRACTS AND COMMITMENTS.
(a) SCHEDULE 2.7 lists all written contracts and other
written agreements to which Target or its Subsidiary is a party the
performance of which will involve consideration in excess of $25,000.
(b) Each of the agreements, contracts, commitments,
leases, plans and other instruments, documents and undertakings set
forth in SCHEDULE 2.7 (or not required to be
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listed thereon because of the terms thereof), is enforceable in
accordance with its terms. Except as set forth in SCHEDULE 2.7,
Target and its Subsidiary are, and, to Target's Knowledge, all other
parties thereto are, in compliance with the provisions thereof and,
to Target's Knowledge, no event has occurred which with or without
the giving of notice or lapse of time, or both, would constitute a
default thereunder. Target has delivered to Palweb true, correct and
complete copies of each of the written, and a correct and complete
summary of each of the oral, agreements, contracts, commitments,
leases, plans and other instruments, documents and undertakings set
forth in SCHEDULE 2.7.
2.8 TITLE TO ASSETS. Target and its Subsidiary have good and
marketable title to, or a valid leasehold interest in, the Assets, free and
clear of all Encumbrances excepting only (i) the Liabilities expressly reflected
or reserved against on the face of the Interim Balance Sheet (rather than any
notes thereto) and (ii) Permitted Encumbrances.
2.9 CONDUCT OF TARGET SINCE THE INTERIM BALANCE SHEET DATE. Except
as set forth in SCHEDULE 2.9, since the Interim Balance Sheet Date, Target and
its Subsidiary have conducted their businesses only in the Ordinary Course of
Business and have not, except in the Ordinary Course of Business suffered any
material adverse change in their business, operations, Assets, prospects or
condition (financial or otherwise).
2.10 LITIGATION; DECREES. To Target's Knowledge, there are no
judicial or administrative actions, proceedings or investigations pending or
threatened that question the validity of this Agreement or any action taken or
to be taken by Target or the Shareholder in connection with this Agreement.
Except as set forth in SCHEDULE 2.10: (i) there are no lawsuits, claims,
administrative or other Proceedings or investigations pending or, to Target's
Knowledge, threatened by, against or affecting Target or its Subsidiary or any
of their Assets; and (ii) there are no judgments, orders or decrees of any
Governmental Entity binding on Target or its Subsidiary or any of their Assets.
2.11 COMPLIANCE WITH LAW; PERMITS. To Target's Knowledge, except as
set forth in SCHEDULE 2.11, Target and its Subsidiary have materially complied
with each Law of any Governmental Entity to which Target and its Subsidiary or
their business, operations or Assets are subject and are not currently in
violation, or alleged by any Governmental Entity to have violated, of any of the
foregoing. Target and its Subsidiary own, hold, possess or lawfully use in the
operation of their businesses all Permits which are required for it to conduct
their businesses as now conducted or for the ownership and use of the Assets, in
material compliance with all Laws.
2.12 TAX MATTERS.
(a) Target and its Subsidiary have filed all Income Tax
Returns that they were required to file. All such Income Tax Returns
were correct and complete in all material respects. All Income Taxes
owed by Target and its Subsidiary (whether or not shown on any Income
Tax Return) have been paid.
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(b) There is no material dispute or claim concerning any
Income Tax liability of Target or its Subsidiary either (i) claimed or
raised by any authority in writing; or (ii) as to which the Shareholder
and the directors and officers of Target or its Subsidiary have
Knowledge based upon personal contact with any agent of such authority.
(c) Target and its Subsidiary are not a party to any
Income Tax allocation or sharing agreement.
2.13 COMMISSIONS OR FINDERS FEES. Neither Target nor any Person
acting on behalf of Target has agreed to pay a commission, finder's fee or
similar payment in connection with this Agreement or any matter related hereto
to any Person.
2.14 INTELLECTUAL PROPERTY. SCHEDULE 2.14 identifies each patent or
registration which has been issued to Target or its Subsidiary with respect to
any of its Intellectual Property, identifies each pending patent application or
application for registration which Target or its Subsidiary has made with
respect to any of its Intellectual Property, and identifies each license,
agreement or other permission which Target or its Subsidiary has granted to any
third party with respect to any of its Intellectual Property.
2.15 YEAR 2000 PROBLEM. Target and its Subsidiary have reviewed the
areas within their businesses and operations which could be adversely affected
by, and have developed or are developing a program to address on a timely basis,
the "Year 2000 Problem" (that is, the risk that computer applications used by
Target or its Subsidiary may be unable to recognize and perform properly
date-sensitive functions involving certain dates prior to and any date on or
after December 31, 1999), and have, to the extent possible, made related inquiry
of material suppliers and vendors.
2.16 DISCLOSURE. With respect to this Agreement, the Schedules and
Exhibits to this Agreement and the other agreements contemplated by this
Agreement, to the Knowledge of Target, Target has not made any untrue statement
of a material fact or omitted to state a material fact necessary in order to
make the statements made, in light of the circumstances under which they were
made, not misleading.
3. REPRESENTATIONS AND WARRANTIES OF PALWEB AND SUB. As a material
inducement to Target to enter into this Agreement and consummate the
transactions contemplated herein, Palweb and Sub represent and warrant to
Target, as of the date of this Agreement, as follows:
3.1 ORGANIZATION.
(a) Palweb is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
the requisite corporate power and authority to own, lease and operate its Assets
and to carry on its business as presently conducted.
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(b) Sub is a corporation duly organized, validly existing
and in good standing under the laws of the State of Texas and has the requisite
corporate power and authority to own, lease and operate its Assets and to carry
on its business as presently conducted.
3.2 AUTHORITY; POWER; BINDING EFFECT. The execution, delivery and
performance of this Agreement and the agreements, instruments and documents
contemplated hereby (collectively, the "Other Agreements") by Palweb and Sub
have been authorized by all necessary corporate action on the part of Palweb and
Sub and no other proceedings (corporate or other) on the part of Palweb and Sub
are necessary to authorize the execution, delivery and performance of this
Agreement and the Other Agreements. Palweb and Sub have the requisite power and
authority to execute and deliver this Agreement and the Other Agreements, to
consummate the transactions contemplated hereby and thereby and to take any and
all other actions required to be taken by it pursuant to the provisions of this
Agreement and the Other Agreements. This Agreement and the Other Agreements have
been duly executed and delivered by Palweb and Sub and, assuming the due
execution and delivery of this Agreement by Target and Shareholder, or the other
applicable parties to the Other Agreements, this Agreement and the Other
Agreements constitute the legal, valid and binding obligation of Palweb and Sub
enforceable against it in accordance with its terms and conditions.
3.3 PALWEB COMMON STOCK. The Palweb Common Stock to be delivered
in connection with the Merger as provided in this Agreement has been duly
authorized by Palweb and, when delivered in accordance with the terms of this
Agreement, will be validly issued, fully paid and nonassessable, free and clear
of any Encumbrances (other than the restrictions on transfer contemplated by
this Agreement), and no shareholder of Palweb will have any preemptive right of
subscription or purchase in respect thereof.
3.4 NO VIOLATION; CONSENTS. Neither the execution and delivery of
this Agreement nor the consummation of the transactions contemplated herein by
Palweb and Sub will, directly or indirectly, with or without notice or the
passage of time, except as contemplated by this Agreement: (a) violate or
conflict with any provision of the Organizational Documents of Palweb or Sub;
(b) violate any provision of any Law of any Governmental Entity applicable to
Palweb or Sub; (c) conflict with, violate or result in a breach of or constitute
(with due notice or lapse of time) a default under any contract, lease, loan
agreement, mortgage, security agreement, indenture, or other agreement or
instrument to which Palweb or Sub is a party or by which Palweb or Sub is bound
or to which any of their Assets is subject; (d) result in the imposition of any
Encumbrance on Palweb or Sub or any of their Assets; or (e) require any
authorization, consent, approval or other action by or notice to or filing with
any Person or Governmental Entity.
3.5 COMMISSION DOCUMENTS AND OTHER REPORTS. Palweb has filed all
periodic reports required to be filed by it with the Commission (the "Palweb
Commission Documents"). As of their respective dates, the Palweb Commission
Documents complied in all material respects with the requirements of the
Securities Exchange Act of 1934, as amended, and the rules and regulations
thereunder, and none of the Palweb Commission Documents contained any untrue
statement of a material fact or omitted to state any material fact required to
be stated therein or necessary to make
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the statements therein, in light of the circumstances under which they were
made, not misleading. Since the date of the last filed Palweb Commission
Document, Palweb has not suffered a material adverse change in its condition
(financial or otherwise). The consolidated financial statements of Palweb
included in the Palweb Commission Documents complied as to form in all
material respects with the applicable accounting requirements and the
published rules and regulations of the Commission with respect thereto, were
prepared in accordance with GAAP (except, in the case of the unaudited
statements, as permitted by the regulations of the Commission) consistently
applied throughout the periods involved (except as may be indicated therein
or in the notes thereto) and fairly present the consolidated financial
position, results of operations and cash flows of Palweb and its consolidated
Subsidiary as of the dates or for the periods indicated therein, subject, in
the case of the unaudited statements, to normal non-material changes
resulting form audit, customary year-end adjustments and the absence of
footnote disclosure.
3.6 COMMISSIONS OR FINDERS FEES. Palweb, Sub and any Person acting
on behalf of them have not agreed to pay a commission, finder's fee or similar
payment in connection with this Agreement or any matter related hereto to any
Person.
3.7 DISCLOSURE. With respect to this Agreement, the Schedules and
Exhibits to this Agreement and the other agreements contemplated by this
Agreement, to the Knowledge of Palweb and Sub, Palweb and Sub have not made any
untrue statement of a material fact or omitted to state a material fact
necessary in order to make the statements made, in light of the circumstances
under which they were made, not misleading.
4. OTHER COVENANTS AND AGREEMENTS.
4.1 TAX-FREE REORGANIZATION. It is intended that the Merger be
treated as a reorganization within the meaning of Section 368(a) of the Code.
Subject to the terms and conditions hereof, the Parties shall use their
reasonable best efforts to cause the merger to be treated as a reorganization
within the meaning of Section 368(a) of the Code.
4.2 REGISTRATION OF PALWEB COMMON STOCK OWNED BY PACECO FINANCIAL
SERVICES, INC. Upon the request of Target's Subsidiary, Paceco Financial
Services, Inc., Palweb will use its best efforts to register the Palweb Common
Stock owned by Paceco Financial Services, Inc., for sale pursuant to the
Securities Act of 1933, as amended and any applicable state securities laws, and
Palweb and Paceco Financial Services, Inc., agree to cooperate and to take all
actions that may be necessary or appropriate to fully effect such registration
of such Palweb Common Stock.
5. CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER. The
respective obligations of each Party under this Agreement to consummate the
transactions contemplated hereby will be subject to the satisfaction, at or
prior to Closing, of all of the following conditions, any one or more of which
may be waived in whole or in part at the option of Palweb or Target:
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5.1 GOVERNMENTAL AND THIRD PARTY CONSENTS AND APPROVALS. All
consents, approvals, waivers permits and authorizations required to be obtained
prior to the Effective Time from, any Governmental Entity or other Person
(including, without limitation, those set forth in SCHEDULES 2.3) in connection
with the execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby shall have been made or obtained (as the case
may be).
5.2 NO ADVERSE PROCEEDINGS. No temporary restraining order,
preliminary or permanent injunction or other order preventing the consummation
of the Merger shall have been issued by any Governmental Entity and remain in
effect, and no proceedings seeking the issuance of such an order or injunction,
or seeking relief against Palweb, Sub or Target if the Merger is consummated,
shall be pending or threatened which, in the good faith judgment Palweb's, Sub's
or Target's respective Board of Directors (acting upon the written opinion of
their respective outside counsel), has a reasonable probability of resulting in
such order, injunction or relief and any such relief would have a material
adverse effect on such Party.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF PALWEB AND SUB. The obligations
of Palweb and Sub under this Agreement to consummate the transactions
contemplated hereby will be subject to the satisfaction, at or prior to Closing,
of all of the following conditions (any one or more of which may be waived in
whole or in part at the option of Palweb):
6.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Target made in this Agreement or in any Exhibit, Schedule or
document delivered pursuant hereto must have been true and correct in all
material respects as of the date hereof.
6.2 PERFORMANCE BY TARGET. All of the covenants and obligations
that Target is required to perform or to comply with pursuant to this Agreement
must have been duly performed and complied with in all material respects.
6.3 CLOSING DOCUMENTS. Target or the Shareholder must have
delivered to Palweb all of the documents set forth in Sections 8.2 and 8.4.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF TARGET. The obligation of Target
under this Agreement to consummate the transactions contemplated hereby is
subject to the satisfaction, at or prior to the Closing, of each the following
conditions (any of which may be waived in whole or in part at the option of
Target):
7.1 REPRESENTATIONS AND WARRANTIES. All representations and
warranties of Palweb and Sub made in this Agreement or in any Exhibit, Schedule
or document delivered pursuant hereto must have been true and correct in all
material respects as of the date hereof.
7.2 PERFORMANCE BY PALWEB AND SUB. All of the covenants,
agreements and obligations that Palweb and Sub are required to perform or to
comply with pursuant to this Agreement at or prior to the Closing must have been
duly performed and complied with in all material respects.
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7.3 CLOSING DOCUMENTS. Palweb must have delivered to Target or the
Shareholder all of the documents set forth in Sections 8.3 and 8.4.
8. CLOSING.
8.1 CLOSING DATE. The closing of the transactions contemplated by
this Agreement (the "Closing") shall occur on the date of the execution of this
Agreement (the "Closing Date").
8.2 DOCUMENTS TO BE DELIVERED BY TARGET AND SHAREHOLDER. At the
Closing, Target and the Shareholder will deliver to Palweb the following:
(a) EVIDENCE OF GOVERNMENTAL AND THIRD-PARTY CONSENTS AND
APPROVALS. Evidence in form reasonably satisfactory to Palweb of the
receipt of each of the governmental and third-party consents, approvals
and waivers.
(b) TARGET STOCK CERTIFICATES. Certificates evidencing
outstanding shares of Target Common Stock as contemplated by Section
1.5.
(c) OTHER DOCUMENTS. Such additional certificates,
instruments, documents, information and materials as Palweb may
reasonably request.
8.3 DOCUMENTS TO BE DELIVERED BY PALWEB AND SUB. At the Closing,
Palweb and/or Sub will deliver to Target or the Shareholder the following:
(a) MERGER CONSIDERATION. Certificates representing the
Palweb Common Stock constituting the Merger Consideration shall be
delivered to the Shareholder in the amounts and manner as set forth in
Section 1.5.
(b) OTHER DOCUMENTS. Such additional certificates,
instruments, documents, information and materials as Target may
reasonably request.
8.4 CONCURRENT CONDITIONS. The performance or tender of
performance at Closing of all matters applicable to a Party under this Agreement
shall be deemed concurrent conditions and no Party shall be required at Closing
to perform, or tender performance of, the obligations of such Party hereunder
unless, coincident therewith, each other Party from whom performance is required
under this Agreement performs or tenders performance of its obligations
hereunder.
9. INDEMNIFICATION BY SHAREHOLDER.
9.1 SURVIVAL; RIGHT TO INDEMNIFICATION NOT AFFECTED BY
INVESTIGATION. All representations, warranties, covenants and obligations in
this Agreement, any Schedules attached hereto pursuant to Section 2 or otherwise
and any certificate or agreement delivered pursuant to this Agreement will
survive the Closing to the extent provided in Section 9.3 below. Shareholder
will
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indemnify and will pay to the Palweb the amount of any Damages to the extent
provided in Sections 9.3 and 9.4. The right to indemnification based on
Breach of the representations, warranties, covenants and obligations of a
Party in this Agreement will not be affected by any investigation conducted
by the other Party; provided however, notwithstanding anything herein to the
contrary, a Party shall not be liable for any damages arising from a Breach
which the other Party, or any of their respective officers, counsel or other
representatives, had actual Knowledge was incorrect or false prior to the
Closing Date. For purposes hereof, Palweb shall be deemed to have actual
Knowledge of the facts set forth in the Schedules and the content of the
documents described in the Schedules hereto to the extent that true and
complete copies thereof have been provided to Palweb. In addition,
notwithstanding anything herein to the contrary, it is understood and
acknowledged that no claims for Damages may be made as a result of an adverse
change after the Closing to the business conducted by Target that results
from the consummation of the transactions contemplated herein (but provided
such adverse change is not the result of the Breach of any specific
representation, warranty or covenant of Target herein) or the actions or
inactions of Palweb following the Closing, including, without limitation, any
changes in accounting policies or changes to the business formerly conducted
by Target.
9.2 DAMAGES.
(a) Damages means the amount of any loss, liability,
obligation, debt, claim, damage or expense (including costs of
investigation and defense and reasonable attorneys' fees), incurred by
Palweb or its directors, officers, employees, agents, advisors,
stockholders, controlling persons, and Affiliates arising, directly or
indirectly, from and in connection with:
(i) any Breach of any representation or warranty
made by Target in this Agreement, the Schedules or any other
certificate or document delivered by Target pursuant to this
Agreement; and
(ii) any Breach by Target of any covenant or
obligation of Target in this Agreement.
(b) Damages also means the amount of any loss, liability,
obligation, debt, claim, damage or expense (including costs of
investigation and defense and reasonable attorneys' fees) incurred by
Palweb or its directors, officers, employees, agents, advisors,
stockholders, controlling persons, and Affiliates after the Closing
Date arising from the defense, compromise, settlement or disposition
(including any judgement of a court of competent jurisdiction or award
of an arbitrator) of each of the proceedings, claims, actions,
threatened claims and disputes identified in SCHEDULE 2.10 or any
update or supplement thereto.
(c) The amount of any Damages shall be reduced by the
amount of any judgment or settlement payment or other payment, if any,
actually received by Palweb or Sub from a third party in connection
with the resolution or settlement of the applicable disputed matter.
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9.3 TIME LIMITATIONS. Any claims for payment of Damages must be
asserted by written notice from Palweb to the Shareholder not later than the
first anniversary of the Closing Date.
9.4 LIMITATIONS ON AMOUNT. Palweb will not be entitled to the
payment of any Damages unless and until the amount of Damages exceeds $50,000,
and then Palweb will only be entitled to payment of any Damages in excess of
$50,000.
10. INDEMNIFICATION BY PALWEB AND SUB. Palweb and Sub, jointly and
severally, will indemnify and will pay to the Shareholder the amount of any
loss, liability, obligation, debt, claim, damage, expense (including costs of
investigation and defense and reasonable attorneys' fees), directly or
indirectly, from and in connection with (a) any Breach of any representation or
warranty made by Palweb or Sub in this Agreement or any Schedule or update to a
schedule delivered by Palweb or Sub or in any certificate delivered by Palweb
pursuant to this Agreement, or (b) any Breach by Palweb or Sub of any covenant
or obligation of Palweb in this Agreement. Palweb and Sub will have no liability
(for indemnification or otherwise) with respect to any representation or
warranty made, or covenant or obligation to be performed and complied with,
unless on or before the first anniversary of the Closing Date, the Shareholder
notifies Palweb of a claim specifying the factual basis of that claim in
reasonable detail to the extent then known by the Shareholder.
11. REMEDIES EXCLUSIVE. Except as otherwise provided in Section 12.1
relating to specific performance the remedies provided for in Sections 9 and 10
above shall be the exclusive remedies of the Parties and the Shareholder with
respect to this Agreement and all or any aspect of the transactions contemplated
herein.
12. MISCELLANEOUS PROVISIONS.
12.1 SPECIFIC PERFORMANCE. Each of the Parties acknowledges and
agrees that the other Parties would be damaged irreparably in the event any of
the provisions of this Agreement are not performed in accordance with their
specific terms or otherwise are Breached. Accordingly, each of the Parties
agrees that the other Parties shall be entitled to an injunction or injunctions
to prevent Breaches of the provisions of this Agreement and to enforce
specifically this Agreement and the terms and provisions hereof, in addition to
any other remedy to which they may be entitled, at law or in equity. If any
action is brought by a Party to specifically enforce this Agreement, the
Breaching Party shall waive any defense that there is an adequate remedy at law.
12.2 NOTICES. All notices, consents, waivers, and other
communications under this Agreement must be in writing and will be deemed to
have been duly given when (a) delivered by hand (with written confirmation of
receipt), (b) sent by telecopier (with written confirmation of receipt),
provided that a copy is mailed by registered or certified mail, return receipt
requested, or (c) when received by the addressee, if sent by a nationally
recognized overnight delivery service (receipt requested), in each case to the
appropriate addresses and telecopier numbers set forth below (or to such other
addresses and telecopier numbers as a Party may designate by notice to the other
Parties):
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(a) Palweb and Sub: 1607 W. Commerce Street
Dallas, TX 75208
Facsimile No.: 214/745-4578
Attention: Paul A. Kruger
With a Copy to: Crowe & Dunlevy
1800 Mid-America Tower
Oklahoma City, OK 73102
Facsimile No.: 405/239-6651
Attention: Michael M. Stewart
(b) Target and Shareholder: 2500 S. McGee
Norman, OK 73072
Facsimile No.: 405/360-5354
Attention: Mark R. Kidd
With a Copy to: Andrews, Davis, Legg, Bixler,
Milsten & Price
500 West Main Street
Oklahoma City, OK 73102
Facsimile No.:405/235-8786
Attention: Joe Rockett
12.3 WAIVER. The rights and remedies of the Parties to this
Agreement are cumulative and not alternative. Neither the failure nor any delay
by any Party in exercising any right, power, or privilege under this Agreement
or the documents referred to in this Agreement will operate as a waiver of such
right, power, or privilege, and no single or partial exercise of any such right,
power, or privilege will preclude any other or further exercise of such right,
power, or privilege or the exercise of any other right, power, or privilege. To
the maximum extent permitted by applicable law, (a) no claim or right arising
out of this Agreement or the documents referred to in this Agreement can be
discharged by one Party, in whole or in part, by a waiver or renunciation of the
claim or right unless in writing signed by the other Parties; (b) no waiver that
may be given by a Party will be applicable except in the specific instance for
which it is given; and (c) no notice to or demand on one Party will be deemed to
be a waiver of any obligation of such Party or of the right of the Party giving
such notice or demand to take further action without notice or demand as
provided in this Agreement or the documents referred to in this Agreement.
12.4 ENTIRE AGREEMENT AND AMENDMENT. This Agreement supersedes all
prior agreements between the Parties with respect to its subject matter and
constitutes (along with the documents referred to in this Agreement) a complete
and exclusive statement of the terms of the agreement between the Parties with
respect to its subject matter. This Agreement may not be amended except by a
written agreement executed by the Party to be charged with the amendment.
15
<PAGE>
12.5 FURTHER ASSURANCES. The Parties agree (a) to furnish upon
request to each other such further information, (b) to execute and deliver to
each other such other documents, and (c) to do such other acts and things, all
as any other Party may reasonably request for the purpose of carrying out the
intent of this Agreement and the documents referred to herein.
12.6 GOVERNING LAW. This Agreement, including without limitation,
the interpretation, construction and validity hereof, shall be governed by the
laws of the State of Oklahoma, without regard to its conflict of laws
principles.
12.7 SEVERABILITY. If any provision of this Agreement is held
invalid or unenforceable by any court of competent jurisdiction, the other
provisions of this Agreement will remain in full force and effect. Any provision
of this Agreement held invalid or unenforceable only in part or degree will
remain in full force and effect to the extent not held invalid or unenforceable.
12.8 EXECUTION IN COUNTERPARTS. This Agreement may be executed in
one or more counterparts, each of which will be deemed an original copy of the
Agreement and all of which, when taken together will be deemed to constitute one
and the same agreement.
12.9 ASSIGNMENTS, SUCCESSORS AND NO THIRD PARTY RIGHTS. No Party
may assign any of its rights or obligations under this Agreement without the
prior consent of the other Party. Subject to the preceding sentence, this
Agreement will apply to, be binding in all respects upon, and inure to the
benefit of the successors and permitted assigns of the Parties. Nothing
expressed or referred to in this Agreement will be construed to give any Person
other than the Parties to this Agreement any legal or equitable right, remedy,
or claim under or with respect to this Agreement or any provision of this
Agreement, except as set forth immediately below with respect to third party
beneficiary rights of the Shareholder. This Agreement and all of its provisions
and conditions are for the sole and exclusive benefit of the Parties to this
Agreement and their successors and assigns; provided, however, that the
Shareholder shall be deemed to be third party beneficiaries to the rights of
Target under this Agreement and with respect to any provision hereunder for the
Shareholder's benefit (including, without limitation, Section 10).
12.10 CERTAIN INTERPRETIVE MATTERS AND DEFINITIONS.
(a) Unless the context otherwise requires, (i) all
references to Sections or Schedules are to Sections or Schedules of or
to this Agreement; (ii) each term defined in this Agreement has the
meaning assigned to it; (iii) "or" is disjunctive but not necessarily
exclusive; and (iv) words in the singular include the plural and vice
versa. All references to "$" or dollar amounts will be to lawful
currency of the United States of America.
(b) No provision of this Agreement will be interpreted in
favor of, or against, any of the Parties hereto by reason of the extent
to which any such Party or its counsel participated in the drafting
thereof or by reason of the extent to which any such provision is
inconsistent with any prior draft hereof or thereof.
16
<PAGE>
(c) Any reference to any Law shall be deemed also to
refer to all rules and regulations promulgated thereunder, unless the
context requires otherwise.
(d) The word "including" means "including, without
limitation," and does not limit the preceding words or terms.
(e) All words used in this Agreement will be construed to
be of such gender or number as the circumstances require.
12.11 JURISDICTION AND VENUE. The Parties intend that all disputes
concerning this Agreement shall be resolved by arbitration as provided below,
unless arbitration shall be held by a court of competent jurisdiction to be
unenforceable. In such event, the Parties agree that any suit, action or
proceeding with respect to this Agreement may be brought in the Oklahoma state
courts of competent jurisdiction in Cleveland County, Oklahoma or in the United
States District Court in which the City of Norman is located. ALL PARTIES HEREBY
IRREVOCABLY WAIVE ANY OBJECTIONS WHICH THEY MAY NOW OR HEREAFTER HAVE TO THE
PERSONAL JURISDICTION OR VENUE OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF
OR RELATING TO THIS AGREEMENT BROUGHT IN ANY SUCH COURT AND HEREBY FURTHER
IRREVOCABLY WAIVE ANY CLAIM THAT SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY
SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
12.12 DISPUTE RESOLUTION. Except as otherwise provided in this
Section 12.12, in the event of any dispute, controversy or claim arising out of
or relating to this Agreement or the Breach thereof, the Parties shall meet
promptly (through representatives with authority to resolve the dispute). If the
Parties cannot resolve the dispute within 30 days, the Parties shall arbitrate
the dispute in accordance with the Commercial Arbitration Rules of the American
Arbitration Association, by a sole arbitrator, but the arbitration proceeding
may not revoke or revise any provision of this Agreement. All arbitrators
selected shall be independent third parties and shall have knowledge and
experience in the matters addressed by the claim. Except as set forth in this
Section 12.12, arbitration shall be the sole and exclusive remedy between the
Parties with respect to any dispute, protest, controversy or claim arising out
of or relating to this Agreement, provided, the arbitrator shall not have the
power or authority to award consequential, incidental or punitive damages.
Unless all the Parties to an arbitration otherwise consent in writing, the
location of the arbitration hearings and the place of entry of the award shall
be in Kansas City, Missouri. The Parties consent to jurisdiction of, and agree
that venue will lie in, any of the state and federal courts set forth in Section
12.11. The arbitration award shall be final and binding and shall not be
reviewable in any court on any grounds except corruption, fraud or undue means
of a Party or for evident partiality or corruption of the arbitrator. The
Parties intend to eliminate all other court review of the award and the
arbitration proceedings. Except for a proceeding to enforce or confirm an award
or a proceeding brought by all Parties to the dispute to vacate
17
<PAGE>
or modify an award, the initiation of any suit relating to a dispute that is
arbitrable under this Agreement shall constitute a material Breach of this
Agreement. However, the Parties hereby acknowledge that Breach of this
Agreement may give rise to irreparable injury to the Parties, inadequately
compensable in monetary damages alone, and notwithstanding anything to the
contrary stated herein, the Parties shall be permitted to seek and obtain
specific performance as provided in Section 12.1.
12.13 PAYMENT OF EXPENSES. Each Party hereto shall pay its own
expenses incident to preparing for, entering into and carrying out this
Agreement and the transactions contemplated hereby.
13. DEFINITIONS.
13.1 DEFINITIONS. Capitalized terms used in this Agreement and not
defined elsewhere in this Agreement shall have the meanings ascribed to them in
this Section 13.1 (such meanings applicable to both the singular and plural
forms of the terms defined) as follows:
"AFFILIATE" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act of 1934, as amended.
"ASSETS" means assets, rights, properties and goodwill of any kind or
type, tangible and intangible, real or personal, wheresoever located.
"BREACH" means a "Breach" of a representation, warranty, covenant,
obligation or other provision of this Agreement or any instrument delivered
pursuant to this Agreement will be deemed to have occurred if there is or has
been (i) any inaccuracy in or breach of, or any failure to perform or comply
with, such representation, warranty, covenant, obligation or other provision, or
(ii) any claim by a third party which claim if true would result in a Breach of
a representation, warranty, covenant, obligation, or other provision.
"CODE" means the Internal Revenue Code of 1986, as amended, or any
successor law, and the regulations promulgated thereunder.
"COMMISSION" means the United States Securities and Exchange
Commission, and any successor thereto.
"ENCUMBRANCE" means any charge, claim, community property interest,
condition, equitable interest, lien, option, pledge, security interest, right of
first refusal, or restriction of any kind, including any restriction on use,
voting, transfer, mortgage, easement, servitude, right of way, encroachment,
receipt of income, or exercise of any other attribute of ownership.
18
<PAGE>
"GAAP" means United States generally accepted accounting principles as
in effect from time to time.
"GOVERNMENTAL ENTITY" means any domestic or foreign court, government
or governmental or regulatory agency, authority, entity or instrumentality.
"HART-SCOTT-RODINO ACT" means the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and the regulations thereunder.
"INCOME TAX" means any federal, state, local or foreign income Tax,
including any interest, penalty, or addition thereto, whether disputed or not.
"INCOME TAX RETURN" means any return, declaration, report, claim for
refund or information return or statement relating to Income Taxes, including
any schedule or attachment thereto, and including any amendments thereof.
"INTELLECTUAL PROPERTY" means all domestic or foreign letters patent
(including any reissue or re-examination thereof), patent applications
(including any continuation, division, renewal or substitute thereof), patent
licenses, inventions, software licenses, know-how licenses, trade names,
trademark registrations and applications, service mark registrations and
applications, common law trademarks and service marks, copyrights, copyright
registrations and applications, trade secrets, technical knowledge, know-how or
other confidential proprietary information capable of being set forth in
SCHEDULE 2.14 which is owned or used by Target.
"IRS" means the United States Internal Revenue Service.
"KNOWLEDGE" means an individual will be deemed to have "Knowledge,"
whether or not such term is capitalized herein, of a particular fact or other
matter if such individual is actually aware of such fact or other matter after
conducting a reasonable investigation. A person (other than an individual) will
be deemed to have "Knowledge" of a particular fact or other matter if any
individual who is serving, or who has served, as a director, executive officer,
partner, executor or trustee of such person (or in any similar capacity) has, at
any time prior to Closing, had Knowledge of such fact or other matter.
"LAWS" means all foreign, federal, state, county and local statutes,
laws (including common law), ordinances, regulations, rules, resolutions,
orders, codes, determinations, writs, injunctions, awards (including, without
limitation, awards of any arbitrator), judgments and decrees applicable to the
specified Person or to the businesses or assets and properties thereof
(including, without limitation, Laws relating to securities registration and
regulation, the sale, leasing, ownership or management of real property,
employment practices, terms and conditions, and wages and hours, building
standards land use and zoning, safety, health and fire prevention, and
environmental protection, including Environmental Laws).
19
<PAGE>
"LEGAL REQUIREMENT" means any federal, state, local, municipal,
foreign, international, multinational or other administrative order,
constitution, law, ordinance, principal of common law, regulation, statute or
treaty.
"LIABILITIES" means any direct or indirect, or matured or unmatured,
indebtedness, guaranty, endorsement, claim, loss, damage, deficiency, cost,
expense, obligation or responsibility, whether absolute, fixed, contingent or
otherwise, known or unknown, asserted or unasserted, choate or inchoate,
liquidated or unliquidated, secured or unsecured.
"MERGER CONSIDERATION" means the shares of Palweb Common Stock that the
Shareholder shall have a right to receive upon conversion of the Target Common
Stock as provided in Section 1.4 hereof.
"OGCA" means the Oklahoma General Corporation Act, as amended, or any
successor law or regulations promulgated thereunder.
"ORDINARY COURSE OF BUSINESS" means an action taken by a Person will be
deemed to have been taken in the "Ordinary Course of Business" only if:
(a) such action is consistent with the past practices of
such Person and is taken in the ordinary course of the normal
day-to-day operations of such Person;
(b) such action is not required to be authorized by the
board of directors of such Person (or by any Person or group of Persons
exercising similar authority); and
(c) such action is similar in nature and magnitude to
actions customarily taken, without any authorization by the board of
directors (or by any Person or group of Persons exercising similar
authority), in the ordinary course of the normal day-to-day operations
of other Persons that are in the same line of business as such Person.
"ORGANIZATIONAL DOCUMENTS" means the articles or certificate of
incorporation and the bylaws of a corporation and any amendment to any of the
foregoing.
"PERMITS" means all assignable franchises, grants, authorizations,
licenses, permits, easements, variances, exemptions, consents, certificates,
approvals and orders necessary to own, lease and operate the properties and
assets and to carry on the business of any specified Person as it is now being
conducted.
"PERMITTED ENCUMBRANCES" means only those Encumbrances which do not and
will not materially interfere with the use of, impair, or reduce the value of
any Assets or Leased Real Property.
20
<PAGE>
"PERSON" means any individual, corporation, partnership, limited
liability company, joint venture, association, trust or any other entity,
association or organization including a Governmental Entity.
"PALWEB COMMON STOCK" means shares of common stock, par value $.10 per
share, of Palweb.
"PROCEEDING" means any action, arbitration, audit, hearing,
investigation, litigation, suit (whether civil, criminal, administrative,
investigative or informal), commenced, brought, conducted or heard by or before,
or otherwise involving, any Governmental Body or arbitrator.
"RECITALS" means the portion of this Agreement preceding Section 1.
"SECURITIES ACT" means the Securities Act of 1933, as amended, or any
successor law, and the regulations promulgated thereunder.
"SHAREHOLDER" means Paul A. Kruger the holder of all of the Target
Common Stock.
"SUBSIDIARY" means any corporation with respect to which a specified
Person (or a Subsidiary thereof) owns a majority of the common stock or has the
power to vote or direct the voting of sufficient securities to elect a majority
of the directors.
"TARGET COMMON STOCK" means shares of common stock, par value $0.01 per
share, of Target.
"TAX" and any derivatives thereof, means and includes any and all
federal, state, county, local, and foreign income (including gross, adjusted
gross and supplemental net income), payroll, Medicare, withholding, unemployment
insurance, social security, sales, use, service, service use, leasing, leasing
use, excise, recording, franchise, gross receipts, value added, alternative or
add-on minimum, estimated, occupation, real and personal property, stamp,
transfer, workers' compensation, severance, windfall profits, and environmental
(including taxes under Code Section 59(A)) and any other tax, charge, fee, levy
or assessment of the same or of a similar nature, including any and all
interest, penalties and additions thereto, whether disputed or not.
"TAX RETURN" means and includes any and all returns, forms,
declarations, reports, claims for refund and information returns and statements
relating to Taxes and any amendments thereto, and including any schedules or
attachments thereto.
"TBCA" means the Texas Business Corporation Act, as amended, or any
successor law, or regulations promulgated thereunder.
21
<PAGE>
13.2 OTHER DEFINITIONS. Each of the following terms is defined in
the Section set forth opposite such term.
<TABLE>
<S> <C>
"Palweb" Recitals
"Palweb Commission Documents" Section 3.5
"Agreement" Recitals
"Audited Financial Statements" Section 2.5
"Certificates of Merger" Section 1.7
"Closing" Section 8.1
"Closing Date" Section 8.1
"Damages" Section 9.2
"Target" Recitals
"Effective Time" Section 1.7
"Financial Statements" Section 2.5
"Interim Balance Sheet" Section 2.5
"Interim Balance Sheet Date" Section 2.5
"Interim Financial Statements" Section 2.5
"Merger" Recitals
"Other Agreements" Section 3.2
"Party or Parties" Recitals
"Surviving Corporation" Section 1.2
"Unaudited Financial Statements" Section 2.5
Year 2000 Problem Section 2.15
</TABLE>
22
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as of the date first above written.
"PALWEB"
PALWEB CORPORATION
By:
---------------------------
Title:
--------------------------
"SUB"
PP FINANCIAL, INC.
By:
---------------------------
Title:
--------------------------
"TARGET"
PACE HOLDING, INC.
By:
---------------------------
Title:
--------------------------
"SHAREHOLDER"
------------------------------
Paul A. Kruger
23
<PAGE>
SCHEDULE 2.1
None.
<PAGE>
SCHEDULE 2.3
Paceco Financial Services, Inc. ("Paceco"), the subsidiary of Target,
has agreed to obtain the consent of the Oklahoma Department of Securities to the
Merger prior to the Closing of the Merger.
<PAGE>
SCHEDULE 2.4
None.
<PAGE>
SCHEDULE 2.5(A)
<PAGE>
SCHEDULE 2.5(B)
<PAGE>
SCHEDULE 2.5(C)
<PAGE>
SCHEDULE 2.6
Certain liabilities to which Paceco is subject are disclosed in
Schedule 2.10.
<PAGE>
SCHEDULE 2.7
(a) OFFICE LEASE.
Lease of office space dated January 1, 2000 between Subsidiary and
Onward, LLC providing for rent of $3,500 per month for a term of 24
months.
(b) EMPLOYMENT AGREEMENTS.
Employment Agreements between Subsidiary and the following employees:
Margaret Heath
Donna McMahon
(c) CONSULTING AGREEMENT.
Consulting Agreement between Subsidiary and L.O. and Albernice Pace
("Consultants") dated on or about November 1, 1997 providing for
monthly consulting fees of $2,500 per month, automobile expenses and
medical insurance for so long as either of the Consultants shall live.
(d) INVESTMENT CERTIFICATES PROMISSORY NOTES AND OTHER
INVESTMENTS.
Subsidiary is obligated on investment certificates, passbook savings
accounts, promissory notes and various other instruments entered into
in the ordinary course of business.
<PAGE>
SCHEDULE 2.9
None.
<PAGE>
SCHEDULE 2.10
(a) Oklahoma Department of Securities (File No. SE91493).
As a result of an examination of Paceco by the Oklahoma Department of
Securities ( the "DOS"), certain concerns have been raised involving certain
related party transactions and certain alleged failures to comply with the
Oklahoma Securities Act and regulations thereunder. The DOS has advised Paceco
that the renewal of the registration of Paceco's investment certificates will be
deferred until such concerns have been satisfied. Paceco is in the process of
responding to the concerns of the DOS. While such examination is pending, Paceco
by agreement with the DOS has suspended the offer or sale of investment
certificates except to its existing customers and has agreed not to renew or
otherwise offer or sell thirty month certificates. Paceco has represented to the
DOS that Paceco intends to wind down the offer and sale of investment
certificates over a twenty-four month period.
(b) SPRINGFIELD COACH BUILDERS, INC. VS. RICK ZACHARY, ET AL.
Paceco was named a defendant in this action in the District Court of
Oklahoma County on August 31, 1998. The suit alleges that Paceco converted a
limousine in which Paceco held a security interest by obtaining title through
fraudulent misrepresentations. Plaintiff seeks actual damages of a minimum of
$10,000 and punitive damages. Paceco believes it has meritorious defenses to the
action and intends to vigorously defend it. The case is in the early stages of
discovery.
<PAGE>
SCHEDULE 2.11
See Schedule 2.10
<PAGE>
SCHEDULE 2.14
None.
<PAGE>
EXHIBIT 3.1
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 share is Ten Cents ($0.10) 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>
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.
<PAGE>
EIGHT. 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 may 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 herein before
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>
COMMONWEALTH OF PENNSYLVANIA )
) ss.
COUNTY OF PHILADELPHIA )
BE IT REMEMBERED that on this 20th 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 Bardsley
------------------------------
Notary Public
3
<PAGE>
CERTIFICATE OF AMENDMENT
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
By: /s/ Norman A. Jackson
------------------------------
Secretary
<PAGE>
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATION
FILED 10:16 AM 06/30/1993
931815274-703509
ARTICLES OF MERGER
COME NOW, Cabec Energy Corp. ("Cabec"), a Texas corporation, and
Browning Enterprises, Inc. ("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 Energy Corp. and Browning Enterprises,
Inc.
2. The name of the Surviving Corporation shall be Cabec Energy
Corp., a Texas corporation.
3. The Merger Agreement has been approved, adopted, certified,
executed, and acknowledged by each of the constituent corporation, 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.
Page 1
<PAGE>
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.
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
Page 2
<PAGE>
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 28th day of April, 1993.
/s/ Connie L. Gady
-------------------------------------------
Notary Public in and for The State of Texas
My commission expires:
10-5-94
- -------------------------
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 28th day of April, 1993.
/s/ Connie L. Gady
-------------------------------------------
Notary Public in and for The State of Texas
My commission expires:
10-5-94
- -------------------------
Page 3
<PAGE>
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 27th day of April, 1993.
/s/ Sandra D. Peeples
-------------------------------------------
Notary Public in and for The State of Texas
My commission expires:
03-08-97
- -------------------------
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 27th day of April, 1993.
/s/ Sandra D. Peeples
-------------------------------------------
Notary Public in and for The State of Texas
My commission expires:
03-08-97
- -------------------------
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<PAGE>
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATION
FILED 09:00 AM 11/29/1995
950276951-703509
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 Entergy 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" contains 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 15th day of November, 1995, to be effective as
of the 30th day of November, 1995, 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, Jr.
------------------------------
Ralph Curton, Secretary
Page 1
<PAGE>
STATE OF TEXAS )
)
COUNTY OF TARRANT )
Before me, a notary public, on this day personally appeared Ralph
Curton, Jr., 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 15th day of November, 1995.
/s/ Diane Gatti
-------------------------------------------
Notary Public in and for the State of Texas
My Commission Expires:
10-14-96
- -------------------------
Page 2
<PAGE>
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
class are entitled to vote as a class.
Page 1
<PAGE>
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 of 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, 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
Page 2
<PAGE>
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, except as to the date
from which dividends, if any, shall accrue.
IN WITNESS WHEREOF, this Certificate of Merger is executed on the 13th
day of November, 1995, to be effective as of the 27th day of April, 1993, with
the 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
Page 3
<PAGE>
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 Public in and for the State of Texas
My Commission Expires:
JULY 13, 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:
10-14-96
- -------------------------
Page 4
<PAGE>
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 Racby
-------------------------------------------
Notary Public in and for the State of Texas
My Commission Expires:
- -------------------------
STATE OF TEXAS )
)
COUNTY OF TARRANT )
Before me, a notary public, on this day personally appeared Omer 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 Racby
-------------------------------------------
Notary Public in and for the State of Texas
My Commission Expires:
- -------------------------
Page 5
<PAGE>
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 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 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
Page 1
<PAGE>
now or hereafter provided 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 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 17th 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
Page 2
<PAGE>
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 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 amendments states as
follows:
RESOLVED, That the Certificate of Incorporation of this
corporation be amended by changing the 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 liable for any further payments
thereon. Further, the preferred stock may be issued in
Page 1
<PAGE>
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 provided 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 Article 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
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
Page 2
<PAGE>
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.
1
<PAGE>
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.
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
2
<PAGE>
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.
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
3
<PAGE>
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, providing a quorum shall be present.
4
<PAGE>
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
5
<PAGE>
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.
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.
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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.
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
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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,
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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.
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
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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 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
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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.
ARTICLE VII
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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.
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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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EXHIBIT 10.1
LOAN AGREEMENT
PalWeb Corporation
1607 West Commerce Street
Dallas, Texas 75208
(214) 698-8330
December 1, 1999
Mr. Ralph Curton, Jr.
P.O. Box 7027
Dallas, Texas 75209
Dear Mr. Curton:
The undersigned, PalWeb Corporation (the "Company"), a publicly held
and traded Delaware corporation, agrees with you as follows:
SECTION 1. DESCRIPTION OF THE NOTE AND COMMITMENT.
1.1 DESCRIPTION OF THE NOTE. The Company agrees to issue to you
(or your nominee) a line of credit Convertible Debenture (the "Note") in the
aggregate principal amount of $500,000.00, with the Note to be dated as of the
date of issue, to bear interest from such date at the rate specified
hereinbelow. The Company shall use proceeds of the Loan represented by the Note
to pay the Company's general operating expenses and overhead. The Note shall be
substantially in the same form and substance as the note attached hereto as
Exhibit "A" and incorporated herein by reference for all purposes.
Interest on the Note shall be computed on the basis of a 365 day year
consisting of twelve months at the rate of eight and one-half percent (8.5%) per
annum.
The term Note, as used herein, shall include the Note delivered to you
pursuant to this Agreement. You are hereinafter sometimes referred to as the
"Noteholder".
1.2 (a) COMMITMENT; CLOSING DATE. Subject to the terms and
conditions hereof, and the basis of the representations and warranties
hereinafter set forth, you agree to loan the Company up to $500,000.00, on a
revolving line of credit basis, with draws on the loan to be in the maximum
amount of $100,000.00 in any calendar month. The initial amount to be funded
shall be $25,000.00. Simultaneously with the funding by you of said initial
$25,000.00, the Company agrees to execute a Promissory Note, payable to you, in
the form of the note attached hereto as Exhibit "A".
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Requests for funding under the terms of the of the Note shall be made
to you at your offices and payment therefor by you shall be in Federal or other
current or immediately available funds at Security National Bank and Trust
Company, Norman, Oklahoma, in the amount or the amounts requested by the
Company, subject, however, to the maximum monthly draw of $100,000.00, as set
forth above.
(b) SUBSEQUENT DRAWS AFTER INITIAL LOAN AMOUNT. Following the funding
of the initial $25,000.00 which shall be funded within three (3) days of written
request, the Company shall have the right to increase its indebtedness over and
above the Initial Loan Amount by up to an additional $475,000.00 as provided in
Section 1.2(a) above by giving you five (5) business days prior written notices,
subject, however, to the previously stated maximum monthly draw of $100,000.00.
1.3 OTHER AGREEMENTS. The Company may, at its sole discretion,
enter into similar or different note agreements with other lenders.
SECTION 2. REPRESENTATIONS.
2.1 REPRESENTATIONS OF THE COMPANY. The Company represents and
warrants that, to the best of its knowledge, all representations that have been
made to you in writing are true and correct as of the date hereof and are
incorporated herein by reference with the same force and effect as though herein
set forth.
2.2 REPRESENTATIONS OF NOTEHOLDER. In entering into this
Agreement, you acknowledge, represent, warrant, and agree with the Company, as
follows:
(a) No consent, approval, authorization, or order of any court or
governmental agency or body is required for, and no statutory waiting period is
required to expire before the execution and delivery by you of this Agreement or
the consummation by you of the transactions contemplated hereunder other than
those which have been obtained or will be obtained prior to or at the purchase
of the Note.
(b) The purchase of the Note by you hereunder and the performance
of this Agreement will not result in a breach or violation of any of the terms
or provisions of, or constitute a default under, any statute, or any indenture,
mortgage, deed of trust, loan agreement, or other agreement or instrument to
which you are a party or by which you are bound, the certificate or articles of
incorporation or bylaws of the undersigned if the undersigned is a corporation,
the partnership agreement of the undersigned if the undersigned is a
partnership, the trust instrument of the undersigned if the undersigned is a
trust, the will and letters testamentary of the undersigned if the undersigned
is an estate, or any order, rule, or regulation of any court or governmental
agency or body having jurisdiction over the undersigned or the property of the
undersigned.
(c) You are acquiring the Note for your own account as a
principal, for investment purposes only, and not with a view to or for resale,
distribution, or fractionalization thereof, in whole or in part, and no other
person has a direct or indirect beneficial interest in such Note.
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(d) You acknowledge that the offering and sale of the Note is
intended to be exempt from registration under the Securities Act of 1933, as
amended (the "Act"), and under the securities or Blue Sky laws of the states in
which the Note will be offered. You represent and warrant to, and agree with,
the Company that you have the financial ability to bear the economic risk of
your investment, have adequate means for providing for your current and
contemplated financial needs, personal or other contingencies, and have no need
for liquidity with respect to an investment in the Note.
(e) You have complete knowledge of the Company's business and
intended use of the proceeds from the sale of the Note (which shall include, but
not be limited to, the following purposes: (i) operating capital for the
Company; and (ii) any other purpose approved by a majority vote of the Board of
Directors of the Company), and you have experience in financial and business
matters such that you are capable of evaluating the merits and risks of your
investment in the Note.
(f) You meet all suitability standards imposed by the State of
Texas in connection with the purchase of promissory notes.
(g) That you:
(i) have been furnished with information and documents
that you have requested, and have carefully examined such information and
documents and have evaluated the risks and other considerations relating to a
purchase of the Note;
(ii) have been given the opportunity to ask questions of,
and receive answers from the Company concerning the terms and conditions of the
purchase and sale of the Note to which this Agreement relates, and other matters
pertaining to this investment, and have been given the opportunity to obtain
such additional information necessary to verify the accuracy of the information
disseminated by the Company in order for you to evaluate the merits and risks of
a purchase of the Note to the extent the Company possesses such information or
can acquire it without unreasonable effort or expense; and
(iii) have determined that the Note is a suitable
investment and that at this time you have no need for liquidity of this
investment and could bear the complete loss thereof.
(h) You represent, warrant, and agree that you will not sell or
otherwise transfer the Note or any portion thereof without notifying the Company
in writing, and fully understand and agree that you must bear the economic risk
of this purchase for an indefinite period of time because, among other reasons,
the Note has not been registered under the Act or under the securities or Blue
Sky laws of any state, and, therefore, cannot be resold, pledged, assigned, or
otherwise disposed of unless applicable securities laws of such states or an
exemption from such registration is available. You understand that the Company
is under no obligation to register the Note on your behalf or to assist you in
complying with any exemption from
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registration under the securities laws. You also understand that sales or
transfers of the Note are further restricted by the provisions of state
securities or Blue Sky laws.
(i) No representations or warranties have been made to you by the
Company or any officer, employee, agent, or subsidiary of the Company, other
than the representations and warranties of the Company in this Agreement.
(j) Any information that the undersigned has heretofore furnished
to the Company is true, correct, and complete as of the date of this Agreement,
and if there should be any change in such information at or prior to the closing
date hereunder, you will immediately furnish such revised or corrected
information to the Company.
You comprehend, acknowledge, represent, agree, and are aware of each of
the following:
(a) The Company is a developmental stage company, as defined under
generally accepted auditing standards, and has not realized a profit from
operations for several years. The Company does not currently have sufficient net
operating income to either make the interest payments or retire the principal
debt represented by the Note.
(b) No federal or state agency has passed upon the Note as
securities or made any finding or determination as to the fairness of this loan
as a potential investment.
(c) There are substantial risks of loss of investment incident to
the purchase of Note, and that no person or entity shall be personally liable or
responsible for the repayment of any interest or principal payments related to
the Note.
(d) The investment in the Note is an illiquid investment and you
must bear the economic risk of investment for an indefinite period of time.
(e) There is no established market for the Note and there can be
no assurance that a public market for the Note will develop.
(f) This Agreement contains restrictions on transferability of the
Note. The Note cannot be transferred without the Company, in its sole
discretion, being assured that such transfer complies with federal securities
laws, and the Company may request an opinion of counsel to that effect.
You hereby represent and warrant that you are, or the entity for which
you are executing this Agreement is, an "accredited investor". An accredited
investor is defined as:
(1) a natural person, over the age of 21 and legally competent,
whose net worth, individually or jointly with his or her spouse exceeds
$1,000,000.00 (inclusive of the value of home, home furnishings, and
automobiles); or
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(2) a natural person, over the age of 21 and legally competent,
whose individual annual adjusted gross income (as defined herein) exceeded
$200,000.00 or whose joint annual adjusted gross income (as defined herein) with
his or her spouse exceeded $300,000.00, in the last two (2) prior years and who
reasonably expects that his or her individual personal income will exceed
$200,000.00, or his or her joint income with his or her spouse will exceed
S300,000.00, in the current year; "individual annual adjusted gross income"
means an individual's "adjusted gross income" as reported for federal income tax
purposes, less any income increased by the following amounts (but not including
any amounts attributable to a spouse or the property owned by a spouse): (i) the
amount of any tax-exempt interest income received; (ii) the amount of losses
claimed as a limited partner in a limited partnership; (iii) any deduction
claimed for depletion; (iv) any deduction allowed for amounts contributed to an
IRA or Keogh retirement plan; (v) alimony paid; and (vi) for applicable taxable
years, any amount by which income from long-term capital gains has been reduced
in arriving at adjusted gross income pursuant to the provisions of Section 1202
of the Internal Revenue Code of 1986 (the "Code"); and "joint annual adjusted
gross income" means (x) in the ease of a husband and wife filing a joint federal
income tax return, the "adjusted gross income" reported for federal income tax
purposes on such return, increased by the amounts described in clauses (i)
through (vi) above; and (y) in the case of a husband and wife not filing a joint
federal income tax return, the sum of the husband's and the wife's individual
annual adjusted gross income as defined above; or
(3) an executive officer of the Company;
(4) an entity (i.e., a corporation, partnership, trust, or estate)
each of the equity owners of which meets the requirements of categories (1),
(2), or (3) above or categories (5) and (6) below;
(5) a trust, with total assets in excess of $5,000,000.00 not
formed for the specific purpose of acquiring Securities, whose purchase is
directed by a natural person or entity that has such knowledge and experience in
financial and business matters to be capable of evaluating the merits and risks
of acquiring Securities; or
(6) (i) a bank as defined in Section 3(a) (2) of the Act, or a
savings and loan association or other institution as defined in Section 3(a) (5)
(A) of the Act, whether acting in its individual or fiduciary capacity; (ii) a
broker or dealer registered pursuant to Section 15 of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"); (iii) an insurance company as
defined in Section 2(13) of the Act; (iv) an investment company registered under
the Investment Company Act of 1940; (v) a business development company as
defined in Section (2) (a) (48) of the Investment Company Act of 1940; (vi) a
Small Business Investment Company licensed by the U.S. Small Business
Administration under Section 301 (c) or (d) of the Small Business Investment Act
of 1958; (vii) a plan established and maintained by a state, its political
subdivisions, or any agency or instrumentality of a state or its political
subdivisions, for the benefit of its employees, if such plan has total assets in
excess of$5,000,000.00; (viii) an employee benefit plan within the meaning of
Title I of the Employee Retirement Income Security Act of 1974, as amended, and
either (x) the employee benefit plan has total assets in excess of
$5,000,000.00; (y) the investment decision is made by a plan
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fiduciary, as defined in Section 3(21) of such act, that is either a bank,
savings and loan association, insurance company, or registered investment
adviser, or (z) if the plan is a self directed plan, solely by persons that
are "accredited investors" under Rule 501 of the Act; (ix) a private business
development company as defined in Section 202(a) (22) of the Investment
Advisers Act of 1940; or (x) an organization described in Section 501 (c) (3)
of the Code, with total assets in excess of$5,000,000.00.
SECTION 3. CLOSING CONDITIONS.
Your obligation to loan the funds represented by the Note on the
Closing Date shall be subject to the performance by the Company of its
agreements hereunder which by the terms hereof are to be performed at or prior
to the time of delivery of the Note and to the following further conditions
precedent:
3.1 COMPANY EXISTENCE AND AUTHORITY. On or prior to the effective
date of this Note Agreement, you shall have received, in form and substance
reasonably satisfactory to you, such documents and evidence with respect to the
Company as you may reasonably request in order to establish its existence and
good standing.
3.2 SATISFACTORY DOCUMENTS. The Note and other documents made and
executed in connection with the transactions contemplated by this Agreement, and
all documents necessary to the consummation thereof shall be in satisfactory
form and substance to you, and you shall have received upon request a copy
(executed or certified as may be appropriate) of all legal documents or
proceedings taken in connection with the consummation of said transactions.
3.3 WAIVER OF CONDITIONS. If the conditions specified herein have
not been fulfilled by the Company, you may waive compliance by the Company with
any such condition to such extent as you may in your sole discretion determine.
Nothing in this Section 3.3 shall operate to relieve the Company of any of its
obligations hereunder or to waive any of your rights against the Company.
4. COMPANY COVENANTS.
4.1 EXISTENCE. The Company will preserve and keep in force and
effect its legal existence and all licenses and permits necessary, in all
material respects, to the proper conduct of its business.
4.2 INSURANCE. The Company and/or the operator of the Well will
maintain insurance coverage by financially sound and reputable insurers in such
forms and amounts and against such risks as are customary for companies of
established reputation engaged in the same or similar businesses, provided that
the foregoing shall not prevent any transaction permitted by Section 4.5.
4.3 MAINTENANCE. The Company will maintain, preserve and keep its
assets which are used or useful in the conduct of its business, in good repair
and working order and
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from time to time will make all necessary repairs, replacements, renewals,
and additions so that at all times the efficiency thereof shall be maintained.
4.4 NATURE OF BUSINESS. The Company will not engage in any
business if, as a result, the general nature of the Company's business, taken on
a consolidated basis, would then be substantially changed from the general
nature of the business engaged in by the Company on the date of this Agreement,
without first obtaining written consent from you, which consent shall not be
unreasonably withheld.
4.5 MERGERS, CONSOLIDATIONS AND SALES OF ASSETS. The Company will
not (i) consolidate with or be a party to a merger with any other company or
(ii) sell, lease, or otherwise dispose of all or any substantial part of the
assets of the Company, provided, however, that the Company may consolidate or
merge with any other Company if the Company shall be the surviving or continuing
entity, or if the Company is not the surviving or continuing entity, the
surviving or continuing entity shall expressly assume in writing the obligations
of the Company under this Agreement and under the Note
4.6 INVESTMENTS. The Company will not make any investments in or
loans, advances, or extensions of credit to any person, except:
(a) investments in (i) marketable direct obligations issued or
unconditionally guaranteed by the United States of America or any agency
thereof, maturing within one (1) year from the date of acquisition thereof, (ii)
banker's acceptances, commercial paper and deposits of United States Dollars
maturing within one (1) year from the date of acquisition thereof issued by
commercial banks chartered under the laws of the United States of America or any
state thereof, each such bank having a deposit rating of A-1 or better by
Moody's Investors Service and maintaining policies with the Federal Deposit
Insurance Corporation (FDIC);
(b) loans or advances to any officers, managers, members and
employees not exceeding in the aggregate at any one time, fifty thousand dollars
($50,000 00);
(c) receivables arising from the sale of goods in the ordinary
course of business of the Company.
4.7 GUARANTIES. The Company will not become or be liable in
respect to any guaranty except guaranties of the Company which are incurred in
the ordinary course of business.
4.8 REPORTS AND RIGHTS OF INSPECTION. The Company will keep proper
books and records in accordance with generally accepted accounting principles
consistently applied (except for changes disclosed in the financial statements
furnished to you by the Company and concurred in by the Company's independent
public accountants, and will furnish you so long as you are a holder of the
Note, and to each other holder of the Note, a copy of the Company's Annual
Financial Statements
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<PAGE>
5. EVENTS OF DEFAULT AND REMEDIES THEREFOR.
5.1 EVENTS OF DEFAULT. Any one or more of the following shall
constitute an "Event of Default" as the term is used herein.
(a) Default shall occur in the payment of interest or principal on
any Note when the same shall have become due and such default is not remedied
within thirty (30) days after written notice thereof to the Company; or
(b) Default shall occur in the observance or performance of any
covenant or agreement contained in this Agreement which is not remedied within
thirty (30) days after written notice thereof to the Company; or
(c) The Company becomes insolvent or bankrupt, applies for or
consents to the appointment of a custodian or receiver for the Company under
Federal bankruptcy law; or
(d) A custodian, trustee, liquidator, or receiver is appointed for
the Company and is not discharged within 90 days after such appointment.
5.2 ACCELERATION OF MATURITY. When any Event of Default described
in Section 5.1 above has occurred and is continuing for a period of thirty (30)
days, you may, by giving notice in writing to the Company sent by registered
mail, certified mail - return receipt requested, or telegram (the "Notice of
Acceleration"), declare the entire principal and accrued interest on the Note,
to be, and it shall thereupon become, forthwith due and payable. The Company
further agrees, to the extent permitted by law, to pay to you all costs and
expenses incurred by you in collection of the Note upon any Default hereunder or
thereon, including reasonable compensation to your attorneys for their services
rendered therewith. You may rescind and annul such declaration of acceleration,
and no such rescission and annulment shall extend to or affect any subsequent
Default or Event of Default or impair any right consequent thereto.
SECTION 6. AMENDMENTS, WAIVERS, AND CONSENTS.
6.1 CONSENT REQUIRED. Any term, covenant, agreement, or condition
of this Agreement may, with the consent of the Company, be amended or compliance
therewith be waived (either generally or in a particular instance and either
retroactively or prospectively), if the Company shall have obtained the consent
in writing of the holder and party to this Agreement.
6.2 EFFECT OF AMENDMENT OR WAIVER. Any such amendment or waiver
shall be binding upon the holder and each and any future holder of the Note and
upon the Company, whether or not such Note shall have been marked to indicate
such amendment or waiver. No such amendment or waiver shall extend to or affect
any obligation not expressly amended or waived or impair any right consequent
thereto.
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7. INTERPRETATION OF AGREEMENT; DEFINITIONS.
Unless the context otherwise requires, the terms hereinafter set forth
when used shall have the following meanings and the following definitions shall
be equally applicable to the both the singular and plural forms of any of the
terms herein defined:
"Affiliate" shall mean any Person (i) which directly or indirectly,
through one or more intermediaries, controls, or is controlled by, or is under
common control with, the Company, (ii) which beneficially owns or holds 10% or
more of any class of the Voting Membership Interests of the Company. The term
"control" means the possession, directly or indirectly, or the power to direct
or cause the direction of the management and policies of a Person, whether
through the ownership of Voting Interest or Stock, by contract or otherwise.
"Person" shall mean an individual, partnership, corporation, trust, or
unincorporated organization, and a government agency or political subdivision
thereof.
8. MISCELLANEOUS.
8.1 NOTICES. Except as may be otherwise specifically provided in
this Agreement, all notices required or permitted hereunder shall be in writing
and shall be deemed to be delivered three (3) days after being deposited in the
United States Mail, postage prepaid, registered or certified mail, return
receipt requested, postage prepaid, addressed to the parties at the respective
addresses set forth below or at such other addresses as may have been
theretofore specified by written notice delivered in accordance herewith:
If to the Company: PalWeb Corporation
1607 West Commerce Street
Dallas, Texas 75208
If to you: Ralph Curton, Jr.
P.O. Box 7027
Dallas, Texas 75209
8.2 LOAN AGREEMENT. This Agreement constitutes a Loan Agreement,
and shall not create a partnership, joint venture, or other similar association
between any of the parties to this Agreement for federal or state tax purposes
or otherwise, and the parties agree to cause whatever elections or returns to be
filed which may be necessary to evidence or preserve such status.
8.3 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
the Company and its successors and assigns and shall inure to the benefit of
your heirs, successors, and assigns, including each successive holder or holders
of the Note.
8.4 SURVIVAL OF COVENANTS AND REPRESENTATIONS. All covenants,
representations, and warranties made by the Company and you shall survive the
closing and the delivery of this Agreement and the Note.
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8.5 SEVERABILITY. Should any part of this Agreement for any reason
be declared invalid, such decision shall not affect the validity of any
remaining portion, which remaining portion shall remain in force and effect as
if this Agreement had been executed with the invalid portion thereof eliminated,
and it is hereby declared the intention of the parties hereto that they would
have executed the remaining portion of this Agreement without including any such
part(s), or portion(s) which may, for any reason, be hereafter declared invalid.
8.6 GOVERNING LAW; VENUE. This Agreement and the Note shall be
governed by and be construed in accordance with the laws of the State of Texas.
VENUE FOR ANY ARBITRATION AND/OR LEGAL PROCEEDINGS ARISING OUT OF THIS AGREEMENT
AND/OR IN CONNECTION WITH THE NOTE SHALL BE EXCLUSIVELY DALLAS COUNTY, TEXAS.
8.7 CAPTIONS. The descriptive headings of the various Sections or
parts of this Agreement are for convenience only and shall not affect the
meaning or construction of any provisions hereof.
SECTION 9. CONVERSION OF NOTE.
9.1 RIGHT OF CONVERSION BY NOTEHOLDER. On or after six (6) months
after the date of this Agreement, the Noteholder shall have the right to convert
the principal of the Note into fully paid and non-assessable shares of the
Company's Common Stock at the rate of one (1) share for each $0.10 of debt
(principal amount) which is then due and owing by the Company to the Noteholder
at the time of such conversion. Such right shall be exercised by the surrender
of the Note to the Company at any time during the usual business hours at the
office of the Company, accompanied by written notice, executed by the Noteholder
of the Note, that the holder elects to convert the Note or any portion thereof
and specifying the name or names (with addresses and U.S. Federal Taxpayer
Identification Numbers) in which such certificate or certificates for Common
Stock are to be issued and (if so required by the Company) by a written
instrument or instruments of transfer in form satisfactory to the Company duly
executed by the Noteholder or its duly authorized legal representative and the
amount of funds required by the Company for transfer. For convenience, the
conversion of all or a portion, as the case may be, of the principal of the Note
into the Common Stock of the Company is hereinafter sometimes referred to. as
the conversion of the Note. All or a portion of the Note surrendered for
conversion shall, when surrendered to the Company, and all interest due thereon
is paid, be canceled, and subject to the next succeeding sentence, no Note or
Notes shall be issued in lieu thereof. In the case of the Note being converted
in part only, upon such conversion the Company shall execute and deliver to the
holder thereof a new Note in an aggregate principal amount equal to the
unconverted portion of the Note.
9.1 RIGHT OF CONVERSION BY THE COMPANY. On or after two (2) years
after (he date of this Agreement, the Company shall have the right to convert
the principal of the Note into fully paid and non-assessable shares of the
Company's Common Stock at the rate of one (1) share for each $0.10 of debt
(principal amount) which is then due and owing by the Company to the Noteholder
at the time of such conversion. Such right shall be exercised by the delivery of
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<PAGE>
the Stock to the Noteholder, accompanied by written notice, executed by the
Company, that the Company elects to convert the Note or any portion thereof into
Common Stock. For convenience, the conversion of all or a portion, as the case
may be, of the principal of the Note into the Common Stock of the Company is
hereinafter sometimes referred to as the conversion of the Note. All or a
portion of the Note converted shall be canceled, and subject to the next
succeeding sentence, no Note or Notes shall be issued in lieu thereof. In the
case of the Note being-converted in part only, upon such conversion the Company
shall execute and deliver to the holder thereof a new Note in an aggregate
principal amount equal to the unconverted portion of the Note.
9.3 ADJUSTMENTS IN RESPECT OF UNPAID INTEREST. Conversion or
adjustment shall be permissible with respect to unpaid interest (interest
accrued on the Note, but unpaid by the Company, may be surrendered for
conversion).
9.4 NO ADJUSTMENTS IN RESPECT OF DIVIDENDS. No payment or
adjustment shall be made upon any conversion on account of any dividends on the
Common Stock issued upon conversion.
9.5 NO FRACTIONAL SHARES. No fractional shares or scrip
representing fractional shares shall be issued upon the conversion of the Note.
If the conversion of the Note results in a fraction, an amount equal to such
fraction multiplied by the conversion price of the Common Stock shall be paid to
such Noteholder in cash by the (company.
9.6 SHARES TO BE RESERVED. The Company covenants that it will at
all times reserve and keep available out of its authorized Common Stock, solely
for the purpose of issue upon conversion of the Note as herein provided, such
number of shares of Common Stock as shall then be issuable upon the conversion
of the Note. The Company covenants that all shares of Common Stock so issuable
shall, when issued, be duly and validly issued and fully paid and
non-assessable.
The Company covenants that, upon conversion of the Note as herein
provided, there will be credited to the appropriate Common Stock capital
accounts from the consideration for which the shares of Common Stock issuable
upon conversion are issued an amount per share of Common Stock so issued, as
determined by the Company, which amount shall not be less than the amount
required by law and by the Company's certificate of incorporation, as amended,
as in effect on the date of such conversion.
9.7 REGISTRATION OF SHARES. The Company agrees that it shall use
its best effort to cause the Common Stock issued upon conversion of the Note to
be registered, and the Company shall pay all costs and fees in connection with
such registration. However, you understand and agree that such registration may
be denied by applicable governmental and regulatory agencies, and consequently,
the denial of such registration shall not constitute default by the Company
hereunder.
THE EXECUTION HEREOF BY YOU SHALL CONSTITUTE A CONTRACT BETWEEN YOU AND
THE COMPANY FOR THE PURPOSES SET FORTH HEREIN, AND
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THIS AGREEMENT MAY BE EXECUTED IN ANY NUMBER OF COUNTERPARTS, AND EACH
EXECUTED COUNTERPART SHALL CONSTITUTE AN ORIGINAL, BUT ALL TOGETHER ONLY ONE
AGREEMENT.
COMPANY:
PALWEB CORPORATION,
a Delaware corporation
By: /s/ Paul A. Kruger
--------------------------------------
Paul A. Kruger, Chairman of the Board
NOTEHOLDER:
/s/ Ralph Curton, Jr.
--------------------------------------
Ralph Curton, Jr.
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<PAGE>
EXHIBIT "A"
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<PAGE>
PROMISSORY NOTE
---------------
<TABLE>
<CAPTION>
<S> <C>
Date: December 1, 1999
Maker: PalWeb Corporation, a Delaware corporation
Maker's Mailing Address: 1607 West Commerce Street
Dallas, Texas 75208
Payee: Ralph Curton, Jr.
Place for Payment: P.O. Box 7027
Dallas, Texas 75209
Principal Amount: $500,000.00, or so much of said Principal Amount as
is advanced from time to time. $S00, 000.00 is the
maximum amount that may be borrowed by Maker under
this Note. As of today, Maker has received $25,000.00
and future advances are contemplated.
Annual Interest Rate on Unpaid Principal from Date: 8.5%
Annual Interest Rate on Matured, Unpaid Amounts: 8.5%
Terms of Payment (Principal and Interest): Quarterly payments of accrued interest shall be paid
on March 1, June 1, September 1, and December 1 of
each year, with a final payment of all accrued
interest and the Principal Amount due and payable on
or before December 1, 2001
</TABLE>
Maker promises to pay to the order of Payee at the place for payment
and according to the terms of payment the Principal Amount plus all accrued
interest. All unpaid amounts shall be due by the final scheduled payment date.
On default in the payment of this Note, the unpaid principal balance
shall become immediately due at the election of Payee. Maker and each surety,
endorser, and guarantor waive all demands for payment, presentation for payment,
notices of intention to accelerate maturity, notices of acceleration of
maturity, protests, and notices of protest. In the event of default in the
payment of this Note, the holder hereof may, at any time following default,
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EXHIBIT 10.2
PERSONNEL STAFFING AGREEMENT
Agreement made and entered into this __________ day of _______________,
19__, by and between ACCORD HUMAN RESOURCES, INC. ("Accord"), an Oklahoma
Corporation, and PLASTIC PALLET PRODUCTION COMPANY, INC.
("Company"), a Texas Corporation, with respect to the following:
Accord is engaged in the business of providing personnel, related
employment planning and programs of human resource management, services and
reporting as hereinafter scheduled and agreed; and
Company has previously provided Accord with a schedule of its current
staffing needs (the "Staffing Summary"), including gross payroll by job
classification; and such other information as has been requested by Accord prior
to execution of this Agreement; and
Company wishes to engage Accord to provide certain employees and
services to Company.
NOW, THEREFORE, for and in consideration of the premises, the mutual
promises and considerations herein expressed, and other good and valuable
consideration by each of the parties to the other furnished, the receipt,
adequacy and sufficiency of which is hereby acknowledged by each of the parties
hereto, it is hereby agreed by ad between Accord and Company as follows:
1. DEFINITIONS. The following terms shall have the indicated meanings:
1.1 "Effective Date" means 12:00 A.M. on the 17th day of January
1999.
1.2 "Employees" means those individuals identified on the Employee
Schedule as employees of Accord.
1.3 "Employee Handbook" means the handbook provided to each
Employee containing employment policies and procedures of Accord with respect to
the Employees, as updated from time to time pursuant to paragraph 7.4.
1.4 "Employee Schedule" shall mean the schedule of Employees
delivered to Accord, pursuant to paragraph 2, as modified from time to time
pursuant to paragraph 6.5.
1.5 "Employee Time Reports" means reports, prepared by Company and
provided to Accord from time to time for calculation of Gross Compensation due
nonexempt Employees.
<PAGE>
1.6 "Employment Fee" means the fee for Accord's services
hereunder, as provided in paragraph 4 below.
1.7 "FICA" means the Federal Insurance Contributions Act,
regulations issued thereunder, the interpretations thereof, as in effect from
time to time throughout the term of this Agreement.
1.8 "Gross Compensation" means, for each Pay Period, with respect
to each exempt Employee, the amount so designated on the current Employee
Schedule, and with respect to each nonexempt Employee, the number of hours
worked by such Employee during such Pay Period times such Employee's hourly wage
as designated on the current Employee Schedule, adjusted to the applicable rate
with respect to overtime, as provided in the Employee Handbook. Additionally,
the Gross Compensation shall include the gross compensation applicable for any
other amounts paid to an Employee or with respect to such Employee's employment,
including, but not limited to commissions, accrued vacation, sick, holiday, or
severance pay.
1.9 "Managing Authority" shall mean the applicable managing
authority of Company and each individual member of any organizational body which
is the managing authority of the Company, including, but not limited to the
owner of a sole proprietorship, the board of directors and each director of a
corporation, each manager of a limited liability company, each partner of a
partnership, and any other individual or organizational body who is individually
or collectively responsible for the affairs of the Company.
1.10 "Net Compensation" means, for each Pay Period for each
Employee, Gross Compensation for such Employee less federal, state, and local
withholding, FICA, and all other applicable payroll deductions.
1.11 "Payday" shall mean, for each Pay Period, with respect to each
exempt Employee, the last day of the Pay Period, and with respect to each
nonexempt Employee, the last business day of the next following Pay Period.
1.12 "Pay Period" means, for each Employee, the period of
employment included for calculation of such Employee's Gross Compensation from
time to time as follows:
(SELECT ONE)
_________ Weekly, beginning at 12:01 a.m. on ____________ of each week
and ending at 12:00 Midnight on the following ____________ ; or
X Bi-Weekly, beginning at 12:01 a.m. on a given Monday and
ending at 12:00 Midnight on the second following Sunday; or
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_________ Semi-monthly, beginning and ending at times mutually agreed
on by Accord and Company.
1.13 "Report Date" means the third business day prior to each
scheduled Payday.
1.14 "Third-Party Employer" shall mean any third party who provides
or has provided employee leasing services or personnel staffing services to
Company.
2. TERMINATION OF EMPLOYEES BY COMPANY AND EMPLOYMENT BY ACCORD. Company
has, as of the date hereof, delivered the Employee Schedule to Accord,
containing certain personal and employment information regarding each current
employee of Company. Effective at the commencement of business on the Effective
Date, Company shall terminate and Accord shall employ all employees of Company
named on the Employee Schedule. This Agreement shall not cover any person
employed by the Company on or prior to the Effective Date who is not named on
the Employee Schedule.
3. EMPLOYEE SCHEDULE. Company engages Accord, and Accord agrees to provide
Employees to meet the staffing needs of Company, as Company may advise Accord
from time to time, pursuant to the terms and conditions of this Agreement.
4. EMPLOYEE FEE. In consideration for its services hereunder, Company
shall pay Accord the Employment Fee, which shall be an amount, for each Pay
Period, equal to a given percentage of the Gross Compensation of all Employees
during such Pay Period. Such percentage shall be determined as per the following
schedule:
CLERICAL EMPLOYEES (W/C CODE 8810) - 112.04%
MACHINE SHOP EMPLOYEES (W/C CODE 3632) - 117.69%
The Employment Fee has been determined on the basis of Company's
current business operation and the job classification of its current employees
for worker's compensation purposes, and current law, regulation, and worker's
compensation insurance rates affecting Accord's employment costs, and shall be
adjusted for any increase in taxes, amounts payable under FICA, worker's
compensation rates or other costs imposed on Accord as a result of changes in
Company's business, or in law or regulation related to the employer/employee
relationship of Accord and the Employee.
5. SUPERVISION OF EMPLOYEES.
5.1 CONTROL OF OPERATIONS. Company shall at all times have
exclusive control of its planning and operations. Control shall be exercised on
behalf of the Company by the Managing Authority. Any and all actions taken by
the Managing Authority with respect to the planning and operations of the
Company shall be deemed taken by or on behalf of the Company, and not by Accord.
Neither this Agreement, nor the fact that one or more individuals who are
members of the Managing Authority may be
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<PAGE>
Employees hereunder shall be deemed to grant to Accord any right or
authority, or place upon Accord any duty or responsibility, to direct the
planning or operations of the Company. Notwithstanding any relationship of
employer/employee between Accord and owner, director, manager, partner or
officer of the Company, actions taken by any such person when acting in the
capacity of Managing Authority or with respect to matters related to the
planning and operations of Company shall be the sole responsibility of
Company, and Company indemnifies Accord against loss, cost, claim or expense
resulting from any action of any such person acting in such capacity, and
from any action of any Employee acting pursuant to the direction of the
Managing Authority or with respect to matters related to the planning and
operations of Company.
5.2 CONTROL OF EMPLOYEE JOB PERFORMANCE. Subject to the overall
control of the business and affairs of the Company to be exercised by Company
pursuant to paragraph 5.1 of this Agreement, Accord shall have authority and
responsibility for control of job performance by the Employees and shall control
the day-to-day activities of the Employees. Accord shall exercise such control
through its duly authorized officers and agents, including, but not limited to
on-site supervisors. In the exercise of its rights and obligations hereunder
with respect to the Employees, Company shall take no action or omit to take any
action, the result of which would be to place Accord in violation of the
policies and procedures set forth in the Employee Handbook, or any applicable
laws, rules and regulations.
5.3 EMPLOYMENT MATTERS. Accord shall have the exclusive authority
to adjust compensation of Employees, and to hire, discharge, or discipline
Employees for failure to perform job requirements or comply with policies of
Accord. Accord may, at its option, designate one or more of the Employees as
on-site supervisors, with such responsibilities and authority to act on behalf
of Accord as Accord may deem appropriate.
6. PAYMENT PROCEDURES.
6.1 TIME REPORTS. On or before each Report Date, Company shall
provide Accord with an Employee Time Report and all other information necessary
to compute the Gross Compensation for the prior Pay Period for all nonexempt
employees.
6.2 COMPENSATION CALCULATION. On or before the business day
following each Report Date, Accord shall provide Company with its computation,
for each Employee, of the Gross Compensation due on the next Pay Day and the
applicable Employment Fee. Company shall, within 24 hours following receipt of
such information, notify Accord of any adjustments or modifications necessary,
and provide such information and documentation as Accord may reasonably require
to make such adjustments or modifications. All payments for any partial Pay
Period during which any exempt Employee shall be provided to Company shall be
prorated.
6.3 PAYMENTS BY COMPANY. On or before the day prior to each
Payday, Accord shall transfer funds by automated payment from Client's
established bank
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<PAGE>
account in an amount equal to the Gross Compensation plus the Employment Fee
for each Employee for the applicable Pay Period. Client agrees to complete
within sixty (60) days of the date of this Agreement an "Authorization for
Automated Payment of Payroll Deposit Form" which shall be provided by Accord.
Until automated transfer of funds is established, Client agrees to make
payments to Accord by wire transfer or cashier's check on or before Payday.
6.4 PAYMENTS BY ACCORD. On each Payday, Accord shall pay each
Employee an amount equal to the Net Compensation for such Employee for the
applicable Pay Period. Payment shall be made by delivery of Accord's payroll
check to Company for delivery to the Employee, or by direct deposit to
Employee's bank account, if Accord has established a direct deposit service with
such Employee's bank and if such Employee has timely elected such service.
6.5 EMPLOYEE SCHEDULE ADJUSTMENTS. The Employee Schedule will be
adjusted from time to time as necessary to reflect additions and cancellations
of Employees subject to this Agreement and changes in wages, salaries, job
descriptions, job locations, and other information set forth therein.
7. ACCORD'S REPRESENTATIONS, WARRANTIES, AND COVENANTS. Accord represents,
warrants and, provided Company is not in default in performance of any
obligation hereunder including but not limited to the payment of the Employment
Fee, covenants as follows:
7.1 EMPLOYEE PAYMENTS. Throughout the term of this Agreement,
Accord shall pay all salaries, wages, and other remuneration to its Employees as
set forth in the Employee Schedule.
7.2 WORKERS' COMPENSATION INSURANCE. Throughout the term of this
Agreement, Accord shall provide workers' compensation insurance coverage. Accord
shall provide Company a copy of its certificate of insurance evidencing such
coverage upon request.
7.3 HEALTH INSURANCE AND OTHER BENEFITS. Throughout the term of
this Agreement, Accord shall provide each Employee health and other benefits as
may be agreed upon by Accord and Company from time to time.
7.4 EMPLOYEE HANDBOOK. Accord shall provide each Employee with an
Employee Handbook at the time of employment, and written updates on the Employee
Handbook on or before the effective date of any modifications in Accord's
employment policies and procedures.
7.5 TAX RETURNS AND PAYMENTS. Throughout the term of this
Agreement and thereafter with respect to any periods during which this Agreement
was in effect, Accord shall prepare and file all tax returns and reports with
respect to its Employees as may be required by law or regulation and pay all
amounts due and owing pursuant thereto.
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<PAGE>
7.6 EMPLOYEE TAX FORMS. Accord shall prepare, file and furnish to
Employees, with a copy to Company, all information regarding compensation and
other benefits paid to Employees throughout the term of this Agreement and tax
reporting forms required by law or regulation with respect to such compensation
and benefits, including but not limited to all forms applicable to the Employees
which are required by federal, state, and local governments to be provided by an
employer to an employee, including U.S. Department of the Treasury, Internal
Revenue Service, Forms W-2 (Wage and Tax Statement), W-4 (Employee's Withholding
Allowable Certificate); 1099 (as and if applicable); and comparable and/or
counterpart forms prescribed by any state or local government.
7.7 EMPLOYER TAX FORMS. Accord shall prepare and file all tax
reporting forms required of Accord with respect to the Employees, including but
not limited to forms required by federal, state, and local governments,
including United States Department of the Treasury, Internal Revenue Service
Form 941 (Employer's Quarterly Federal Tax Return for Federal Income Tax
withheld from Wages and Federal Insurance Contributions Act Taxes); Form 940
(Employer's Annual Federal Unemployment Tax Return); and comparable and/or
counterpart forms prescribed by any state or local government.
7.8 INDEMNITY. Accord shall defend, indemnify and hold Company
harmless of and from all claims by Employees resulting from any breach of this
Agreement by Accord except if such breach is the result of negligence of
Company, willful acts of the Company, any illegal act of Company, or breach of
this Agreement by Company.
7.9 FIDUCIARY LIABILITY. Accord shall provide Company with
evidence of insurance for fiduciary liability covering loss which might result
from a loss of Employee funds held by Accord in a fiduciary capacity.
7.10 CONFIDENTIALITY. Information regarding the business plans and
operations of Company and the Employees shall be confidential, and Accord shall
not disclose any such information without the prior consent of Company;
provided, that Accord shall have no obligation with respect to, or liability as
a result of, disclosure of any such information by any Employee.
8. COMPANY'S REPRESENTATIONS, WARRANTIES, AND COVENANTS. Company
represents, warrants and convenants to Accord, and for the benefit of the
Employees, as follows:
8.1 COMPANY'S OBLIGATIONS TO EMPLOYEES. (i) all wages and
compensation, leave, vacation, severance, and other benefits of the Employees
accrued prior to the Effective Date for which Company is responsible and
obligated have been paid in full; (ii) Company has no employment contract,
written or verbal, with any Employee; (iii) there are no separate contracts,
Agreements, or other arrangements existing with respect to the Employees as a
group or any of them which would bind or obligate Accord, except as expressly
set forth herein; (iv) the principal location of the workplace
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<PAGE>
of each Employee and each location where such Employee performs services for
Company is accurately described on the Employee Schedule; and (v) all
pension, profit sharing, or other employee benefit plans existing at the
Effective Date are current and in compliance with applicable law, and
execution of this Agreement shall not be deemed a breach under the terms of
those plans.
8.2 COMPENSATION. Neither Company nor any affiliate of Company
shall, during the term of this Agreement, pay any Employee any wage, salary,
bonus, or other compensation, directly or indirectly.
8.3 INFORMATION. As of the Effective Date, and throughout the term
of this Agreement, all information provided by the Company in contemplation of
this Agreement or pursuant hereto, including but not limited to employee lists,
job descriptions and classifications, compensation, benefits, Employee
Schedules, and Employee Time Reports is and shall be true and correct.
8.4 WORKPLACE. Company is currently in compliance with all local,
state, and Federal laws and regulations applicable to the workplace in which
each Employee performs his work. Company shall provide the workplace and all
tools, equipment, and supplies necessary for the operation of Company's business
for all Employees and shall at all times during the term hereof: (i) maintain
the same in strict accordance with applicable health and working standards and
specifications; (ii) comply with and provide all health and safety equipment and
working conditions required by all health and safety engineering and
governmental health and safety laws, rules, regulations, directives, orders or
similar requirements respecting the workplace; (iii) post all Employee notices
required by law; (iv) provide accommodations for disabled workers as may be
required by law or regulation; and (v) provide, or allow Accord to provide, all
documentary announcements to Employees which are required by law or specified in
conjunction with the work of the Employees.
8.5 ACCESS TO WORKPLACE. Company shall provide Accord or its
designees access, at any reasonable time during customary business hours to the
business premises of Company to assure compliance by Company with its
obligations hereunder.
8.6 LIABILITY INSURANCE. Company shall maintain in force and
effect and pay for commercial general liability insurance (including business
premises and vehicles). Such insurance shall insure Accord and Company against
public liability for bodily injury and property damage with a minimum combined
single limit of ONE MILLION AND NO/100 dollars ($1,000,000.00). If "no fault"
law shall be applicable, P.I.P. or equivalent coverage shall apply. Company
shall cause its insurance carrier to name Accord as an additional insured and
issue a certificate of insurance to Accord providing not less than thirty (30)
days advance written notice shall be provided to Accord of any reduction,
cancellation, expiration or material change occurring after the effective date
of this Agreement.
7
<PAGE>
8.7 PROFESSIONAL LIABILITY INSURANCE. If any Employee subject to
this Agreement is a professional engaged to render services in a professional
capacity, Company shall provide and pay for malpractice or equivalent insurance
which shall cover any and all acts, errors or omissions, including, but not
limited to, the negligence of the professional Employee and Accord while such
Employee is rendering professional services for, on behalf or relating to
Company. Company shall cause Accord to be named as an additional insured and
shall provide for the issuance of a certificate of insurance to Accord providing
that not less than thirty (30) days advance written notice shall be provided to
Accord by registered mail of any reduction, cancellation, expiration or material
change occurring after the Effective Date.
8.8 EXISTING INSURANCE. Unless otherwise specifically agreed in
writing by Accord, Company shall maintain in full force and effect at all times
during the term of this Agreement, all insurance required under this Agreement
and all property, fire and liability insurance (other than workers' compensation
insurance) existing as of the Effective Date. Company further agrees to cause
Accord to be named as an additional insured with respect to each such policy of
insurance.
8.9 INDEMNITY. Company shall defend, indemnify and hold Accord
harmless of and from all loss, costs, claims, and expenses resulting directly or
indirectly from (i) breach of any representation or warranty, or failure to
perform any obligation of Company under this Agreement, (ii) any claim or cause
of action of any current or former employee of Company, and (iii) any act or
omission of any Employee in the conduct of or related to Company's business,
except if such loss, cost, claim or expense is the result of negligence of
Accord, any illegal act of Accord, or any breach of this Agreement by Accord.
8.10 EMPLOYEE SUITABILITY. Company has conducted, with respect to
each current Employee, and will conduct with respect to each additional
Employee, such skills testings, interviews, background investigations and other
review of the suitability of such Employee as it determines necessary. Accord
shall have no obligation or liability to Company with respect to the suitability
of any Employee for his or her job responsibilities or for any act of or
omission of any Employee. Accord may, at its option, conduct such testing and
background investigations as it may deem appropriate.
8.11 NO LITIGATION. Except as previously disclosed to Accord in
writing, there is no action, suit, proceeding or investigation pending, or to
the knowledge of Company threatened against Company related to the Employees or
the Company's employer/employee relationship with the Employees. Company will
advise Accord promptly upon the inception of any such action, suit, proceeding,
investigation or threat thereof.
8.12 COMPLIANCE APPLICABLE LAW. Company has not violated any
applicable statute or regulation in any respect, which would adversely affect
the Employees or Company's existing employment relationship with the Employees.
Company is and
8
<PAGE>
shall remain in compliance with all statutes, regulations, and executive
orders respecting Employees and employment practices.
8.13 FIDELITY BONDS. Company shall advise Accord of any Employee
with access to cash or other property of Company or of any third party property
within the control of Company, and shall obtain a fidelity bond naming Company
and Accord as insured with respect to each such Employee.
8.14 NOTICE OF TERMINATION. Company has given all notices and taken
all actions required of Company under Work Adjustment and Retraining
Notification Act and any other law or regulation pertaining to plant closing.
8.15 NOTICE OF CLAIMS. Company shall promptly advise Accord of
unsatisfactory job performance of any Employee, and of any claims of
discrimination, sexual harassment, or other improper conduct of an Employee.
8.16 EMPLOYEE SICKNESS, ACCIDENT AND/OR INJURY. Company shall
notify Accord immediately of any Employee sickness, accident or injury and
provide Accord with all information required by the applicable state and federal
regulatory agencies.
9. TERM OF AGREEMENT.
9.1 TERMINATION AND EXTENSION. Unless sooner terminated as
hereinafter provided, this Agreement and the rights and obligations of the
parties shall commence at the Effective Date, and shall extend for a period of
one year. Either party may elect to cause the Agreement to expire as of the end
of the original or any extended term of this Agreement, by notifying the other
party of its intent to terminate the Agreement not less than thirty (30) days
prior to the expiration of the then current term of the Agreement. Unless so
terminated, at the expiration of the original or any extended term of this
Agreement, this Agreement shall be automatically extended for an additional
year. Upon expiration of this Agreement, Company shall have no right to extend
or retain the services of Accord.
9.2 EARLY TERMINATION. This Agreement may be terminated prior to
the then effective expiration date, at the election of company, upon 90 days
advance written notice to Accord; and at the election of Accord, immediately in
the event of any breach of the terms and provisions hereof by Company.
9.3 EMPLOYEE TERMINATION. Company may terminate this Agreement
with respect to any Employee upon notice to Accord.
9.4 LIMITATIONS. If termination of this Agreement, or termination
with respect to any Employee, would result in termination of any Employee by
Accord, Company's right to terminate shall be subject to any contractual
restriction on termination between Accord and such Employee, any other
restrictions on termination of employment imposed by law, and to such Employee's
rights to notice, hearing, and other procedures
9
<PAGE>
as may be required by law or regulation or as may be provided in the Employee
Handbook.
9.5 OBLIGATIONS OF THE PARTIES. Upon termination of this
Agreement, Accord's obligation to provide employee staffing services shall
terminate. For any period of employment prior to termination, Accord shall pay
Employees, make payments to third parties in respect of such employment, and
complete its accounting and reporting duties. Upon the termination of employment
of any Employee, Accord shall provide all legally required notices (including,
without limitation, and where applicable, notices required by COBRA, WARN and
state insurance laws). If a terminated Employee is entitled to any accrued
vacation, sick or holiday pay, commissions, or other amounts in respect of his
employment, Accord shall pay such amounts. Company shall indemnify and hold
Accord harmless from any claim, cost, expense, or other loss resulting from
termination by Company of this Agreement, or termination with respect to any
Employee (except to the extent any such claim, cost, expense, or other loss is
the result of action by Accord which is contrary to the provisions of this
Agreement or applicable law or regulations), including, but not limited to any
such claim, cost, expense, or other loss resulting from termination of any
Employee or modification of the duties, responsibilities, or compensation of any
Employee; the occurrence of a qualifying event under I.R.C. Section 4980B with
respect to anY such Employee; and any obligation to compensate such Employee for
accrued vacation and sick leave. On termination of this Agreement, regardless of
how occurring, each of the parties shall do all things necessary or requisite to
conclude the business relationship and comply with Employee and employer payment
and reporting obligations.
10. EXISTING EMPLOYEE BENEFIT PLANS. Notwithstanding the fact that the
Employees are to be employed by Accord in accordance with the terms and
provisions of this Agreement, the Employees may, for purposes of the Internal
Revenue Code of 1986, the Internal Revenue Service, the United States Department
of Labor and other governmental and state agencies, be considered to be the
employees of the Company. Accordingly, to the extent that the Company has or
continues to sponsor or participate in any type of employee benefit plan,
program or arrangement, which plans would include by example, and not by
limitation, employee benefit plans as defined under Section 3(3) of ERISA
including all defined contribution and defined benefit plans, vacation,
severance, health, welfare, holiday or any other employee welfare or fringe
benefit program sponsored by the Company, such Employees may be required to be
covered under such employee benefit plans, programs, or arrangements on a
prospective basis. Company will seek its own advise and will be solely
responsible regarding the continuation, termination and the payment of benefits
under all such employee benefit plans, programs or arrangements.
11. GENERAL.
11.1 WAIVER OF COVENANT, CONDITION, OR REMEDY. The waiver of
performance of any covenant, condition or promise shall not invalidate this
Agreement, nor shall it be considered a waiver of any other covenant,
condition or promise. The exercise of any
10
<PAGE>
remedy provided in this Agreement shall not be a waiver of any consistent
remedy provided by law, and the provisions in this Agreement for any remedy
shall not exclude other consistent remedies unless they are expressly
excluded.
11.2 INTERPRETATION OF AGREEMENT. This Agreement shall be
construed in accordance with the laws of the State of Oklahoma. Captions and
organization are for convenience and shall not be used in construing meaning.
Time is of the essence in this Agreement. Each provision contained in the
Agreement shall be independent and severable from all other provisions
contained herein, and the invalidity of any such provision shall in no way
affect the enforceability of the other provisions.
11.3 ENTIRE AGREEMENT. Any proposal, bid, offer, or other prior
discussion or communication regarding the subject matter of this Agreement is
preliminary in nature, is superseded by this Agreement, and is intended
solely for the purpose of discussion and evaluation. This Agreement
constitutes the entire Agreement between the parties. No other Agreement,
statement or promise, or modification or amendment of this Agreement shall be
binding unless in writing and signed by both parties to this Agreement. If
any provision of this Agreement shall contravene or be invalid or
unenforceable under the laws of the State of Oklahoma, the remaining
provisions of this Agreement shall not be affected thereby.
11.4 ATTORNEY'S FEES. If any action is brought upon this
Agreement, in addition to any other award made to it, the prevailing party
shall be entitled to recover its reasonable attorneys' fees and costs of suit.
11.5 SUCCESSORS AND ASSIGNMENT. The rights and obligations
contained in this Agreement shall inure to the benefit of and be binding upon
the parties hereto and their respective successors. This Agreement is
personal to the parties hereto and expressly declared to be non-assignable.
Any assignment or attempted assignment of the rights hereunder shall be null,
void and of no force and effect.
11.6 AMENDMENTS. This Agreement can be amended or modified only
by written Agreement between the parties.
11.7 NOTICES. All notices and demands shall be given in writing
by mail or by facsimile transmission confirmed by mail posted within 24 hours
of the transmission. All facsimile transmissions shall be made between 8:00
A.M. and 5:00 P.M. Monday through Friday except on banking holidays in the
State of Oklahoma. All notices, demands, and confirmations by mail shall be
made by certified mail, postage prepaid, return receipt requested. Notice
shall be considered given when mailed, or when transmitted, as applicable.
Unless otherwise advised in writing by the other party, each party shall
transmit notices and demands as follows:
11
<PAGE>
TO COMPANY: TO ACCORD:
By Mail: By Mail:
Plastic Pallet Company, Inc. Accord Human Resources, Inc.
1607 W. Commerce Street 210 Park Avenue, Suite 1200
Dallas, TX 75208 Oklahoma City, OK 73102
By Telecopier: (214) 745-4578 By Telecopier: (405) 232-9899
11.8 NO PARTNERSHIP OR JOINT VENTURE. Nothing herein contained
shall be deemed to create a joint venture or partnership between Company and
Accord.
11.9 WAIVER OF SUBROGATION. The parties each hereby waive any
claim which it or anyone claiming through, or under it, by subrogation or
otherwise, might now or hereafter have against the other party on account of
any loss or damage which is insured against, to the extent that such loss or
damage is recovered under policies of insurance required to be provided
hereunder. Each party agrees to immediately give each insurance carrier
providing any such policy written notice of the terms of the mutual waiver
described above, and to have said insurance policies properly endorsed to
reflect such waiver. Each party shall cause its insurance carrier to provide
written evidence of said waiver.
IN WITNESS WHEREOF, the parties hereto have signed and executed this
Agreement on the date herein first above written.
ACCORD: ACCORD HUMAN RESOURCES, INC.
an Oklahoma Corporation
By:
-----------------------------------
Vice President
ATTEST:
- -----------------------------
Assistant Secretary (SEAL)
COMPANY: PLASTIC PALLET PRODUCTION COMPANY, INC.
By: /s/ Michael John
-----------------------------------
President
- -------
ATTEST:
- -----------------------------
Secretary (SEAL)
12
<PAGE>
EXHIBIT 10.3
FIRST SUPPLEMENT TO THE
STOCK PURCHASE/EXCHANGE AGREEMENT OF MARCH 11, 1998
the parties
CABEC Energy Corp.
1607 West Commerce Street
Dallas, Texas 75208 / USA
- - hereafter CABEC -
and
Max Jenssen c/o VIMONTA AG
Weichselmattstrasse 10a
4103 Bottmingen / Switzerland
- - hereafter MAXJEN -
agree to the revised version listed under points A and C, and expanded upon
in point D, under the heading "Recitals", as follows:
(A) from his stock portfolio MAXJEN will make available 10
VIMONTA AG stocks (=20% of the total issued 50 stocks) to
CABEC in exchange for
(B) 2 (two) stock certificates already received from Ms.
Margarete Jung with a total value of 15,000,000 in newly
issued stocks of the CABEC Energy Corp., since their issue
with the notice ("restricted under rule 144, as promulgated
by the United States Securities and Exchange Commission
pursuant to the Securities Act of 1993, as amended from
time to time").
(C) both parties mutually ensure that the respective block of
stocks is free from liability or encumbrances of any kind
and that free and unrestricted trade can be carried out
following the expiration of the legal waiting period.
All other points of the Stock Purchase / Exchange Agreement document of March
11, 1998 retain their unlimited applicability. Both parties already declare
themselves to be in agreement at this time, if necessary and requested, to
sign a legally binding sworn translation of this first supplement.
Dallas/Basel, August 3, 1998.
/s/ Michael John /s/ Max Jenssen
- ------------------------------ --------------------------
CABEC Energy Corp. Max Jenssen
<PAGE>
VIMONTAAG
(VIMONTA SA/VIMONTA LTD.)
Capital stock of 50,000 Francs divided into
50 bearer stocks with a face value of 1,000 Francs each.
STOCK CERTIFICATE
No. 001
for 10 bearer stocks
No. 01 to no. 10
with a total nominal value of
10,000 Francs
With the stocks defined herein, the lawful holder of
this certificate has a share in all legal and statutory
rights and obligations of our corporation.
Bottmingen, September 12, 1990
In the name of the Board of Directors
/s/ Peter Treu
-----------------------
Peter Treu
<PAGE>
RECEIPT
The undersigned, Mr. Michael John, acting as the representative authorized to
sign for
CABEC Energy Corp.
1607 West Commerce Street
Dallas, Texas 75208 / USA
confirms that Treu & Co. Allschwill, has received the original of stock
certificate no 001 of which a copy is attached, of 10 bearer stocks of
Vimonta AG, whose headquarters are in Bottmingen/Bl.
Basel/Dallas on the
/s/ Michael John
------------------------------
Michael John
CEO CABEC Energy Corp.
<PAGE>
EXECUTIVE AGREEMENT
between
Plastic Pallet Production Inc.
(future PalWeb Corporation)
1607 West Commerce Street
Dallas, Texas 75208 / USA
- hereafter PPP -
and
VIMONTA AG
Weichselmattstrasse 10a
4103 Bottmingen / Switzerland
- hereafter VIMONTA -
Preamble
The basis of this executive agreement is the valid undersigned Stock Purchase
/ Exchange Agreement - here Section 9a, License and Guarantee, and the
additional supplement for this document of July 2, 1998, which was signed on
March 11, 1998 - between the representative of CABEC Energy Corp.; here Mr.
Michael John, and the representatives of VIMONTA; here Dr. Michael Hoenig and
Ms. Margarete Jung.
On the basis of discussions held on November 10 and 11, 1998 in Dallas, the
future points of contact for both parties are defined as follows.
Section 1
VIMONTA, or its representative, has exclusive rights in Asia and Europe,
including the territory of the former USSR (Russia), on production
technology/patent rights which are acquired from PPP or its subsidiaries in
the matters of
- high pressure extruder machines (double-clamp high pressure
injection molding machines)
- transport container technology (transport receptacles)
Section 2
In order to be able to be successful in the designated markets, the following
PPP services will be made available:
<PAGE>
- technical support in a timely manner; innovative-conditioned
product maintenance and technology transfer
- structural and design plans with dimensions, e.g. in
AutoCAD, material and parts lists of machines and palette
forms (molds) described under Section 1
- supplier certificate for product-conditioned components
- PC price calculation program corresponding to the parts
list
- demonstration machines (upon assumption of the direct
costs)
- instruction and in-service training, and introductory
training from technicians sent by VIMONTA
Section 3
Those requirements described under Section 2 are confirmed as soon as
possible, and to be supplied by PPP, at the latest, by the beginning of April
1999.
Section 4
Following respective prior appointments, the firm Pace Plastic Pallets, Inc.
Oklahoma, is prepared to demonstrate in running mode (ready for use mode), if
required, its high pressure extruder machines to VIMONTA'S prospective buyers.
Section 5
Following the receipt of detailed, described and necessary technical
equipment and measures, VIMONTA is prepared to be exorbitantly active in the
operation of the distribution of PPP machinery technology. Furthermore,
VIMONTA declares that it will not market any machinery of existing, known
competitors through its operational structure.
Dallas/Basel, December 10, 1998
/s/ Michael John /s/ JACKLI
- ------------------------------- -----------------------------------
CABEC Energy Corp. VIMONTA AG
JACKLI
<PAGE>
The registrant hired the individual named below to interpret the preceding
document from the German language into English. To the best of the
registrant's knowledge, the preceding document is a fair and accurate
translation.
PALWEB CORPORATION
/s/ Paul A. Kruger
------------------------------
Paul A. Kruger
Chairman of the Board and President
================================================================================
CERTIFICATE OF ACCURACY
STATE OF NEW YORK )
) SS:
COUNTY OF NEW YORK )
Mariusz Moryl, being duly sworn, deposes and says:
I am fluent in both the English and German languages, I have made the above
translation from a copy of the original document in the German language and
hereby certify that the same is a true and complete translation to the best
of my knowledge, ability, and belief.
<TABLE>
<CAPTION>
<S> <C> <C>
/s/ Mariusz Moryl BARRIE ROSEN
- ---------------------------------------- Notary Public, State of New York
Mariusz Moryl No. O2R05015233
Russian and Slavic Language Services, Inc. Qualified in New York County
Commission Expires Oct. 26, 2000 /s/ Barrie Rosen
----------------------------
Notary Public
</TABLE>
<PAGE>
EXHIBIT 10.4
STOCK PURCKASE/EXCHANGE AGREEMENT
This Stock Purchase/Exchange Agreement (the "Agreement") is entered
into by and among Dr. Michael Hoenig and Magarete Jung ("Sellers"), individuals
residing in Germany, and CABEC ENERGY CORP. ("Purchaser"), a publicly held and
traded Delaware (U.S.A.) corporation.
R E C I T A L S :
A. Sellers own beneficially and of record in excess of 80 shares
(40%) of the 200 authorized and issued (and outstanding) shares of the Common
Stock of VIMONTA AG, a Swiss corporation (the Vimonta Stock"); and
B. Purchaser is authorized to issue 200,000,000 shares of Common
Stock, and Purchaser currently has approximately 133,000,000 shares of Common
Stock issued and outstanding; and
C. Purchaser desires to purchase from Seller, and Seller desires
to sell to Purchaser, the Vimonta Stock, in exchange for 30,000,000 shares (the
"Cabec Stock") of newly issued Common Stock of Purchaser (restricted under Rule
144, as promulgated by the United States Securities and Exchange Commission
pursuant to the Securities Act of 1933, as amended from time to time).
AGREEMENT
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged and confessed, Sellers and Purchaser agree as follows:
1. TRANSFER/EXCHANGE OF SHARES.
a. At the Closing, as such term is hereinafter defined, Sellers
agree to deliver to Purchaser the Vimonta Stock.
b. At the Closing, as such term is hereinafter defined, Purchaser
agrees to deliver to Sellers the Cabec Stock.
2. CLOSING. The closing ("Closing") shall be held on or before
March 18, 1998, or at such later time as shall be mutually acceptable to the
parties.
3. WARRANTIES AND REPRESENTATIONS OF SELLERS. Sellers warrant and
represent to Purchaser that Sellers (i) own the Vimonta Stock free and clear of
any claim whatsoever by any parties, (ii) Sellers have not pledged or encumbered
the Vimonta Stock in any manner, (iii) the Vimonta Stock is nonassessable, (iv)
Sellers have granted no right, warrant, purchase option, or any other right
which directly or indirectly affects the Vimonta Stock, (v) the Vimonta Stock
has voting and other rights that are identical to all other shares of VIMONTA
AG, and (vi) the Vimonta Stock is freely assignable by Sellers to Purchaser in
accordance with this Agreement.
<PAGE>
4. WARRANTIES AND REPRESENTATIONS OF PURCHASER. Purchaser
warrants and represents to Sellers that the Cabec Stock (i) is free and clear of
any claim whatsoever by any parties, (ii) is nonassessable, (iii) may be issued
to Sellers by Purchaser in accordance with this Agreement, and (iv) is
restricted pursuant to Rule 144.
5. AMENDMENT. This Agreement may only be altered, modified, or
amended by a written agreement signed by Sellers and Purchaser.
6. ENTIRE AGREEMENT. This Agreement contains the only agreement
of Sellers and Purchaser with respect to the purchase/exchange of the Vimonta
Stock and the Cabec Stock and supersedes all prior written or oral agreements,
negotiations, understandings, or commitments.
7. PARTIES BOUND. This Agreement shall be binding upon and inure
to the benefit of and be enforceable by Sellers and Purchaser, their heirs,
executors, administrators, successors, and assigns.
8. ASSIGNMENT RIGHTS. Sellers and Purchaser, in their sole
discretion, may assign their rights under this Agreement to any person or
persons.
9. CHOICE OF LAW; VENUE. This Agreement shall be governed by and
construed in accordance with the laws of the State of Texas (U.S.A.). VENUE FOR
ANY CAUSE OF ACTION RELATING TO THIS AGREEMENT SHALL BE EXCLUSIVELY DALLAS,
TEXAS.
10. FURTHER AGREEMENTS. Sellers and Purchaser agree to execute
such other and further agreements as are necessary or desirable to effect the
intent of this Agreement.
EXECUTED to be effective as of March 11, 1998.
SELLERS:
-----------------------------------------
DR. MICHAEL HOENIG
-----------------------------------------
MAGARETE JUNG
PURCHASER:
CABEC ENERGY CORP., a Delaware corporation
By:
------------------------------------
Michael John, President
2
<PAGE>
EXHIBIT 10.5
PLASTIC PALLET PRODUCTION, INC.
1607 COMMERCE STREET
DALLAS, TX 75208
LEASE AGREEMENT
THIS LEASE AGREEMENT, made and entered into this fifth day of April 1999, by
and between Onward, L.L.C., hereinafter referred to as "Lessor," and Plastic
Pallet Production, Inc., hereinafter referred to as "Lessee".
WITNESSETH:
WHEREAS, Lessor owns the following described real estate and premises situated
in Cleveland County, Oklahoma, to wit:
1607 W. Commerce
Dallas, TX 75208
and is entitled to lease same, and,
WHEREAS, the said real estate property is improved and there is situated
thereon an office building.
NOW, THEREFORE, in consideration of the mutual covenants and obligations of
the parties hereinafter set forth, to be faithfully kept and performed by
them, it is hereby mutually understood, covenanted and agreed as follows:
PROPERTY LEASED
This lease shall cover the space known as 73,400 sq. ft. shop area at 1607 W.
Commerce Street, Dallas, TX 75208.
TERM OF LEASE
This lease shall be for a term of one (1) year and, which term shall begin on
the first day of the month of April, 1999. Same shall not be renewed or
extended except in accordance with the provisions hereof.
RENTAL PROVISIONS
As consideration for the leasing of said premises and occupancy thereof,
Lessee hereby agrees to pay Lessor the sum of Twelve Thousand, Two Hundred,
Thirty-four Dollars and 83/100 ($12,234.83) per month payable in advance in
cash or by check on the first day of each month.
<PAGE>
ALTERATIONS, REPAIRS AND MAINTENANCE
OF CONSISTENT DECORATING SCHEME
Lessee agrees to keep and maintain the leased premises neat and in as good
condition, order and state of repair as at the beginning of the lease term,
save and except the usual wear and tear and depreciation. Lessee shall pay for
the cost of any repairs to the building where the leased premises is located
made necessary by the negligence of the Lessee, or by agents, servants,
employees, or invitees of Lessee.
Due to the unique character of the building, Lessee shall not be permitted to
make alterations, changes or improvements on the leased premises without the
prior written permission of Lessor. No alterations, change or improvement
shall be made without the prior written approval of Lessor. If in the opinion
of the Lessor, Lessee shall allow the leased premises to become disorderly
Lessor shall notify the Lessee in writing and if Lessee fails to cure such
defect within 30 days, Lessee shall be in default hereunder.
No work shall be done on the premises without approval of Lessor and only
Lessor's approved contractors and tradesmen shall perform the work. If artwork
or other items are placed on the walls, then the Lessee shall be responsible
for the cost incurred by the Lessor to paint and repair the walls at the end
of the lease term.
NO ASSIGNMENT OR SUBLEASE
Lessee shall not assign this lease, nor shall Lessee sublet the premises or
any part thereof, without the prior written approval of Lessor.
SUBORDINATION
This lease shall be subordinate to any mortgage that may hereinafter be placed
upon the premises and to any and all advances to be made thereunder and to the
interest thereon and to all renewals, replacements and extensions thereof.
Lessee shall upon written demand by Lessor, execute and deliver such
instruments as may be required at any time and from time to time to
subordinate the rights and interest of Lessee under this lease to the lien of
any mortgage placed upon the leased premises or upon the real property of
which the leased premises are a part, at any time and from time to time,
whether before or after the commencement of this lease during the term thereof.
FIRE CLAUSE
If the building where the leased premises are located shall, during the term
of this lease, be so damaged by fire, storm, tornado or explosion as to
substantially destroy either the leased premises or the building where the
leased premises are located, then Lessor shall have the option either to
terminate the lease, or to rebuild and restore the premises to good and
tenantable conditions for the Lessee's occupancy. In the event Lessor elects
to terminate the lease under such circumstance, then Lessee shall vacate the
leased premises and shall be under no further obligation for the payment of
rental. In the event Lessor elects to restore and rebuild the building and
premises, then the rental shall be abated proportionately for the period of
time that the
2
<PAGE>
Lessee is deprived of possession which such rebuilding and repair is being
accomplished. In the event damage shall occur to the building from such fire
or other hazard during the term of this lease, and if the same does not result
in the substantial destruction of either the leased premises or the building
where the leased premises are located then the Lessor shall be obligated to
restore the leased premises to good, serviceable, and tenantable condition,
equal to the condition of the leased premises immediately prior to such
damage, and under such circumstances, Lessee shall be entitled to a just and
proportionate reduction in the rental until the leased premises has been
restored and put in such pre-existing condition.
UTILITIES AND MAINTENANCE
Lessee shall pay all bills for light, heat, water and power furnished to the
leased premises. Lessee shall provide, and pay for the janitorial service for
leased premises. Lessee shall pay his telephone bills and all other bills.
TAXES, INSURANCE AND INDEMNITY
Lessor shall pay all ad valorem and other taxes assessed against the above
described building and leased premises during the term of the lease; provided,
Lessee shall pay all taxes upon all of Lessee's personal property located on
the leased premises.
Lessor shall carry and maintain such fire and extended coverage insurance on
the building, fixtures and leased premises as Lessor may determine advisable,
at the expense of the Lessor, and in the event of any loss or destruction, all
of the proceeds of any such policy of insurance shall be payable to the Lessor
alone.
Lessee shall carry such insurance as Lessee may deem advisable, at the expense
of Lessee, on any and all improvements, stock, merchandise, fixtures or other
personal property of Lessee contained in the building, and the proceeds of any
loss thereunder shall be payable to Lessee alone.
In the event any activity of Lessee or any approve improvement made by Lessee
to the leased premises results in an increased fire insurance rate, then in
addition to the above stipulated rental, the Lessee shall pay the increase in
the fire insurance premiums caused by such activity, change or improvement.
During the term hereof, Lessee shall maintain in full force and effect at all
times, for the benefit of Lessee and Lessor, as their respective interest may
appear, public liability and property damage insurance issued by a fully
qualified insurance company or companies for the leased premises, with limits
of at lease $100,000.00 with respect to death of or injury to any one person,
$300,000.00 with respect to death of injury in any one accident, and
$100,000.00 with respect to loss or destruction of or damage to property.
Lessee, shall, upon request, furnish to Lessor appropriate certificates of
each insurance. Lessee hereby indemnifies and agrees to hold Lessor harmless
from any and all costs, including attorney's fees, loss, damage or expense
arising out of death of or injury to persons, or loss of or damage to property
in connection with the occupancy of the leased premises by Lessee. Lessor
shall not be liable for damage to any of Lessee's
3
<PAGE>
property located in the leased premises caused by fire, burst, stopped or
leaking water, gas, plumbing fixtures or sewer pipes or from any failure to
properly deliver any utility service to the lease premises, unless it be shown
that Lessor shall have been guilty of gross negligence.
It is understood and agreed that Lessee intends to use the premises for
manufacturing. No other business or occupation shall be conducted hereon
without the prior written consent of Lessor. Any business of any kind operated
upon the premises shall be in accordance with all applicable ordinances and
statutes.
DEFAULT BY LESSEE
In the case of default by Lessee in the performance of any promise, covenant
or agreement contained in this lease or in case of a violation of any of the
rules and regulations hereafter promulgated by Lessor, and should Lessee fail
to remedy such default or violation within ten (10) days after mailing a
written notice to Lessee, the Lessor may terminate this lease, re-enter the
demised premises and remove all persons therefrom and store all personal
property found therein at the expense of Lessee without being deemed guilty of
trespass and without prejudice to any remedies for back rent or other breaches
of this agreement, or the Lessor after reassuming possession endeavor to
re-let the premises for the remainder of the unexpired term at the best rent
available for the account of Lessee who shall remain liable for any deficiency.
SURRENDER
At the expiration of the term of this lease, or upon any sooner termination
thereof, the Lessee herein shall remove all of his goods, wares, merchandise,
furniture and fixtures from the leased premises, and will peaceably yield unto
the Lessor the said leased premises in as good order, repair and condition as
when delivered by Lessor, ordinary wear and tear and damage by the elements
alone excepted. Lessee must repair any holes or other damage left after
removal of any items owned by Lessee. All improvements made to the leased
premises shall belong to Lessor and may not be removed by Lessee.
ATTORNEY'S FEES
Should either party hereto institute any action or proceeding in court to
enforce any provisions hereof or for damage by reason of alleged breach of any
provisions of this lease or for a declaration of such party's rights or
obligations hereunder, or for any other judicial remedy, the prevailing party
shall be entitled to receive from the losing party such amount as the court
may adjudge to be reasonable as attorney fees for the services rendered to the
party ultimately prevailing in any such action or proceeding.
PROTECTION FROM LIENS
Lessee shall keep the demised premises at all times during the term hereof
free of Mechanic's Liens and Materialman's Liens or other liens of like nature
other than liens created or claimed by reason of any work done by or at the
instance of Lessor, and Lessee shall at all times fully protect and indemnify
Lessor against all such liens or claims which may ripen into liens and
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<PAGE>
against all attorney's fees and other costs and expenses growing out of or
incurred by reason of or on account of any such claim or lien.
NOTICES
All demands and notices of any kind which are permitted or required to be
given hereunder shall be deemed duly given when deposited in the United States
mail, postage prepaid, properly addressed and certified (with return receipt
requested) in the case of notice by Lessee, to Lessor at 2500 South McGee Ste.
147, Norman, OK 73072, and in case of notice by Lessor to Lessee at 1607 W.
Commerce Street, Dallas, TX 75208. Either party may at any time and from time
to time designate a different address by advising the other party thereof in
writing, following which the address so designated shall be deemed to be the
address of the party giving such advice, for the purpose hereof.
LIEN OF LESSOR
To secure the performance of all obligations due and owing from Lessee to
Lessor hereunder, including the payment of rent, Lessor shall have and is
hereby given a lien upon all furniture, fixtures, goods, wares and merchandise
owned by the Lessee situated in or upon the demised premises.
ACCESS BY LESSOR
Lessee shall permit Lessor and its agents to enter upon the leased premises at
any reasonable time for the purpose of inspecting same, or for the purpose of
maintaining the building in which the leased premises are situated, or for the
purpose of making repairs, alterations or additions to any other portion of
the building.
RULES AND REGULATIONS
Lessee agrees to comply with the Rules and Regulations which Lessor may from
time to time prescribe in regard to the care and cleanliness of the building
and grounds where the leased premises are located and in regard to the comfort
and convenience of other occupants of said building. Lessor's Rules and
Regulations regarding the cleanliness and orderliness of the building and
grounds and the Rules and Regulations relating to the consistent decorating
scheme are final. After notice and thirty (30) days to cure, if the Lessee is
not in compliance with the Rules and Regulations, the Lessee will be in
default of the lease. The Rules and Regulations are at the discretion of the
Lessor and may change at any time.
BINDING EFFECT
This lease shall be for the benefit of and be binding upon the parties hereto
and their respective heirs, executors, administrators, devisees successors and
assigns.
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this lease the day and year
first above written.
Onward, L.L.C.
By: /s/ Paul A. Kruger
-------------------------------------
Manager
Plastic Pallet Production:
By: /s/ Michael John
-------------------------------------
6
<PAGE>
[ONWARD, L.L.C. LOGO]
April 8, 1999
Plastic Pallet Production, Inc.
1607 Commerce Street
Dallas, TX 75209
Dear Sirs,
Onward, L.L.C. grants to Plastic Pallet Production, Inc. for a period of three
(3) years following the closing date April 5, 1999, the option to repurchase
1607 Commerce Street, Dallas, TX 75209. This option is valid only for Plastic
Pallet Production, Inc. and may not be assigned, pledged or granted. The
purchase price of the property under this option is $2,700,000.00. All
expenses to be paid for by Plastic Pallet Production, Inc.
Sincerely,
/s/ Paul A. Kruger
Paul A. Kruger
PAK/jb
7
<PAGE>
EXHIBIT 10.6
INDEMNITY AGREEMENT
THIS INDEMNITY AGREEMENT (the "Agreement") is entered into by and
between THE UNION GROUP, INC. ("Indemnitor"), a Nevada corporation, and CABEC
ENERGY CORP. (the "Indemnitee"), a Delaware corporation.
WITNESSETH:
WHEREAS, on May 6, 1998, Indemnitee and Ralph Curton, Jr. ("Curton")
entered into that certain Stock Purchase Agreement, wherein Curton sold to
Indemnitee all of the issued and outstanding stock of Curton Capital Corp.
("CCC");
WHEREAS, CCC owns beneficially and of record an investment interest
(the "Interest") in 100% of the issued and outstanding stock of Cabec Energy
Industries, Inc., f/k/a Cooper Manufacturing Corporation ("Cooper"), a Texas
corporation, which is expressly subject to that certain (United States
Bankruptcy Court), Order Confirming Debtor's (Cooper's) Revised and Restated
Fourth Plan of Reorganization, as modified and entered on the Bankruptcy Court's
Docket on November 21, 1997, (the "Order"), with said interest entitling CCC to
the following:
After Cooper's creditors and other are paid in full pursuant to its
(Cooper's) Plan of Reorganization and other subsequent agreements, CCC will have
(a) a 15% non-dilutable equity interest (stock ownership) in the new
(post-bankruptcy) Cooper, which is Tulsa Cooper, Inc., an Oklahoma corporation,
and (b) a 3% royalty on gross sales of Tulsa Cooper, Inc.'s products;
WHEREAS, CCC owns beneficially and of record 100% of the issued and
outstanding shares of the stock of Fleur-David Corporation, a Texas corporation;
and
WHEREAS, CCC owns beneficially and of record 100% of the issued and
outstanding shares of the stock of Wyoming Pipe and Tool Corp., a Wyoming
corporation; and
WHEREAS, on August 24, 1998, Indemnitor and Indemnitee entered into
that certain Stock Purchase Agreement, wherein Indemnitee sold to Indemnitor all
of the issued and outstanding stock of CCC in exchange for all of the issued and
outstanding stock of Indemnitor; and
WHEREAS, Indemnitor is willing to grant Indemnification to Indemnitee
against any and all liability, debts, financial obligations, and/or costs
relating in any way to the Cooper interests defined above, Fleur-David
Corporation, Wyoming Pipe & Tool Corp., or any other energy related asset
formerly owned by Indemnitee; and
WHEREAS, Indemnitor has agreed to assume any and all financial
obligations of Indemnitee up to and through December 13, 1997.
NOW, THEREFORE, in consideration of the sum of $10.00 and other good
and valuable consideration, paid by Indemnitee to Indemnitor, the receipt and
sufficiency of which are hereby
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acknowledged and confessed, and in further consideration of the mutual
benefits to accrue to each party hereto as a result hereof, the parties agree
as follows:
AGREEMENT:
1. Indemnitor agrees to defend any and all actions, filed against
Indemnittee, whether at law or in equity, arising out of, resulting from, in
connection with, or relating to a claim by any party for damages, liability,
costs, or debts concerning Indemnitee's former energy related business, the
Cooper Interest, Fleur-David Corporation, Wyoming Pipe & Tool Corp., and any
energy related asset formerly owned by Indemnitee and/or any of its
subsidiaries, with the defense of any such action, whether at law or in equity,
to be at the sole cost and expense of Indemnitor.
2. Indemnitor agrees to indemnify and hold harmless Indemnitee
against any and all liability, damages, costs (including, but not limited to,
reasonable attorney's fees incurred by Indemnitee in defending or being joined
as a party to any action, at law or in equity), and debts (relating in any way
to the energy related assets and business formerly conducted by Indemnitee and
its subsidiaries) of any nature or kind whatsoever, arising out of, resulting
from, relating to, or in connection with the energy related assets and business
formerly conducted by Indemnitee and its subsidiaries.
3. Indemnitor agrees to assume any and all financial obligations
of Indemnitee, including, but not limited to, management contracts, salary
obligations, debts to third parties, income taxes, corporate franchise taxes, or
other financial obligations of Indemnitee up to and through December 13, 1997.
Notwithstanding the foregoing, Indemnitor is not assuming any financial
obligations of Indemnitee that relate in any way to the business of
manufacturing and sale of plastic pallets or the salary obligations due and
owing to any person that worked primarily in the plastic pallet manufacture and
sale portion of Indemnitee's business.
EXECUTED TO BE EFFECTIVE AS OF the 31 day of August, 1998.
INDEMNITOR:
THE UNION GROUP,
a Nevada corporation
By:
-----------------------------------------
Ralph Curton, Jr., President
INDEMNITEE:
CABEC ENERGY CORP.,
a Delaware corporation
By:
-----------------------------------------
Michael John, President
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EXHIBIT 21.1
SUBSIDIARIES OF PALWEB CORPORATION
Following is a list of subsidiaries of the registrant:
1. Plastic Pallet Production, Inc., a Texas corporation;
2. Plastic Pallet Support Equipment, Inc., a Texas corporation;
3. Modular Plastic Pallets, Inc., a Texas corporation;
4. PP Financial, Inc., a Texas corporation;
5. PP Transport, Inc., a Texas corporation; and
6. PP Systrans, Inc., a Texas corporation.
7. Pace Holding, Inc., an Oklahoma corporation, as a wholly owned subsidiary of
PP Financial, Inc.
<PAGE>
EXHIBIT 99.1
NO. DV99-00110-E
CABEC ENERGY CORP., ) IN THE DISTRICT COURT
)
PLAINTIFF, )
)
VS. ) DALLAS COUNTY, TEXAS
)
WOLFGANG ULLRICH AND )
ROSARIN CHAISAYAN, )
)
DEFENDANTS. ) 101ST JUDICIAL DISTRICT
DEFAULT JUDGMENT
On this day, came on to be heard the above-entitled and numbered cause wherein
Cabec Energy Corp n/k/a PalWeb Corporation is Plaintiff, and Wolfgang Ullrich
and Rosarin Chaisayan are Defendants. The Plaintiff appeared by and through its
attorney of record and announced ready for trial.
The Defendants although duly and legally cited to appear and answer,
failed to appear and answer and wholly made default.
Citations were served according to law and returned to the Clerk where
they remained on file for the time required by law. The Court has read the
pleadings and the papers on file an is of the opinion that the Defendants by
their default have admitted the allegations of Plaintiff's Petition and that the
cause of action is liquidated, and finds as follows:
1. Defendant Wolfgang Ullrich has damaged Plaintiff in the amount
of $20,000,000.00 by his breach of contract;
2. Defendant Wolfgang Ullrich should be required to return to
Plaintiff the 31,443,308 shares of the common stock of
Plaintiff issued to said Defendant, represented by PalWeb
Corporation Common Stock Certificate Nos. CEC 1584 (1,000,000
shares), CEC 1586 (1,443,308 shares), CEC 1587 (1,000,000
shares), CEC 1588 (1,000,000 shares), CEC 1589 (1,000,000
shares), CEC 1590 (1,000,000 shares), CEC 1591 (1,000,000
shares), CEC 1592 (1,000,000 shares), CEC 1593 (1,000,000
shares), CEC 1594 (1,000,000 shares), CEC 1595 (1,000,000
shares), CEC 1596 (1,000,000 shares), CEC 1597 (10,000,000
shares), CEC 1598 (5,000,000 shares), and CEC 1599 (5,000,000
shares), and that the return of such
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<PAGE>
stock may be accomplished by canceling the above listed stock
certificates;
3. Defendant Rosarin Chaisayan should be required to return to
Plaintiff the 10,000,000 shares of the common stock of
Plaintiff issued to said Defendant, represented by PalWeb
Corporation Common Stock Certificate No. CEC 1585,
representing 10,000,000 shares, and that the return of such
stock may be accomplished by canceling said stock certificate
listed above; and
4. Plaintiff is entitled recover from Defendants reasonable
attorneys' fee in the amount of $20,000.00 for the trial of
this cause, together with an additional $5,000.00 as
reasonable attorneys' fees if this matter is appealed to and
successfully defended in the Texas Court of Appeals, together
with an additional $7,500.00 as reasonable attorneys' fees if
this matter is appealed to and successfully defended in the
Texas Supreme Court.
IT IS, THEREFORE, ORDERED, ADJUDGED, and DECREED that PalWeb
Corporation f/k/a Cabec Energy Corp., Plaintiff, have and recover of and from
Defendant Wolfgang Ullrich the sum of $20,000,000.00.
IT IS FURTHER ORDERED, ADJUDGED, and DECREED that PalWeb Corporation
Common Stock Certificate Nos. CEC 1584 (1,000,000 shares), CEC 1586 (1,443,308
shares), CEC 1587 (1,000,000 shares), CEC 1588 (1,000,000 shares), CEC 1589
(1,000,000 shares), CEC 1590 (1,000,000 shares), CEC 1591 (1,000,000 shares),
CEC 1592 (1,000,000 shares), CEC 1593 (1,000,000 shares), CEC 1594 (1,000,000
shares), CEC 1595 (1,000,000 shares), CEC 1596 (1,000,000 shares), CEC 1597
(10,000,000 shares), CEC 1598 (5,000,000 shares), and CEC 1599 (5,000,000
shares), held by Defendant Wolfgang Ullrich, be returned to Plaintiff by the
cancellation of such stock certificates, and Plaintiff's transfer agent,
Continental Stock Transfer & Trust Company, New York, NY, is hereby ordered to
cancel PalWeb Corporation Common Stock Certificate Nos. CEC 1584 (1,000,000
shares), CEC 1586 (1,443,308 shares), CEC 1587 (1,000,000 shares), CEC 1588
(1,000,000 shares), CEC 1589 (1,000,000 shares), CEC 1590 (1,000,000 shares),
CEC 1591 (1,000,000 shares), CEC 1592 (1,000,000 shares), CEC 1593 (1,000,000
shares), CEC 1594 (1,000,000 shares), CEC 1595 (1,000,000 shares), CEC 1596
(1,000,000 shares), CEC 1597 (10,000,000 shares), CEC 1598 (5,000,000 shares),
and CEC 1599 (5,000,000 shares), held by Defendant Wolfgang Ullrich.
IT IS FURTHER ORDERED, ADJUDGED AND DECREED that PalWeb Corporation
Common Stock Certificate No. CEC 1585 (representing 10,000,000 shares), held by
Defendant Rosarin Chaisayan, be returned to Plaintiff by the cancellation of
such stock certificate, and Plaintiff's transfer agent, Continental Stock
Transfer & Trust Company, New York, NY, is hereby ordered to cancel PalWeb
Corporation Common Stock Certificate No. CEC 1585 (representing 10,000,000
shares), held by Defendant Rosarin Chaisayan.
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<PAGE>
IT IS FURTHER ORDERED, ADJUDGED, and DECREED that PalWeb Corporation
f/k/a Cabec Energy Corp., Plaintiff, have and recover of and from Defendants
Wolfgang Ullrich and Rosarin Chaisayan, jointly and severally, reasonable
attorneys' fees in the amount of $20,000.00 for the trial of this cause,
together with an additional $5,000.00 as reasonable attorneys' fees if this
matter is appealed to and successfully defended in the Texas Court of Appeals,
together with an additional $7,500.00 as reasonable attorneys' fees if this
matter is appealed to and successfully defended in the Texas Supreme Court.
IT IS FURTHER ORDERED, ADJUDGED, and DECREED that the award of
attorneys' fees herein is part of the judgment hereby rendered.
IT IS FURTHER ORDERED, ADJUDGED, and DECREED that Plaintiff is entitled
to post-judgment interest at the rate of ten percent (10%) per annum.
Plaintiff is further entitled to such writs and processes as may be
necessary in the enforcement and collection of this judgment.
SIGNED this 16th day of September, 1999.
------ ---------
/s/ J M Patterson, Jr.
--------------------------
PRESIDING JUDGE
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EXHIBIT 99.2
NO. 99-10249-B
PLASTIC PALLET PRODUCTION, ) IN THE DISTRICT COURT
INC., PALWEB CORPORATION, )
AND ONWARD, L.L.C., )
)
PLAINTIFFS, )
)
VS. ) DALLAS COUNTY, TEXAS
)
CHARTEX AG AND NEW INTER )
HKB AG, )
)
DEFENDANTS. ) 44TH JUDICIAL DISTRICT
DEFAULT JUDGMENT
On this day, came on to be heard the above-entitled and numbered cause
wherein Plastic Pallet Production, Inc. ("PPP"), PalWeb Corporation ("PalWeb"),
and Onward, L.L.C. ("Onward") are Plaintiffs, and Chartex AG ("Chartex") and New
Inter HKB AG ("NIH") are Defendants. The Plaintiff appeared by and through their
attorney of record and announced ready for trial.
The Defendants although duly and legally cited to appear and answer,
failed to appear and answer and wholly made default.
Citations were served according to law and returned to the Clerk where
they remained on file for the time required by law. The Court has read the
pleadings and the papers on file and is of the opinion that the Defendants by
their default have admitted the allegations of Plaintiffs' Petition and that the
cause of action is liquidated, and finds as follows:
1. On or about September 18, 1997, Plaintiff PPP executed that
certain Promissory Note (the "Note") in the original principal
amount of $1,350,000.00, payable to the order of Defendant
Chartex, and executed that certain Deed of Trust (the "Deed of
Trust") dated September 18, 1997, which placed a lien on
certain improved real property (the "Property") situated in
Dallas County, Texas to secure payment of the Note, and such
Deed of Trust was filed in Volume 97184, Page 00807, of the
Deed Records of Dallas County, Texas. The Property is more
particularly described on Exhibit "A" attached hereto and
incorporated herein by reference for all purposes.
2. Defendant Chartex did not advance PPP the sum of
$1,350,000.00.
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<PAGE>
3. Plaintiff PPP acquired title to the Property by Warranty Deed
from Mack C. Long, Jr. dated September 18, 1997, and recorded
in Volume 97184, Page 00795, of the Deed Records of Dallas
County, Texas.
4. On or about April 5, 1999, Plaintiff PPP sold and conveyed the
Property to Plaintiff Onward by means of a Warranty Deed.
Additionally, Plaintiff PPP has assigned its slander of title
claim against Defendant Chartex to Plaintiff Onward.
5. The recording of the Deed of Trust by Defendant Chartex
constitutes a slander of Plaintiff Onward's title to the
Property. Plaintiff Onward has been damaged by Defendant
Chartex's slander of Plaintiff Onward's title to the Property
in that Plaintiff Onward has attempted to obtain a loan
collateralized by the Property and has been unable to do so
because of the lien of the Deed of Trust.
6. Defendant Chartex was issued 1,000,000 shares of the common
stock of Plaintiff PalWeb on January 9, 1998, allegedly as
additional consideration for making the $1,350,000.00 loan to
Plaintiff PPP, and Defendant Chartex was issued another
5,000,000 shares of the common stock of PalWeb on March 17,
1999, for suspending the interest accrual on the Note as of
that date until December 31, 1999.
7. Because of the wrongful filing and recording of the Deed of
Trust by Defendant Chartex, Plaintiff Onward has been required
to employ T. Alan Owen & Associates, P.C. to bring suit to
remove such cloud on Plaintiff Onward's title to the Property.
8. The actions of Defendant Chartex, as set forth in Plaintiffs'
Original Petition, amount to the deliberate and intentional
fraud upon Plaintiff PalWeb in a stock transaction, and are
violations of Section 27.01, ET SEQ., of the Texas Business
and Commerce Code.
9. Defendant Chartex should be required to return to Plaintiff
PalWeb the 6,000,000 shares of the common stock of Plaintiff
issued to Defendant Chartex, represented by PalWeb Corporation
Common Stock Certificate Nos. CEC 1557 (representing 1,000,000
shares) and CEC 1950 (representing 5,000,000 shares), and that
the return of such stock may be accomplished by canceling the
above listed stock certificates.
10. The actions of Defendant Chartex, as set forth in Plaintiffs'
Original Petition, amount to deliberate, intentional, and
willful breach of contract by Defendant Chartex with respect
to its failure to advance Plaintiff PPP the sum of
$1,350,000.00 as called for in the Note. As a result, the Note
should be cancelled.
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<PAGE>
11. The actions of Defendant Chartex in connection with the
issuance of the 6,000,000 shares of PalWeb common stock to
Defendant Chartex by Plaintiff PalWeb in consideration of
Defendant Chartex's agreement and commitment to (i) loan
Plaintiff PPP the sum of $1,350,000.00, and (ii) suspend the
interest accrual on the Note from March 17, 1999 until
December 31, 1999, amount to deliberate, intentional, and
willful breach of contract by Defendant Chartex. This
constitutes another reason that Defendant Chartex should be
required to return PalWeb Corporation Common Stock Certificate
Nos. CEC 1557 (representing 1,000,000 shares) and CEC 1950
(representing 5,000,000 shares) to Plaintiff PalWeb by
canceling such stock certificates.
12. Defendant NIH has made unsecured loan advances (the "Loan") to
Plaintiff PPP that total $1,619,422.00. As additional
consideration for making the $1,619,422.00 in loan advances,
Defendant NIH was issued 7,413,384 shares of the common stock
of Plaintiff PalWeb on January 9, 1998.
13. Wolfgang Ullrich ("Ullrich") is the sole shareholder of both
Defendant Chartex and Defendant NIH and Ullrich operates said
Defendants solely for his own benefit and Defendants and
Ullrich constitute a single business enterprise, carrying out
a common business objective. Ullrich operates Defendants only
to benefit his personal interests and to fraudulently conceal
their common business objective, and Defendants acted as
Ullrich's alter ego in connection with the PalWeb common stock
(the "Stock") issued to Defendants.
14. On September 16, 1999, the 101st District Court of Dallas
County, Texas granted PalWeb a $20,000,000.00 Judgment against
Ullrich. Plaintiff PalWeb has assigned to Plaintiff PPP
$1,619,422.00 of its $20,000,000.00 Judgment against Ullrich.
15. Plaintiff PPP is entitled to offset its $1,619,422.00 portion
of the $20,000,000.00 Judgment against Ullrich, assigned to
Plaintiff PalWeb, against the $1,619,422.00 loan claim that
Defendant NIH has against Plaintiff PPP.
16. Plaintiff PalWeb is entitled to levy execution on the retained
portion of its $20,000,000.00 Judgment against Ullrich by
claiming the 7,413,384 shares of PalWeb common stock held by
Defendant NIH, valued at $0.10 per share ($741,338.40), and
having such stock returned to Plaintiff PalWeb by canceling
the stock certificates held by Defendant NIH, Certificate Nos.
CEC 1568 (representing 4,540,979 shares) and CEC 1569
(representing 2,872,405 shares), and the return of such stock
may be accomplished by canceling the stock certificates
described above.
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<PAGE>
17. Plaintiffs are entitled to recover from Defendants reasonable
attorneys' fees in the amount of $20,000.00 for the trial of
this cause, together with an additional $5,000.00 as
reasonable attorneys' fees if this matter is appealed to and
successfully defended in the Texas Court of Appeals, together
with an additional $10,000.00 as reasonable attorneys' fees if
this matter is appealed to and successfully defended in the
Texas Supreme Court.
IT IS, THEREFORE, ORDERED, ADJUDGED, and DECREED that PalWeb
Corporation Common Stock Certificate Nos. CEC 1557 (representing 1,000,000
shares) and CEC 1950 (representing 5,000,000 shares), held by Defendant Chartex
AG be returned to Plaintiff PalWeb by the cancellation of such stock
certificates, and Plaintiff PalWeb's transfer agent, Continental Stock Transfer
& Trust Company, New York, NY, is hereby ordered to cancel PalWeb Corporation
Common Stock Certificate Nos. CEC 1557 (representing 1,000,000 shares) and CEC
1950 (representing 5,000,000 shares) that are currently R/N/O Chartex AG.
IT IS FURTHER ORDERED ADJUDGED, and DECREED that that certain Deed of
Trust executed by Plaintiff PPP for the benefit of Defendant Chartex, filed in
Volume 97184, Page 00807, of the Deed Records of Dallas County, Texas is hereby
declared to be void, canceled, and of no force and effect.
IT IS FURTHER ORDERED, ADJUDGED, and DECREED that Defendant Chartex's
claim of a debt owed by Plaintiff PPP in the amount of $1,350,000.00 is invalid,
of no force and effect, and Plaintiff PPP owes nothing to Defendant Chartex, and
that certain Promissory Note dated September 18, 1997, in the original principal
amount of $1,350,000.00, executed by Plaintiff PPP, payable to the order of
Defendant Chartex, is hereby declared to be void, canceled, and of no force and
effect.
IT IS FURTHER ORDERED, ADJUDGED, and DECREED that Defendants Chartex
and NIH are the alter ego of Ullrich, and with respect to dealings with
Plaintiffs, Defendants and Ullrich constitute a single business enterprise,
carrying out a common business objective.
IT IS FURTHER ORDERED, ADJUDGED, and DECREED that Plaintiff PPP is
entitled to offset its $1,619,422.00 portion of the $20,000,000.00 Judgment
against Ullrich held by Plaintiff PalWeb, assigned to Plaintiff PPP by Plaintiff
PalWeb, against the $1,619,422.00 loan claim that Defendant NIH has against
Plaintiff PPP.
IT IS FURTHER ORDERED, ADJUDGED, and DECREED that Plaintiff PalWeb is
entitled to levy execution on the portion of the $20,000,000.00 Judgment against
Ullrich retained by Plaintiff PalWeb by laying a claim against the 7,413,384
shares of PalWeb common stock held by Defendant NIH, valued at $0.10 per share
($741,338.40).
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<PAGE>
IT IS FURTHER ORDERED, ADJUDGED, and DECREED that PalWeb Corporation
Common Stock Certificate Nos. CEC 1568 (representing 4,540,979 shares) and CEC
1569 (representing 2,872,405 shares), held by Defendant New Inter HKB AG, be
returned to Plaintiff PalWeb by the cancellation of such stock certificates and
Plaintiff PalWeb's transfer agent, Continental Stock Transfer & Trust Company,
New York, NY, is hereby order to cancel PalWeb Corporation Common Stock
Certificate Nos. CEC 1568 (representing 4,540,979 shares) and CEC 1569
(representing 2,872,405 shares) that are currently R/N/O New Inter HKB AG.
IT IS FURTHER ORDERED, ADJUDGED, and DECREED that Plaintiffs PPP,
PalWeb, and Onward have and recover of and from Defendants Chartex AG and New
Inter HKB AG, jointly and severally, reasonable attorneys' fees in the amount of
$20,000.00 for the trial of this cause, together with an addition $5,000.00 as
reasonable attorneys' fees if this matter is appealed to and successfully
defended in the Texas Court of Appeals, together with an additional $10,000.00
as reasonable attorneys' fees if this matter is appealed to and successfully
defended in the Texas Supreme Court.
IT IS FURTHER ORDERED, ADJUDGED, and DECREED that Plaintiffs PPP,
PalWeb, and Onward have and recover of and from Defendants Chartex AG and New
Inter HKB AG, jointly and severally, all costs of court.
IT IS FURTHER ORDERED, ADJUDGED, and DECREED that the award of
attorneys' fees and costs of court awarded herein is part of the judgement
hereby rendered.
IT IS FURTHER ORDERED, ADJUDGED, and DECREED that Plaintiff is entitled
to post-judgment interest at the rate of ten percent (10%) per annum.
Plaintiff is further entitled to such writs and processes as may be
necessary in the enforcement and collection of this judgment.
SIGNED this 27th day of March, 2000.
/s/ M. Scott Kiliker
-------------------------------
PRESIDING JUDGE
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