U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-SB
General Form for Registration of Securities of Small
Business issuers Under Section 12(b) or 12(g) of the
Securities Act of 1934
THE AUXER GROUP, INC.
(Name of Small Business Issuer in its Charter)
Delaware 22-3537927
(State or Other Jurisdiction (I.R.S. Employer of
Incorporation or organization) Identification No.)
30 Galesi Drive, Wayne, New Jersey 07470
(Address of Principal Executive Offices) (Zip Code)
(973) 890-1331
(Issuer's Telephone Number)
Securities to be registered under Section 12(b) of the Act:
None
Securities to be registered under Section 12(g) of the Act:
Common Stock, $.001 Par Value
(Title of Class)
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TABLE OF CONTENTS
ITEM 1. DESCRIPTION OF BUSINESS
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION
ITEM 3. DESCRIPTION OF PROPERTY
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND
CONTROL PERSONS
ITEM 6. EXECUTIVE COMPENSATION
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
ITEM 8. LEGAL PROCEEDINGS
ITEM 9. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
ITEM 10. RECENT SALE OF UNREGISTERED SECURITIES
ITEM 11. DESCRIPTION OF SECURITIES
ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS
ITEM 13. FINANCIAL STATEMENTS
ITEM 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS
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Part I
Item 1. Description of Business
BUSINESS DEVELOPMENT
The Auxer Group, Inc. was incorporated in Idaho on June
24, 1920 under the name "The Auxer Gold Mines, Inc." (the
"Auxer"). The Company's original business was mining.
Auxer's life was changed from a life of 50 years to a term
of existence of perpetuity on August 27, 1960. In 1972 the
mining assets were transferred to Idora Silver Mines, Inc.
and Auxer maintained a dormant status for a majority of the
1970's and 1980's.
Effective May 2, 1994, the National Association of
Securities Dealers (NASD) cleared Auxer's request for
unpriced quotation on the OTC Bulletin Board for the Auxer
Gold Mines common stock under the symbol AUXI. On April
18,1995, Auxer acquired all of the issued and outstanding
shares of CT Industries, which became our wholly owned
subsidiary. CT's assets included the distribution rights to
an oil treatment formulation. Auxer issued 4,000,000 shares
of its common stock to shareholders of CT Industries. Upon
consummation of such acquisition, Auxer moved its offices to
Ridgewood, New Jersey. Auxer continued to develop the engine
treatment and test market the product it acquired from CT
Industries through infomercials and by sponsoring regional
races.
In 1996, Auxer established Wayne, New Jersey as its
principal place of business and acquired the issued and
outstanding shares of two companies. Firstly, on February 8,
1996, it acquired Universal Filtration Industries, Inc.
("Universal Filtration"), a company that made products for dry-cleaners.
Auxer issued 1,500,000 of its common stock to
Universal Filtration shareholders for all the outstanding
shares of Universal Filtration. Secondly, on October 25,
1996, Auxer acquired Harvey Westbury Corporation,
Inc.("Harvey Westbury") a light manufacturer and
wholesaler of aftermarket automotive products. Auxer
issued 170,000 shares of its common stock to Harvey Westbury
shareholders or their designees for all outstanding shares
of Harvey Westbury Corp. Both acquisitions have been
accounted for as reverse acquisitions using the purchase
method of accounting with historic costs being the basis for
value. Consideration value was based upon the market value
of Auxer's securities at the time of the acquisition.
In early 1997, Auxer attempted to broaden its development
through a series of strategic investments in software
companies located in the United Kingdom. Auxer's
investments in the UK software group were developed in
conjunction with two key individuals, Robert Smith, former
President of Burroughs, London England and ITT Caribbean
Manufacturing, Puerto Rico; and Danny Chapchal,
currently Managing Director of Cambridge Display
Technology, Cambridge, England. The software group was
organized to create a spectrum of software applications
geared to the expanding asset care and management markets.
The software group attempted to compete globally within the
asset care market and the enterprise resource market.
In August, 1997 shareholders of Auxer voted to exchange
their shares on a one for one basis for shares in The Auxer
Group, Inc., the new Delaware corporation (the "Company").
The Company, was incorporated in the State of Delaware on
August 11, 1997 and was authorized to issue 25,000,000
shares at $.001 par value. Of those shares, 20,000,000
shares were for common stock, while the remaining 5,000,000
shares were for preferred stock. On September 22, 1997, the
Company filed an amendment to its articles of incorporation
whereby it increased its authorized shares to 75,000,000 at
a par value of $.001 per share. Of those shares,
50,000,000 shares are common stock, while the remaining
25,000,000 shares are preferred stock. In August, 1997,
Auxer merged into the Company. Effective on or about August
7th, 1997, the Company began trading on the OTC Electronic
Bulletin Board under the symbol AXGI.
In May 1998, the Company divested itself of its software
business for the amount of the investment, $353,000, which
was received in the form of a promissory note to be
repaid upon the business achieving cash flow positive
status. As of September 30, 1999, the Company determined
the collectability of the promissory note was doubtful and
wrote it off.
On March 19, 1999 the Company amended its articles of
incorporation to increase the number of shares the
Company had authority to issue to 175,000,000 shares at
a par value of $.001 par value per share. Of such shares,
150,000,000 are common stock, while the remaining 25,000,000
shares are preferred stock.
On April 22, 1999, the Company purchased automotive parts
inventory from Ernest DeSaye, Jr., employed Mr. DeSaye and
placed these assets in Hardyston Distributors, Inc., one of
the Company's wholly owned subsidiaries. Hardyston was
incorporated in New Jersey on April 22, 1999. The Company
issued 836,700 shares of its common stock plus $15,000 cash
for the purchase of the automotive parts inventory to Ernest
DeSaye, Jr.
Effective January 4, 1999, the National Association of
Securities Dealers ("NASD") enacted the OTC Bulletin Board
Eligibility Rule ("Eligibility Rule"). To be compliant with
the Eligibility Rule, a company must be registered with the
SEC under Section 13 or 15(d) of the Securities and Exchange
Act of 1934 and be current in its required filings. To be
current in its required filings a company must have filed
its latest required annual filing and any subsequent
filings. Alternatively, an issuer who has recently filed
its Form 10 or Form 10-SB must have cleared all comments by
the SEC. The Company did not meet the new requirements to
continue trading on the OTC Bulletin Board, and its
quotation was discontinued. Effective September 4, 1999,
the Company began trading on the National Quotation Service
Pink Sheets.
Neither the Company nor any of its subsidiaries has filed
any petition for bankruptcy and is not aware of any actions
related to bankruptcy. Furthermore, there are no known
personnel of the Company who currently have any petitions
filed under the Bankruptcy Act or under any state insolvency
laws.
BUSINESS OF THE ISSUER
The Company is a holding company which currently owns four
(4) subsidiaries: The Harvey Westbury Corporation Inc.
("HW"), CT Industries, Inc. ("CT"), Hardyston Distributors
("HD") and Universal Filtration Industries, Inc. ("UFI")
which is currently dormant. Harvey Westbury accounts for
approximately 61% of the Company's total revenue. The
Company assembles and packages automotive accessories under
the name, Easy Test, sells engine treatment under the name,
Formula 2000 Ultimate and sells waxes and polishes under the
name, Garry's Royal Satin to the automotive, marine, and
aviation industries. Hardyston Distributors, Inc. is a
distributor of automotive parts and accessories to local
mechanics, service stations and dealers which account for
approximately 38% of the Company's revenue. CT Industries,
Inc. is a subsidiary currently set up to house the Internet
and retail sales which account for 2% of the Company's total
revenue. The Company intends to continue these operations in
the future.
In 1998, management continued development and sales of the
Garry's Marine Care Products line and completed testing
of Formula 2000 Ultimate. The first production run of
Ultimate 2000 was completed. The Company believes that
Easy Test sales suffered from a warm winter across the
United States. The beginning of 1998 proved to be a
difficult period for the Company in the software investment
as well. Unfortunately, the person expected to be the
Company's primary financier, Robert Smith, unexpectedly
passed away in January of 1998, and as a result,
management was forced to divest itself of the software
program. With the loss of our financing, the Company opted
to accept an offer by Mr. Chapchal to purchase its software
operations rather than further drain the Company's cash
flow position and risk further delay of the advancement of
its new automotive products. The Company and Mr. Chapchal
completed arrangements to turn over the software division in
June 1998 while structuring the sale in such a manner that
the Company could recoup its investment. However, the cash
flow drain on the Company proved to be a burden the
remainder of the year as the Company was forced to direct a
majority of the arranged financing for the automotive
companies to the software investment.
Additionally, the Company completed development of the
marine product line and began trying to reduce the costs of
IT silicone spray. With the cash flow strain Harvey
Westbury's sales and marketing plans were crippled and the
Company saw much of the planned sales deteriorate due to
inability to deliver in a timely fashion as maintaining
adequate inventory was not possible. Additionally,
layoffs in operations and sales were required. The
reduced sales group tried to focus on marketing and selling
of the Garry's Marine products line and the Easy Test line
as well as launch Formula 2000 during the Fall 98 buying
season. The group's focus turned from development to sales
and marketing during this period but the
impact was limited due to funding.
REVIEW OF PRODUCTS
The Company currently has two subsidiaries selling
automotive products. Hardyston Distributors distributes a
variety of automotive hard parts (which represents 100% of
its sales), currently representing approximately 38% of the
Company's revenue during 1999. The Harvey Westbury product
lines, which include the products under the names Easy Test
and Garry's Royal Satin, represent the Company's other
revenue. In 1998, Harvey Westbury's sales by product breaks
down as follows: Easy Test Anti-freeze & Battery Testers -
27%; Easy Test Mobile A/C Accessories - 2%; Easy Test Drain
Plug Series - 4%; Easy Test Fleet Drain Plug Series - 4%;
Easy Test Hatchback Lights - 4%; Garry's Royal Satin - 57%;
and Formula 2000 Ultimate - 2%.
King's Ransom Premium Cleaner Wax and Polish: This cleaner
wax was introduced in the late 1980s and is formulated for
clear-coat paint finishes. It maintains the creamy texture
that the Company believes Royal Satin is noted for and
offers what the Company perceives to be a long lasting shine
with no silicones.
Royal Satin Supreme: The product was designed with the
intent to provide an even longer lasting shine and better
durability than King's Ransom for clear-coat finishes. The
company intends for the product to take advantage of the
Royal Satin trademark, which the Company believes is well
recognized, in certain regions.
Garry's Interior Car Care Products: The Company's products
in this category are a carpet cleaner, waterproofing spray,
leather cleaner and plastic and fiberglass cleaner. The
products are currently packaged in spray tops, however
new packaging options are being reviewed.
Garry's Royal Satin Marine Products: The Company believes
Garry's Royal Satin has a respectable brand name recognition
within the boating and marine industry in the SE and NE
regions of the United States. The Royal Satin Marine line
consists of a boat wash, heavy-duty compound, a finishing
polish and its flagship cleaner wax. The line also offers
care products covered in the automotive line.
Cream Paste Cleaner Wax: The product is the flagship
cleanerwax that the Company believes is well respected among
detailing professionals. Its blend of waxes and cleaner
offers what the company believes to be a tremendous one-step
cleaning and waxing option or can be applied after a
compound in detailing practices.
Heavy Duty Rubbing Compound: This product is intended to
complement to the Company's flagship cleanerwax for
difficult oxidation problems that are too difficult for
normal oxidation.
Finishing Polish: The product offers the detailer an extra
layer of protection that is intended to get them through an
entire season. Cleaner waxes on the market typically fall
short of performing more than 4 months. This polish and
protector is intended to give the boating enthusiast an
extra couple months of added shine and protection from
oxidation.
Boat Wash: In this product, the Company has attempted to
formulate a product to clean and prep a boat for the
deoxidization process. The Company believes this product is
biodegradable and safe for a finishes.
It Silicone and T-Bolt Rust Penetrant: Harvey Westbury
markets a silicone and multipurpose lubricant under the
brand name It and T-Bolt. The products are believed to have
been around since the 1940=s and had what the Company
believes to be national recognition up through the 1980s.
Formula 2000 Ultimate Product Line: CT Industries maintains
formulations for a synthetic lubrication product designed
for engines and transmission lubrication enhancement.
EasyTest Product Line: The Easy Test product series is
believed to be approximately a 25-year-old line that Harvey
Westbury founded. The products consist of three (3) types of
antifreeze and battery testers, a carbon monoxide tester, and drain
plug series. Additionally, the air conditioning
line is trademarked under Easy Test as well as the Hatchback
solar powered rechargeable light and other accessory
products.
Antifreeze & Battery Testers: The Harvey Westbury tester
products are manufactured at the Company's facilities in
Farmingdale, NY. The main products are anti-freeze and
battery testers, which come in three different sizes. The
first type is a five-ball tester that consists of a four-inch
glass catheter, assembled together with a vinyl squeeze
bulb and dispensing tail. The working components in these
items are five specific gravity balls that float at
different concentrated levels of the solution being
tested. The solution for the anti-freeze test involves a
water to anti-freeze mix, while the battery test involves
a water to acid mix. Once the items are manufactured and
assembled, they are then packaged for retail distribution
using Harvey Westbury's in-house machinery and equipment.
The same concept applies to the other two size types, which
are much larger and resemble a French horn and turkey-baster
in their respective shapes. Most items are sold
under their registered trademark Easy-Test7, however, the
Company also maintains several private label contracts
within the industry.
Mobile Air Conditioning Accessories: Harvey Westbury markets
all of its air-conditioning accessory items under the brand
name Easy-Test. The product line is mainly comprised of
retrofit kits, recharge kits, charging hose, fittings,
manifold gauges, leak detector kits, thermometers, and
protective goggles. Additionally, the accessory items are
designed to service all R-12 (CFC-12 or Freon) and R134a
(HFC-134a) automotive systems.
Crankcase Drain Plug Series (CDPs & EDPs): Two series of
crank case drain plugs are currently packaged by the
Company. The group actively markets the CDP series which is a strong
rubber plug complete with an inserting tool. The product is
marketed to the do it yourself market and the quick oil
change chains. The product is purchased in single or six
pack blister pack options. The second series is a metal
screw in product. The product is self-tapping.
Fleet Drain Plug Series (RDPs): The Fleet drain plug series
is an imported product. The product is generally designed
for large construction and farm equipment as well as RVs.
The product comes as a kit. The product allows the user to
insert a drain tube by screwing onto a permanent attachment
to vehicles.
Carbon Monoxide Testers: Harvey Westbury assembles and
packages Carbon Monoxide devices that alert the consumer to
the presence of carbon monoxide by changing color. This
small indicator is roughly 2" in diameter and is comprised
of a proprietary blend of chemicals, which react to carbon
monoxide. The pill indicator is affixed to an adhesive
backed plastic applicator that allows the item to be placed
almost anywhere. In addition, the pill indicator changes
back to its original color after the carbon monoxide is
removed which makes the item reusable. Depending on the
surrounding climate, these detectors can last up to a full
year. Harvey Westbury offers two types of testers based on
their levels of detection sensitivity. Since carbon
monoxide is measured in Part Per Millions (PPM), one tester
will react to carbon monoxide dosages of 50ppm and the other
will react at 100ppm.
Miscellaneous Products: Harvey Westbury assembles pneumatic
hoses. Additionally, the Company continues to maintain
several miscellaneous items in the Easy Test line such as
windshield wiper cleaners, hatchback lights, and hacksaw
blades. As of September 30, 1999 the Company reported
inventory of $263,970. Carrying amount of inventory in
miscellaneous product is less than 2%. Products that are
considered obsolete are "written off" in accordance with
generally accepted accounting principles.
MARKETING
The Company is engaged in business in several markets. The
Company is conducting business with automotive retailers and
distributors as well as marine retailers and distributors.
The Company's revenues do not exceed 20% with any individual
customer. While the Company is not engaged in any formal
contracts with identified volumes, the Company has
arrangements to private label for Warren Distribution for
Polar products and CarQuest Inc. for CarQuest products. The
Company's products are packaged under several other unknown
brand names since the products are sold in bulk and packaged
by other companies.
The Company's subsidiary, Harvey Westbury has entered into
several licensing agreements with third party distribution
companies to private label products. In August 1998 Harvey
Westbury entered into a licensing agreement with Warren
Distribution to use the trademark Polar on its Easy Test
Anti-freeze and Battery Tester products, to be distributed
through Warren Distribution. In October 1998, Harvey
Westbury entered into a licensing agreement with CARQUEST,
Inc. to use the trademark CARQUEST on its Easy Test Anti-freeze
and Battery Tester products, to be distributed
internationally throughout CARQUEST's network of warehouse
distributors and retail outlets.
In June 1999, Harvey Westbury entered into an advertising
agreement with the Veritas Group, Ltd. to develop and
implement a regional and national marketing and advertising
campaign to promote its Garry's Royal Satin and Formula 2000
Synthetic Engine Treatment.
The Company is currently employing the strategies outlined
below:
Garry's Royal Satin Automotive Product Line:
--------------------------------------------
The Company believes that Royal Satin has recognition in the
NE and SE United States and in Puerto Rico, and that the
product also has recognition in the aviation sector
markets. In 1999, the Company introduced an improved clear-coat
in Royal Satin Supreme. The Company intends to promote
the product through TV and magazine ads regionally in the
areas where Garry's Royal Satin has recognition. The Company
intends to repackage Garry's Royal Satin in new plastic
containers and labels.
Garry's Royal Satin Marine Products:
------------------------------------
The Company intends to focus its sales and distribution
efforts for its marine products in the NE and SE region of
the United States in 1999. The Company intends to promote
Garry's Royal Satin Marine products through local and
regional magazine advertisements, discounted sales
promotions, and distribution of samples.
It Silicone and T-Bolt Rust Penetrant:
--------------------------------------
Garry's IT and T-Bolt have unknown brand name recognition at
this time. The Company believes the product was distributed
in the Northeast United States. The Company sells limited
quantities (less than 1% of total revenues) of these
products. No current marketing programs are in place.
Formula 2000 Ultimate Product Line:
-----------------------------------
The Company introduced Formula 2000 Ultimate to the market
in 1998. Management believes that a TV ad campaign will be
necessary to pull the product through the distribution
system. In 1999, the Company introduced the product on the
Internet and intends to test market several Internet banner
concepts on automotive Internet sites.
The Company believes that engine treatment products are a
competitive market place and will need to be unique in order
to differentiate itself between other products. The Company
believes that Formula 2000 can demonstrate increased mileage
as proof of reduced friction. While the Company has no
direct evidence to support an increase in mileage claim, the
Company did have independent lab tests performed by FES,
Inc. in Stillwater, Oklahoma. The Company had load
resistance and wear analysis tests performed in August 1993
and follow-up tests in March 1997. Wear rate reduction from
testing showed a 63% reduction in engine wear compared to
base oil only. In an effort to be unique, the group is
seeking to initiate the Formula 2000 mileage challenge. By
providing incentives to the user to track his mileage
through promotions and contests for completing mileage
tracking forms, the Company intends to accumulate data,
force the client to focus on the product's performance, and
develop a unique following of resale clients.
Easy Test Product Line:
-----------------------
Antifreeze & Battery Testers:
-----------------------------
The Company plans to maintain an aggressive pricing format
for this commodity item and to continue to offer discounts
to old clients for returning. Management continues to pursue
lower cost manufacturing opportunities in order to remain a
low cost supplier of these testers. Management intends to
become a volume importer of inexpensive testers and
accessories. With Harvey Westbury's in-house packaging
capabilities, the Company intends to pursue more private
labeling arrangements. The Company intends grow its other
Easy Test products through its current tester client base.
Mobile Air Conditioning Accessories:
------------------------------------
The Company plans to introduce a line of AC accessories and
chemicals with a new catalog. Management believes the
increased line will increase the opportunity to increase
revenue and enable the Company to import larger quantities.
The Company intends to be a low cost supplier of these
accessory products.
Crankcase Drain Plug Series:
----------------------------
The Company intends to market this product to its current
tester client base. The Company intends to be a low cost
supplier of these accessory products.
Carbon Monoxide Testers:
------------------------
The Company intends to focus on maintaining its current
client base and to identify new clients with similar
profiles. Management believes it can market this product to
the small aircraft aviation industry where Garry's Royal
Satin has a small client base.
Fleet Drain Plug Series:
------------------------
The Company intends to reintroduce the product to the client
base as well as identify similar profile prospects through
mailing campaigns.
SOURCES AND SUPPLIERS
Neither the Company nor any of its subsidiaries currently
have any contracts or arrangements with any subcontractors.
The raw materials and suppliers for all of the Company's
current products are easily accessible and several sources
exist. Harvey Westbury's Easy Test Testers and Accessories
are imported from suppliers in Taiwan and China. The 501
series testers are assembled in Harvey Westbury's
Farmingdale, NY facility. Harvey Westbury's Easy Test
Mobile Air Conditioning Accessories are imported from
suppliers in China and Taiwan and some products are
manufactured at the Harvey Westbury Farmingdale, NY
facility. Harvey Westbury's Garry's Royal Satin and Formula
2000 products are manufactured in New York. Hardyston
Distributors purchases automotive parts from several local
distributors in Northern New Jersey.
COMPETITION AND RELATED MATTERS
Garry's Royal Satin Product Line for Automotive, Marine &
Aviation: The Wax and Polish market is mainly comprised of
waxes, polishes, and Protectants. According to the
Automotive Parts & Accessories Association's ("APAA")
Automotive Weekly, the Automotive Wax Polish Industry
produced retail revenues totaling 470 million dollars in
1995. This figure was confirmed by the Aftermarket Business
Journal's ("AB") 23rd Annual Car Care study which, in
addition, showed an estimated figure of 498 million dollars
in retail sales for 1996. The forecasted growth for 1997 is
four percent. Although seemingly stagnant, the Company
believes that the reduced growth patterns since 1992 still
provide a fair amount of room for new developers. The
Company believes this industry market is clearly dominated
in the southern and Midwest regions of the country.
The Company believes that the care products industry is
comprised of multiple types of products and brand names.
Any area or component of one vehicle has a particular
product made to clean and/or protect it. The products,
mechanically, generally come in either aerosol cans or
plastic spray bottles with a typical range to include
lubricants, cleaners, sealants, adhesives, and
protectants. According to the 23rd Annual report conducted
by the Aftermarket Business Magazine ("AB"), the Glass
Cleaner and all-purpose Cleaner markets each respectively
estimated retail sales to be $63 and $92 million, with an
expected growth rate of 3% to 11%.
In addition to the Automotive Industry, the Company believes
that the Marine Waxes and Polishes industry provides
significant opportunity.
The wax market primarily consists of what the company terms
Do It Yourselfer ("DIYer") client base. The Company
believes that the distribution chain from manufacturer to
end-user (consumer) generally follows a traditional route.
The Company believes that it's a three level process
that starts with the manufacturer wholesaler who sells to
the distributor who, in turn, sells product to the Jobber
and/or retailer. The consumer can then purchase from the
retailer to complete the chain. According to AB's 23rd
Annual Car Care study, the leading retail distribution
sources are the major Discount Chain stores such as Wal-Mart
and Kmart, as well as the major Automotive Retail groups
like Pep Boys and Western Auto. These two groups command a
45% and 41% market share, respectively. Other retail outlet
sources include Department Stores (9%) such as Sears, and
Non-Automotive chains (5%) such as grocery & convenience
stores.
The Company believes that recent years have shown that major
retailers command a larger influence in the industry by
being their own distributors. The Company believes that
this push has started to shift the distribution chain
towards a two step process, which entails the wholesaler
selling direct to the retailer. Under this method, the
Company believes that since the retailer can now handle more
volume than the distributor, in most cases, they are able to
demand lower purchase levels. The Company believes that
this puts tremendous strain on the distributors and can
probably account for what the Company perceives to be a
decrease in growth. Electronic Data Inquiry ("EDI") systems
are also becoming more accepted by major retailers. These
systems make it easier to order directly from the
manufacturer.
Harvey Westbury Corp. falls into the first level of
distribution. It is a manufacturer distributor of Garry's,
which is its own line of car care products to include
waxes, pastes, cleaners & Protestants.
There are three primary strategies from which the Company
intends for this segment of its business to provide
opportunity for growth. The first of which is better and
more appealing packaging. Few product lines offer
attractive, screw top containers. The second is the one-step
application process. According to the AB's 23rd Annual
study, one popular industry trend set by the baby boomer
generation is the notion of a quick and easy product.
Consumers are constantly looking for less time consuming
methods of cleaning their vehicles. Finally, sales support
can play a big factor. Market penetration exists for
those manufacturers who supply assistance with sales
support. Harvey Westbury has just introduced a new
packaging scheme for its Royal Satin Wax Garry's line which
involves a new twist off plastic container for
convenience along with a new color and label design. Also,
the cream paste and liquid products offered by the wax line
allow what the Company believes to be easy-on application.
Finally, the 1998 marketing program provides for customer sales support.
The Company believes that competition in this industry
mainly exists between the long time, well-recognized brand
name organizations such as First Brands, 3M and Turtle Wax
and the recently popular younger groups like Star Brita and
Mothers. It is important to recognize that each
major competitor has nationally advertised promotions and
also plays an active role in the Marine industry.
The following is an overview of the competition:
(1) FIRST BRANDS located in Danbury, Connecticut. This
public company (NYSE:FBR) had reported sales for 1996 of
over one billion dollars. One hundred thirteen million
dollars of these sales represent car care products
consisting of waxes and polishes (30-50% of the
market). Their principle brand name is STP, which plays
an active role in the automotive additive industry. The
brand name for which they market their wax is known as
Simoniz, which is classified as an inexpensive,
quality product that is currently distributed through
traditional routes and supported with strong
representation in most chains and outlets. The product
has been in existence since the mid 1900's and is
traditionally packaged in a yellow metal container to
include various sizes. The company believes the first
brand's strength is its brand name recognition, and its
weakness is their packing and delivering reliability.
(2) TURTLE WAX, INC. located in Chicago, Illinois
This private company has several branches located all over
the nation. Over the years this company has developed
several car care trademarks and brand name subsidiaries
such as Lubricating 2001, Finish 2001, Formula 2001, and CD-
2. Its most recognized national brand name Turtle Wax,
alone, had an estimated 20 million in sales for 1996 (10-
20% of the market) according to the American Business
Directory. Their green and white packaging is unmistakable
to the consumer. This low-end product is priced between
1.99 and 5.99, which gives it the benefit of being
affordable. The Company believes that Turtle Wax's strength
is its well-recognized brand name. Turtle Wax also
maintains excellent product development and is
characteristically one of the pioneers for setting the
tones in the industry. A few years ago, Turtle Wax set a
trend when they introduced the convenient hand applicator
affixed to the top of their containers. This year at the
1997 APAA show in Las Vegas, the Company introduced a new
polish, which involves a spray-on application that just
wipes off with no buffing required. Again, this coincides
with what the Company believes to be recent trends of easy-
on mode. Turtle Wax, Inc. has strong distributor, and major
retailer penetration with large marketing and advertising
capital to help support their products.
Minnesota, Mining and Manufacturing (3M) B located in St.
Paul, Minnesota: This public company (NYSE: MMM) is a major
leader in several industries to include Automotive and
Marine. Their 1996 10K reported net sales of over $14
billion. 3M's strength appears to be its brand name
recognition.
Other Competition:
Other major competitors in the wax and polish industry
include BLUE CORAL, who was recently acquired by Quaker
State and StarBrite Distributors, Inc. located out of
Florida. Another popular brand name called MOTHER'S located
in Huntington Beach, California has recently made a push
into the national market and has rapidly introduced a
complete car care product line to compliment their wax
items.
It Silicone and T-Bolt Rust Penetrant:
While dozens of competitors market a silicone spray, most
notably Gunk and Prestone. Others market a multipurpose
lubricator such as WD-40 and Liquid Wrench. The Company
believes that the real issue to competitiveness is cost to
make and brand name awareness. The Company believes that
is has recently been able to solve the cost issues and
believes it can compete in the marketplace. The market is
projected at over $100 Million.
Formula 2000 Ultimate Product Line:
The Engine Treatment and Oil Additive market is part of what
the company perceives to be the lucrative Automotive
Aftermarket Parts & Accessories Industry and the Company
categorizes within the chemical products group. According to
The 23rd Annual Car Care study sponsored by the Aftermarket
Business journal (AB), the Aftermarket chemical product
group represented nearly $3 Billion in retail revenue in
1996. Additionally, the FAIR estimated the additive market
to be approximately $650 Million in retail sales (in
1994).
Additionally, AB's 23rd Car Care study, establishes a
market size of $272 Million in 1996 with 9% growth in 1997
or $296.5 Million in total retail sales of engine
treatments. Approximately 72% of the engine treatment is
sold through retail chains and automotive stores.
The Company has been unable to find much statistical data on
the international market for engine treatments. Today the
company believes, Europe, Canada, the Pacific Rim and
Central America represent the best market opportunities.
Some of the major brands maintain distributors and
representation in these regions. However, the Company
believes that this market is currently not well established.
The Company believes that a significant market exists
for engine treatment outside the United States of equal size
or larger if it is approached with the correct marketing
emphasis.
Currently, the distribution of engine treatment follows
the traditional paths within the Aftermarket industry to
include traditional wholesale distribution to automotive
retail chains (classical 3 tier), major retail chains (two
tier) and direct telemarketing and infomercial settings.
Within the retail chain market, engine treatment is
distributed as follows:
49%- through Automotive Chains
46%-through Discount Chains
4%-through Non Automotive Chains
1%-through Department Store Chains
The average retail gross margins maintain 31% and turn their
inventory 4.3 turns per year according to AB 23rd Car Care
Study. The Company believes that the engine treatment
market has developed into three distinct marketing
categories of high-end brand names, mid-range non-brand
names and private label, and low end products.
The high-end brand names, where Formula 2000 Ultimate
intends to be associated, are products such as Slick 50,
Duralube, MotorUp, and Prolong, which dominate the retail
shelves. These products usually range in price from $16.99
to $29.99 in automotive retail stores and $11.99 to $19.99
in discount stores.
The mid-range products consist of non-brand name products
and private label such as TM8, Tech2000 (Wal-Mart),
Lubricator2001 (Turtlewax) ranging in price from $8.99 to
$16.99 in retail stores and $6.99 to $12.99 in discount
stores. Typically, these products include PTFE and low end
oil additives packages. The low-end products consist of
additional private label brands and STP's brand of oil
additives. Typically, these products consist only of
low-end packages which include cleaners and low grade oil
alternatives. These products are retailed for as low as
$1.25 in discount stores and up to $6.99 in retail stores
Within the engine treatment market, the Company
believes that several opportunities exist.
The Company believes that most trade journals are
communicating the same idea. Namely that to successfully
move engine treatment products, the consumer must be
educated with quality point of sale material and well
informed salespeople at the retail level. The Company
believes that this can be achieved by quality fieldwork from
manufacturer reps and quality field training for
distributors.
The Company believes that the main competition within the
marketplace comes from well-known names from the automotive
industry to include First Brands and Blue Coral, a wholly
owned subsidiary of Quaker State.
First Brands: This company has what the Company believes is
the most recognized name in oil additives and engine
treatments with their brand name, STP. While First Brands
is a multi-billion dollar company, the Company
estimates First Brands to have generated approximately $70
Million to $100 Million in oil additives (17% to 25%
market share) during 1997. STP's product line is
positioned as a low-end product line with multiple product
additives. The products are typically a quality motor oil
mixed with old, well known, low-end additive packages. The
company competes relatively on low gross margins with high
volume concepts. STP offers a full line of additive
products.
The Company believes First Brands relies heavily on the
long-standing recognition of STP within the additive market
as they have done for many years after creating the oil
additive business in the 1940s. STP continues to stay the
course and dominate the inexpensive oil additive arena.
Quaker State: Is a multibillion-dollar public company that
is well recognized for its line of motor oil products,
however the company is well diversified and owns the well
recognized car care products company, Blue Coral. Blue
Coral acquired the Slick50 in 1994 for approximately $60
Million and the assumption of approximately $13 Million in
debt.
The Company believes Slick50's line of engine treatments and
additives is the most recognized brand name within United
States for high-end products. The Company estimates that
Slick50 contributes approximate $50 to $70 Million in
annual revenue to the Blue Coral group of Quaker State.
Slick50's initial engine treatment product was primarily a
quality motor oil and PTFE, sometimes better recognized as
DuPont's Teflon. In recent years, Slick50 has adjusted its
formula to include some of today's more popular additive
packages. Additionally, Blue Coral has introduced a full
line of additives and gas treatments as well as semi-
synthetic and full synthetic engine treatments. The
synthetic versions are expected to be PAO technology.
Clearly, the strengths of this product are its brand name
recognition and strong complete line of products.
Blue Coral's marketing approaches include the recent 2 for
1-engine treatment and gas treatment packages and the $19.99
oil change (handy carrying case and four quarts of oil). The
Company believes Blue Coral's weakness to be mediocre
technology. However, Blue Coral seems to be very profitable
as the products are very inexpensive to make and receive the
highest retail prices. The product is rarely found for
less than $17.99 and more often is fixed at $19.99. The
original Slick50 has recently dropped in retail price to as
low as $16.99, while the newer synthetic formulas rarely
show discounts.
Prolong: This company is private and estimated at
approximately $20 to $30 Million in annual sales. The
company is located in California and the Company believes it
is recognized as one of the top four or five recognized
high-end brand names. The company believes Prolong has its
strongest following in the West region of the United States
and can be found in many of the prominent retailers.
Prolong has been registered with the American Business
Information's database for 7 years and is noted for an
usually psychedelic bottle. The company has not changed its
format from a single showcase product, although the
company has a full line of additive products. Prolong is
arguably the company which started the infomercial blitzes
in the 1990's in which all of the market leaders followed
suit.
The Company believes that Prolong maintains relatively
strong brand name recognition; however, the Company believes
that the technology behind the product is not strong and
that it is only a supped-up additive package. The product
typically retails for $12.99 to $19.99 and usually shares
shelf space with Slick50. Prolong and DuraLube are
typically not offered together; but either Prolong or
DuraLube are sold with Slick50.
DuraLube: This company is private and is estimated at
approximately $10 to $20 Million in annual sales. DuraLube
is located in Eden, New York and is recognized as one of the
top four or five high-end brand names in the marketplace.
The Company believes that DuraLube is most noted for
introduction of the chlorine-based treatments which have
recently fallen out of favor with lubrication and tribology
experts. DuraLube contends its product is no longer
chlorine-based. The Company believes DuraLube has strong
brand name awareness, however the Company believes that the
technology of the product is questionable.
DuraLube offers a full line of additives and treatments,
however the Company has not introduced any synthetic
formulas to date. DuraLube pursued a heavy infomercial
marketing basis in the early 1990s as did many companies.
Lately, the Company believes DuraLube has changed its
strategy to offer their engine treatment within different
packages and looks; for example, DuraLube has offered
the $19.99 oil change (oil free with a triangular drain
pan) and is currently offering a 2 for 1 treatment program
for $19.99 (complete with engine and gas treatment). The
product also shares retail shelf space next to the brand
name leader, Slick50 in most major retailers where it is
typically retailed between $12.99 to $18.99 as a sole
product (usually $2 to $4 less than Slick50).
MotorUp: MotorUp is private and the Company estimates it to
have approximately $5 to $10 Million in annual sales.
While representing a small share of the market (1% to 3%),
this company has achieved what the company believes is a
strong brand name awareness in only two years.
MotorUp is located in Philadelphia and entered the
marketplace approximately three years ago. The Company
believes that MotorUp has made a strong impact from a
marketing standpoint. The President of the company has
what the Company believes is a strong marketing
background and took the 1996 Automotive Show by storm with
a multimillion infomercial marketing blitz prior to the
show and focused heavily on the Southeast region of the
United States in 1996. By 1997, this company showed
staying power through its infomercials. Additionally,
this company popularized the 15 oz. bottle, satisfaction
guaranteed and A No Oil Change product.
MotorUp introduced a full line of additives at the 1997
automotive trade show, however, the product line did not
include a semi-synthetic or synthetic product. MotorUp
maintains a high-end brand name product. The Company
believes MotorUp's strength is its marketing appeal,
however, the technology is simple quality oil mixed with a
strong additive package. Currently, MotorUp is moving away
from infomercials and establishing distributors and
retailers. The product is starting to show up on some of
the retail shelves, however the Company believes it has not
unseated the shelf space of Slick 50, DuraLube and
Prolong. The product can be found in some of the less
prominent retailers on special isle shelving and is
retailed between $19.99 to $29.99 with a lubrication manual
and is recently marketing a gas treatment 2 for 1 package.
Other Competition:
The Company believes that the remaining 39% to 63% of the
engine treatment market is comprised of many mid-tier
companies that offer engine treatments as part of their
additive product lines or private label vendors. The
Company believes that most of these companies average $5 to
$25 Million in total annual sales. Several mid-tier
products tend to have some brand name recognition and
include Lubricator 2001 (Turtlewax product), TM8, Tech2000
(Wal-Mart Private Label), R-2000 (Bilstein), Marvel Mystery
Oil, and Tufoil.
The Company believes another indirect competitor to the
engine treatment market is the recently growing synthetic
motor oils. Mobile introduced the Mobile One technology,
(initially PAO technology) and has recently introduced TMP
technology. This technology is still developing and Mobile
is clearly leading the way as is the recognized technology
leader within the lubrication industry. Today, Mobile
synthetic motor oil technology nearly parallels Formula
2000's synthetic technology. In recent years, most
lubricating oil packages have introduced some form of
synthetic technology, primarily PAO based. Synthetic
motor oils are more costly and compare in price to Formula
2000, however, they are retailed for $4 to $6 per quart.
While the technology basis is similar, the market for
synthetic oils is completely separate in today's
marketplace.
EasyTest Product Line:
Antifreeze & Battery Testers:
However, only a fraction of this figure represents the
tester market, which is an estimated two million
dollars. The Company views Tester products as a penny
items, which, over the past several years have been
clearly dominated by the overseas regions; particularly
Taiwan and China. Since inexpensive labor and raw materials
can offer lower pricing, many distributors simply import
these small items with minimal concerns.
The Company believes that the tester market primarily
consists of a DIY (do it yourselfer) client base. The
Company believes that the distribution chain from
manufacturer to end-user (consumer) generally follows a
traditional route. It's a three level process that starts
with the manufacturer wholesaler who sells to the
distributor who, in turn, sells product to the Jobber and or
retailer. The consumer can then purchase from the retailer
to complete the chain. The typical third level outlets
are made up of automotive retailers, service stations,
convenience stores, grocery stores, etc.
The Company believes that Harvey Westbury Corp. is
one of the leading manufacturers in the United States of
these tester items. Since the Easy-Test line offers
several other products, the Company also acts as its own
distributor.
The following is an overview of the competition:
JONI ENTERPRISES, LTD.- located in Taiwan, Republic of
China.
This company has been competing with Harvey Westbury for
over twenty years and currently leads the market as the
primary manufacturer. As much as 50% of the market is
imported from JONI. The Company believes that most of their
revenue is based on these specific items, however, Joni also
carries a small automotive windshield accessory line, which
accounts for some income. Joni's strength is their niche of
large clients that they have created over the years. Their
weakness is their obvious location. Any domestic company
willing to manufacture these items could cause a serious
threat to the overseas distribution line.
THEXTON MFG., CO. - located in Minneapolis, Minnesota.
This estimated ten million-dollar company only makes the
larger, professional type testers, which, furthermore,
represents less than twenty percent of their entire revenue.
The Company primarily specializes in automobile repairs and
service equipment. The strength of this company is that
they manufacture in the United States and they also have
a niche. Their weakness is that they only specialize in
the high-end testers, which limit them to the Jobber
market and not the Retail arena.
WILMAR CORPORATION - located in Seattle, Washington.
This estimated five million-dollar company that has spent
the last nine years specializing in the manufacturing of
plastic products. They are currently importing several
items to increase their catalog selection and act as a
distributor to several major retail chains. They now have a
large assortment of items to offer which gives them strong
leverage with the major retailers since these buyers primarily
look for well-developed product lines that are easily identifiable
to consumers.
CUSTOM ACCESSORIES, INC. - located in Niles, Illinois.
This private company has specialized for seven years as an
automotive parts and supplies manufacturer and is classified
under the American Business Directory as a $20 to $50
million company. The Company believes for the past two years
Custom has imported several items in bulk form and simply
packaged them domestically with their brand name Custom.
Their strength is their established client base and wide
range of accessory items.
Other major competitors in this market are VICTOR
AUTOMOTIVE, INC., PRESTONE, CHASLYN CO., and ALLISON CORP.
The Company believes that all of these companies have a
large distribution base with large product selections.
Again, they all import overseas from Taiwan and China and
package domestically.
Mobile Air Conditioning Accessories:
This vast market can be further broken down, however, into
several specialized categories such as compressors, hoses,
valves, refrigerants, refrigerant recovery, retrofit
servicing, and accessories. The majority of manufacturers
reside in the southern, hot regions of the country such
as Texas and Florida.
The automotive air-condition accessories market primarily
consists of Jobbers and Do It Yourselfers (DIY). The
company believes that the jobbers' clientele out numbers
the DIY by two to one. This is primarily due to the recent
EPA regulations which limit the sale of certain items to
certified automotive air-conditioning technicians only.
The Company believes that the distribution chain from
manufacturer to end-user (consumer) generally follows a
traditional route. It's a three level process that starts
with the manufacturer wholesaler who sells to the
distributor who, in turn, sells product to the Jobber
and/or retailer. The consumer can then purchase from the
retailer to complete the chain. The typical third level
outlets are made up of automotive stores like CarQuest and
NAPPA, and discount retailers such as Pep Boys and Western
Auto.
Due to the belief that chlorofluorocarbons (CFCs) deplete
the ozone layer, 150 countries signed a treaty called the
Montreal Protocol which was created to protect the earth's
ozone. The United States Clean Air Act, phased out the
production of the automotive air-conditioning refrigerant
known as Freon (R-12 or CFC-12) by December 31, 1995.
Currently, Freon can only be purchased by certified
technicians and will be officially illegal to distribute by
2003. The most feasible substitute for Freon, at the time
was considered to be R-134a, which possessed similar R-12
characteristics and called for minimal system adjustments.
The automotive manufacturers then began to convert their
systems to adhere to the new refrigerant specifications. A
recent Motor Trend article indicated that there are over
140 million cars requiring retrofits. As the R-12
distribution deadline approaches, more and more consumers
are looking towards the retrofit. The Company believes this
creates tremendous opportunity for those who offer these
accessories. Harvey Westbury's AC line is primarily focused
on supplying these items. The Company believes that most of
the public is unclear about the steps involved in this
conversion process and will therefore look to reputable
companies for solutions. Harvey Westbury has been in the
air-conditioning business for over thirty years, which
the Company believes gives it a competitive edge towards
reputation.
The following is an overview of the competition:
AEROQUIP CORP. - located in Maumee, Ohio.
This private company has been registered with the American
Business Directory (ABI) for over ten years and is an
estimated one billion-dollar company with branches all
across the mid-west and southern regions of the United
States; its headquarters is in Ohio. The company
specializes in a variety of markets including Hose,
Fittings, and Coupling manufacturing; Heating and Cooling
parts & Accessories manufacturing; Automotive and
Aviation parts manufacturing; Plastic Products and Plastic
Extruders manufacturing; and Mold Making. It is also
important to note that the products sold from this company
mainly support the Jobber clientele.
WATSCO COMPONENTS, INC. - located in Hialeah, Florida.
This public company (NYSE: WSO) whose 1996 10K indicated net
sales to be $330 million. Retrofit refrigerant access
valves, vacuum pumps, refrigerant recovery machines &
filters manufacturing briefly describes their Air-conditioning
involvement to the industry. This company is also a Jobber
based wholesaler.
INTERDYNAMICS, INC. - located in Brooklyn, New York.
This private company has been registered with ABI for over
ten years and is categorized as a $100 million organization.
They specialize in automobile parts, equipment, and supplies
manufacturing. Their share of the AC accessories market
includes AC testing and charging accessories, refrigerants,
and electronic climate control systems. The Company
believes that Interdynamics is one of the largest retail
based manufacturer distributor in the industry (15% to 25%
of the market). Their items can conveniently be found in the
major discount chains such
as Pep Boys, Western Auto, and R&S Strauss.
Other Competition:
Another significant competitor in the accessories industry
would be SCHRADER-BRIDGEPORT located in Altavista,
Virginia. They contribute to a large portion of the retrofit
adapter fittings found in the market today, which all
contain their patented Schrader-Valve as the main internal
working component. Also, CASTROL INDUSTRIAL North America,
INC. located in Downers Grove, Illinois manufactures a large
share of the Retrofit Kits found in the market to include
their own brand name CASTROL, as well as other significant
private label contracts such as EVERCO.
Crankcase Drain Plug Series (CDPs & EDPs):
The market appears to be a niche. There is only one other
vendor currently known to manufacture this product which has
exclusive arrangements with Difco, Inc. and Cargo, Inc.
Fleet Drain Plug Series (RDPs):
The markets for this product are companies with maintenance
sections who perform regular maintenance requirements on
fleet operations. Also, major trucking outlets and repair
centers are strong customers. The Recreational Vehicle
market tends to move these items as well. There is only one
other known distributor, IAS, in the United States. The
company primarily focuses on the RV market.
Carbon Monoxide Testers:
Market & Competition:
The Carbon Monoxide ("CO") market is a fairly young
industry, with the first CO gas detectors being introduced
in 1993. Carbon Monoxide is a colorless, odorless,
poisonous gas byproduct of burning oils and other fuels. It
can be quickly absorbed by the body and cause such symptoms
as headache, dizziness, irritability, and nausea. Higher
concentrations of the gas are lethal. The distribution
chain from manufacturer to end-user (consumer)
generally follows a traditional route. It's a three level
process that starts with the manufacturer wholesaler who
sells to the distributor who, in turn, sells the product to
the Jobber and/or retailer. The consumer can then purchase
from the retailer to complete the chain. The common retail
sources for these particular items are the major Discount
Chains such as Kmart and Home Depot. Harvey Westbury
maintains a manufacturer status with its CO detector
products.
Also, these detectors have been traditionally targeted
for household use. Harvey Westbury currently directs its
marketing efforts towards the aviation and automotive
safety arena. Several state and local municipalities
mandate these detectors for their department vehicles,
as well as regulated flight school facilities. With the
large number of cars, trucks, and buses in operation today,
the company believes positive growth potential for these
items. The third aspect of growth is in technology. There is
plenty of room for improvement at each device tier. The
Company believes that Harvey Westbury is one of the few
organizations that distribute the chemically treated
indicator disk, which currently acts as the main
component in battery-powered models. Harvey Westbury's
packaging facility offers it the ability to private label
their card indicators if the demand for these items
increases.
The competition within this industry mainly exists
between the companies that specialize in these gas detector
items such as smoke detectors.
FIRST ALERT, INC. - located in Aurora, Illinois.
This is a public company whose 1996 10K showed a reported
sales of over $205 million. The Company believes First
Alert was the pioneering organization that introduced the
CO detector. When First Alert CO detector sales rose from
$9 million to $92 million in one year, it soon became
apparent that a market existed for this type of product.
This company's primary source of revenue is from smoke
detectors. The Company believes First Alert is the leader in
this new industry. First Alert, Inc. products are retailed
under the brand name First Alert that offers a complete line
of gas detectors.
QUANTUM GROUP, INC. - located in San Diego, California.
This private company has registered with American Business
Directory for over ten years and is categorically listed as
a 10 to 20 million-dollar company. Quantum specialize in
safety equipment and measuring device manufacturing. The
Company believes Quantum Group, Inc.'s R&D Department
holds the lead in the chemically treated indicator disk,
which is the primary component to all the battery-powered
and card detector CO products. The 1996 10K for First
Alert references Quantum Group as their sole supplier
for this component. The company's full line of products
is marketed under two brand names, COSTARJ, and Quantum.
Other Competition:
Several other brand name companies exist in the market, of
which all fall between the sales categories of $2.5 Million
to 10 Million. Such competitive brand names are Nighthawk,
Lifesaver, S-Tech, American Sensors, Air-Zone, Emerson,
Macurco, and Safety1st.
POINTS OF OPERATION
Auxer, CT Industries, Harvey Westbury and Hardyston all
maintain their headquarters and administrative operations in
Wayne, New Jersey. Additionally, Harvey Westbury's
maintains its main sales office in Wayne, New Jersey.
Harvey Westbury leases a light manufacturing and warehousing
facility in Farmingdale, New York were the Easy Test product
components primarily manufactured by various vendors
throughout the United States and Internationally and
assembled/packaged at the Farmingdale location. Garry's
waxes, polishes, and chemicals, as well as Formula 2000
Engine Treatment are manufactured and private labeled by
several vendors throughout the United States and warehoused
at the Farmingdale location. Hardyston Distributor's has an
additional location in Franklin, New Jersey. Hardyston
distributes automotive parts and accessories to the
surrounding area automotive stores and service stations.
Hardyston warehouses parts inventory and a small
distribution staff at the Franklin location. The Company
currently employs 5 employees at Hardyston and 5 employees
at Harvey Westbury.
GOVERNMENT REGULATION
While numerous government regulations are developed directed
at the automotive and marine industries on an on-going
basis; the company does not believe that there are any
significant government regulations pending that would impact
the current product categories that the Company is currently
marketing and selling.
INTELLECTUAL PROPERTY
The Company does not own any material property in the form
of patents.
The Company's subsidiary, Harvey Westbury, sells automotive
accessories under the name Easy Test, which is a registered
trademark, number 942648 which was registered on September
12, 1972 and renewed in 1993. Additionally, Harvey Westbury
sells waxes and polishes under the name Garry's Royal Satin,
which is not a registered trademark. Harvey Westbury
previously was a distributor for Garry's Laboratories based
in Buffalo, New York. Garry's Laboratories registered and
owned the trademark. However, Garry's Laboratories ceased
doing business and the trademark registration expired.
Harvey Westbury has continued to distribute the product
under the trade name "Garry's Royal Satin."
In October 1995, Universal Filtration entered into an
agreement with William Hayday for the purchase of the
worldwide non-transferable rights to market the Fiona Button
Trap Filter and the rights to make any future modification
to the design. The term of the agreement was October 1,
1995 until September 30, 1999. The agreement has expired.
On May 23, 1996, CT Industries entered into a supply
agreement with MotionLube, licensee of patented technology
relating to vehicular and machinery lubricants covered by
Patent No. 5,385,683 whereas MotionLube will manufacture or
cause to be manufactured the product covered above which
will be sold under the name Formula 2000. The term of the
agreement was for one year from the date of the agreement,
which will automatically renew annually provided no
violations by either party. The agreement was not renewed
after the first year. Auxer now sells a new engine treatment
under Harvey Westbury.
Item 2. Management's Discussion and Analysis or Plan of
Operation
- - ---------------------------------------------------------
Plan of Operation
The Company is an investment holding company that is
comprised of three subsidiaries: the Harvey-Westbury
Corporation, Hardyston Distributors, Inc., CT Industries,
and Universal Filtration Industries. The Company is a
manufacturer, wholesaler, and distributor with a line of
automotive, marine, and aviation aftermarket and hardware
products. In July 1999, the company's Board of Directors
approved the formation of a new entity with a focus on
Internet related acquisitions and development.
The Company's plan of operation for the next twelve months
is to continue to develop sales of Harvey Westbury and
Hardyston Distributors. The Company plans for Harvey
Westbury to generate enough sales in fiscal year 2000 to
begin supporting itself. The company plans for Hardyston
Distributors to add an additional location, satellite
warehouse in the 1st quarter, 1999. The company also plans
to invest in an Internet technology business or business
that plans to enter into Internet-related activity within
the next twelve months.
Over the next twelve months, the Company's plans will
require funding to increase Harvey Westbury's and
Hardyston's inventory and vehicles, support Harvey
Westbury's marketing and advertising program for Garry's
Royal Satin waxes and polishes, and support research and
development cost. The company can satisfy it cash
requirements for three to six months without additional
financing.
The Company has an on-going research and development program
with a focus on adding additional products to the Easy Test
and Garry's Royal Satin product lines within Harvey
Westbury. These programs are planned to continue over the
next twelve months. The company does not plan to purchase or
sell any significant assets during the term, however the
company may lease additional facility requirements as needed
for Hardyston Distributor's satellite location and
additional office space which may be required for the
Company's Internet-related entity and activities.
The Company plans to add additional employees over the next
twelve months in Harvey Westbury's production and sales
personnel if the company's sales continue to increase.
Additionally, the company plans to add drivers and sales
personnel in Hardyston Distributors if the company's sales
continue to grow. If the company's Internet entity and/or
business develop over the next twelve months, the company
plans to add personnel to the Internet Entity. The company
may also add administrative and executive personnel under
The Auxer Group.
The Company will require additional financing to capitalize
the plans outlined above. The Company plans to raise
additional capital of $1,000,000 through a private placement
and/or registered offering in the 4th quarter of 1999 or 1st
quarter of 2000. The proceeds of this planned offering will
be used to fund the above expansion plans and operating
expenses. The company expects additional funding may be
required in the next twelve months to satisfy increased
inventory requirements if Harvey Westbury and Hardyston
sales increase. The Company currently has an offering for
7,000,000 shares in effect to raise an aggregate of $350,000
pursuant to the exemption under Rule 504 of Regulation D.
As of September 30, 1999, the Company had sold 5,200,000
shares. The Company expects to sell the remaining 1,800,000
shares in the 4th Quarter of 1999 to satisfy the short term
capital requirements for the Company.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS
Management's Discussion and Analysis of Financial Condition
and Results of Operations for the Years December 31, 1997
and 1998 and for the Nine Months Ended September 30, 1999.
The financial statements for the years ended December 31,
1997 and 1998 have been prepared on a going concern basis,
which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of
business.
From April 18, 1995 to December 31, 1997, the Company was in
a development stage since it has generated moderate recovery
from the sales of its various product lines. The company
primarily a development stage company due to the fact that
the company's focus was developing engine treatment
technology and redeveloping and establishing new raw
material vendors for most of the products under the Garry's
Royal Satin and Easy Test lines under Harvey Westbury. While
revenues were generated, generating sales was not the
primary focus of the company during this period, but rather
product development.
The Company's revenue source is primarily related to sales
generated in the automotive (approximately 85% of total
revenues) and marine (approximately 15% of total revenues)
industries. The company expects the revenue mix and
profitability to remain consistent in 1999. In 2000, the
company anticipates the automotive revenues will represent
approximately 90% of total revenues and the remaining 10% in
the marine industry. Additionally, the company is
attempting to acquire Internet technology and property
rights, which could influence the revenue mix in 2000.
Results of operations for periods ended December 31, 1997
and 1998
The Company incurred net losses of $2,244,500 for period
from April 18, 1995 to December 31, 1998. These factors
indicate that the Company's continuation, as a going concern
is dependent upon its ability to obtain adequate financing.
The company had sales of $508,077 in 1997 and sales of
$287,456 in 1998. The company had losses of ($767,692) in
1997 and ($839,735) in 1998. Sales decreased in 1998 due to
the drop in sales of Harvey Westbury. Harvey Westbury has
been the primary operating subsidiary representing ninety
percent (90%) of the company's sales in 1997 and ninety-eight
percent (98%) of the company's sales in 1998. Harvey
Westbury's Garry's Royal Satin and Easy Test products were
being developed and reintroduced to their respective markets
in 1997 and 1998. The company had total expenses of $930,445
in 1997 and $889,239 in 1998 which were also the total
operating expenses. In the 1997, the company's net operating
cash flow was ($722,987), net investing cash flow was
($615,789), and net financing cash flow was $1,327,424. In
the 1998, the company's net operating cash flow was
($608,444), net investing cash flow was ($137,735), and net
financing cash flow was $718,265.
Nine months ended September 30, 1998 and 1999
The financial statements for the nine months ended September
30, 1998 and 1999 have been prepared as interim statements.
The Company incurred net losses of ($658,877) for the nine
months ending September 30, 1998 and net losses of
($752,250) including a gain on the forgiveness of debt of
$99,780 and a loss on the note receivable for $353,000 for
the nine months ending September 30, 1999. The company had
sales of $239,063 for the nine months ended September 30,
1998 and sales of $651,478, and an income gain of $99,780
for an extraordinary item (gain on forgiveness of debt) and
a loss for an extraordinary item (loss on note receivable)
for the nine months ended September 30, 1999. Sales
increased for the nine months ended September 30, 1999
compared to the nine months ended September 30, 1998 due to
two factors: first, Harvey Westbury's sales increase and
second, Hardyston Distributors began operations on April 22,
1999. The company had total expenses of $715,117 for the
nine months ended September 30, 1998 and $723,432 for the
nine months ended September 30, 1999 which were also the
total operating expenses. In the nine months ended September
30, 1998, the company's net operating cash flow was
($477,905), net investing cash flow was ($158,735), and net
financing cash flow was $606,015. In the nine months ended
September 30, 1999, the company's net operating cash flow
was ($661,289), net investing cash flow was ($27,262), and
net financing cash flow was $688,551.
Trends, Events, or Uncertainties with Material Impacts
During 1997, the Company formed Auxer UK Ltd., a wholly
owned foreign corporation based in the United Kingdom. This
company invests in software technologies in the United
Kingdom. This company is treated as an investment as of
December 31, 1997 and was subsequently sold on June 20,
1998. The Company has a note receivable of $353,000 from the
sale at an interest rate of 8%. The note was to be repaid
upon the software investment achieving a cash flow positive
status. As of September 30, 1999, the Company determined
the collectability of the note is doubtful and has written
it off.
The decrease in Harvey Westbury's sales in 1998 is partly
attributable to financing difficulty experienced in 1998.
The Company was relying on funding planned for the 1st
quarter of 1998 which failed to materialize. The planned
funding to increase marketing and sales efforts as well as
complete development projects for Garry's Royal Satin and
Easy Test was redirected to continue operations of the
software investment while arranging to divest of the
investment. As a result, the Company believes Harvey
Westbury sales were impacted.
The Company's subsidiary, Harvey Westbury has attempted to
sell automotive wax under the name, King's Ransom. Sales as
a result of this product are nominal and the company has
decided to sell the remaining inventory, less than $10,000
and discontinue selling the product. Harvey Westbury has
developed a substitute product to replace King's Ransom
which is planned to be sold under the name of Garry's Royal
Satin Supreme.
The automotive industry consolidation over the past several
years has created a more competitive marketplace for
automotive parts and accessories. The direct impact of this
event has led to the success of major automotive retail
chains. The impact to the company appears to have only
changed name of the clients. The volumes of product
purchased appears to have remained constant.
The Company's subsidiary, Harvey Westbury entered a
licensing agreement with Warren Distribution to use the
trademark Polar on its Easy Test products to be distributed
throughout Warren Distribution's network of warehouse
distributors and retail outlets in August 1998. Revenues
generated from sales to Warren were less than two percent
(2%) of the company's total revenue in 1998. The company
plans for the revenue generated from the sales to Warren to
increase as Warren has added the 701 series and 901 series
of anti-freeze and battery testers to the Polar line in
1999. The Company believes this relationship will continue
over the next twelve months and the added products may
generate additional revenue. If the current licensing
relationship is discontinued in the next twelve months, the
company does not believe this event would have a material
impact on the company.
The Company's subsidiary, Harvey Westbury entered a
licensing agreement with Carquest to use the trademark
Carquest on its Easy Test products to be distributed
throughout Carquest's network of warehouse distributors and
retail outlets in October 1998. Revenue generated from sales
to Carquest network represented less than five percent (5%)
of the company's total revenue in 1998. The Company plans
for the revenue generated from sales to Carquest's network
to increase as the Harvey Westbury's products are being
represented in Carquest's catalog in 1999. The company
believes the relationship with Carquest will continue over
the next twelve months and the increased exposure in the
Carquest catalog may generate additional sales. If the
current licensing relationship is discontinued in the next
twelve months, the company does not believe this event would
have a material impact on the company.
In January 1999, the Company entered into an investor
relations agreement with PMR & Associates. Under the terms
of the agreement, PMR & Associates was to be paid a fee of
$3,500 for these services. The agreement was renewed in
April 1999 with fees to be paid of $6,000 for these services
for three months which expired in June 1999. In July 1999,
the Company entered into a management consulting agreement
with PMR & Associates for services related in assisting in
the development of the web site and Internet related
development as well as acquisition development. PMR &
Associates was granted options to purchase shares above
market value at the time of the agreement. The shares were
not exercised and have expired.
On April 22, 1999, the Company issued 836,700 shares of
common stock at $.1075 per share plus $15,000 for the
purchase of assets of Ernest DeSaye, Jr. The company
employed Mr. DeSaye and formed a newly incorporated
subsidiary, Hardyston Distributors, Inc. The company has
started a new company and plans for the subsidiary's revenue
to increase. The company believes Hardyston Distributors
will need additional inventory, personnel and vehicles to
increase its sales.
The Company invested $10,000 towards advertising in the
Puerto Rico markets in May 1999. The advertising effort was
developed with the Veritas Group and was focused on
assisting current distributors in Puerto Rico sell Garry's
Royal Satin waxes and polish. The company believes
advertising and marketing support is necessary to continue
to sell Garry's Royal Satin waxes and polishes. The Company
plans to continue to advertise and market its products in
Puerto Rico over the next twelve months and the budget for
advertising is undetermined and is relative to the ability
to raise funds discussed in the Plan of Operations
subsection. The Company has not been able to completely
evaluate the results of the advertising in 1999, but
believes continued advertising in Puerto Rico over the next
twelve months is necessary in order to increase revenues
from sales in Puerto Rico.
The Company introduced web sites for Harvey Westbury and
Formula 2000 in April 1999, which enables visitors to the
site to purchase the Company's products. The Company has
not advertised the website in 1999 and revenue generated
from the sales from the website represent less than one
percent (1%) of the Company for the six months period ended
June 30, 1999. The Company plans to advertise and market its
web sites in the next twelve months and is relative to the
ability to raise funds discussed in the Plan of Operations
subsection. The Company believes advertising over the next
twelve months is necessary in order to increase revenues
from sales from the web sites.
In July 1999, the Company approved the formation of a new
entity with a focus on Internet related acquisition and
development. In August 1999, the Company signed a letter of
intent to purchase the name, assets, and intellectual
property for Internet related business. The Company plans
to invest funds toward the development of web sites and/or
Internet related businesses over the next twelve months.
The Company plans to advertise these potential web sites and
businesses over the next twelve months. The company
believes advertising over the next twelve months is
necessary in order to develop revenues from the sales from
these potential businesses.
Internal and External Sources of Liquidity
For year ending December 31, 1997, the Company paid for
operations by raising $1,327,424 through common stock
issuance and debt borrowings after payments to short term
debts. The company borrowed $140,000 from FT Trading in
convertible notes at 8% dated September 5, 1997 payable on
demand plus interest payable semi-annually on January 1, and
June 1 with shares of the Company's common stock. The
Company borrowed $100,000 from the Augustine Fund in
convertible notes at 8% dated November 21, 1997 payable on
demand plus interest payable semi-annually on March 1, and
August 1 with shares of the Company's common stock. The
Company had notes payable of $230,000 on December 31, 1997.
The Company borrowed and made payments of $54,552 under a
security agreement with United Credit Corporation to borrow
money secured by the receivable evidenced by invoices of
Harvey Westbury Corp. The Company has provided guarantees
of the repayment of loans. United agreed to lend an amount
equal to 75% of the net value of all Harvey Westbury
accounts. The Company raised capital of $999,072 through the
sale and issuance of common stock to provide for services
rendered, consulting requirements and operating and
investment activities.
For year ending December 31, 1998, the Company paid for
operations by raising $718,265 through common stock issuance
and debt borrowings after payments to short term debts. The
Company borrowed $60,000 from the Augustine fund in
convertible notes at 8% dated November 21, 1998 payable on
demand plus interest payable semi-annually on March 1, and
August 1 with shares of the Company's common stock. The
Company had notes payable of $190,000 on December 31, 1998.
The Company borrowed and made payments of $28,759 under a
security agreement with United Credit Corporation to borrow
money secured by the receivable evidenced by invoices of
Harvey Westbury Corp. The Company has provided guarantees
of the repayment of loans. United agreed to lend an amount
equal to 75% of the net value of all Harvey Westbury
accounts. The Company raised capital of $823,825 through the
sale and issuance of common stock to provide for services
rendered, consulting requirements and operating and
investment activities.
For the nine months ended September 30, 1999, paid for
operations by raising $688,551 through common stock issuance
and debt borrowing after payment to short term debts. On
February 2, 1999 and February 16, 1999, the Company issued
common stock of $39,020 to MYD Distributors for a legal
settlement. The Company had notes payable of $84,166 on
September 30, 1999. The Company borrowed and made payments
of $32,195 under a security agreement with Finova Growth
Finance (Finova Growth Finance acquired United Credit's
accounts) to borrow money secured by the receivable
evidenced by invoices of Harvey Westbury Corp. The Company
has provided guarantees of the repayment of loans. Finova
agreed to lend an amount equal to 75% of the net value of
all Harvey Westbury accounts. On January 2, 1999, the
Company issued preferred stock of $27,500 to pay expenses.
The Company raised capital of $759,185 through the sale and
issuance of common stock to provide for services rendered,
consulting requirements and operating and investment
activities.
Year 2000 Compliance
The Company's state of readiness is in the process of
completion. The Company's Information Technology (IT)
system's are based on a multi-unit network of personal
computers. The IT systems are using Microsoft Windows 95
and Windows 98 operating systems under a peer-to-peer
network. The IT systems have been upgraded with Microsoft's
Year 2000 Resource CD. The Company receives the latest
version from Microsoft as it becomes available. All
supporting business software has been upgraded for Year 2000
compliant issues to the extent that the third party software
is known. The Company has performed simulated tests and
have not experienced any material impacts. The Company will
continue to maintain the IT systems with the most up to date
versions of Year 2000 compliant software. The Company's web
sites and credit card processing requirements are maintained
on server systems of third parties and have all been tested
for Year 2000 compliance. The Company does not consider Y2K
issues to be of high risk or expensive to fix. The Company
believes only minor fixes may be required. As a contingency
plan, the Company has implemented an aggressive backup
program where all data will be maintained on backup storage
independent of the Company's IT systems. In the case of IT
system failure (worst case), the Company estimates $5000 in
IT system upgrades or replacements with new IT systems may
be required. The Company has budgeted these funds for this
situation and intends to reserve these funds in December
1999.
Item 3. Description of Property
- - --------------------------------
The Company leases all properties it currently conducts
business on. The Auxer Group, Inc and its subsidiaries
maintain headquarters and administrative offices at 30
Galesi Drive, Wayne, New Jersey, 07470. Additionally, Harvey
Westbury houses it's main sales offices at the same
location. The property is an office complex area off of a
major local highway (State Highway 46). The lease was
entered into on November 1, 1996. An $1,800 security
deposit was paid and rental payments to be paid are as
follows: for December 1, 1997 to November 30, 1998, annual
rent of $21,948 (monthly payments of $1,829); for December
1, 1998 to November 30, 1999, annual rent of $23,777
(monthly payments of $1,981). In consideration for the
Company taking the space in an "as is" condition, the
landlord abated the monthly base rent for a period of 4
months and payments of rent began on April 1, 1997. The
Company has the right to terminate this lease after the
first year upon 90 days notice.
The Harvey Westbury Corp. maintains light manufacturing and
warehousing facilities at 18 Heisser Court, Farmingdale, New
York 10015. The property is a warehouse and light
manufacturing complex off of a major local highway (State
Highway 109). The lease was entered into April 1, 1995 and
initially expired on April 30, 1998. On February 23, 1998,
the lease was extended to expire on April 30, 1999. A
$5,770 security deposit was required. Rental payments for
May 1, 1997 to April 30, 1998, were $33,744 annual (monthly
payments of $2,812). Rental payments for May 1, 1998 to
April 30, 1999 were $35,604 annual (monthly payments of
$2,967). On March 29th, 1999, the lease was extended for
the period from May 1, 1999 to April 30, 2000. Rental
payments for the period are $36,024 annual (monthly payments
of $3,002).
Hardyston Distributors, Inc. maintains a distribution center
and warehouse facility at 22-B Lasinski Road, Franklin, New
Jersey, 07416. The property is a warehouse complex in
Franklin New Jersey. The lease was entered into on December
26, 1997 which commenced on March 1, 1998 and expires on
February 28, 1999 with an option to renew for an additional
twelve months from March 1, 1999 to February 28, 2000. The
option to renew was invoked. Rental payments for March 1,
1998 to February 28, 1999 were $8,400 annually (monthly
payments of $700). Rental payments for March 1, 1999 to
February 28, 2000 are $8,700 (monthly payments of $725).
Item 4. Security Ownership of Certain Beneficial Owners and
Management
- - ------------------------------------------------------------
The following table sets forth certain information regarding
the Company's common and preferred stock beneficially owned
on September 30, 1999, for (i) each shareholder known by the
Company to be the beneficial owner of 5% or more of the
Company's outstanding common and preferred stock, (ii) each
of the Company's executive officers and directors, and (iii)
all executive officers and directors as a group. In
general, a person is deemed to be a "beneficial owner" of a
security if that person has or shares the power to vote or
direct the disposition of such security. A person is also
deemed to be a beneficial owner of any security of which the
person has the right to acquire beneficial ownership within
60 days. At September 30, 1999, there were 54,036,797
(81,536,797 on a fully diluted basis if preferred shares
were converted) shares of common stock outstanding and
2,750,000 shares of preferred stock outstanding.
Class of Security- Common Stock
<TABLE>
<S> <C> <C>
Name and Address of No. of Shares Percent of
Beneficial Owner: Beneficially Owned: Class:
- - -------------------- ------------------- ------------
Eugene Chiaramonte, Jr. (1) 2,173,886 4.0%
12 White Birch Court
Branchville, NJ 07826 (17,173,886) (21.1%)
Ronald Shaver (2) 600,000 1.1%
18 Caraway Court
Princeton, NJ 08540 (13,100,000) (16.1%)
Ernest DeSaye, Jr. (3) 836,700 1.5%
112 Clove Road
Sussex, NJ 07461 (1.0%)
All Executive Officers and 3,610,586 6.7%
Directors as a Group
(3 persons) (31,110,586) (38.2%)
</TABLE>
Class of Security- Preferred Stock
<TABLE>
<S> <C> <C>
Name and Address of No. of Shares Percent of
Beneficial Owner: Beneficially Owned: Class:
- - -------------------- ------------------- ------------
Eugene Chiaramonte, Jr. (1) 1,500,000 54.5%
Converts to
12 White Birch Court 15,000,000 of
Branchville, NJ 07826 Common Stock
Ronald Shaver (2) 1,250,000 45.5%
18 Caraway Court Converts to
Princeton, NJ 08540 12,500,000 of
Common Stock
All Executive Officers and 2,750,000 100%
Directors as a Group
(3 persons)
</TABLE>
(1) Shares held of record in common stock total
2,173,886 or 4.0% of the total outstanding shares of common
stock and preferred stock total 1,500,000. Each share of
preferred stock is convertible into 10 shares of common
stock. On a fully diluted basis if all preferred shares
were converted to common shares, shares held of common stock
would total 17,173,886 or 21.1% of the total outstanding
shares of common stock.
(2) Shares held of record in common stock total
600,000 or 1.1% of the total outstanding shares of common
stock and preferred stock total 1,250,000. Each share of
preferred stock is convertible into 10 shares of common
stock. On a fully diluted basis if all preferred shares
were converted to common shares, shares held of common stock
would total 13,100,000 or 16.1% of the total outstanding
shares of common stock.
(3) Shares held of record in common stock total
836,700 or 1.5% of the total outstanding shares of common
stock. On a fully diluted basis if all preferred shares were
converted to common shares, shares held of common stock
would total 836,700 or 1.0% of the total outstanding shares
of common stock.
Item 5. Directors, Executive Officers, Promoters and
Control Persons
- - ------------------------------------------------------
The following table sets forth the names, ages, and
positions with the Company of the executive officers and
directors of the Company. Directors serve until the next
annual meeting of the Company's shareholders or until their
successors are elected and qualify. Officers are elected by
the Board and their terms of office are, except to the
extent governed by employment contracts, at the discretion
of the Board.
<TABLE>
<S> <C> <C>
NAME AGE POSITION
- - --------------------- ---- ------------------------
Eugene Chiaramonte, Jr. 55 Director, President and Chief Executive Officer
Ronald Shaver 32 Consultant, Operations and Finance
Ernest DeSaye, Jr. 35 Manager, Hardyston Distributors
</TABLE>
Eugene Chiaramonte Jr. has served as Director, President and
Chief Executive Officer of the Company since April 1995. Mr.
Chiaramonte was a founder and has served as Director,
President and Chief Executive Officer of the Company's
subsidiary, CT Industries since June 1994. Additionally, he
has served as Director and Secretary of the Harvey Westbury
Corp. since October 1996 and a co-founder, Director and
Secretary of Hardyston Distributors since April 1999.
Ronald Shaver has served as a consultant to the Company
since February 1996. He has served as Director and is acting
in the capacity of President of the Harvey Westbury Corp
since October 1996. Additionally, he is a co-founder and has
served as a Director and is acting in the capacity of
President and Chief Executive Officer of Hardyston
Distributors since April 1999. From 1995 to 1996, Mr. Shaver
was a management consultant with George S. May
International. From 1993 to 1995, he was a Vice President of
Atlantic Venture Group, an investment banking firm. From
1989 to 1993, Mr. Shaver served with the Corps of Engineers,
U.S. Army with tours at Ft. Leonard Wood, Mo, Republic of
South Korea, and United States Military Academy, West Point.
Mr. Shaver is currently a Captain in the United States Army
Reserve. He received his MBA from CW Post-Long Island and
BS in Engineering from the University of Kansas and is a
graduate of the National Engineer Center.
Ernest DeSaye has served as the senior manager for the
operations of Hardyston Distributors since April 1999. From
1991 to April 1999, Mr. DeSaye had operated as a sole
proprietor distributing automotive parts and accessories to
the local automotive community. From 1981 to 1991, he was a
Chief Mechanic and co-owner at Vernon Transmission and Auto
Repair.
Item 6. Executive Compensation
- - -------------------------------
The following table shows, for the three-year period ended
December 31, 1998.
SUMMARY COMPENSATION TABLE
<TABLE>
<S> <C> <C> <C> <C>
Name &
Principal Position Year Salary Bonus Other Compensation
- - ------------------ ----- ------- ------ -------------------
Eugene Chiaramonte, Jr. (1) 1998 $0 $0 $0
Chief Executive Officer 1997 $0 $0 $0
1996 $0 $0 $0
Ronald Shaver (2) 1998 $0 $0 $40,000
Operations & Finance 1997 $0 $0 $83,625
1996 $0 $0 $50,650
Ernest DeSaye Jr. (3) 1998 $0 $0 $0
Hardyston Operations 1997 $0 $0 $0
1996 $0 $0 $0
</TABLE>
(1) Mr. Chiaramonte was paid no compensation during
the years of 1996, 1997, and 1998. Beginning in April 1999,
the Company paid Mr. Chiaramonte a salary at the rate of
$60,000 per annum.
(2) In 1998 compensation includes consulting fees
related to Harvey Westbury. In 1997 compensation includes
consulting fees related to Auxer Industries of $10,225,
related to Harvey Westbury of $72,400, and related to
Universal Filtration Industries of $1,000.
(3) Mr. DeSaye was not an officer of the Company
until April 1999. Mr. DeSaye is being paid a salary of
$45,000 per annum in 1999.
The following table sets forth information with respect to
the grant of options to purchase shares of common stock
during the fiscal year ended December 31, 1998, to each
person named in the Summary Compensation Table.
OPTION GRANTS IN THE LAST FISCAL YEAR
<TABLE>
<S> <C> <C> <C> <C>
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO EXERCISE OR EXPIRATION
OPTIONS EMPLOYEES BASE PRICE DATE
NAME GRANTED IN FISCAL ($/SH)
YEAR
- - ------------------- ----------- ---------- ----------- ------------
Eugene Chiaramonte, Jr. 0 0 0
Ronald Shaver 0 0 0
Ernest DeSaye, Jr. 0 0 0
</TABLE>
The Company's stockholders approved the adoption of a
Nonstatutory Option plan at the August 19, 1997
shareholder's meeting whereby the Company reserved 2,000,000
shares of the Company's common stock which would be granted
to employees, officers, directors, and consultants to the
Company. The option plan was to be administered by the
Board of Directors and would not qualify as "incentive stock
options" under Section 422 of the Internal Revenue Code.
The Plan shall be administered by the board of directors of
the Company or by an option committee to be established by
the board of directors of the Company. Participants in the
Plan shall be employees, officers, directors, consultants of
the Company or any other parties who have made a significant
contribution to the business and success of the Company as
may be selected from time to time by the Board in its
discretion.
No options shall be granted under the Plan after March 31,
2001, but Options theretofore granted may extend beyond that
date. The number of Shares which may be issued under the
Plan shall not exceed 2,000,000 in the aggregate. To the
extent that any Option granted under the Plan shall expire
or terminate unexercised or for any reason become
unexercisable as to any Shares subject thereto, such Shares
shall thereafter be available for further grants under the
Plan.
All options granted under the Plan shall be subject to the
following terms and conditions:
(a) The exercise price under each option shall be
determined by the Board and may be more, equal to or less
than the then current market price of the Shares as the
Board may deem to be appropriate;
(b) Period of an Option shall not exceed five years
from the date of grant;
(c) Each Option shall be made exercisable at such
time or times, whether or not in installments, as the Board
shall prescribe at the time the Option is granted and the
person electing to exercise an Option shall give written
notice to the Company of his/her election and of the number
of shares he/she has elected to purchase and shall at the
time of such exercise tender the purchase price of the
shares he/she has elected to purchase.
(d) Upon exercise of any Option granted hereunder,
payment in full shall be made at the time of such exercise
for all such shares then being purchased.
(e) No options may be transferred by the
Participant otherwise than by will or by the laws of descent
and distribution, and during the participant's lifetime the
Option may be exercised only by the Participant.
(f) If the Participant is an employee and his/her
employment terminates for any reason other than his/her
death, the Participant may, unless discharged for cause,
thereafter exercise his/her Option.
(g) If prior to the expiration date of a
participant Option, an Optionee shall retire or resign with
the Company's consent, such Option may be exercised in the
same manner as if the Optionee had continued in the
Company's employ.
(h) If a participant dies at a time when he/she is
entitled to exercise an Option, then at any time or times
within one (1) year after his/her death (or such further
period as the Board may allow) such Option may be exercised,
as to all for any of the shares which the Participant was
entitled to purchase prior to his/her death.
In the event of a stock dividend, stock split or
recapitalization or merger in which the Company is the
surviving corporation, or other similar capital change, the
number and kind of shares of stock or securities of the
Company to be subject to the Plan and to Options then
outstanding or to be granted thereunder, the maximum number
of Shares or securities which may be issued or sold under
the Plan, the exercise price and other relevant provisions
shall be appropriately adjusted by the Board of the Company,
the determination of which shall be binding on all persons.
The Board may at any time discontinue granting Options under
the Plan. The Board of the Company may at any time or times
amend the Plan or amend any outstanding Option or Options
for the purpose of satisfying the requirements of any
changes in applicable laws or regulations or for any other
purpose which may at the time be permitted by law provided,
however, that, except to the extent required or permitted.
As of September 30, 1999, no options had been granted pursuant
to the Plan and no options had been exercised.
The following table sets forth information with respect to
the exercise of options to purchase shares of common stock
during the fiscal year ended December 31, 1998, to each
person named in the Summary Compensation Table and the
unexercised options held as of the end of 1998 fiscal year.
AGGREGATED OPTION/EXERCISES IN LAST FISCAL YEAR AND 1998
FISCAL YEAR END OPTION/VALUES
<TABLE>
<S> <C> <C> <C> <C>
NUMBER OF VALUE OF
SECURITIES UNEXERCISED IN
UNDERLYING THE MONEY
UNEXERCISED OPTIONS
SHARES VALUE OPTIONS AT 1998 FISCAL
ACQUIRED REALIZED 1998 FISCAL YEAR END (#)
ON ($) YEAR END (#) EXERCISABLE/UN
EXERCISE EXERCISABLE/UN EXERCISABLE
NAME (#) EXERCISABLE
- - ----- ------------ -------- -------------------- ---------------
Eugene Chiaramonte, Jr. 0 0 NONE NONE
Ronald Shaver 0 0 NONE NONE
Ernest DeSaye Jr. 0 0 NONE NONE
</TABLE>
LONG-TERM INCENTIVE PLANS-AWARDS IN LAST FISCAL YEAR
<TABLE>
<S> <C> <C> <C>
NUMBER OF SHARES PERFORMANCE ESTIMATED FUTURE PAYOUTS
UNITS PER OTHER OR OTHER UNDER NON-STOCK
NAME RIGHTS PERIOD UNTIL PRICE-BASED PLANS
MATURATION OF PAYOUT
THRESHOLD TARGET
- - ------------------- ---------------- -------------------- --------- -------
Eugene Chiarmonte, Jr. 0 0 0 0
Ronald Shaver 0 0 0 0
Ernest DeSaye Jr. 0 0 0 0
</TABLE>
EXECUTIVE EMPLOYMENT AGREEMENTS:
Effective April 22, 1999, the Company entered into an
Employment Agreement with Ernest DeSaye Jr., whereby Mr.
DeSaye was employed as manager of the Company's subsidiary,
Hardyston Distributors. The Agreement is for a term of five (5)
years and provides for an annual base salary in 1999 of
$45,000 with a 5% increase being made on each anniversary
date of this Agreement. The Agreement provides for
incentive payments in cash and stock or stock options based
on gross profits of Hardyston Distributors.Item 7. Certain
Relationships and Related Transactions
Item 7. Certain Relationships and Related Transactions
- - -------------------------------------------------------
In 1996, the Company issued 300,000 shares to Mr. Shaver in
connection with the acquisition of Universal Filtration
Industries and an additional 300,000 shares were issued to
be held in escrow and delivered to Mr. Shaver at the Board's
discretion. The remaining 300,000 shares were delivered in
October 1997. The 600,000 shares were valued at $30,000.
In December 1998, Eugene Chiaramonte, Jr. gifted to his son,
Eugene Chiaramonte, III, 400,000 of his common shares of the
Company valued at $8,000.
In January 1999, the Company issued 2,750,000 shares of
preferred stock to Mr. Chiaramonte, Jr. and Mr. Shaver in
connection with loans due to Mr. Chiaramonte and expenses
reimbursed for Mr. Shaver. The Company issued 1,500,000
shares of preferred stock to Mr. Chiaramonte, Jr. to reduce
the loans due to officers of $15,000. The Company issued
1,250,000 shares of preferred stock to Mr. Shaver in
exchange for reducing the expenses of $12,500 due to Mr.
Shaver.
In April 1999, the Company issued 836,700 shares of Common
stock to Mr. DeSaye Jr. in connection with the purchase of
automotive parts inventory and assets valued at $104,945.
The Company also paid $15,000 in cash towards the purchase
price. The Company entered into a five (5) year employment
agreement with Mr. DeSaye whereas he will be compensated
with a salary of $45,000 per annum in 1999 with a five
percent (5%) increase annually during the term of the
employment agreement. Under the terms of the agreement, Mr.
DeSaye will receive stock options or additional stock in
connection with the performance of Hardyston Distributors.
Item 8. Legal Proceedings
- - ---------------------------
The Company has the following pending or threatened
litigation:
Ross & Craig Solicitors v. Auxer Industries, Inc. -
Superior Court of New Jersey, Law Division, Passaic County -
Index No. L1598-98. This is a case brought by an English
partnership against us. Ross & Craig is requesting the sum
of $46,666.23 plus interest accruing from 1997 for work,
labor and services rendered. This case should have been
commenced in England against one of Auxer's subsidiary or
affiliate corporations and perhaps against certain
management of Auxer individually. To date there has been a
complaint served and an answer filed. We have a pending
motion to extend discovery. The Company plans to
contest the case vigorously. To date we cannot estimate the
likelihood of success of the defense because discovery has
not yet begun.
Eileen M. Huff, et. al. v. Harvey Westbury Corp. and Auxer
Industries, Inc. - Supreme Court of the State of New York,
Suffolk County, Index No. 29090-97 and Suffolk County
District Court, First District Civil Court of New York,
Index No. CEC67098; and Lorraine Duff v. Harvey Westbury
(and Auxer) and Suffolk County District Court, First
District Civil Court of New York, Index No.CEC67-98. These
cases all involved Auxer's purchase of Harvey Westbury. They
are about the "wrongful termination" of one
employee, and the alleged non-payment of insurance premiums
for another. The Company filed answers to all lawsuits. In
July 1999, the Lorraine Duff case was settled whereby the
parties signed a settlement agreement. The Company agreed
to pay the sum of $5,000 in 10 monthly installments of $500
each. Payments commenced in August 1999 and will continue
until May 2000. With respect to the other lawsuit, the
Company plans to defend its position vigorously. Although
discovery has not yet started, there is a substantial
likelihood that Auxer will be successful in defending this
lawsuit.
Crain Associated Enterprises, Inc. v. Ron Shaver d/b/a
Universal Filtration and Universal Filtration Industries,
Inc. - Superior Court of New Jersey, Special Civil Part,
Passaic County, Docket No. DC 5315-99. Plaintiff is suing
for the sum of $9,999 (the maximum allowed by law in the
State of New Jersey in the Special Civil Part) based on an
outstanding accounts payable due by Universal Filtration.
The Company is not currently aware of any other
pending, past or present litigation that would be
considered to have a material effect on the Company. The
Company considers that any litigation under 10% of its
net assets is not material. There are no known bankruptcy
or receivership issues outstanding and
has no known securities law violations. Additionally, the
Company has no known legal proceedings in which certain
corporate insiders or affiliates of the issuer in position
that is adverse to the issuer.
Item 9. Market Price of and Dividends on the Registrant's
Common Equity and Related Stockholder Matters.
- - ----------------------------------------------------------
Market Information
The Company's shares of Common Stock are currently traded on
the National Quotation System (NQS) "electronic pink sheets"
sponsored by the National Quotations Bureau, LLC under the
symbol "AXGI". Effective September 6, 1999, the Company's
shares of Common Stock were delisted from the OTC Electronic
Bulletin Board (OCTBB) pursuant to the Amendments relating
to Microcap Initiatives to NASD Rules 6530 and 6540,
Eligibility Rule for OTCBB. The amendments to Rules 6530 and
6540 were approved by the SEC on January 4, 1999. The
amendments limited the quotations on the OTCBB to the
securities of companies that report their current financial
information to the SEC, banking, or insurance regulators.
Since the Company was quoted on the OTCBB prior to the
amendment, the Company was required to comply with the
amended NASD Rule 6530 and 6540 by September 6, 1999. The
Company was not compliant with the amended NASD Rules and
was de-listed as a result on September 6, 1999. The Company
qualifies for quotation on other mediums to include the
National Quotation Bureau's Pink Sheets under the exemption
from Rule 15c2-11 granted from the SEC for securities being
removed from the OTCBB pursuant to the Eligibility Rule.
Under the exemption, broker-dealers are permitted to publish
or submit quotations in other quotation mediums, including
the National Quotation Bureau's Pink Sheets. There is no
assurance that an active trading market will develop which
will provide liquidity for the Company's existing
shareholders or for persons who may acquire common stock
through the exercise of any options.
The reported high and low bid prices for the common stock are
shown below for each quarter during the last two
complete fiscal years and first three periods for 1999. The
high and low bid price for the periods in 1997, 1998, and
the first two periods of 1999 shown below are quotations
from the OTCBB. The high and low bid prices for the third
period of 1999 shown below are quotations from the NQS. The
quotations reflect inter-dealer prices and do not include
retail mark-ups, mark-downs or commissions. The prices do
not necessarily reflect actual transactions. For periods
reported under the first, second, and third quarters of
1997, Auxer traded under the symbol AUXI. For the fourth
quarter of 1997 and beyond, Auxer traded under the symbol
AXGI.
Period HIGH BID LOW BID
- - ------ -------- --------
1997
First Quarter 1.625 0.8125
Second Quarter 1.7813 0.5625
Third Quarter 0.9375 0.40625
Fourth Quarter .57 .195
1998
First Quarter 0.42 0.15
Second Quarter 0.26 0.08
Third Quarter 0.20 0.035
Fourth Quarter 0.60 0.010
1999
First Quarter .22 0.012
Second Quarter 1.035 0.055
Third Quarter 0.09 0.0600
As of September 30, 1999, the Company had 150,000,000
authorized shares of common stock (at par value $.001)
whereas 54,036,797 shares were issued and outstanding. As of
September 30, 1999, the Company had 25,000,000 authorized
shares of Preferred stock whereas 2,750,000 shares were
issued and outstanding.
As of September 30, 1999, there were 2,000,000 shares of
common stock reserved for the Company's option plan whereas
no options have been granted or exercised.
As of September 30, 1999, there were 27,500,000 shares of
common stock reserved for the conversion of the Company's
preferred stock whereas 2,750,000 shares of preferred stock
have been issued and outstanding. One share of preferred
stock is convertible into ten (10) shares of common stock.
As of September 30, 1999, there were 1,800,000 shares of
common stock reserved for an offering registered pursuant to
Rule 504 of Regulation D. Under the offering, the Company
is selling 7,000,000 shares, of which 5,200,000 have been
sold to date.
As of September 30, 1999, there were no convertible notes
outstanding and no shares of Common stock reserved for
convertible notes.
Holders
The Company has approximately 3,000 holders of its common
stock.
Dividend Policy
The Company has never declared or paid cash dividends on its
common stock, and may elect to retain its net income in the
future to increase its capital base. The Company does not
currently anticipate paying cash dividends on its common
stock in the foreseeable future. The Company has not paid
any dividends, made distributions, or redeemed any
securities within the last five years.
Penny Stock Considerations.
Broker-dealer practices in connection with transactions in
"penny stocks" are regulated by certain penny stock rules
adopted by the Securities and Exchange Commission. Penny
stocks generally are equity securities with a price of less
than $5.00. Penny stock rules require a broker-dealer, prior
to a transaction in a penny stock not otherwise exempt from
the rules, to deliver a standardized risk disclosure
document that provides information about penny stocks and
the risks in the penny stock market. The broker-dealer also
must provide the customer with current bid and offer
quotations for the penny stock, the compensation of the
broker-dealer and its salesperson in the transaction, and
monthly account statements showing the market value of each
penny stock held in the customer's account. In addition, the
penny stock rules generally require that prior to a
transaction in a penny stock, the broker-dealer make a
special written determination that the penny stock is a
suitable investment for the purchaser and receive the
purchaser's written agreement to the transaction.
These disclosure requirements may have the effect of
reducing the level of trading activity in the secondary
market for a stock that becomes subject to the penny stock
rules. Our shares will likely be subject to such penny stock
rules, and our shareholders will, in all likelihood, find it
difficult to sell their securities.
No market exists for our securities and there is no
assurance that a regular trading market will develop, or if
developed will be sustained. A shareholder, in all
likelihood, therefore, will not be able to resell the
securities referred to herein should he or she desire to do
so. Furthermore, it is unlikely that a lending institution
will accept our securities as pledged collateral for loans
unless a regular trading market develops. There are no
plans, proposals, arrangements or understandings with any
person in regard to the development of a trading market in
any of our securities.
Item 10. Recent Sales of Unregistered Securities
- - -------------------------------------------------
In October 1996, the Company issued 250,000 shares of its
Common Stock to Joel Pensley for legal services rendered for
which services were valued at $25,000. Shares were issued
pursuant to the exemption under Section 4(2)of the Act. Such
investor was a sophisticated investor and had pre-existing
relationships with members of management of the Company.
Accordingly, the issuance of shares was exempt from the
registration requirements of the Act pursuant to Section
4(2) of the Act.
In October 1996, the Company issued an aggregate of 170,000
shares of its Common Stock in connection with the
acquisition of Harvey Westbury to Gerald Harvey or his
designee and were valued at $85,000. Such investor was a
sophisticated investor and had pre-existing relationships
with members of management of the Company and had access to
relevant information pertaining to the contemplated
operations of the Company. Accordingly, the issuance of
shares was exempt from the registration requirements of the
Act pursuant to Section 4(2) of the Act.
In November 1996, the Company issued 400,000 shares of its
Common Stock to Lewis Ransom and his designees pursuant to a
supply agreement between MotionLube Corporation and CT
Industries and were valued at $20,000. The initial 255,000
shares of the total 655,000 shares in connection with this
agreement were issued in June 1996. Such investors were
sophisticated investors, had pre-existing relationships with
members of management of the Company and had access to
relevant information pertaining to the contemplated
operations of the Company. Accordingly, the issuance of
shares was exempt from the registration requirements of the
Act pursuant to Section 4(2) of the Act.
In November 1996, the Company issued 250,000 shares of its
Common Stock to Janice D'Auito, spouse of Anthony D'Aiuto in
connection with Mr. D'Aiuto providing bookkeeping services
rendered and temporary use office space valued at $12,500.
Such investor had a pre-existing relationship with members
of management of the Company and had access to relevant
information pertaining to the contemplated operations of the
Company. Accordingly, the issuance of shares was exempt from
the registration requirements of the Act pursuant to Rule
701 under the Act.
In November 1996, the Company issued 10,000 shares of its
Common Stock to Domenica Morano and Mirza Deljkic for cash
consideration in connection with a private sale valued at
$10,000. Such investors were sophisticated investors, had
pre-existing relationships with members of management of the
Company had access to relevant information pertaining to the
contemplated operations of the Company. Accordingly, the
issuance of shares was exempt from the registration
requirements of the Act pursuant to Section 4(2) of the Act.
In December 1996, September 1997 and October 1997, the
Company issued an aggregate of 110,000 shares of its Common
Stock to Mr. Anthony Towell and Mr. Robert Smith for
consulting services rendered in connection with the
acquisition of Harvey Westbury and were valued at $32,000.
Such investors were sophisticated investors, had pre-existing
relationships with members of management of the
Company and had access to relevant information pertaining to
the contemplated operations of the Company. Accordingly, the
issuance of shares was exempt from the registration
requirements of the Act pursuant to Section 701 under the
Act.
From October through December 1996, the Company issued an
aggregate of 350,000 shares of its common stock in cash
consideration of $150,000 to two (2) sophisticated investors
pursuant to an exemption from registration provided by
Regulation D, Rule 504. Such investors were qualified
investors based on their financial resources and knowledge
of investments, had access to or was provided with relevant
financial and other information relating to the Company. The
issuances were as follows:
<TABLE>
<S> <C> <C> <C>
Date Issued Investor Cash Consideration # of Shares
- - -------- -------- ------------------ -----------
11-1-96 Creative Capital $100,000 250,000
12-18-96 Joel Pensely $50,000 100,000
</TABLE>
Mark Schultz exercised control over Creative Capital.
In January 1997, the Company issued 40,000 shares of its
Common Stock to Joel Pensely for legal services rendered and
were valued at $20,000. Such investor was a qualified
investor based on his financial resources and knowledge of
investments and had access to or was provided with relevant
financial and other information relating to the Company.
Accordingly, the issuance of shares was exempt from the
registration requirements of the Act pursuant to Rule 701
under the Act.
In February 1997, the Company issued 100,000 shares of its
Common Stock to Michael Ellis for engineering services
rendered and 2,000 shares of its common stock to Nicholas
Schiano for consulting services valued at $40,800. Such
investors were sophisticated investors, had pre-existing
relationships with members of management of the Company and
had access to relevant information pertaining to the
contemplated operations of the Company. Accordingly, the
issuance of shares was exempt from the registration
requirements of the Act pursuant to Rule 701 under the Act.
In February 1997, the Company issued 50,000 shares of its
common stock to Thomas Trobiano for consulting services
rendered valued at $25,000. Such investor was a
sophisticated investor, had pre-existing relationships with
members of management of the Company and had access to
relevant information pertaining to the contemplated
operations of the Company. Accordingly, the issuance of
shares was exempt from the registration requirements of the
Act pursuant to Rule 701 under the Act.
In February 1997, the Company issued 50,000 shares of its
common stock to Edward Cowle and 50,000 shares of its common
stock to Deworth Williams for financial consulting services
rendered valued at $40,000. Such investors were
sophisticated investors, had pre-existing relationships with
members of management of the Company and had access to
relevant information pertaining to the contemplated
operations of the Company. Accordingly, the issuance of
shares was exempt from the registration requirements of the
Act pursuant to Rule 701 under the Act.
In April 1997, the Company issued 2,000 shares of its Common
Stock to Jonathan Benefiel for cash consideration in
connection with a private sale valued at $1,500. Such
investor was a sophisticated investor, had a pre-existing
relationship with members of management of the Company and
had access to relevant information pertaining to the
contemplated operations of the Company. Accordingly, the
issuance of shares was exempt from the registration
requirements of the Act pursuant to Section 4(2) of the Act.
In May 1997, the Company issued 20,000 shares of its Common
Stock to Sherman Square Ltd. for marketing consulting
services rendered valued at $8,000. Joel Pensely exercised
control over Sherman Square Ltd. Such investor was a
qualified investor based on his financial resources and
knowledge of investments, had access to or was provided with
relevant financial and other information relating to the
Company. Accordingly, the issuance of shares was exempt from
the registration requirements of the Act pursuant to Rule
701 under the Act.
In May through December 1997, the Company issued an
aggregate of 340,000 shares of its Common Stock to Michael
Ellis for engineering consulting services rendered valued at
$140,150. Such investor was a sophisticated investor, had
pre-existing relationships with members of management of the
Company and had access to relevant information pertaining to
the contemplated operations of the Company. Accordingly, the
issuance of shares was exempt from the registration
requirements of the Act pursuant to Rule 701 under the Act.
In June and July 1997, the Company issued an aggregate of
140,000 shares of its Common Stock to International
Corporate Development for public relations consulting
services rendered valued at $35,000. Donald Whitlock
exercises control over International Corporate Development.
Such investor was a qualified investor based on his
financial resources and knowledge of investments and had
access to or was provided with relevant financial and other
information relating to the Company. Accordingly, the
issuance of shares was exempt from the registration
requirements of the Act pursuant to Rule 701 under the Act.
In August and September 1997, the Company issued an
aggregate of 175,000 shares of its common stock to Market
Surveys International Inc. for public relations services
rendered valued at $75,000. Bernie Schmidt exercised control
over Market Surveys International. Such investor was a
qualified investor based on his financial resources and
knowledge of investments, had access to or was provided with
relevant financial and other information relating to the
Company. Accordingly, the issuance of shares was exempt from
the registration requirements of the Act pursuant to Rule
701 under the Act.
In August and December 1997, the Company issued an aggregate
of 100,000 shares of its Common Stock to Joel Pensely and
Steve Gutstein for legal services rendered valued at
$20,000. Such investors were qualified investors based on
their financial resources and knowledge of investments, had
access to and were provided with relevant financial and
other information relating to the Company. Accordingly, the
issuance of shares was exempt from the registration
requirements of the Act pursuant to Rule 701 under the Act.
In August 1997 through June 1998, the Company issued an
aggregate of 255,000 shares of its Common Stock to Mr.
Chapchal, Jos Coad, Peter Antil and Ivor Lewis for
consulting services rendered in connection with investments
in the United Kingdom based software companies valued at
$38,750. Such investors were sophisticated investors, had
pre-existing relationships with members of management of the
Company and had access to relevant information pertaining to
the contemplated operations of the Company. Accordingly, the
issuance of shares was exempt from the registration
requirements of the Act pursuant to Rule 701 under the Act.
In September 1997, the Company issued 62,500 shares of its
Common Stock to James Tilton for services rendered in
connection with FT Trading funding valued at $14,063.
Anthony Ardizzone exercised control over FT Trading. Such
investor was a qualified investor based on his financial
resources and knowledge of investments, had access to or was
provided with relevant financial and other information
relating to the Company. Accordingly, the issuance of shares
was issued pursuant to the exemption of Rule 504 of
Regulation D under the Securities Act of 1933, as amended.
In September 1997 through January 1998, the Company issued
an aggregate of 464,899 shares of its Common Stock to FT
Trading in conversion of a series of 14 convertible demand
notes of $10,000 each with interest accruing at the rate of
8% per annum, for a total of $140,000. Anthony Ardizzone
exercised control over FT Trading. Such investor was a
qualified investor based on his financial resources and
knowledge of investments, had access to or was provided with
relevant financial and other information relating to the
Company. Accordingly, the issuance of shares was issued
pursuant to the exemption of Rule 504 of Regulation D under
the Securities Act of 1933, as amended.
In October 1997 through September 1998, the Company issued
an aggregate of 700,000 shares of its Common Stock to Frank
Palmari and Jan Talamo of Media Marketing for marketing
consulting services rendered valued at $71,500. Such
investors were qualified investors based on their financial
resources and knowledge of investments, had access to or
were provided with relevant financial and other information
relating to the Company. Accordingly, the issuance of shares
was exempt from the registration requirements of the Act
pursuant to Rule 701 under the Act.
In October 1997, the Company issued 300,000 shares of its
Common Stock to Mr. Shaver for consulting services rendered
valued at $15,000. Such investor was a sophisticated
investor, had pre-existing relationships with members of
management of the Company, was an employee and a member of
management of the Company and had access to relevant
information pertaining to the contemplated operations of the
Company. Accordingly, the issuance of shares was exempt from
the registration requirements of the Act pursuant to Section
4(2) of the Act.
From January through December 1997, the Company issued an
aggregate of 1,690,428 shares of its common stock in cash
consideration of $546,360 to 13 sophisticated investors
pursuant to exemption from registration provided by
Regulation D Rule 504. Such investors were either accredited
or an otherwise qualified investor based on his financial
resources and knowledge of investments, had access to or
were provided with relevant financial and other information
relating to the Company. The issuances were as follows:
<TABLE>
<S> <C> <C> <C>
Date Issued Investor Cash Consideration # of Shares
- - ----------- -------- ------------------ -----------
2-17-97 Creative Capital $92,000 230,000
2-17-97 Sherman Square Ltd. $4,000 10,000
3-6-97 James Stedman $5,000 10,000
3-28-97 The Marketing Co. $5,000 15,000
4-21-97 Edward Scodak $2,500 5,000
4-21-97 Joel Pensely $17,550 39,000
4-21-97 Robert Carrol $2,500 5,000
5-15-97 Joel Pensely $12,000 24,000
5-20-97 Thomas Kernaghan $50,000 50,000
5-22-97 Wade McCaskie $5,000 5,000
6-6-97 Grail Ives Consultants $20,000 40,000
6-18-97 Thomas Kernaghan $10,000 20,000
6-23-97 James Tilton $3,750 15,000
6-23-97 James Stedman $10,000 20,000
6-23-97 Kurt Vezner $10,000 20,000
7-8-97 James Tilton $7,500 25,000
7-21-97 William Palla $2,500 10,000
7-21-97 James Tilton $16,800 60,000
7-21-97 Andy Dyer $5,100 17,000
7-28-97 James Tilton $20,000 71,000
7-28-97 Andy Dyer $5,000 12,500
8-11-97 James Tilton $32,500 100,000
8-11-97 Andy Dyer $10,000 25,000
8-19-97 Andy Dyer $5,000 17,857
8-19-97 James Tilton $15,000 53,571
8-29-97 FT Trading $25,160 68,000
9-12-97 James Tilton $22,500 100,000
10-9-97 James Tilton $25,000 100,000
10-31-97 James Tilton $25,000 125,000
11-13-97 James Tilton $15,000 100,000
11-21-97 Thomas Kernaghan $35,000 87,500
12-10-97 James Tilton $20,000 100,000
12-31-97 James Tilton $10,000 110,000
$546,360.00 1,690,428
</TABLE>
Mark Schultz exercised control over Creative Capital. Joel
Pensely exercised control over Sherman Square Ltd. Michael
Fugler exercised control over The Marketing Co. Thomas
Kernaghan exercised control over Grail Ives Consultants.
Anthony Ardizzone exercised control over FT Trading.
In January 1998 through January 1999, the Company issued an
aggregate of 4,995,833 shares of its Common Stock to the
Augustine Fund in conversion of a series of 16 convertible
demand notes of $10,000 each, accruing interest at the rate
of 8% per annum, for a total of $160,000. Tom Dyzinski
exercised control of the Augustine Fund. Such investor was a
qualified investor based on his financial resources and
knowledge of investments, had access to or was provided with
relevant financial and other information relating to the
Company. Accordingly, the issuance of shares was issued
pursuant to the exemption of Rule 504 of Regulation D under
the Securities Act of 1933, as amended.
In March through October 1998, the Company issued an
aggregate of 675,000 shares of its Common Stock to Elite
Public Relations (400,000 shares), Investments 101 Ltd.
(75,000 shares), and Wall Street Investments (200,000
shares) for public relations consulting services rendered
valued at $24,250. Jason Mantione exercised control of
Elite Public Relations. Jeffery Brommer exercised control of
Investments 101. Anthony Tomaso exercised control of Wall
Street Investments. Such investors were qualified investors
based on their financial resources and knowledge of
investments, had access to or were provided with relevant
financial and other information relating to the Company.
Accordingly, the issuance of shares was exempt from the
registration requirements of the Act pursuant to Rule 701
under the Act.
In April 1998, the Company issued 100,000 shares of its
Common Stock to Louis Szilezy for consulting services
rendered valued at $10,000. Such investor was a qualified
investor based on his financial resources and knowledge of
investments, had access to or was provided with relevant
financial and other information relating to the Company.
Accordingly, the issuance of shares was exempt from the
registration requirements of the Act pursuant to Rule 701
under the Act.
In June 1998, the Company issued an aggregate of 320,000
shares of its Common Stock to Acebarn Limited, David Jolly,
and Romande Limited pursuant to releasing any rights and
claims against the Company in connection with the sale of
the software investment valued at $16,000. Paul Macaulay
exercised control of Acebarn Limited. Brian Aukett exercised
control of Romande Limited. Such investors were either
sophisticated investors, had pre-existing relationships with
members of management of the Company and had access to
relevant information pertaining to the contemplated
operations of the Company. Accordingly, the issuance of
shares was exempt from the registration requirements of the
Act pursuant to Section 4(2) of the Act.
In June and July 1998, the Company issued an aggregate of
1,200,000 shares of its Common Stock to Tripp & Co. (250,000
shares), Capital Investments (200,000 shares) and Rapid
Release Research (750,000 shares) for financial consulting
services rendered valued at $45,000. Donald Carman exercised
control of Tripp & Co. Randy Wheeler exercised control of
Capital Investments. Bruce Pollock exercised control of
Rapid Release Research. Such investors were qualified
investors based on their financial resources and knowledge
of investments, had access to or were provided with relevant
financial and other information relating to the Company.
Accordingly, the issuance of shares was exempt from the
registration requirements of the Act pursuant to Rule 701
under the Act.
In August 1998, the Company issued 35,000 shares of its
common stock to the Law offices of Roger Fidler for legal
services rendered valued at $5,600. Such investor was a
qualified investor based on his financial resources and
knowledge of investments, had access to or was provided with
relevant financial and other information relating to the
Company. Accordingly, the issuance of shares was exempt
from the registration requirements of the Act pursuant to
Rule 701 under the Act.
From January through December 1998, the Company issued an
aggregate of 15,551,490 shares of its common stock in cash
consideration of $445,725 to 13 sophisticated investors
pursuant to exemption from registration provided by
Regulation D Rule 504. Such investors were qualified
investors based on their financial resources and knowledge
of investments, had access to or were provided with relevant
financial and other information relating to the Company. The
issuances were as follows:
<TABLE>
<S> <C> <C> <C>
Date Issued Investor Cash Consideration # of Shares
- - ----------- -------- ------------------- -----------
2-3-98 James Tilton $20,000 200,000
2-3-98 Jerry Schwartz $2,500 25,000
2-3-98 Stewart Schwartz $2,500 25,000
2-26-98 James Tilton $25,000 250,000
3-4-98 Jerry Schwartz $2,050 20,500
3-4-98 Stewart Schwartz $2,050 20,500
3-18-98 James Tilton $20,000 200,000
3-31-98 James Tilton $15,000 200,000
4-14-98 James Tilton $7,500 100,000
4-14-98 Edward Scodak $3,000 30,000
4-14-98 Jerry & Stewart Schwartz $15,000 150,000
4-27-98 James Tilton $10,125 135,000
4-27-98 Jerry & Stewart Schwartz $3,000 40,000
5-11-98 Andy Dyer $5,000 100,000
5-11-98 James Tilton $10,000 180,000
5-11-98 Jerry Schwartz $10,000 133,333
5-21-98 Jerry & Stewart Schwartz $7,000 140,000
5-28-98 James Tilton $9,625 192,500
5-28-98 Laurie Harvey $375 7,500
6-8-98 Jerry & Stewart Schwartz $5,000 125,000
6-15-98 James Tilton $10,000 200,000
6-24-98 Jerry & Stewart Schwartz $16,000 400,000
6-24-98 James Tilton $5,000 100,000
7-9-98 James Tilton $7,500 250,000
7-9-98 Jerry & Stewart Schwartz $14,000 280,000
8-3-98 James Tilton $27,040 545,000
8-3-98 Kurt Vezner $2,960 60,000
8-4-98 Jerry & Stewart Schwartz $10,000 200,000
8-24-98 James Tilton $5,000 166,666
9-11-98 Jerry & Stewart Schwartz $10,000 300,000
9-23-98 Sandra Lam $50,000 1,250,000
10-6-98 Jerry Schwartz $2,000 125,000
10-6-98 Stewart Schwartz $2,000 125,000
10-10-98 James Stedman $10,000 200,000
10-18-98 Coastal International $6,250 500,000
10-18-98 Jeff Applebaum $6,250 500,000
10-20-98 Emerald Group Management $12,500 1,000,000
10-24-98 Olympia Partners, LLC $15,000 1,000,000
11-3-98 Olympia Partners, LLC $7,500 750,000
12-1-98 Coral Cove Partners $8,750 1,029,412
12-8-98 Nismic Sales Corp $8,750 1,029,412
12-14-98 Olympia Partners, LLC $10,000 666,667
12-17-98 Jerry & Stewart Schwartz $8,500 1,000,000
12-17-98 Ashbourne Associates $8,000 800,000
12-17-98 J. Prince Inc. $8,000 800,000
$445,725.00 15,551,490
</TABLE>
Seth Fireman exercised control over Olympia Partners, LLC.
Jeff Applebaum exercised control over Coral Cove Partners
and Ashbourne Associates. Jared Shaw exercised control over
Coastal International, the Emerald Group Management and J.
Prince Inc. Michael Mannis exercised control over Nismic
Sales Corp.
In January 1999, the Company issued 2,750,000 shares of its
Preferred Stock to Eugene Chiaramonte, Jr. and Ronald Shaver
in exchange for reducing the loans and expenses due from the
Company valued at $27,500. Such investors were sophisticated
investors, were employees and members of management of the
Company and had access to relevant information pertaining to
the contemplated operations of the Company. Accordingly, the
issuance of shares was exempt from the registration
requirements of the Act pursuant to Section 4(2) of the Act.
In February 1999, the Company issued 489,000 shares of its
Common Stock to MYD Distributors pursuant to a legal
settlement valued at $39,240. Dan Delmonico exercised
control over MYD Distributors. Such investor was a qualified
investor based on his financial resources and knowledge of
investments, had access to or was provided with relevant
financial and other information relating to the Company.
Accordingly, the issuance of shares was exempt from the
registration requirements of the Act pursuant to Section
4(2) of the Act.
In April 1999, the Company issued 836,700 shares of its
Common Stock to Ernest DeSaye Jr. in connection with the
exchange of assets agreement valued at $89,945. Such
investor was a sophisticated investor, had pre-existing
relationships with members of management of the Company and
had access to relevant information pertaining to the
contemplated operations of the Company. Accordingly, the
issuance of shares was exempt from the registration
requirements of the Act pursuant to Section 4(2) of the Act
under the Act.
In August 1999, the Company issued 5,200,000 shares of its
Common Stock to investors in connection with an offering
pursuant to Regulation D, Rule 504 valued at $260,000. The
offering for 7,000,000 shares of Common Stock if completed
will generate gross proceeds of $350,000. Such investors
were accredited or otherwise qualified investors based on
their financial resources and knowledge of investments, had
access to or were provided with relevant financial and other
information relating to the Company. In connection with the
offering, Harvey Murdock served as the selling agent and
will receive $5,000 for his services as selling agent.
From January through September 1999, the Company issued an
aggregate of 10,150,000 shares of its common stock in cash
consideration of $360,000 to 4 sophisticated investors
pursuant to exemption from registration provided by
Regulation D, Rule 504. Such investor were accredited or
otherwise qualified investors based on their financial
resources and knowledge of investments, had access to or
were provided with relevant financial and other information
relating to the Company. The issuances were as follows:
<TABLE>
<S> <C> <C> <C>
Date Issued Investor Cash Consideration # of Shares
- - ----------- -------- ------------------ ------------
1-6-99 J. Prince Inc. $20,000 2,000,000
1-12-99 Patrick Rost $40,000 1,000,000
1-21-99 James Tilton $30,000 1,000,000
1-23-99 Patrick Rost $40,000 1,000,000
2-1-99 Patrick Rost $40,000 1,000,000
2-3-99 Patrick Rost $40,000 1,000,000
2-23-99 Patrick Rost $40,000 1,000,000
3-25-99 James Tilton $25,000 500,000
3-29-99 James Tilton $25,000 500,000
4-1-99 Andy Dyer $10,000 150,000
4-9-99 James Tilton $50,000 1,000,000
$360,000.00 10,150,000
</TABLE>
Jared Shaw exercised control over J. Prince Inc.
In general, under Rule 144, as currently in effect, subject
to the satisfaction of certain other conditions, a person,
including an affiliate of the Company(in general, a person
who has a control relationship with the Company) who has
owned restricted securities of common stock beneficially for
a least one year is entitled to sell, within any three-month
period, that number of shares of a class of securities that
does not exceed the greater of (I) one percent (1%) of the
shares of that class then outstanding or, if the common
stock is quoted on NASDAQ, (ii) the average weekly trading
volume of that class during the four calendar weeks
preceding such sale. A person who has not been an affiliate
of the Company for at least the three months immediately
preceding the sale and has beneficially owned shares of
common stock for at least two (2) years is entitled to sell
such shares under Rule 144 without regard to any of the
limitations described above.
No prediction can be made as to the effect, if any, that
future sales of shares of common stock or the availability
of common stock for future sale will have on the market
price of the common stock prevailing from time-to-time.
Sales of substantial amounts of common stock on the public
market could adversely affect the prevailing market price of
the common stock.
Item 11. Description of Securities.
- - -------------------------------------
Our authorized capital stock is 150,000,000 shares of
Common Stock, par value $0.001 per share and 25,000,000
shares of preferred Stock, par value $.001 per share. As of
September 30, 1999, we had issued 54,036,797 of our shares
of Common Stock and 2,750,000 of our shares of Preferred
Stock.
As of September 30, 1999, there were 2,000,000 shares of
common stock reserved for the Company's option plan whereas
no options have been granted or exercised.
As of September 30, 1999, there were 27,500,000 shares of
common stock reserved for the conversion of the Company's
preferred stock whereas 2,750,000 shares of preferred stock
have been issued and outstanding. One share of preferred
stock is convertible into ten (10) shares of common stock.
As of September 30, 1999, there were 1,800,000 shares of
common stock reserved for an offering registered pursuant to
Rule 504 of Regulation D. Under the offering, the Company
is selling 7,000,000 shares, of which 5,200,000 have been
sold to date.
The following brief description of our common stock and
preferred stock does not purport to be complete and is
subject in all respects to Delaware law and to the
provisions of our Articles of Incorporation, as amended (the
"Articles") and our Bylaws, copies of which have been filed
as exhibits to this registration statement.
COMMON STOCK
Each share of our common stock entitles the holder to one
(1) vote on all matters submitted to a vote of the
stockholders. Our common stock does not have cumulative
voting rights, which means that the holders of a majority of
the outstanding shares of our common stock voting for the
election of directors can elect all members of the Board of
Directors. A majority vote is also sufficient for other
actions that require the vote or concurrence of stockholders
except in cases in which more than a simple majority is
required by law. Holders of our common stock are entitled
to receive dividends, when, as and if declared by the Board
of Directors, in its discretion, from funds legally
available therefore. Holders of shares of our common stock
are entitled to share, on a ratable basis, such dividends as
may be declared by the Board of Directors out of funds,
legally available therefor. Upon our liquidation,
dissolution or winding up, after payment to creditors, the
holders of our common stock are entitled to share ratably in
the assets of the Company, if any, legally available of
distribution to our common stockholders. Our Bylaws require
that only a majority of the issued and outstanding shares of
our common stock need be represented to constitute a quorum
and to transact business at a stockholders' meeting.
Our common stock has no preemptive rights or no
subscription, redemption or conversion privileges. All of
the outstanding shares of our common stock are fully paid
and non assessable.
Our Board of Directors has total discretion as to the
issuance and the determination of the rights and privileges
of any shares of our common stock which may be issued in the
future, which rights and privileges may be detrimental to
the rights and privileges of the holders of our existing
shares of our common stock now issued and outstanding.
PREFERRED STOCK
Under the Company's Certificate of Incorporation, the Board
of Directors has the power, without further action by the
stockholder, to designate the relative rights and
preferences of the Company's preferred stock, when and if
issued. Such rights and preferences could include
preferences, any of which may be dilutive of the interest of
the holders of Common Stock. The issuance of preferred
stock may have the effect of delaying or preventing a change
in control of the Company and may have an adverse effect on
the rights of the holders of the Common Stock.
Upon issuance, the shares of Preferred Stock will be duly
and validly issued, fully paid and non-assessable. The
Company has instructed its Transfer Agent to reserve from
its authorized but unissued Common Stock a sufficient number
of shares for issuance upon conversion of the Preferred
Stock. The holders of the shares of Preferred Stock have no
preemptive rights with respect to any securities of the
Company.
Dividends
Holders of our preferred stock are entitled to receive
dividends, when, as and if declared by the Board of
Directors, in its discretion, from funds legally available
therefore. Holders of shares of our preferred stock are
entitled to share, on a ratable basis, such dividends as may
be declared by the Board of Directors out of funds, legally
available therefor.
Conversion
The Preferred Stock is convertible, at the holder's option,
at any time into shares of the Company's Common Stock at a
rate of ten shares of Common Stock for each share of
Preferred Stock.
Redemption
The Preferred Stock is not redeemable.
Liquidation Rights
In the event of any liquidation, dissolution or winding up
of the Company, holders of shares of Preferred Stock are
entitled to receive, out of legally available assets, a
liquidation preference of $100.00 per share and no more
before any payment or distribution is made to the holders of
Common Stock or any series or class of the Company's stock
hereafter that ranks junior as to liquidation rights to the
Preferred Stock. After payment in full of the liquidation
preference of the shares of Preferred Stock, the holders of
such shares will not be entitled to any further
participation in any distribution of assets by the Company.
Neither a consolidation, merger or other business
combination of the Company with or into another corporation
or other entity nor a sale or transfer of all or part of the
Company's assets for cash, securities or other property will
be considered a liquidation, dissolution or winding up of
the Company.
Voting Rights
The holders of the Preferred Stock will have voting rights
equal to ten shares of Common Stock for each share of
Preferred Stock.
Reorganization/Recapitalization
In the event of a reorganization or recapitalization of the
Company's Common Stock, holders of the Preferred Stock shall
not be entitled to the benefits of, or be subject to the
detriments of, such reorganization or recapitalization.
Anti-Dilution
The shares of the Company's Preferred Stock shall not be
subject to dilution unless the unanimous holders of the
Preferred Stock vote to change this preference.
The transfer agent and registrar for our common stock is
Interstate Transfer Agent, 874 E. 5900 South, Salt Lake
City, Utah 84107.
Item 12. Indemnification of Directors and Officers
- - ----------------------------------------------------
The Company's Certificate of Incorporation includes
provisions to eliminate, to the full extent permitted by Delaware General
Corporation Law as in effect from time to time, the personal
liability of directors of the Company for monetary damages
arising from a breach of their fiduciary duties as
directors. The Certificate of Incorporation also includes
provisions to the effect that the Company shall, to the
maximum extent permitted from time to time under the law of
the State of Delaware, indemnify any director or officer.
In addition, the Company's By-laws require the Company to
indemnify, to the fullest extent permitted by law, any
director, officer, employee or agent of the Company for acts
which such person reasonably believes are not in violation
of the Company's corporate purposes as set forth in the
Certificate of Incorporation.
Section 145(a) of the Delaware Law provides that a
corporation may indemnify any person who was or is a party
or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative (other than
an action by or in the right of the corporation) by reason
of the fact that he is or was a director, officer, employee
or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture,
trust or other enterprise, against expenses (including
attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be
in or not opposed to the best interests of the corporation,
and, with respect to any criminal action or proceeding, had
no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment,
order, settlement, conviction, or upon a plea of non
contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in
a manner which he reasonably believed to be in or not
opposed to the best interest of the corporation, and, with
respect to any criminal action or proceeding, had reasonable
cause to believe that his conduct was unlawful.
Section 145(b) of the Delaware Law states that a corporation
may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or
completed action or suite by or in the right of the
corporation to procure a judgment in its favor by reason of
the fact that he is or was a director, officer, employee or
agent of the corporation, or is or was serving at the
request or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses
(including attorneys' fees) actually and reasonably incurred
by him in connection with the defense or settlement of such
action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best
interests of the corporation and except that no
indemnification shall be made in respect of any claim, issue
or matter as to which such person shall have been adjudged
to be liable to the corporation unless and only to the
extent that the Court of Chancery or the court in which such
action or suit is brought shall determine upon application
that, despite the adjudication of liability but in view of
all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the
Court of Chancery or such other court shall deem proper.
Section 145(c) of the Delaware Law provides that to the
extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise
in defense of any action, suit or proceeding referred to in
subsections (a) and (b) of section 145, or in defense of any
claim, issue or matter therein, he shall be indemnified
against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection therewith.
Section 145(d) of the Delaware Law states that any
indemnification under subsections (a) and (b) of section 145
(unless ordered by a court) shall be made by the corporation
only as authorized in the specific case upon a determination
that indemnification of the director, officer, employee or
agent is proper in the circumstances because he has met the
applicable standard of conduct set forth in subsections (a)
and (b). Such determination shall be made (i) by the board
of directors by a majority vote of a quorum consisting of
directors who were not parties to such action, suit or
proceeding, or (ii) if such a quorum is not obtainable, or,
even if obtainable, a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion,
or (iii) by the stockholders.
Section 145(e) of the Delaware Law provides that expenses
(including attorneys' fees) incurred by an officer or
director in defending any civil, criminal, administrative or
investigative action, suit or proceeding may be paid by the
corporation in advance of the final disposition of such
action, suit or proceeding upon receipt of an undertaking by
or on behalf of such director or officer to repay such
amount if it shall ultimately be determined that he is not
entitled to be indemnified by the corporation as authorized
in section 145. Such expenses (including attorneys' fees)
incurred by other employees and agents may be so paid upon
such terms and conditions, if any, as the board of directors
deems appropriate.
Section 145(f) of the Delaware Law states that the
indemnification and advancement of expenses provided by, or
granted pursuant to, the other subsections of section 145
shall not be deemed exclusive of any other rights to which
hose seeking indemnification or advancement of expenses may
be entitled under any bylaw, agreement, vote of stockholders
or disinterested directors or otherwise, both as to action
in his official capacity and as to action in another
capacity while holding such office.
Section 145(g) of the Delaware Law provides that a
corporation shall have the power to purchase and maintain
insurance on behalf of any person who is or was a director,
officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director,
officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise,
against any liability asserted against him and incurred by
him in any such capacity, or arising out of his status as
such, whether or not the corporation would have the power to
indemnify him against such liability under the provisions of
section 145.
Section 145(j) of the Delaware Law states that the
indemnification and advancement of expenses provided by, or
granted pursuant to, section 145 shall, unless otherwise
provided when authorized or ratified, continue as to a
person who has ceased to be a director, officer, employee or
agent, and shall inure to the benefit of the heirs,
executors and administrators of such a person.
Item 13. Financial Statements
- - ------------------------------
See Item 15(a) below.
Item 14. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.
- - ----------------------------------------------------------
During the Corporation's last two fiscal years and the
subsequent interim period, no independent accountant who
was previously engaged as the principal accountant to audit
the Corporation's financial statements, resigned or was
dismissed.
The firm of Edelman and Kalosieh, Certified Public
Accountants, has been the Corporation's auditor for the last
two years.
Item 15. Financial Statements and Exhibits
- - --------------------------------------------
(a) Financial Statements
Index to Financial Statements
The Auxer Group, Inc.
<TABLE>
<S> <C>
Report of Independent Auditors F-2
Consolidated Balance Sheets F-4
Consolidated Statement of Income and Retained Earnings F-6
Consolidated Statement of Changes in Stockholders Equity F-7
Consolidated Statement of Cash Flows F-10
Notes to Consolidated Financial Statements F-11
</TABLE>
EDELMAN & KALOSIEH, CPAs P.A.
CERTIFIED PUBLIC ACCOUNTANTS
15-01 BROADWAY
FAIR LAWN, NEW JERSEY 07470
- - ----------
TEL (201) 797-4490
FAX (201) 797-0881
GEORGE A. KALOSIEH, CPA
JOSEPH F. SHACKIL, CPA
PAUL MEOLA, CPAMEMBERS
AMERICAN INSTITUE OF CERTIFIED PUBLIC ACCOUNTANTS
NJ SOCIETY OF CERTIFIED PUBLIC ACCOUNTANTS
------------
DONALD L. EDELMAN, CPA (RETIRED)
To the Board of Directors and Shareholders
of The Auxer Group, Inc.
Independent Auditor's Report
We have audited the accompanying consolidated balance
sheets of Auxer Industries, Inc. (a development stage
Company) as of December 31, 1997 and the acCompanying
consolidated balance sheets of The Auxer Group, Inc. (after
reincorporation into a Delaware Corporation) as of 1998 and
the related statements of operations, cash flows and
shareholders' equity for the years then ended. These
financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on
these financial statements based on our audit. The
financial statements of Auxer Industries, Inc. as of
December 31, 1996, were audited by other auditors whose
report dated March 20, 1997 on these statements included a
going-concern explanatory paragraph discussed in Note 2 to
the financial statements.
We conducted our audit 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 and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides
a reasonable basis for our opinion.
In our opinion, the financial statements referred to
above represent fairly, in all materials respects, the
financial position of Auxer Industries, Inc. (a development
state Company) as of December 31, 1997 and The Auxer Group,
Inc. as of December 31, 1998 and the results of its
operations, shareholders equity and cash flows for the years
then ended in conformity with generally accepted accounting
principles.
The accompanying financial statements have been
prepared assuming that Auxer Industries, Inc. (a development
stage Company until December 31, 1997) will continue as a
going concern. As more fully described in Note 2, the
Company has incurred operating losses since inception and
requires additional capital to continue operations. These
conditions raise substantial doubt about the Company's
ability to continue as a going concern. Management's plans
as to these matters are described in Note 2. The financial
statements do not include any adjustments to reflect the
possible effects on recoverability and classification of
assets or the amounts and classifications of liabilities
that may result from the possible inability of Auxer
Industries, Inc. (a development stage Company) to continue
as a going concern. The financial statement do not include
any adjustments that might result from the outcome of this
uncertainty.
As discussed in Note 12 to the financial statements,
the Company's 1997 stockholders' equity previously reported
as $230,889 should have been $612,889. This discovery was
made subsequent to the issuance of the financial statements.
The financial statements have been restated to reflect this
correction.
EDELMAN & KALOSIEH, CPAs PA
Fair Lawn, New Jersey
July 13, 1999
THE AUXER GROUP, INC.
CONSOLIDATED BALANCE SHEETS
Assets
<TABLE>
<S> <C> <C> <C>
Nine Months
Ending Year End Year End
September 30, December 31, December 31,
1999 1998 1997
(Unaudited) (Audited) (Audited)
Current assets:
Cash $31,439 $3,087 $31,001
Accounts receivable (net of allowances
$7,988 in 1999, $11,666 in 1998,
$11,666 in 1997) 112,797 33,523 54,441
Inventory 317,015 164,302 222,664
Subscriptions Receivable 29,625 15,125 -0-
Prepaid Expenses -0- -0- 4,276
Other receivables 51,232 23,283 23,283
----------- ---------- ---------
Total current assets 542,108 239,320 335,665
----------- ---------- ---------
Property and Equipment
Furniture and fixtures 7,049 7,749 6,249
Machinery and equipment 54,013 41,751 40,516
Leasehold improvements 5,757 5,757 5,757
----------- ----------- ----------
66,819 55,257 52,522
Less: accumulated depreciation (35,867) (22,436) (9,508)
----------- ----------- ----------
Property and equipment (Net) 30,952 32,821 43,014
----------- ----------- ----------
Other assets:
Investment - Affiliate -0- -0- 218,000
Note Receivable - Auxer UK -0- 353,000 -0-
Film productions costs (net of
accumulated amortization of $79,744
in 1999, $61,744 in 1998, $27,789
in 1997) 62,364 80,364 115,319
Organization costs (net of
accumulated amortization of $12,000
in 1999, $9,000 in 1998, $3,000
in 1997) 18,000 21,.000 27,000
Security deposit 8,715 7.852 7,852
Engineering and product marketing
costs (net of accumulated amortization
of $99,513 in 1999, $78,513 in 1998,
$28,956 in 1997) 63,512 78,512 130,854
License and trade name costs (net of
accumulated amortization of $99,322
in 1999, $72,322 in 1998, $28,956
in 1997) 142,428 169,428 212,794
Excess of cost over book value 59,885 55,000 55,000
----------- --------- ----------
Total other assets 354,904 765,156 776,819
----------- ---------- ----------
Total assets $927,964 $1,037,297 $1,145,498
See accountants' report and acCompanying notes to consolidated financial statements.
</TABLE>
THE AUXER GROUP, INC.
CONSOLIDATED BALANCE SHEETS
Liabilities and Stockholders' Equity
<TABLE>
<S> <C> <C> <C>
Nine Months
Ending Year End Year End
September 30, December 31, December 31,
1999 1998 1997
(Unaudited) (Audited) (Audited)
------------- ------------- ------------
Current liabilities
Accounts payable and
accrued expenses $142,646 $202,632 $189,363
Credit Line 32,195 25,793 54,552
Notes payable 84,166 190,000 230,000
Notes payable-officers 37,543 21,893 58,694
------------ ----------- -----------
Total current liabilities 296,550 440,318 532,609
Capital stock
Capital stock-authorized 150,000,000
share, $.001 par value per share,
54,036,797, 36,361,097 and
13,396,245 shares outstanding
in 1999, 1998, & 1997
respectively 54,037 36,361 12,996
Preferred stock - authorized 25,000,000
shares $.01 par value per share,
2,750,000 shares outstanding in 1999 27,500 -0- -0-
Additional paid in capital 3,546,627 2,805,118 2,004,658
Accumulated deficit (2,996,750) (2,244,500) (1,404,765)
------------- ------------ ------------
Total stockholders' equity 631,414 596,979 612,889
------------- ------------ ------------
Total liabilities and
stockholders' equity $927,964 $1,037,297 $1,145,498
-------------- ------------ ------------
-------------- ------------ ------------
See accountants' report and accompanying notes to consolidated financial statements.
</TABLE>
THE AUXER GROUP, INC.
CONSOLIDATED STATEMENT OF INCOME AND RETAINED EARNINGS
<TABLE>
<S> <C> <C> <C> <C>
Nine Months Nine Months Year End Year End
Ending Ending December 31, December 31,
September 30, September 30, 1998 1997
1999 1998 (Audited) (Audited)
(Unaudited) (Unaudited)
------------- -------------- ------------ ------------
Income $651,478 $239,063 $287,456 $508,077
Less cost of good sold 427,076 182,823 237,952 345,324
Gross profit 224,402 56,240 49,504 162,753
Operations:
General and administrative 637,186 589,056 717,752 782,370
Deprecation 9,384 9,697 12,928 8,125
Amortization 63,001 102,496 136,663 84,916
Interest expense 8,620 12,763 20,790 31,964
Research and development 5,241 1,105 1,106 23,070
---------- ----------- ---------- -----------
Total expenses 723,432 715,117 889,239
---------- ----------- ---------- -----------
Income (loss)
from operations (499,030) (658,877) (839,735) (767,692)
Income (loss) before
extraordinary item (499,030) (658,877) (839,735) (767,692)
Extraordinary item
gain on forgiveness
of debt 99,780 -0- -0- -0-
Extraordinary item-loss
on Note receivable (353,000) -0- -0- -0-
Net income (loss) (752,250) (658,877) (839,735) (767,692)
------------- ----------- ----------- ----------
Accumulated deficit
at beginning (2,244,500) (1,404,765) (1,404,765) (637,073)
-------------- ----------- ----------- ----------
Accumulated deficit
at end ($2,996,750) ($2,063,642) ($2,244,500) (1,404,765)
-------------- ------------- ------------ ------------
Net income (loss)
per common share ($0.01) ($0.03) ($0.02) ($0.06)
-------------- ------------- ------------ ------------
-------------- ------------- ------------ ------------
Net income (loss)
per common share
- assuming dilution ($0.01) ($0.03) ($0.02) ($0.06)
-------------- ------------- ------------ -----------
-------------- ------------- ------------ -----------
See accountants' report and accompanying notes to consolidated financial statements.
</TABLE> THE AUXER GROUP, INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<S> <C> <C> <C> <C> <C>
Preferred Preferred Common Common
Stock Stock Stock Stock Additional
Shares Par Value Shares Par Value Paid in Accumulated
(A) $.001 (B) $.001 Capital Deficit
Amount Amount
--------- ----------- --------- ---------- ---------- -----------
Balances at
December 31, 1994 0 $0 929,929 $930 ($680) $-0-
Stock Issued
04/18/95 (1) 4,000,000 4,000 750
07/15/95 (2) 100,000 100 (100)
10/31/95 (3) 300,000 300 (300)
12/31/95 (4) 1,000,000 1,000 899,000
Net Loss for the year (23,194)
- - ----------------------------------------------------------------------------------------
Balances at
December 31, 1995 0 $0 6,329,929 $6,330 $898,670 ($23,194)
- - ----------------------------------------------------------------------------------------
- - ----------------------------------------------------------------------------------------
Stock Issued
06/04/96 (5) 32,000 32 15,968
04/09/96 (6) 500,000 500 49,500
08/07/96 (7) 1,500,000 1,500 73,500
03/01/96 (8) 152,000 152 65,648
11/01/96 (9) 250,000 250 99,750
06/26/96 (10) 255,000 255 12,495
07/15/96 (11) 76,000 76 37,924
10/25/96 (12) 250,000 250 24,750
10/25/96 (13) 170,000 170 84,830
10/10/96 (14) 400,000 400 19,600
11/21/96 (15) 10,000 10 9,990
11/21/96 (16) 250,000 250 12,250
12/18/96 (17) 100,000 100 49,900
08/18/96 (18) 100,000 100 49,900
12/31/96 (19) 50,000 50 24,950
12/31/96 (20) (660,000) (660) (602,808)
Net Loss for the year (613,879)
- - ----------------------------------------------------------------------------------------
Balances at
December 31, 1996 0 $0 9,764,929 $9,765 $926,817 ($637,073)
- - -----------------------------------------------------------------------------------------
- - -----------------------------------------------------------------------------------------
Stock Issued
12/31/97 (21) 230,000 230 91,770
12/31/97 (22) 110,000 110 9,890
12/31/97 (23) 100,000 100 14,900
12/31/97 (24) 103,520 103 19,897
12/31/97 (25) 175,000 175 34,825
12/31/97 (26) 100,000 100 22,400
12/31/97 (27) 140,355 140 34,860
12/31/97 (28) 202,428 202 56,798
12/31/97 (29) 74,916 75 22,525
12/31/97 (30) 96,525 97 29,903
12/31/97 (31) 100,000 100 32,400
12/31/97 (32) 58,072 58 19,942
12/31/97 (33) 68,000 68 25,092
12/31/97 (34) 125,000 125 49,875
12/31/97 (35) 39,000 39 17,461
12/31/97 (36) 184,000 184 91,816
12/31/97 (37) 2,000 2 1,498
12/31/97 (38) 50,000 50 49,950
12/31/97 (39) 370,000 370 18,130
12/31/97 (40) 180,000 180 44,820
12/31/97 (41) 100,000 100 39,900
12/31/97 (42) 230,000 230 114,770
12/31/97 (43) 200,000 200 39,800
12/31/97 (44) 62,500 63 13,999
12/31/97 (45) 195,000 195 48,555
12/31/97 (46) 75,000 75 24,925
12/31/97 (47) 20,000 20 7,980
12/31/97 (48) 100,000 100 48,900
12/31/97 (49) 140,000 140 69,860
12/31/97 (50) (400,000) (400) (19,600)
Net Loss for the year (767,692)
- - ----------------------------------------------------------------------------------------
Balance at
December 31, 1997 0 $0 12,996,245 $12,996 $2,004,658 ($1,404,765)
- - ----------------------------------------------------------------------------------------
- - ----------------------------------------------------------------------------------------
Stock Issued 23,364,852 23,365 800,460 -0-
Net Loss for the year -0- -0- -0- (839,735)
- - ----------------------------------------------------------------------------------------
Balances at
December 31, 1998 0 $0 36,361,097 $36,361 $2,805,118 ($2,244,500)
- - ----------------------------------------------------------------------------------------
- - ----------------------------------------------------------------------------------------
Stock Issued 2,750,000 27,500 17,675,700 17,676 741,509
Net Loss for the year (399,250)
- - ----------------------------------------------------------------------------------------
Balances at
September 30,
1999 2,750,000 $27,500 54,036,797 $54,037 $3,546,627 ($2,643,750)
- - ----------------------------------------------------------------------------------------
- - ----------------------------------------------------------------------------------------
</TABLE>
(A) Preferred stock, par value $.001, convertible
to 10 shares of common stock, 25,000,000 shares authorized,
2,750,000 shares issued and outstanding
(B) Common stock, par value $.001, 150,000,000
shares authorized, 54,036,797 shares issued and outstanding.
See accountants' report and accompanying notes to
consolidated financial statements.
THE AUXER GROUP, INC.
(During Development Stage)
<TABLE>
<S> <C>
1) Shares issued to purchase CT Industries, Inc.
2) Issuance of shares of common stock in consideration of consulting services at par.
3) Issuance of shares of common stock in consideration of consulting services at par.
4) Sale of shares pursuant to Rule 504 at $.90 per share.
5) Sale of shares of common stock pursuant to Regulation D at $.50 per share.
6) Sale of shares of common stock pursuant to Rule 504 at $.10 per share.
7) Issuance of shares of common stock to purchase Universal Filtration Industries,
Inc. at $.05 per share.
8) Issuance of shares of common stock in consideration of consulting services at $.43
per share.
9) Sale of shares of common stock pursuant to Rule 504 at $.40 per share.
10) Issuance of shares of common stock for acquisition of Motion Lube contract at $.05
per share.
11) Sale of shares of common stock pursuant to Regulation D at $.50 per share.
12) Sale of shares of common stock pursuant to Regulation D at $.10 per share.
13) Issuance of shares of common stock for acquisition of Harvey Westbury Corp. at
$.50 per share.
14) Issuance of shares of common stock for license agreement at $.05 per share.
15) Sale of shares of common stock pursuant to Regulation D at $1.00 per share.
16) Issuance of shares of common stock pursuant to Regulation D as consideration for
consulting at $.05 per share.
17) Sale of shares of common stock pursuant to Rule 504 at $.50 per share.
18) Sale of shares of common stock pursuant to Rule 504 at $.50 per share.
19) Sale of shares of common stock pursuant of Regulation D at $.50 per share.
20) Exchange of shares of common stock in exchange for note receivable.
21) Sale of shares of common stock pursuant to Rule 504 at $.40 per share.
22) Sale of shares of common stock pursuant to Rule 504 at $.09 per share.
23) Sale of shares of common stock pursuant to Rule 504 at $.15 per share.
24) Sale of shares of common stock pursuant to Rule 504 at $.19 per share.
25) Sale of shares of common stock pursuant to Rule 504 at $.20 per share.
26) Sale of shares of common stock pursuant to Rule 504 at $.225 per share.
27) Sales of shares of common stock pursuant to Rule 504 at $.25 per share.
28) Sales of shares of common stock pursuant to Rule 504 at $.28 per share.
29) Sale of shares of common stock pursuant to Rule 504 at $.30 per share.
30) Sale of shares of common stock pursuant to Rule 504 at $.31 per share.
31) Sale of shares of common stock pursuant to Rule 504 at $.325 per share.
32) Sale of share of common stock pursuant to Rule 504 at $.34 per share.
33) Sale of shares of common stock pursuant to Rule 504 at $.37 per share.
34) Sale of shares of common stock pursuant to Rule 504 at $.40 per share.
35) Sales of shares of common stock pursuant to Rule 504 at $.45 per share.
36) Sales of shares of common stock pursuant to Rule 504 at $.50 per share.
37) Sales of shares of common stock pursuant to Rule 504 at $.75 per share.
38) Sales of shares of common stock pursuant to Rule 504 at $1.00 per share.
39) Issuance of shares of common stock pursuant to Regulation D as consideration
services rendered at $.05 per share.
40) Issuance of shares of common stock pursuant to Regulation D as consideration
services rendered at $.25 per share.
41) Issuance of shares of common stock pursuant to Regulation D as consideration
services rendered at $.40 per share.
42) Issuance of shares of common stock pursuant to Regulation D as consideration
services rendered at $.50 per share.
43) Issuance of shares of common stock in consideration for services rendered at
$.20 per share.
44) Issuance of shares of common stock in consideration for services rendered at
$.225 per share.
45) Issuance of shares of common stock in consideration for services rendered at
$.25 per share.
46) Issuance of shares of common stock in consideration for services rendered at
$.33 per share.
47) Issuance of shares of common stock in consideration for services rendered at
$.40 per share.
48) Issuance of shares of common stock in consideration for services rendered at
$.49 per share.
49) Issuance of shares of common stock in consideration for services rendered at
$.50 per share.
50) Shares of common stock rescinded.
See accountants' report and accompanying notes to consolidated financial statements.
</TABLE>
THE AUXER GROUP, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<S> <C> <C> <C> <C>
Nine Months Nine Months Year End Year End
Ending Ending December 31, December 31,
September 30, September 30, 1998 1997
1999 1998 (Audited) (Audited)
(Unaudited) (Unaudited)
------------- -------------- ------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net profit (loss) ($499,030) ($658,877) ($839,735) ($767,692)
Amortization and depreciation 72,383 112,193 149,591 93,041
Extraordinary gain on
forgiveness of debt 99,780 -0- -0- -0-
Extraordinary loss on
note receivable (353,000) -0- -0- -0-
----------------------------------------------------------
(679,867) (546,684) (690,144) (674,651)
(Increase) decrease:
Accounts receivable (79,274) 18,404 20,918 (12,617)
Inventory (152,713) 50,106 58,362 (117,933)
Prepaid (14,500) -0- (15,125) -0-
Note Receivable 353,000 -0- -0- -0-
Other receivables (27,949) (5,742) -0- -0-
Increase (decrease):
Accounts payable &
accrued expenses (59,986) 1,735 13,269 86,490
----------------------------------------------------------
TOTAL CASH FLOW
FROM OPERATIONS (661,289) (477,905) (608,444) (722,987)
----------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Stock subscription receivable -0- -0- -0- -0-
Other Loan Receivable -0- -0- -0- 6,500
Organization costs -0- -0- -0- (30,000)
License costs -0- -0- -0- (130,000)
Engineering and product
marketing costs -0- -0- -0- (157,025)
Purchase property
and equipment (12,262) (1,235) (2,735) (19,412)
Investment - affiliate (15,000) (135,000) (135,000) (218,000)
Excess of cost over book value -0- -0- -0- (11,200)
Security deposit -0- -0- -0- (7,652)
Film production costs -0- (22,500) -0- (49,000)
-----------------------------------------------------------------
TOTAL CASH FLOWS FROM
INVESTING ACTIVITIES (27,262) (158,735) (137,735) (615,789)
-----------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings/payments under line
of credit agreement (net) (32,195) (39,278) (28,759) 54,552
Proceeds from short term debt -0- -0- -0- 422,000
Payments on short term debt (11,054) (20,000) (40,000) (100,000)
Shareholder loan payable (54,885) (23,032) (36,801) (48,200)
Sale of common stock 759,185 688,325 823,825 999,072
Sale of preferred stock 27,500 -0- -0- -0-
----------------------------------------------------------------
TOTAL CASH FLOWS FROM
FINANCING ACTIVITIES 688,551 606,015 718,265 1,327,424
----------------------------------------------------------------
NET INCREASE IN CASH 28,352 (30,625) (27,914) (11,352)
CASH BALANCE BEGINNING
OF PERIOD 3,087 31,001 31,001 42,353
----------------------------------------------------------------
CASH BALANCE END OF PERIOD $31,439 $376 $3,087 $31,001
----------------------------------------------------------------
----------------------------------------------------------------
See accountants' report and accompanying notes to consolidated financial statements.
</TABLE>
The consolidated balance sheet at September 30, 1999 and the
consolidated statements of operations and cash flows for the
nine months ended September 30, 1999 and the consolidated
statement of stockholders' equity for the nine months ended
September 30, 1999 are unaudited but include all adjustments
which are in the opinion of management, necessary to the
fair presentation of the financial position and results of
operations for the periods then ended. All such adjustments
are of normal and recurring nature. The results of the
operations for any interim period are not necessarily
indicative of results of operations for a full fiscal year.
Note 1 - Organization of Company
- - -------------------------------------
a. Creation of the Company
Auxer Industries, Inc. (the "Company") was formed on
June 20, 1920 under the laws of the State of Idaho as The
Auxer Gold Mines with an initial capitalization of 500,000
shares of common stock, $1.00 par value each and a life of
50 years. On August 22, 1960, its certificate of
incorporation was amended to change the number of authorized
shares to issue to 10,000,000 common shares $.50 par value
each. On May 2, 1995, the certificate of incorporation was
amended to change the name of the Company to Auxer
Industries, Inc. and to change the number of authorized
shares to 50,000,000 shares of common stock, $.001 par value
each.
On August 11, 1997 the Company incorporated in the
State of Delaware under the name The Auxer Group, Inc. In
September 1997 the shareholders of the Company voted to
exchange their shares on a one for one basis for shares in
the new Company, The Auxer Group, Inc. The new corporate
name was effective January 1, 1998 for accounting and tax
purposes.
b. Description of the Company
The Company is an investment holding Company that is
comprised of four subsidiaries: the Harvey Westbury
Corporation, Hardyston Distributors, Inc., CT Industries,
and Universal Filtration Industries. The Company is a
manufacturer, wholesaler, and distributor with a line of
automotive, marine, and aviation aftermarket and hardware
products. The Company was considered to be in a development
stage from April 18, 1995 until the end of its fiscal year
December 31, 1997 since it has generated moderate recovery
from the sales of its various product lines.
On April 18, 1995, the Company acquired CT Industries,
Inc. ("CT"), a New Jersey corporation based in Wayne, New
Jersey. CT is a distributor of various automotive products.
On February 8, 1996, the Company acquired Universal
Filtration Industries, Inc. ("Universal Filtration") a New
York corporation. Based in Farmingdale, New York, Universal
Filtration has developed the "Fiona Micro Screen Filter", a
replacement upgrade to a component of machinery used by the
dry cleaning industry.
On October 25, 1996, the Company acquired Harvey-Westbury Corp.
("Harvey-Westbury"), a New York corporation.
Based in Farmingdale, New York, Harvey-
c. Westbury is a manufacturer and wholesaler of various
automotive, marine and aviation products.
On April 22, 1999, the Company purchased the assets of
Hardyston Distributors. Based in northern New Jersey,
Hardyston Distributors is an automotive parts distributor.
Note 2 - Summary of Significant Accounting Policies
- - -----------------------------------------------------
a. Basis of Financial Statement Presentation
The accompanying financial statements have been
prepared on a going concern basis, which contemplates the
realization of assets and the satisfaction of liabilities in
the normal course of business. The Company incurred net
losses of $2,996,750 for period from April 18, 1995 to
September 30, 1999. These factors indicate that the
Company's continuation as a going concern is dependent upon
its ability to obtain adequate financing.
The Company is anticipating that with the completion of
proposed private placements of its securities, the Company
will have sufficient funding to increase sale of its
products to the public. The Company will require
substantial additional funds to finance its business
activities on an ongoing basis and will have a continuing
long-term need to obtain additional financing. The
Company's future capital requirements will depend on
numerous factors including, but not limited to, continued
progress developing additional products, improve
manufacturing efficiency and build an inventory to meet
fulfillment requirements for the Company's various
automotive products and filters for the cleaning industry
and the completion of planned acquisitions. The Company
plans to engage in such ongoing financing efforts on a
continuing basis.
The consolidated financial statements presented consist
of the Company and its wholly owned subsidiaries CT,
Universal Filtration and Harvey Westbury, all of which are
under common control. Material inter-Company transactions
and balances have been eliminated in the consolidation.
b. Earnings per share
Earnings per share have been computed on the basis of
the total number of shares of common stock outstanding as of
December 31, 1997 of 12,996,245.
Earnings per share have been computed on the basis of
the total number of shares of common stock outstanding as of
September 30, 1998 of 23,908,355.
Earnings per share have been computed on the basis of
the total number of shares of common stock outstanding as of
December 31, 1998 of 36,361,097.
Earnings per share have been computed on the basis of
the total number of shares of common stock outstanding as of
September 30, 1999 of 54,036,797.
Earnings per share - assuming dilution, have been
computed on the basis of the number of shares of common
stock outstanding as of September 30, 1999 of 81,536,797
assuming the dilution effect of the convertible preferred
stock issued and outstanding. Each preferred share is
convertible to 10 shares of the Company's common stock.
c. Receivables
Allowances against receivables are provided equal to
the estimated collection losses that will be incurred in
collection of all receivables and a reserve for returns and
discounts traditionally taken. Estimated allowances are
based on historical collection experience coupled with
review of current status of the existing receivables and
amounted to $11,666 at December 31, 1997, $33,523 at
December 31, 1998 and $112,797 at September 30, 1999.
d. Property and Equipment
Property and equipment are recorded at cost and are
depreciated under the straight-line methods over the
estimated useful lives of the related assets. Expenditures
for major renewals and betterments that extend the useful
lives of property and equipment are capitalized.
Expenditures for maintenance and repairs are charged to
expense as incurred.
a.
<TABLE>
<S> <C> <C>
Cost at Accumulated Depreciation
12/31/97 12/31/97
---------- --------------------------
Machinery and equipment $40,516 $7,792
Office furniture and fixtures 6,249 893
Leasehold improvements 5,757 823
Cost at Accumulated Depreciation
12/31/98 12/31/98
---------- --------------------------
Machinery and equipment $41,751 $17,780
Office furniture and fixtures 7,749 2,423
Leasehold improvements 5,757 2,233
Cost at Accumulated Depreciation
12/31/99 12/31/99
---------- --------------------------
Machinery and equipment $41,751 $14,915
Office furniture and fixtures 6,249 2,232
Leasehold improvements 5,757 2,058
</TABLE>
e. Revenue recognition
Revenue is recognized when products are shipped or
services are rendered or maintenance contracts are signed.
f. Note Receivable
During 1997, the Company formed Auxer UK Ltd., a
wholly-owned foreign corporation based in the United
Kingdom. This Company invests in software technologies in
the United Kingdom.
This Company is treated as an investment as of December
31, 1997 and was subsequently sold on June 20, 1998. The
Company has a note receivable of $353,000 from the sale at
an interest rate of 8%. The Company agreed to defer
principle and interest payments on said note until such time
that certain criteria were met. As of September 30, 1999
the Company determined that the collectability of the note
is doubtful and has written it off. This event is treated
as an extraordinary on the consolidated and retained
earnings for the nine months ending September 30, 1999.
g. Research and development expenses
Research and development costs are charged to
operations when incurred.
h. Patents, Trademarks and Licensing Agreements
Certain costs incurred to acquire exclusive licenses of
patentable technology are capitalized and amortized over a
five-year period or the term of the license, whichever is
shorter. The portion of these amounts determined to be
attributable to patents is amortized over their remaining
lives and the remainder is amortized over the estimated
period of benefits but not more than 40 years.
i. Organization Costs
The cost of organizing the Company is being amortized
over 60 months. Amortization expense charged to operations
for the year ended December 31, 1997 was $3,000, , for the
nine month period ended September 30, 1998 was $4,500, for
the year ended December 31, 1998 was $6,000, for the nine
month period ended September 30, 1999 was $4,500.
j. Use of Estimates
The preparation of financial statements in conformity
with generally accepted accounting principles requires
management to make estimates and assumptions that effect the
reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues
and expenses during the reporting period. Accordingly,
actual results could differ from those estimates.
Note 3 - Acquisitions
- - ---------------------
(a) Acquisition of CT Industries, Inc.
On April 18, 1995, the Company acquired all the capital
stock CT, owned equally by Eugene Chiaramonte, Jr. and
Howard Tapen, for 4,000,000 shares of common stock.
(b) Acquisition of Universal Filtration Industries,
Inc.
On February 10, 1996, the Company entered into a
memorandum of understanding which was formalized on August
7, 1996, for the acquisition of all of the common shares of
Universal Filtration for 1,500,000 shares of common stock.
Under this agreement, the Company delivered stock
certificates representing 1,000,000 shares. Certificates
representing 500,000 shares of common stock were issued but
not delivered, as their delivery was premised on the results
of operations as set forth in audited financial statements.
As of December 20, 1996, the acquisition agreement was
modified as follows because certain economic representations
of Universal were note met:
Of the 500,000 shares of common stock issued, the
delivery which was contingent on Universal Filtration
meeting various performance objectives, 400,000 shares were
rescinded.
c. Acquisition of Harvey-Westbury Corp.
On October 25, 1996, the Company issued 170,000 shares
of common stock for acquisition of Harvey-Westbury at $.50
per share.
d. Acquisition of the assets of Hardyston Distributors
On April 22, 1999 the Company issued 836,700 shares
of common stock at $.1075 per share plus $15,000 for the
purchase of inventory and sundry equipment from Mr. Ernest
DeSaye, a sole proprietor.
Note 4 - Inventory
- - -----------------------
Inventory consists of raw materials, work in process
and finished goods and is valued at the lower cost or
market.
Note 5 - Debt
- - -------------------
(a) Security Agreement
The Company has entered into a security agreement with
Finova Growth Finance to borrow money secured by the
receivables evidenced by invoices of Harvey-Westbury Corp.
The Company has provided guarantees of the repayment of
loans. United agreed to lend an amount equal to 75% of the
net value of all Harvey-Westbury's accounts.
(b) Notes Payable
The following is a summary of short term debt at
December 31, 1997:
Convertible Notes Payable to Augustine Fund in the
amount of $100,000, dated November 21, 1997 payable on
demand plus interest at a rate of 8%, payable semi-annually
on March 1 and August 1 with shares of the Company's common
stock.
Convertible Notes Payable to FT Trading in the amount
of $50,000 dated September 5, 1997 payable on demand plus
interest at a rate of 8%, payable semi-annually on January 1
and June 1 with shares of the Company's common stock.
Notes Payable to Creative Capital in the amount of
$80,000 payable on demand plus interest at a rate of 8%.
The following is a summary of short term debt at
December 31, 1998:
Convertible Notes Payable to Augustine Fund in the
amount of $110,000, dated November 21, 1998 payable on
demand plus interest at a rate of 8%, payable semi-annually
on March 1 and August 1 with shares of the Company's common
stock.
Notes Payable to Creative Capital in the amount of
$80,000 payable on demand plus interest at a rate of 8%.
The following is a summary of short term debt at
September 30, 1999:
Convertible Notes Payable to Augustine Fund in the
amount of $99,780, dated November 21, 1998 payable on demand
plus interest at a rate of 8%, was forgiven on March 25,
1999.
Notes Payable to Creative Capital in the amount of
$80,000 payable on demand plus interest at a rate of 8%.
Note Payable to Hudson United Bank in the amount of
$4,166 at a rate of 8% payable in 24 monthly installments of
$238.84.
Note 6 - Related Party Transactions
- - -----------------------------------------
Issuance of Common Shares
On April 18, 1995, the Company acquired all the capital
CT, owned equally by Eugene Chiaramonte, Jr. and Howard
Tapen, for 4,000,000 shares of common stock.
Note 7 - Income Taxes
- - ---------------------------
The Company provides for the tax effects of
transactions reported in the financial statement. The
provision, if any, consists of taxes currently due plus
deferred taxes related primarily to differences between the
basis of assets and liabilities for financial and income tax
reporting. The deferred tax assets and liabilities, if any,
represent the future tax return consequences of those
differences, which will either be taxable or deductible when
the assets and liabilities are recovered or settled. As of
September 30, 1998, the Company had no material current tax
liability, deferred tax assets, or liabilities to impact on the
Company's financial position because the deferred tax
asset related to the Company's net operating loss carry
forward and was fully offset by a valuation allowance.
The Company has net operating loss carry forwards for
income tax purposes of $(1,407,873) at December 31, 1997,
$(2,063,642) at September 30, 1998, of $(2,244,500) at
December 31, 1998, of $(2,996,750) at September 30, 1999.
These carry forward losses are available to offset future
taxable income, if any, and expires starting in the year
2011. The Company's utilization of this carry forward
against future taxable income may become subject to an
annual limitation due to a cumulative change in ownership of
the Company of more than 50 percent.
<TABLE>
<S> <C> <C> <C> <C>
Deferred
tax asset: Sep 30, 1999 Sep 30, 1998 Dec 31, 1998 Dec 31, 1997
-----------------------------------------------------------------
Net Operating loss
carry forward $1,018,895 $701,638 $763,130 $478,677
Valuation
allowance (1,018,895) (701,638) (763,130) (478,677)
Net deferred
tax assets $0 $0 $0 $0
-----------------------------------------------------------------
-----------------------------------------------------------------
</TABLE>
The Company recognized no income tax benefit for the
loss generated for the periods through September 30, 1998.
SFAS No. 109 requires that a valuation allowance be
provided if it is more likely than not that some portion of
all of a deferred tax asset will not be realized. The
Company's ability to realize benefit of its deferred tax
asset will depend on the generation of future taxable
income. Because the Company has yet to recognize
significant revenue from the sale of its products, the
Company believes that a full valuation allowance should be
provided.
Note 8 - Business and Credit Concentrations
- - ------------------------------------------------
The amount reported in the financial statements for
cash, trade accounts receivable and investments approximates
fair market value. Because the difference between cost and
the lower of cost or market is immaterial, no adjustment has
been recognized and investments are recorded at cost.
Financial instruments that potentially subject the
Company to credit risk consist principally of trade
receivables. Collateral is generally not required.
Note 9 - Commitments and Contingencies
- - ----------------------------------------
a. Lease agreement for office space
The Company entered into a three-year lease agreement
with a nonaffiliated party beginning on November 1, 1996 at
30 Galesi Drive, Wayne, New Jersey for office space. An
$1,800 security deposit was required with minimum monthly
rental payments to be paid as follows:
a.
<TABLE>
<S> <C> <C>
Period Annual Rent Monthly Rent
- - ------------------------------------- ----------- -------------
December 1, 1997 to November 30, 1998 $21,948.00 $1,829.00
December 1, 1998 to November 30, 1999 $23,777.04 $1,981.42
</TABLE>
In consideration of the Company taking the space in an
"as is' condition, the Landlord abated the monthly base rent
for a period of 4 months. Payment of rent began on April 1,
1997. After November 30, 1999, the Company is continuing to
lease the property on a month to month basis through
February 29, 2000 at the same rate as the last period.
The Company has the right to terminate this lease after
the first year upon 90 days notice. If the Company elected
to terminate the lease, the Company agrees to pay a
termination fee equal to four months rent.
b. Lease Agreement for Industrial Facility
The Company entered into a three-year lease agreement
with a non affiliated party beginning on April 1, 1995 and
expiring April 1, 1998, at 15 Heisser Court, Farmingdale,
New York, for the Harvey-Westbury operations. On February
23, 1998, the lease was extended to expire on April 30,
1999. On March 29, 1999 the lease was extended to expire on
April 30, 2000. A $5,770 security deposit was required with
minimum monthly rental payments to be paid as follows:
a.
<TABLE>
<S> <C> <C>
Period Annual Rent Monthly Rent
- - ----------------------------- ----------- -------------
May 1, 1997 to April 30, 1998 $33,744.00 $2,812.00
May 1, 1998 to April 30, 1999 $35,604.00 $2,967.00
May 1, 1999 to April 30, 2000 $36,024.00 $3,002.00
</TABLE>
The Company assumed the lease agreement with a non
affiliated party entered into by Mr. Ernest DeSaye, Jr.
beginning March 1, 1998 and expiring on February 28, 1999.
The option to renew for an additional year was invoked
extending the expiration of the lease to February 28, 2000.
<TABLE>
<S> <C> <C>
Period Annual Rent Monthly Rent
- - ---------------------------------- ----------- ------------
March 1, 1998 to February 28, 1999 $8,400.00 $700.00
March 1, 1999 to February 28, 2000 $8,700.00 $725.00
</TABLE>
c. Purchase of Filter Marketing Rights
In October, 1995, Universal Filtration entered into an
agreement with William Hayday for the purchase of the
worldwide non transferable rights to market the Fiona Button
Trap Filter and the rights to make any future modification
to the design.
The term of the agreement was October 1, 1995 until
September 30, 1999. The agreement has expired as of this
period and was not renewed.
Note 10 - Development Stage Company
- - ----------------------------------------
The Company was considered to be a development stage
Company with little operating history and having conducted
research and development and test market activities, funded
the production of multiple sales videos of the Company's
expanded product lines for television and cable
presentation, obtained financing, hired personnel and
developed consulting relationships for the period April 18,
1995 to December 31, 1997. The Company will also be
dependent upon its ability to raise additional capital to
complete its marketing program, acquiring additional
equipment, management talent, inventory and working capital
to engage in profitable business activity.
Note 11 - Segment Information
- - ------------------------------------
The Company's consolidated balance sheet consists of the
following subsidiary components as of September 30, 1999:
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
CT Universal Hardyston Harvey- Auxer
Auxer Industries Filtration Distributors Westbury Indust.,Inc.
Industries Inc. Industries Inc. Corp. Consolidated
Inc. Inc.
------------ ----------- ----------- ------------ ----------- -------------
Balance Sheet
Current Assets $27,344 $19,662 $0 $143,698 $351,404 $542,108
Fixed Assets 11,100 0 3,397 7,527 8,928 30,952
Other Assets 267,063 46,754 10,910 5,514 24,663 354,904
- - ----------------------------------------------------------------------------------------
Total Assets $305,507 $66,416 $14,307 $156,739 $384,995 $927,964
- - ----------------------------------------------------------------------------------------
- - ----------------------------------------------------------------------------------------
Liabilities and Stockholders' Equity
Current
Liabilities $101,710 $39,761 $17,230 $23,365 $114,484 $296,550
Long Term
liabilities 0 0 0 0 0 0
Stockholders'
Equity 203,797 26,655 (2,923) 133,374 270,511 631,414
- - ----------------------------------------------------------------------------------------
Total liabilities and
stockholders'
equity $305,507 $66,416 $14,307 $156,739 $384,995 $927,964
- - ----------------------------------------------------------------------------------------
- - ----------------------------------------------------------------------------------------
The Company's consolidated statement of operations for the nine month period ended
September 30, 1999
Statement of operations
Revenues $0 $2,851 $0 $261,626 $387,001 $651,478
Costs of goods sold 0 2,316 0 178,741 246,019 427,076
- - --------------------------------------------------------------------------------------
Gross profit 0 535 0 82,885 140,982 224,402
Operating
expenses (213,000) (11,363) (56) (67,505) (431,508) (723,432)
- - --------------------------------------------------------------------------------------
Net income
(loss) $(466,220) $(10,828) $(56) $15,380 $(290,526) $(752,250)
- - --------------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------------
</TABLE>
The Company's consolidated balance sheet consists of the following subsidiary
components as of September 30, 1998:
<TABLE>
<S> <C> <C> <C> <C> <C>
CT Universal Harvey- The Auxer
The Auxer Industries Filtration Westbury Group, Inc.
Group Inc. Industries Corp.
Inc. Inc.
------------ ----------- ----------- ------------ -----------
Balance Sheet
Current Assets $16,368 $30,815 $10,969 $203,126 $261,278
Fixed Assets 13,456 607 4,737 15,752 34,552
Other Assets 667,482 71,379 25,455 57,257 821,573
- - ---------------------------------------------------------------------------
Total Assets $697,306 $102,801 $41,161 $276,135 $1,117,403
- - ---------------------------------------------------------------------------
- - ---------------------------------------------------------------------------
Liabilities and Stockholders' Equity
Current
Liabilities $211,976 $44,721 $37,369 $181,000 $475,066
Long Term
liabilities 0 0 0 0 0
Stockholders'
Equity 485,330 58,080 3,792 95,135 642,337
- - --------------------------------------------------------------------------
Total liabilities and
stockholders'
equity $697,306 $102,801 $41,161 $276,135 $1,117,403
- - --------------------------------------------------------------------------
- - --------------------------------------------------------------------------
The Company's consolidated statement of operations for the nine months ended September 30,
1998
Statement of operations
Revenues $0 $967 $2,750 $235,346 $239,063
Costs of goods sold 0 805 1,500 180,518 182,823
- - -------------------------------------------------------------------------
Gross profit 0 162 1,250 54,828 56,240
Operating
expenses (278,225) (1,719) (12,989) (422,184) (715,117)
- - -------------------------------------------------------------------------
Net income
(loss) $(278,225) $(1,557) $(11,739) $(367,356) $(658,877)
- - -------------------------------------------------------------------------
- - -------------------------------------------------------------------------
</TABLE>
The Company's consolidated balance sheet consists of the following subsidiary
components as of December 31, 1998:
<TABLE>
<S> <C> <C> <C> <C> <C>
CT Universal Harvey- Auxer
Auxer Industries Filtration Westbury Industries,Inc.
Industries Inc. Industries Corp. Consolidated
Inc. Inc.
------------ ----------- ----------- ------------ -----------
Balance Sheet
Current Assets $19,153 $19,348 $280 $200,539 $239,320
Fixed Assets 13,029 107 4,076 15,609 32,821
Other Assets 2,091,568 (251,987) (317,216) (757,209) 765,156
- - ---------------------------------------------------------------------------
Total Assets $2,123,750 $(232,532) $(312,860) $(541,061) $1,037,297
- - ---------------------------------------------------------------------------
- - ---------------------------------------------------------------------------
Liabilities and Stockholders' Equity
Current
Liabilities $220,863 $42,142 $37,580 $139,733 $440,318
Long Term
liabilities 0 0 0 0 0
Stockholders'
Equity 1,902,887 (274,674) (350,440) (680,794) 596,979
- - ---------------------------------------------------------------------------
Total liabilities and
stockholders'
equity $2,123,750 $(232,532) $(312,860) $(541,061) $1,037,297
- - ---------------------------------------------------------------------------
- - ---------------------------------------------------------------------------
The Company's consolidated statement of operations for the year ended December 31, 1998
Statement of operations
Revenues $0 $1,168 $2,750 $283,538 $287,456
Cost of goods sold 0 38,934 400 198,618 237,952
Gross profit 0 (37,766) 2,350 84,920 49,504
Operating
expenses (347,745) (21,351) (16,880) (333,410) (889,239)
- - --------------------------------------------------------------------------
Net income
(loss) $(347,745) $(59,117) $(14,530) $(418,330 $(839,735)
- - --------------------------------------------------------------------------
- - --------------------------------------------------------------------------
</TABLE>
The Company's consolidated balance sheet consists of the following subsidiary
components as of December 31, 1997:
<TABLE>
<S> <C> <C> <C> <C> <C>
CT Universal Harvey- Auxer
Auxer Industries Filtration Westbury Industries,Inc.
Industries Inc. Industries Corp. Consolidated
Inc. Inc.
------------ ----------- ----------- ------------ -----------
Balance Sheet
Current Assets $10,172 $58,594 $2,668 $264,231 $335,665
Fixed Assets 16,949 607 5,706 19,752 43,014
Other Assets 1,622,683 (213,664) (299,719) (342,481) 766,819
- - ----------------------------------------------------------------------------
Total Assets $1,649,804 $(154,463) $(291,345) $(58,498) $1,145,498
- - ----------------------------------------------------------------------------
- - ----------------------------------------------------------------------------
Liabilities and Stockholders' Equity
Current
Liabilities $222,996 $61,094 $44,565 $203,954 $532,609
Long Term
liabilities 0 0 0 0 0
Stockholders'
Equity 1,426,808 (215,557) (335,910) (262,452) 612,889
- - ----------------------------------------------------------------------------
Total liabilities and
stockholders'
equity $1,649,804 $(154,463) $(291,345) $(58,498) $1,145,498
- - ----------------------------------------------------------------------------
- - ----------------------------------------------------------------------------
The Company's consolidated statement of operations for the year ended December 31, 1997
Statement of operations
Revenues $ 0 $1,149 $47,347 $459,581 $508,077
Costs of goods sold 0 0 9,303 336,021 345,324
Gross profit 0 1,149 38,044 123,560 162,753
Operating
Expenses (425,140) (46,563) (101,776) (356,966) (930,445)
- - ----------------------------------------------------------------------------
Net income
(loss) $(425,140) $(45,414) $(63,732) $(233,406) $(767,692)
</TABLE>
Note 12 - Restatement
- - --------------------------
During 1998, errors were discovered in which stock was
issued and not recorded, and stock was issued and recorded
at the incorrect price. These errors were corrected by
restating notes payable, accumulated deficit, common stock
and capital in excess of par. The effect of these errors
was to overstate 1996 net losses by $2,402, understate 1997
net losses by $17,500 and overstate notes payable by
$102,000 for a net change in stockholders' equity of
$117,098.
In addition, the Company accrued as salary for the
President for the years ended December 31, 1995, 1996 and
1997 at $100,00 per year for a total of $300,000. On July
6, 1999, the parties agreed that the compensation accrued
would be deferred until such time certain criteria are met.
As a result, the financial statements were restated to
reflect the effect of not accruing officer salary at
$100,000 per year for 1995, 1996, and 1997 resulting in a
net change in stockholders equity of $300,000.
Item 15.(b) Exhibits
<TABLE>
<S> <C>
Exhibit No. Description
2.0 Plan of Reincorporation
3.1 Articles of Incorporation of The Auxer Group, Inc. and Articles of
Amendment
3.2 By-laws of The Auxer Group, Inc.
10.1 Acquisition Agreement and Plan of Reorganization between the Auxer Gold
Mines and CT Industries Inc.
10.2 Acquisition Agreement of Harvey-Westbury Corp.
10.3 Carquest Products, Inc. License Agreement
10.4 Agreement of Business Combination By Exchange of Assets for Stock between
The Auxer Group, Inc. and Ernest DeSaye, Jr. doing business as
Hardyston Distributors.
10.5 Agreement and Plan of Acquisition between Auxer Industries, Inc. and
Universal Filtration Industries, Inc.
10.6 Finova Capital Corporation Agreement.
10.7 PMR and Associates Investor Relation Agreement dated January 4, 1999
10.8 PMR and Associates Investor Relations Services Agreement dated
April 6, 1999
10.9 PMR and Associates Management Consulting Services Agreement dated
July 1, 1999
21 Subsidiaries
27.1 Financial Data Schedule for The Auxer Group, Inc.
</TABLE>
Signatures
In accordance with Section 12 of the Securities Exchange Act
of 1934, the registrant caused this registration statement
to be signed on its behalf by the undersigned, thereunto
duly authorized.
/S/EUGENE CHIARAMONTE, JR.
--------------------------
BY: EUGENE CHIARAMONTE, JR.
Title: President, Chief
Executive Officer and
Director
Date: December 1, 1999
EXHIBIT 2.0 - AUXER REINCORPORATION
- - -----------------------------------
Merger of Auxer Industries, Inc. into a newly formed
Delaware company. The proposed Reincorporation would be
accomplished by merging the Company into a newly formed
Delaware company, which will be named the Auxer Group, Inc.
("Auxer Delaware"), pursuant to an Agreement and Plan of
Merger and Reorganization (the "Merger Agreement"). Auxer
Delaware will be incorporated in Delaware specifically for
purposes of the Reincorporation and will have conducted no
business and have no material assets or liabilities. Auxer
Delaware's principal executive offices will be located at 30
Galesi Drive, Wayne, New Jersey 07470; telephone (201)
890-1331. The Reincorporation would not result in any change
in the Company's business, assets or liabilities and would
not result in any relocation of management or other
employees.
Effective Time. The Merger will take effect on the
later of the times (the "Effective Time") on which a
Certificate of Merger is filed with the Secretary of State
of Idaho and Articles of Merger are accepted for record by
the Secretary of State of Delaware, which filings are
anticipated to be made as soon as practicable after the
Reincorporation proposal is approved by the stockholders of
the Company. On the Effective Time, the separate corporate
existence of the Company will cease and stockholders of the
Company will become stockholders of Auxer Delaware.
Management After the Merger. Immediately after the
Merger, members of the board of directors of Auxer Delaware
(the "Delaware Board of Directors") will be composed of the
current members of the board of directors of the Company.
The current members of the board of directors will continue
to hold office as directors of Auxer Delaware until their
terms expire. The term will be until the next meeting of
shareholders of Auxer Delaware.
Conversion of Common Stock. As a result of the
Reincorporation, each outstanding share of common stock of
the Company will automatically be converted into one share
of common stock of Auxer Delaware (the "Delaware Common
Stock"). Other than changes due to the differences between
Idaho and Delaware law, there will be no changes in the rights,
preferences or privileges of holders of the Common
Stock as a result of the Reincorporation, except that the
certificate of incorporation of Auxer Delaware will
authorize a class of preferred stock whereas the present
certificate of incorporation of the Company does not so
authorize. The Delaware Common Stock will be listed on the
NASD Electronic Bulletin Board under a new symbol. Share
certificates will have a new CUSIP number.
Number of Shares of Common Stock Outstanding. The
number of outstanding shares of Delaware Common Stock
immediately following the Reincorporation will equal the
number of Shares of Common Stock of the Company outstanding
immediately prior to the Effective Time.
Employee Plans. The Company's Nonstatutory Stock Option
Plan (the "Plan"), will be continued by Auxer Delaware
following the Reincorporation. Approval of the proposed
Reincorporation will constitute approval of the adoption and
assumption of the Plans by Auxer Delaware.
Federal Income Tax Consequences. The Reincorporation is
intended to be tax free under the Code. Accordingly, no gain
or loss will be recognized by the holders of shares of the
Company's Common Stock as a result of the Reincorporation,
and no gain of loss will be recognized by the Company or
Auxer Delaware. Each former holder of shares of the
Company's Common Stock will have the same basis in the
Delaware Common Stock received by such holder pursuant to
the Reincorporation as such holder has in the shares of the
Company's Common Stock held by such holder at the Effective
Time. Each stockholder's holding period with respect to the
Delaware Common Stock will include the period during which
such holder held the share of Common Stock, provided the
latter were held by such holder as a capital asset at the
Effective Time. The Company has not obtained a ruling from
the Internal Revenue Service with respect to the
consequences of the Reincorporation.
The Company believes no gain or loss should be
recognized by the holders of outstanding options to purchase
shares of Common Stock. provided that all such options (a)
were originally issued in connection with the performance of
services by the optionee; (b) lacked a readily ascertainable
value (e.g., were not actively traded on an established
market) when originally granted; and (c) the options to
purchase the Delaware Common Stock into which the Company's
outstanding options will be converted in the Reincorporation
also lack a readily ascertainable value when issued.
The foregoing is only a summary of certain federal tax
consequences. Stockholders should consult their own tax
advisers regarding the federal tax consequences of the
Reincorporation as well as any consequences under the laws
of any other jurisdiction.
Accounting Treatment of the Merger. Upon consummation
of the Merger, all assets and liabilities of the Company
will be transferred to Auxer Delaware at book value because
the conversion of the Company's Common Stock into Delaware
Common Stock will be accounted for as a pooling of
interests.
Approval Required ,for Reincorporation. The affirmative
vote of a majority of the outstanding shares of the
Company's capital stock entitled to vote on the proposal is
required for approval of the Reincorporation. The
Reincorporation may be abandoned or the Merger Agreement may
be amended with certain exceptions either before or after
stockholder approval has been obtained, if in the opinion of
the Board of Directors, circumstances arise that make such
action advisable.
Shares of Preferred Stock. A paragraph in the proposed
Delaware certificate of incorporation would authorize the
creation of 5,000,000 shares of preferred stock. Under the
terms of the paragraph., the preferred stock may be issued,
from time to time, in one or more classes. The attributes of
each such class would be designated by the Board of
Directors prior to issuance. Attributes which may but need
not be given to any given class by the board include
preference over the common stock in the event of liquidation
of the Company, dividend (cumulative or noncumulative)
rights either on a fixed or variable basis, the right to
participate in dividends declared to shareholders of Common
Stock, voting and conversion into Shares of Common Stock at
a fixed ratio or variable ratio dependent on factors such a
the market price of the Common Stock.
This flexibility of structure makes the existence of
preferred stock a powerful tool to raising capital. On the
other hand, shareholders of Common Stock may be adversely
affected by this flexibility. For example, their dividends
may be reduced by dividends declared and paid to holders of
one or more classes of preferred stock; their percentage
ownership of Auxer Delaware may be reduced by conversion of
shares of preferred stock into Shares of Common Stock; their
control of Auxer Delaware may be reduced by voting rights,
including super voting rights, which may be granted holders
of one or more classes of preferred stock.
There can be no assurance that the Company will receive
commitments for such financing on terms acceptable to it.
The Board of Directors believes, however, that having
preferred stock authorized and available for issuance or
reservation will allow Auxer Delaware to have greater
flexibility in considering potential future actions
involving the issuance of stock which may be desirable or
necessary to accommodate Auxer Delaware's growth plans,
including capital raising transactions and acquisitions. The
Company does not presently contemplate seeking stockholder
approval for any future issuances of preferred stock unless
required to do so by an obligation imposed by applicable law
or a regulatory authority. Except as indicated above, the
Board of Directors has no current plans to effect any such
potential actions.
This paragraph in the certificate of incorporation
contemplated by this proposal would have an anti-takeover
effect. However, the Company is not aware of any specific
effort by any party or parties to take a controlling
interest in the Company. Neither the certificate of
incorporation or by-laws contain other provisions having
anti-takeover effect and management of the Company does not
contemplate proposing other anti-takeover measures in future
proxy solicitations. In the event the Company is threatened,
through purchases of shares on the open market, a proxy
contest for control of the board of directors or a tender
offer to stockholders, the Company may issue Shares of
Preferred Stock, convertible into Shares of Common Stock to
parties friendly to Management in order to thwart such
threat or the Company may offer rights to convertible and/or
voting preferred stock to existing stockholders at
preferential prices in the event the party or parties
threatening the takeover acquire an aggregate of a certain
percentage of the outstanding Common Stock. However, the
purposes of this paragraph to the Company's proposed
certificate of incorporation are not related to any
anti-take-over strategies.
EXHIBIT 3.1 - AUXER CERTIFICATE OF INCORPORATION
- - ------------------------------------------------
STATE OF DELAWARE
CERTIFICATE OF AMENDMENT
OF CERTIFICATE OF INCORPORATION
The Auxer Group, Inc.
---------------------
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
The Auxer Group, Inc.
--------------------
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 "Fourth" so that, as amended, said Article shall be
and read as follows:
See attached schedule 1A
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 Corporation has caused this
certificate to be signed by Eugene Chiaramonte, an
Authorized Officer, this 19th, day of March, 1999.
By: (s) Eugene Chiaramonte
-----------------------
Authorized Officer
Name: Eugene Chiaramonte
Title: President
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
THE AUXER GROUP, INC.
Schedule - 1 A
Fourth
The total number of shares of stock which the Corporation
shall have authority to issue is 175,000,000. The per value
of each such shares is $.001.
150,000,00 of such shares shall be common stock. 25,000,000
of such shares shall be preferred stock. The President of
the Corporation is hereby granted the power to determine by
resolution from time to time the powers , preferences,
rights, qualifications, restrictions, or limitations of the
preferred stock.
STATE OF DELAWARE
CERTIFICATE OF AMENDMENT
OF CERTIFICATE OF INCORPORATION
The Auxer Group, Inc.
---------------------
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
The Auxer Group, Inc.
---------------------
resolutions were duty 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 " Fourth " so that, as amended, said Article shall
be and read as follows:
See attached schedule 1A
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 has caused this certificate to be
signed by Eugene Chiaramonte an Authorized Officer,
this 19th day of March, 1999
By: (s) Eugene Chiaramonte
----------------------
Authorized Officer
Name: Eugene Chiaramonte
Print or Type
Title: President
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
THE AUXER GROUP, INC.
Schedule - 1A
Fourth
The total number of shares of stock which the Corporation
shall have authority to issue is 175,000,000. The per value
of each such shares is $.001.
150,000,000 of such shares shall be common stock. 25,000,000
of such shares shall be preferred stock. The President of
the Corporation is hereby granted the power to determine by
resolution from time to time the powers , preferences,
rights, qualifications, restrictions, or limitations of the
preferred stock.
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
BEFORE PAYMENT OF ANY PART OF THE CAPITAL
OF
THE AUXER GROUP, INC.
It is hereby certified that:
1. The name of the corporation (hereinafter called the
"corporation") is
THE AUXER GROUP, INC.
2. The corporation has not received any payment of any of
its stock.
3. The certificate of incorporatin of the corporation is
hereby amended by striking out Article FOURTH thereof and by
substituting in lieu of said Article the following new
Article:
"FOURTH"
The total number of shares of stock which the
Corporation shall have authority to issue is 75,000,000. The
par value of each of such shares is $.001.
50,000,000 of such shares shall be shares of common
stock.
25,000,000 of such shares shall be shares of preferred
stock. The board of directors of the Corporation is hereby
granted the power to determine by resolution from time to
time the powers, preferences, rights, qualifications,
restrictions or limitations of the preferred stock."
The amendment of the certificate of incorporation of
the corporation herein certified was duly adopted, pursuant
to the provision of Section 241 of the General Corporation
Law of the State of Delaware, by the sole incorporator, no
directors having been named in the certificate of
incorporation and no directors having been elected.
Signed on August 28, 1997
(s) Eugene Chiaramonte
-----------------------
Eugene Chiaramonte,
Incorporator
CERTIFICATE OF INCORPORATION
THE AUXER GROUP, INC.
The undersigned, a natural person, for the purpose of
organizing a corporation for conducting the business and
promoting the purposes hereinafter stated, under the
provisions and subject to the requirements of the laws
(particularly Chapter 1, Title 8 of the Delaware Code and
the acts amendatory thereof and supplemental thereto, and
known, identified and referred to as the "Delaware General
Corporation Law ") hereby certifies that:
FIRST:
The name of this corporation (hereinafter called the
"Corporation") is THE AUXER GROUP, INC.
SECOND:
The address, including street, number, city and county,
of the registered office of the Corporation in the State of
Delaware is 1013 Centre Road, Wilmington, New Castle County,
Delaware 19805; and the name of the registered agent of the
Corporation is Corporation Service Company.
THIRD:
The purpose of the Corporation is to engage in any
lawful act or activity for which corporations may be
organized under the Delaware General Corporation Law of the
State of Delaware.
FOURTH:
The total number of shares of stock which the
Corporation shall have authority to issue is 25,000,000. The
par value of each of such shares is $.001.
Subsequently amended. See certificate of
amendment.
20,000,000 of such shares shall be shares of
common stock.
5,000,000 of such shares shall be shares of preferred
stock. The board of directors of the Corporation is hereby
granted the power to determine by resolution from time to
time the powers, preferences, rights, qualifications,
restrictions or limitations of the preferred stock.
FIFTH:
The name and mailing address of the incorporator are as
follows:
Eugene Chiaramonte
30 Galesi Drive
Wayne, New Jersey 07470
SIXTH:
The Corporation is to have perpetual existence.
SEVENTH:
Whenever a compromise or arrangement is proposed
between the Corporation and its creditors or any class of
them and/or between the Corporation and its stockholders or
any class of them, any court of equitable jurisdiction
within the State of Delaware may, on the application in a
summary way of the Corporation or of any creditor or
stockholder thereof or on the application of any receiver or
receivers appointed for the Corporation under the provisions
of Section 291 of Delaware General Corporation Law or on the
application of trustees in dissolution or of any receiver or
receivers appointed for the Corporation under the provisions
of Section 279 of Delaware General Corporation Law order a
meeting of the creditors or class of creditors, and/or of
the stockholders or class of stockholders of the
Corporation, as the case may be, to be summoned in such
manner as the said court directs. If a majority in number
representing three--fourths in value of the creditors or
class of creditors, and/or of the stockholders or class of
stock-holders of the Corporation, as the case may be, agree
to any compromise or arrangement of the Corporation as
consequence and to any reorganization of such compromise or
arrangement, the said compromise or arrangement and the said
reorganization shall, if sanctioned by the court to which
the said application bas been made, be binding on all the
creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of the Corporation,
as the case may be, and also on the Corporation.
EIGHTH:
For the management of the business and for the conduct
of the affairs of the Corporation, and in further
definition, limitation and regulation of the powers of the
Corporation and of its directors and of its stockholders or
any class thereof, as the case may be, it is further
provided:
1. The management of the business and the conduct of
the affairs of the Corporation shall be vested in its board
of directors. The number of directors which shall constitute
the whole board of directors shall be fixed by, or in the
manner provided in, the by-laws. The phrase
"whole board" and the phrase "total number of directors"
shall be deemed to have the same meanings to wit, the total
number of directors which the Corporation would have if
there were no vacancies. No election of directors need be by
written ballot.
2. After the original or other by-laws of the
Corporation have been adapted, amended, or repealed, as the
case may be, in accordance with the provisions of Section
109 of the Delaware General Corporation Law, and after the
Corporation has received any payment for any of its stock,
the power to adopt, amend, or repeal the by-laws of the
Corporation may be exercised by the board of directors of
the Corporation; provided, however, that any
provision for the classification of directors of the
Corporation for staggered terms pursuant to the provisions
of subsection (d) of Section 141 of the Delaware General
Corporation Law shall be set forth in an initial by-law or
in a by-law adopted by the stockholders of the Corporation
entitled to vote.
3. Whenever the Corporation shall be authorized to issue
only one class of stock, each outstanding share shall
entitle the holder thereof to notice of, and the right to
vote at, any meeting of stockholders. Whenever the
Corporation shall be authorized to issue more than
one class of stock, no outstanding share of any class of
stock which is denied voting power under the provisions of
this certificate of incorporation shall entitle the holder
thereof to the right to vote at any meeting of stockholders
except as the provisions of paragraph (2) of
subsection (b) to Section 242 of the Delaware General
Corporation Law shall otherwise require; provided, that no
share of any such class which is otherwise denied voting
power shall entitle the holder thereof to vote upon the
increase or decrease in the number of
authorized shares of said class.
4. With the consent in writing or pursuant to a vote of
the holders of a majority of the capital stock issued and
outstanding, the board of directors shall have the authority
to dispose, in any manner, of the whole property of the
Corporation
5. The by-laws shall determine whether and to what
extent the accounts and books of the Corporation, or any of
them, shall be open to inspection by the stockholders; and
no stock-holder shall have any right or inspecting any
account or book or document of the Corporation, except as
conferred by law or by by-laws or by resolution of the
stockholders.
6. The stockholders and directors shall have the power
to hold their meeting and to keep the books, documents and
papers of the Corporation outside the State of Delaware at
such places as may be from time to time designated by the
by-laws or by resolution of the stock-
holders or directors, except as otherwise required by the
Delaware General Corporation Law.
NINTH:
The personal liability of the directors of the
Corporation is hereby eliminated to the fullest extent
permitted by the provisions of paragraph (7) of subsection
(b) of Section 102 of the Delaware General Corporation Law,
as the same may be amended and supplemented.
TENTH:
The corporation shall, to the fullest extent permitted
by the provisions of Section 145 of the Delaware General
Corporation Law, as the same may be amended and
supplemented, indemnify any and all persons whom it shall
have power to indemnify under said section from and against
any and all of the expenses, liabilities or other matters
referred to in or covered by said section, and the
indemnification provided for herein shall not be deemed
exclusive of any other rights to which those indemnified may
be entitled under any by-law, agreement, vote of
stockholders or disinterested directors or otherwise, both
as to action in his official capacity and as to action In
another capacity while holding such office, and shall
continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of
the heirs, executors and administrators of such a person.
ELEVENTH:
From time to time any of the provisions of this
certificate of incorporation may be amended, altered or
repealed, and other provisions authorized by the laws at the
time in force may be added or inserted in the manner and at
the time prescribed by said laws, and all rights at any time
conferred upon the stockholders of the Corporation by this
certificate of incorporation are granted subject to the
provisions of this Article ELEVENTH.
TWELFTH:
The corporation elects not to be governed by Section 203
of the Delaware General Corporation Law.
Signed on July 31, 1997
(s) Eugene Chiaramonte
----------------------
Eugene Chiaramonte,
Incorporator
EXHIBIT 3.2 - BYLAWS OF THE AUXER GROUP, INC.
- - ---------------------------------------------
BY-LAWS OF THE AUXER GROUP, INC.
ARTICLE I - OFFICES
1. The registered office of the corporation shall
be as designated in the Certificate of Incorporation of The
Auxer Group, Inc. (hereinafter referred to as "Auxer" or the
"corporation"), unless changed by resolution of the
corporation's Board of Directors.
2. The corporation may also have offices at such
other places as-the Board of Directors may from time to time
appoint or the business of the corporation may require.
ARTICLE II - SEAL
1. The corporate seal shall have inscribed thereon
the name of the corporation, the year of its organization
and the words "Corporate Seal, Delaware".
ARTICLE III - SHAREHOLDERS' MEETING
1. Meetings of the shareholders shall be held at
the office of the corporation at 30 Galesi Drive, Wayne, New
Jersey, or at such other place or places, either within or
without the State of Delaware, as may from time to time be
selected.
2. The annual meeting of the shareholders, shall be
held on the second Saturday of February in each year, if not
a legal holiday, and if a legal holiday, then on the next
secular day following at 10:00 o'clock a.m. when they shall
elect a Board of Directors, and transact such other business
as may properly be brought before the meeting. If the annual
meeting shall not be called and held during any calendar
year, any shareholder may call such meeting at any time
thereafter.
3. The presence, in person or by proxy, of
shareholders entitled to cast at least a majority of the
votes which all shareholders are entitled to cast on the
particular matter shall constitute a quorum for the purpose
of considering such matter, and, unless otherwise provided
by statute, the acts, at a duly organized meeting, of the
shareholders present, in person or by proxy, entitled to
cast at least a majority of the votes which all shareholders
present are entitled to cast shall be the acts of the
shareholders. The shareholders present at a duly organized
meeting can continue to do business until adjournment,
notwithstanding the withdrawal of enough shareholders to
leave less than a quorum. Adjournment, or adjournments, of
any annual or special meeting may be taken but any meeting
at which directors are to be elected shall be adjourned only
from day to day, or for such longer periods not exceeding
fifteen days each, as may be directed by shareholders who
are present in person or by proxy and who are entitled to
cast at least a majority of the votes which all such
shareholders would be entitled to cast at an election of
directors until such directors have been elected. If a
meeting cannot be organized because a quorum has not
attended, those present may, except as otherwise provided by
statute, adjourn the meeting to such time and place as they
may determine, but in the case of any meeting called for the
election of directors, those who attend the second of such
adjourned meetings, although less than a quorum, shall
nevertheless constitute a quorum for the purpose of electing
directors.
4. Every shareholder entitled to vote at a meeting
of shareholders, or to express consent or dissent to
corporate action in writing without a meeting, may authorize
another person or persons to act for him by proxy. Every
proxy shall be executed in writing by the shareholders, or
by his duly authorized attorney in fact, and filed with the
Secretary of the corporation. A proxy, unless coupled with
an interest, shall be revocable at will, notwithstanding any
other agreement or any other provision in the proxy to the
contrary, but the revocation of a proxy shall not be
effective until notice thereof has been given to the
Secretary of the corporation. No unrevoked proxy shall be
valid after eleven months from the date of its execution,
unless a longer time is expressly provided therein, but in
no event shall a proxy, unless coupled with an interest be
voted on after three years from the date of its execution. A
proxy shall not be revoked by the death or incapacity of the
maker unless before the vote is counted or the authority is
exercised, written notice of such death or incapacity is
given to the Secretary of the corporation. A shareholder
shall not sell his vote or execute a proxy to any person for
any sum of money or anything of value. A proxy coupled with
an interest shall include an unrevoked proxy in favor of a
creditor of a shareholder and such proxy shall be valid so
long as the debt owed by him to the creditor remains unpaid.
Elections for directors need not be by ballot, except upon
demand made by a shareholder at the election and before the
voting begins. Cumulative voting shall not be allowed. No
share shall be voted at any meeting upon which any
installment is due and unpaid.
5. Written notice of the annual meeting shall be
given to each shareholder entitled to vote thereat, at least
five (5) days prior to the meeting.
6. In advance of any meeting of shareholders, the
Board of Directors may appoint judges of election, who need
not be shareholders, to act at such meeting or any
adjournment thereof. If judges of election be not so
appointed, the chairman of any such meeting may, and on the
request of any shareholder or his proxy shall, make such
appointment at the meeting. The number of judges shall be
one or three. If appointed at a meeting on the request of
one or more shareholders or proxies, the majority of shares
present and entitled to vote shall determine whether one or
three judges are to be appointed. On request of the chairman
of the meeting, or of any shareholder or his proxy, the
judges shall make a report in writing of any challenge or
question or matter determined by them, and execute a
certificate of any fact found by them. No person who is a
candidate for office shall act as a judge.
7. Special meetings of the shareholders may be
called at any time by the President, or the Board of
Directors, or shareholders entitled to cast at least
one-fifth of the votes which all shareholders are entitled
to cast at the particular meeting. At any time, upon written
request of any person or persons who have duly called a
special meeting, it shall be the duty of the Secretary to
fix the date of the meeting, to be held not more than sixty
days after the receipt of the request, and to give due
notice thereof. If the Secretary shall neglect or refuse to
fix the date of the meeting and give notice thereof, the
person or persons calling the meeting may do so.
8. Business transacted at all special meetings
shall be confined to the objects stated in the call and
matters germane thereto, unless all shareholders entitled to
vote are present and consent.
9. Written notice of a special meeting of
shareholders stating the time and place and object thereof,
shall be given to each shareholder entitled to vote thereat
at least five (5) days before such meeting, unless a greater
period of notice is required by statute in a particular
case.
10. The officer or agent having charge of the
transfer books shall make at least five days before each
meeting of shareholders, a complete list of the shareholders
entitled to vote at the meeting, arranged in alphabetical
order, with the address of and the number of shares held by
each, which list shall be subject to inspection by any
shareholder, 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 shareholder during the whole time of the meeting. The
original share ledger or transfer book, or a duplicate
thereof kept in this state, shall be prima facie evidence as
to who are the shareholders entitled to examine such list or
share ledger or transfer book, or to vote in person or by
proxy, at any meeting of shareholders.
ARTICLE IV - DIRECTORS
1. The business of this corporation shall be
managed by its Board of Directors, which shall initially be
composed of a sole member, but which may be increased up to
eleven members. The directors need not be residents of this
state or shareholders in the corporation. They shall be
elected by the shareholders, at the annual meeting of
shareholders of the corporation, and each director shall be
elected for the term of one year and until his successor
shall be elected and shall qualify. Whenever there are three
or more shareholders, there must be at least three
directors. The number of directors may be increased or
decreased within the limits set forth hereinabove by
majority vote of the Board of Directors. In the event that a
vacancy occurs on the Board of Directors, the remaining
directors may fill that vacancy by appointing by majority
vote a replacement director who shall serve until his
successor is elected and qualified.
2. In addition to the powers and authorities by
these ByLaws expressly conferred upon them, the Board may
exercise all such powers of the corporation and do all such
lawful acts and things as are not by statute or by the
Articles or by these ByLaws directed or required to be
exercised or done by the shareholders.
3. The meetings of the Board of Directors may be
held at such place within this state, or elsewhere, as a
majority of the directors may from time to time appoint, or
as may be designated in the notice calling the meeting.
4. Each newly elected Board may meet at such place
and time as shall be fixed by the shareholders at the
meeting at which such directors are elected and no notice
shall be necessary to the newly elected directors in order
legally to constitute the meeting, or they may meet at such
place, and time as may be fixed by the content in writing of
all directors.
5. Regular meetings of the Board shall be held
without notice on the second Saturday in February of each
year at 10:30 a.m. at the registered office of the
corporation, or at such other time and place as shall be
determined by the Board.
6. Special meetings of the Board may be called by
the President on five days notice to each director, either
personally or by mail or by telegram; special meetings shall
be called by the President or Secretary in like manner and
on like notice on the written request of a majority of the
directors in office.
7. A majority of the directors in office shall be
necessary to constitute a quorum for the transaction of
business, and the Acts of a majority of the directors
present at a meeting at which a quorum is present shall be
the acts of the Board of Directors. Any action which may be
taken at a meeting of the directors may be taken without a
meeting if a consent or consents in writing, setting forth
the action so taken, shall be signed by all of the directors
and shall be filed with the Secretary of the corporation.
8. Directors as such, shall not receive any stated
salary for their services, but by resolution of the Board, a
fixed sum and expenses of attendance, if any, may be allowed
for attendance at each regular or special meeting of the
Board PROVIDED, that nothing herein contained shall be
construed to preclude any director from serving the
corporation in any other capacity and receiving compensation
therefor.
ARTICLE V - OFFICERS
1. The executive officers of the corporation shall
be chosen by the directors and shall be a President,
Secretary and Treasurer. The Board of Directors may also
choose a Vice President and such other officers and agents
as it shall deem necessary, who shall hold their offices for
such terms and shall have such authority and shall perform
such duties as from time to time shall be prescribed by the
Board. Any number of offices may be held by the same person.
It shall not be necessary for the officers to be directors.
2. The salaries of all officers and agents of the
corporation shall be fixed by the Board of Directors.
3. The officers of the corporation shall hold
office for one year and until their-successors are chosen
and have qualified. Any officer or agent elected or
appointed by the Board of Directors may be removed by the
Board of Directors whenever in its judgment the best
interests of the corporation will be served thereby.
4. The President shall be the chief executive
officer of the corporation; he shall preside at all meetings
of the shareholders and directors; he shall have general and
active management of the business of the corporation, shall
see that all orders and resolutions of the Board are carried
into effect, subject, however, to the right of the directors
to delegate any specific powers, except such as may be by
statute exclusively conferred on the President, to any other
officer or officers of the corporation. He shall execute
bonds, mortgages and other contracts requiring a seal, under
the seal of the corporation. He shall be EX-OFFICIO a member
of all committees, and shall have the general powers and
duties of supervision and management usually vested in the
office of President of a corporation.
5. The Secretary shall attend all sessions of the
Board and all meetings of the shareholders and act as clerk
thereof, and record all the votes of the corporation and the
minutes of all its transactions in a book to be kept for
that purpose; and shall perform like duties for all
committees of the Board of Directors when required. He shall
give, or cause to be given, notice of all meetings of the
shareholders and of the Board of Directors, and shall
perform such other duties as may be prescribed by the Board
of Directors or President, and under whose supervision he
shall be. He shall keep in safe custody the corporate seal
of the corporation, and when authorized by the Board, affix
the same to any instrument requiring it.
6. The Treasurer shall have 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 keep the moneys of
the corporation in a separate account to the credit of the
corporation. He shall disburse the funds of the corporation
as may be ordered by the Board, taking proper vouchers for
such disbursements, and shall render to the President and
directors, at the regular meetings of the Board, or whenever
they may require it, an account of all his transactions as
Treasurer and of the financial condition of the corporation.
ARTICLE VI VACANCIES
1. If the office of any officer or agent, one or
more, becomes vacant for any reason, the Board of Directors
may choose a successor or successors, who shall hold office
for the unexpired term in respect of which such vacancy
occurred.
2. Vacancies in the Board of Directors, including
vacancies resulting from an increase in the number of
directors, shall be filled by a majority of the remaining
members of the Board though less than a quorum, and each
person so elected shall be a director until his successor is
elected by the shareholders, who may make such election at
the next annual meeting of the shareholders or at any
special meeting duly called for that purpose and held prior
thereto.
ARTICLE VII CORPORATE RECORDS
1. There shall be kept at the registered office or
principal place of business of the corporation an, original
or duplicate record of the proceedings of the shareholders
and of the directors, and the original or a copy of its
By-Laws, including all amendments or alterations thereto to
date, certified by the Secretary of the corporation. An
original or duplicate share register shall also be kept at
the registered office or principal place of business or at
the office of a transfer agent or registrar, giving the
names of the shareholders, their respective addresses and
the number and classes of shares held by each.
2. Every shareholder shall, upon written demand
under oath stating the purpose thereof, have a right to
examine, in person or by agent or attorney, during the usual
hours for business for any proper purpose, the share
register, books or records of account, and records of the
proceedings of the shareholders and directors, and make
copies or extracts therefrom. A proper purpose shall mean a
purpose reasonably related to such person's interest as a
shareholder. In every instance where an attorney or other
agent shall be the person who seeks the right to inspection,
the demand under oath shall be accompanied by a power of
attorney or such other writing which authorizes the attorney
or other agent to so act on behalf of the shareholder. The
demand under oath shall be directed to the corporation at or
at its principal place of business.
ARTICLE VIII - SHARE CERTIFICATES, DIVIDENDS, ETC.
1. The share certificates of the corporation shall
be numbered and registered in the share ledger and transfer
books of the corporation as they are issued. They shall
bear the corporate seal and shall be signed by the President
and Secretary.
2. Transfers of shares shall be made on the books
of the corporation upon surrender of the certificates
therefor, endorsed by the person named in the certificate or
by attorney, lawfully constituted in writing. No transfer
shall be made which is inconsistent with law.
3. The Board of Directors may fix a time, not more
than fifty days, prior to the date of any meeting of
shareholders, or the date fixed for the payment of any
dividend or distribution, or the date for the allotment of
rights, or the date when any change or conversion or
exchange of shares will be made or go into effect, as a
record date for the determination of the shareholders
entitled to notice of, or to vote at, any such meeting, or
entitled to receive payment of any such dividend or
distribution, or to receive any such allotment of rights, or
to exercise the rights in respect to any such change,
conversion, or exchange of shares. In such case, only such
shareholders as shall be shareholders of record on the date
so fixed shall be entitled to notice of, or to vote at, such
meeting or to receive payment of such dividend, or to
receive such allotment of rights, or, to exercise such
rights, as the case may be, notwithstanding any transfer of
any shares on the books of the corporation after any record
date fixed as aforesaid. The Board of Directors may close
the books of the corporation against transfers of shares
during the whole or any part of such period, and in such
case, written or printed notice thereof shall be mailed at
least ten days before the closing thereof to each
shareholder of record at the address appearing on the
records of the corporation or supplied by him to the
corporation for the purpose of notice. while the stock
transfer books of the corporation are closed, no transfer of
shares shall be made thereon. If no record date is fixed for
the determination of shareholders entitled to receive notice
of, or vote at, a shareholders' meeting, transferees of
shares which are transferred on the books of the corporation
within ten days next preceding the date of such meeting
shall not be entitled to notice of or to vote at such
meeting.
4. In the event that a share certificate shall be
lost, destroyed or mutilated, a new certificate may be
issued therefor upon such terms and indemnity to the
corporation as the Board of Directors may prescribe.
5. The Board of Directors may declare and pay
dividends upon the outstanding shares of the corporation,
from time to time and to such extent as they deem advisable,
in the manner and upon the terms and conditions provided by
statute and the Articles of Incorporation.
6. Before payment of any dividend there may be set
aside out of the net profits of the corporation such sum or
sums as the directors, from time to time, in their absolute
discretion, think proper as a reserve fund to meet
contingencies, or for equalizing dividends, or for repairing
or maintaining any property of the corporation, or for such
other purpose as the directors shall think conducive to the
interests of the corporation, and the directors may abolish
any such reserve in the manner in which it was created.
ARTICLE IX MISCELLANEOUS PROVISIONS
1. All checks or demands for money and notes of the
corporation shall be signed by such officer or officers as
the Board of Directors may from time to time designate.
2. The fiscal year shall begin in the first day of
July each year.
3. Whenever written notice is required to be given
to any person, it may be given to such person, either
personally or by sending a copy thereof through the mail, or
by telegram, charges prepaid, to his address appearing on
the books of the corporation, or supplied by him to the
corporation for the purpose of notice. If the notice is
sent by mail or by telegraph, it shall be deemed to have
been given to the person entitled thereto when deposited in
the United States mail or with a telegraph office for
transmission to such person. Such notice shall specify the
place, day and hour of the meeting and, in the case of a
special meeting of shareholders, the general nature of the
business, to be transacted.
4. Whenever any written notice is required by
statute, or by the Articles or By-Laws of this corporation,
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 deemed equivalent to the giving of
such notice. Except in the case of a special meeting of
shareholders, neither the business to be transacted at nor
the purpose of the meeting need be specified in the waiver
of notice of such meeting. Attendance of a person, either in
person or by proxy, at any meeting shall constitute a waiver
of notice of such meeting, except where a person attends a
meeting for the express purpose of objecting to the
transaction of any business because the meeting was not
lawfully called or convened.
5. One or more directors or shareholders may
participate in a meeting of the Board, of a committee of the
Board or of the shareholders, by means of conference
telephone or similar communications equipment by means of
which all persons participating in the meeting can hear each
other.
6. Except as otherwise provided in the Articles or
ByLaws of this corporation, any action which may be taken at
a meeting of the shareholders or of a class of shareholders
may be taken without a meeting, if a consent or consents in
writing, setting forth the action so taken, shall be signed
by all of the shareholders who would be entitled to vote at
a meeting for such purpose and shall be filed with the
Secretary of the corporation.
7. Any payments made to an officer or employee of
the corporation such as a salary, commission, bonus,
interest, rent, travel or entertainment expense incurred by
him, which shall be disallowed in whole or in part as a
deductible expense by the Internal Revenue Service, shall be
reimbursed by such officer or employee to the corporation to
the full extent of such disallowance. It shall be the duty
of the directors, as a Board, to enforce payment of each
such amount disallowed. In lieu of payment by the officer or
employee, subject to the determination of the directors,
proportionate amounts may be withheld from his future
compensation payments until the amount owed to the
corporation has been recovered.
ARTICLE X ANNUAL STATEMENT
1. The President and Board of Directors shall
present at each annual meriting a full and complete
statement of the business and affairs of the corporation for
the preceding year. Such statement shall be prepared and
presented in whatever manner the Board of Detectors shall
deem advisable and need not be verified by a certified
public accountant.
ARTICLE XI AMENDMENTS
1. These By-Laws may be amended or repealed by the
vote of the directors entitled to cast at least a majority
of the votes the shareholders or of a class of shareholders
may be taken without a meeting, if a consent or consents in
writing, setting forth the action so taken, shall be signed
by all of the shareholders who would be entitled to vote at
a meeting for such purpose and shall be filed with the
Secretary of the corporation.
2. Any payments made to an officer or employee of
the corporation such as a salary, commission, bonus,
interest, rent, travel or entertainment expense incurred by
him, which shall be disallowed in whole or in part as a
deductible expense by the Internal Revenue Service, shall be
reimbursed by such officer or employee to the corporation to
the full extent of such disallowance. It shall be the duty
of the directors, as a Board, to enforce payment of each
such amount disallowed. In lieu of payment by the officer or
employee, subject to the determination of the directors,
proportionate amounts may be withheld from his future
compensation payments until the amount owed to the
corporation has been recovered.
ARTICLE X ANNUAL STATEMENT
1. The President and Board of Directors shall
present at each annual meriting a full and complete
statement of the business and affairs of the corporation for
the preceding year. Such statement shall be prepared and
presented in whatever manner the Board of Detectors shall
deem advisable and need not be verified by a certified
public accountant.
ARTICLE XI AMENDMENTS
1. These By-Laws may be amended or repealed by the
vote of the directors entitled to cast at least a majority
of the votes which all directors are entitled to cast
thereon, at any regular or special meeting of the directors,
duly convened after notice to the directors of that purpose.
The By-Laws set forth hereinabove were adopted by the
Board of Directors of The Auxer Group, Inc. at its
organizational meeting on July 31, 1997. I hereby certify
that this is a true and exact copy of said By-Laws.
(s)Eugene Chiaramonte, Jr.
--------------------------
Eugene Chiaramonte, Jr.
Corporate Secretary
EXHIBIT 10.1 - ACQUISTION AGREEMENT AND PLAN OF
REORGANIZATION BETWEEN THE AUXER GOLD MINES AND CT
INDUSTRIES
- - ---------------------------------------------------
ACQUISITION AGREEMENT AND PLAN OF REORGANIZATION
THIS ACQUISITION AGREEMENT AND PLAN OF REORGANIZATION,
(hereinafter the "Agreement") is made and entered into this
18th day of April, 1995 by and between The Auxer Gold Mines,
an Idaho corporation (hereinafter "Auxer"), CT Industries,
Inc., a Nevada corporation (hereinafter "CTI"), and the
shareholders of CT Industries, Inc. (hereinafter
"Shareholders").
RECITALS
WHEREAS, Auxer desires to acquire all of the issued and
outstanding shares of CTI capital stock in exchange for
4,000,000 shares of authorized but previously unissued Auxer
common stock, par value One Tenth of a Cent ($.001) per
share, and pursuant to the terms and conditions set forth
herein;
WHEREAS, the Shareholders of CTI desire to exchange all
of their shares of CTI capital stock for shares of Auxer
common stock in the respective amounts set forth herein; and
WHEREAS, the parties hereto desire to reorganize the
management and operations of Auxer, to change the
corporation name to Auxer Industries, Inc., and to change
the principal place of business of the corporation.
NOW, THEREFORE, in consideration of the premises and
mutual representations, warranties and covenants herein
contained, the parties hereby agree as follows:
ARTICLE I
ACQUISITION AND EXCHANGE OF SHARES
SECTION 1.1 Acquisition and Plan of Reorganization. The
parties hereby agree that Auxer shall acquire all of the
issued and outstanding shares of M capital stock, in
exchange for four million (4,000,000) shares of authorized
but previously unissued Auxer common stock, par value $.001
per share. It is also agreed to by the parties hereto that
by acquiring all of the shares of CTI capital stock, Auxer
will acquire all rights, title and interest to certain
identified assets and property presently owned by CTI and
specifically described and set forth in Exhibit 1.1, annexed
hereto and by this reference made a part hereof. Said assets
and property may be subject to certain interests, liens
and/or encumbrances which are further described in Exhibit
1.1. The parties hereto hereby further agree that (i) at the
Closing, as hereinafter defined, CTI shall become a
wholly-owned subsidiary of Auxer subject to the conditions
and provisions of Section 1.5 hereof; (ii) as promptly as
practicable after the effectiveness of the Closing, Auxer's
corporate name shall be changed to Auxer Industries, Inc.;
and (iii) as promptly as practicable after the Closing, the
necessary steps shall be taken in order to reflect the
relocation of Auxer's principal place of business to Newark,
New Jersey.
SECTION 1.2 Issuance of Shares.
(a) Upon the Closing of this Agreement, Auxer shall
cause to be issued and delivered to the Shareholders of CTI
or their designees, stock certificates representing an
aggregate of 4,000,000 shares (the "Auxer Shares") of Auxer
common stock.
(b) The Auxer Shares to be issued hereunder shall be
authorized but previously unissued shares of Auxer common
stock, and shall be issued to those persons and in the
respective amounts set forth in Exhibit 1.2 annexed hereto
and by this reference made a part hereof.
(c) It is hereby acknowledged by the parties hereto
that pursuant to that certain Marketing Agreement entered
into by and between Auxer and CTI on March 13, 1995, Auxer
issued to CTI 100,000 shares of authorized but previously
unissued common stock of Auxer as consideration for the
Marketing Agreement. It is agreed upon by the parties hereto
that the 100,000 shares are to be considered as part of the
4,000,000 shares of Auxer common stock to be issued
hereunder and therefore upon the issuance of the additional
3,900,000 shares of Auxer common stock under the terms of
this Agreement, the full consideration of the 4,000,000
shares designated hereunder shall be deemed to have been
satisfied.
(d) All Auxer Shares to be issued hereunder are deemed
"restricted securities" as defined by Rule 144 of the
Securities Act of 1933, as amended (the "1933 Act"), and the
recipients shall represent that they are acquiring the Auxer
Shares for investment purposes only and without the intent
to make a further distribution of the Auxer Shares. All
Auxer Shares to be issued under the terms of this Agreement
shall be issued pursuant to an exemption from the
registration requirements of the 1933 Act, under Section
4(2) of the 1933 Act and the rules and regulations
promulgated thereunder. Certificates representing the Auxer
Shares to be issued hereunder shall bear the following
legend:
The shares represented by this certificate have not
been registered under the Securities Act of 1933, as
amended, and may not be offered for sale, sold or
otherwise transferred except in compliance with the
registration provisions of such Act or pursuant to
an exemption from such registration provisions, the
availability of which is to be established to the
satisfaction of the Company.
SECTION 1.3 Closing. The closing of this Agreement and
the transactions contemplated hereby (the "Closing") shall
take place on the day of ,1995 (the "Closing
Date"), at a time and place to be mutually agreed upon by
the parties hereto, and shall be subject to the provisions
of Article X of this Agreement. At the Closing:
(a) CTI shall deliver to Auxer all stock certificates
representing 100% of the issued and outstanding shares of
CTI capital stock, duly endorsed, so as to make Auxer the
sole holder thereof, free and clear of all claims and
encumbrances;
(b) Auxer shall deliver to those persons listed in
Exhibit 1.2 stock certificates representing an aggregate of
4,000,000 shares of Auxer common stock and which
certificates shall bear a standard restrictive legend in the
form customarily used with restricted securities and as set
forth in Section 1.2(d) above;
(c) Auxer shall deliver an Officer's Certificate as
described in Sections 9.1 and 9.2 hereof, dated the Closing
Date, that all representations, warranties, covenants and
conditions set forth herein by Auxer are true and correct as
of, or have been fully performed and complied with by, the
Closing Date; and
(d) CTI shall deliver an Officer's Certificate as
described in Sections 8.1 and 8.2 hereof, dated the Closing
Date, that all representations, warranties, covenants and
conditions set forth herein by CTI and Shareholders are true
and correct as of, or have been fully performed and complied
with by, the Closing Date;
SECTION 1.4 Auxer Special Meeting of Shareholders. In
anticipation of this Agreement and prior to the Closing
Date, Auxer shall have taken all necessary and requisite
action to call for a Special Meeting of Shareholders to be
held on or before April 18, 1995, in order to transact the
following business:
(a) To ratify this Agreement and all transactions
contemplated hereby;
(b) To amend the Articles of Incorporation to change
the corporate name to Auxer Industries, Inc., or any other
name deemed suitable by the shareholders attending the
meeting;
(c) To accept the resignation of the current directors
of the Company and to nominate and elect a new Board of
Directors consisting of the following three nominees: Eugene
Chiaramonte, Jr., Howard Tapen and Eugene Chiaramonte III;
(d) To amend the Articles of Incorporation to change
the authorized capitalization of the Company to 50,000,000
shares of common stock, par value $.001 per share; and
(e) To amend the Articles of Incorporation to change
the stated corporate purpose to permit the corporation to
engage in any lawful act or activity for which a corporation
may be organized under the Idaho Business Corporation Act.
SECTION 1.5 Consummation of Transaction. If at the
Closing, no condition exists which would permit any of the
parties to terminate this Agreement, or a condition then
exists and the party entitled to terminate because of that
condition elects not to do so, then the transactions herein
contemplated shall be consummated upon such date, and then
and thereupon, Auxer shall file any additional necessary
documents that may be required by the State of Idaho.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF AUXER
Auxer hereby represents, warrants and agrees that:
SECTION 2.1 Organization of Auxer. Auxer is a
corporation duly organized, validly existing and in good
standing under the laws of the State of Idaho, is duly
qualified and in good standing as a foreign corporation in
every jurisdiction in which such qualification is necessary,
and has the corporate power and authority to own its
properties and assets and to transact the business in which
it is engaged. There are no corporations or other entities
with respect to which (i) Auxer owns any of the outstanding
stock or other interest, or (ii) Auxer may be deemed to be
in control because of factors or relationships other that
the quantity of stock or other interest owned. Auxer has all
requisite corporate power and authority to execute and
deliver this Agreement and to consummate the transactions
contemplated hereby. This Agreement is the legal, valid and
binding obligation of Auxer, enforceable against Auxer in
accordance with its respective terms except to the extent
that such enforcement may be limited by applicable
bankruptcy, insolvency and other similar laws affecting
creditors' rights generally.
SECTION 2.2 Capitalization of Auxer. The authorized
capital stock of Auxer consists of 10,000,000 shares of
common stock, par value $.50 per share, of which 1,029,929
shares are presently issued and outstanding. All shares of
Auxer common stock currently issued and outstanding have
been duly authorized and validly issued and are fully paid
and non-assessable, and have been issued in compliance with
applicable federal and state laws or pursuant to appropriate
exemptions therefrom. There are no options, warrants,
rights, calls, commitments or agreements of any character
obligating Auxer to issue any shares of its capital stock or
any security representing the right to purchase or otherwise
receive any such stock. Shares of Auxer common stock to be
issued pursuant to this Agreement, when so issued, will be
duly authorized, validly issued, fully paid and
non-assessable.
SECTION 2.3 Charter Documents. Certified copies of the
Auxer Articles of Incorporation and By-Laws, as amended to
date, are annexed hereto as Exhibit 2.3 and by this
reference made a part hereof.
SECTION 2.4 Corporate Documents. The Auxer
shareholders' list and corporate minute books are complete
and accurate as of the date hereof and the corporate minute
books contain the recorded minutes of all corporate meetings
of shareholders and directors.
SECTION 2.5 Financial Statements. Auxer's financial
statements for the period ended March 31, 1995 and the
fiscal years ended December 31, 1994 and 1993, a copy of
which is annexed hereto as Exhibit 2.5 and by this reference
made a part hereof, are true and complete in all material
respects, having been prepared in accordance with generally
accepted accounting principles applied on a consistent basis
for the periods covered by such statements, and fairly
present, in accordance with generally accepted accounting
principles, the financial condition of Auxer, and results of
its operations for the periods covered thereby. Except as
otherwise disclosed to CTI in writing and as set forth
herein, there has been no material adverse change in the
business operations, assets, properties, prospects or
condition (financial or otherwise) of Auxer taken as a whole
from that reflected in the financial statements referred to
in this Section 2.5.
SECTION 2.6 Absence of Certain Changes or Events. Since
the date of the Auxer financial report attached hereto as
Exhibit 2.5 and except as disclosed otherwise herein, Auxer
has not (i) issued or sold any promissory note, stock, bond,
option or other corporate security of which it was an issuer
or other obligor, (ii) discharged or satisfied any lien or
encumbrance or paid any obligation or liability, absolute or
contingent, direct of indirect, (iii) incurred or suffered
to be incurred any liability or obligation whatsoever, (iv)
caused or permitted any lien, encumbrance or security
interest to be created or arise on or in any of its
properties or assets, (v) declared or made any dividend,
payment or distribution to stock holders or purchased or
redeemed or agreed to purchase or redeem any shares of its
capital stock, (vi) reclassified its shares of capital
stock, or (vii) entered into any agreement or transaction
except in connection with the execution and performance of
this Agreement.
SECTION 2.7 Assets and Liabilities. Auxer does not have
any material assets as reflected in the financial statements
included as Exhibit 2.5. As of the date hereof, Auxer does
not have any debts, liabilities or obligations of any
nature, whether accrued, absolute, contingent, or otherwise,
whether due or to become due, that are not fully reflected
in the Auxer financial statements.
SECTION 2.8 Tax Returns and Payments. Auxer has filed
with the appropriate governmental authority tax returns,
whether based upon income, sales or franchise, as required
by law to be filed on or before the date of this Agreement
with the exception of its federal corporate tax returns.
Auxer represents that immediately upon the Closing it will
prepare and file those required federal tax returns that may
be due. Auxer has paid all taxes to be due on said returns,
any assessments made against Auxer and all other taxes, fees
and similar charges imposed on Auxer by any governmental
authority. No tax liens have been filed and no claims are
being assessed and no returns are under audit with respect
to any such taxes, fees or other similar charges.
SECTION 2.9 Contracts. Auxer is not a party to or bound
by any contract or commitment, including guaranty whether
written or oral, except as otherwise disclosed in Exhibit
2.9.
SECTION 2.10 Required Authorizations. There have been
or will be timely filed, given, obtained or taken, all
applications, notices, consents, approvals, orders,
registrations, qualifications waivers or other actions of
any kind required by virtue of execution and delivery of
this Agreement by Auxer or the consummation by it of the
transactions contemplated hereby. Prior to the Closing, the
shareholders of Auxer shall have approved this Agreement and
the transactions contemplated hereunder and the appropriate
corporate filings shall have been made with the State of
Idaho.
SECTION 2.11 Compliance with Law and Government
Regulations. Auxer is in compliance with and is not in
violation of, applicable federal, state, local or foreign
statutes, laws and regulations (including without
limitation, any applicable building, zoning or other law,
ordinance or regulation) affecting its properties or the
operation of its business. Auxer is not subject to any
order, decree, judgment or other sanction of any court,
administrative agency or other tribunal.
SECTION 2.12 Litigation. There is no litigation,
arbitration, proceeding or investigation pending or
threatened to which Auxer is a party or which may result in
any material change in the business or condition, financial
or otherwise, of Auxer or in any of its properties or
assets, or which might result in any liability on the part
of Auxer, or which questions the validity of this Agreement
or of any action taken or to be taken pursuant to or in
connection with the provisions of this Agreement, and to the
best knowledge of Auxer, there is no basis for any such
litigation, arbitration, proceeding or investigation.
SECTION 2.13 Trade Names and Rights. Auxer does not use
any trade mark, service mark, trade name, or copyright in
its business, nor does it own any trade marks, trade mark
registrations or application, trade name, service marks,
copyrights, copyright registrations or application. No
person owns any trade mark, trade mark registration or
application, service mark, trade name, copyright, or
copyright registration or application, the use of which is
necessary or contemplated in connection with the operation
of Auxer's business.
SECTION 2.14 Governmental Consent. No consent,
approval, authorization or order of, or registration,
qualification, designation, declaration or filing with, any
governmental authority on the part of Auxer is required in
connection with the execution and delivery of this Agreement
or the carrying out of any transactions contemplated hereby
with the exception of the necessary corporate filings with
the State of Idaho relating to the amendment of the Articles
of Incorporation and the proposed exchange of shares.
SECTION 2.15 Authority. Auxer and its shareholders
will, prior to the Closing, approve this Agreement and the
transactions contemplated hereby and will duly authorize the
execution and delivery hereof. Auxer has full power,
authority and legal right to enter into this Agreement and
to consummate the transactions contemplated hereby, and all
corporate action necessary to authorize the execution and
delivery of this Agreement and the consummation of the
transactions contemplated hereby has been duly and validly
taken. The execution and delivery of this Agreement, the
consummation of the transactions contemplated hereby and
compliance by Auxer with the provisions hereof will not (a)
conflict with or result in a breach of any provisions of, or
constitute a default (or an event which, with notice or
lapse of time or both, would constitute a default) under, or
result in the creation of any lien, security interest,
charge or encumbrance upon any of the properties or assets
of Auxer under, any of the terms, conditions or provisions
of the Articles of Incorporation or By-Laws of Auxer, or any
note, bond, mortgage, indenture, license, lease, agreement
or any instrument or obligation to which Auxer is a party or
by which it is bound; or (b) violate any order, writ,
injunction, decree, statute, rule or regulation applicable
to Auxer or any of its properties or assets.
SECTION 2.16 Full Disclosure. None of the
representations and warranties made by Auxer herein, or in
any exhibit, certificate or memorandum furnished or to be
furnished by Auxer, on its behalf pursuant hereto, contains
or will contain any untrue statement of material fact, or
omits any material fact, the omission of which would be
misleading.
ARTICLE III
COVENANTS OF AUXER
SECTION 3.1 Conduct Prior to the Closing. Between the
date hereof and the Closing:
(a) Auxer will not enter into any material
agreement, contract or commitment, whether written or oral,
or engage in any transaction, without the prior written
consent of CTI;
(b) Auxer will not declare any dividends or
distributions with respect to its capital stock or amend its
Articles of Incorporation or By-Laws, without the prior
written consent of CTI;
(c) Auxer will not authorize, issue, sell, purchase
or redeem any shares of its capital stock or any options or
other rights to acquire its capital stock, without the prior
written consent of CTI;
(d) Auxer will comply with all requirements which
federal or state law may impose on it with respect to this
Agreement and the transactions contemplated hereby, and will
promptly cooperate with and furnish written information to
CTI in connection with any such requirements imposed upon
the parties hereto in connection therewith;
(e) Auxer will not incur any indebtedness for money
borrowed, or issue or sell any debt securities, incur or
suffer to be incurred any liability or obligation of any
nature whatsoever, or cause or permit any lien, encumbrance
or security interest to be created or arise on or in any of
its properties or assets, acquire or dispose of fixed
assets, change employment terms, enter into any material or
long-term contract, guarantee obligations of any third
party, settle or discharge any balance sheet receivable for
less than its stated amount or enter into any other
transaction other than in the regular course of business,
except to comply with the terms of this Agreement, without
the prior written consent of CTI;
(f) Auxer shall grant to CTI and its counsel,
accountants and other representatives, full access during
normal business hours during the period prior to the Closing
to all its respective properties, books, contracts,
commitments and records and, during such period, furnish
promptly to CTI and such representatives all information
relating to Auxer as CTI may reasonably request, and shall
extend to CTI the opportunity to meet with Auxer's
accountants and attorneys to discuss the financial condition
of Auxer; and
(g) Except for the transactions contemplated by this
Agreement, Auxer will conduct its business in the normal
course, and shall not sell, pledge or assign any of its
assets without the prior written consent of CTI.
SECTION 3.2 Affirmative Covenants. Prior to Closing,
Auxer will do the following.
(a) Use its best efforts to accomplish all actions
necessary to consummate this Agreement, including
satisfaction of all the conditions contained in this
Agreement;
(b) Promptly notify CTI in writing of any material
adverse change in the financial condition, business,
operations or key personnel of Auxer, any threatened
material litigation or investigation, any breach of its
representations or warranties contained herein, and any
material contract, agreement, license or other agreement
which, if in effect on the date of this Agreement, should
have been included in this Agreement or in an exhibit
annexed hereto and made a part hereof;
(c) Obtain approval of this Agreement from its
shareholders;
(d) Nominate at the Auxer Special Meeting of
Shareholders a new Board of Directors, nominees to be Eugene
Chiaramonte, Jr., Howard Tapen and Eugene Chiaramonte III;
(e) Reserve, and promptly after the Closing, issue
and deliver to Shareholders or their designees the number of
shares of Auxer common stock required hereunder;
(f) Take the necessary corporate action to amend
its Articles of Incorporation to change its name to Auxer
Industries, Inc. or any other name deemed suitable and
approved by the shareholders; and
(g) Take all other necessary corporate actions to
accomplish those items set forth in Section 1.4 hereof.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF CTI AND SHAREHOLDERS
CTI and Shareholders hereby represent, warrant and
agree that:
SECTION 4.1 Organization of CTI. CTI is a
corporation duly organized, validly existing and in good
standing under the laws of the State of Nevada and is duly
qualified and in good standing in every jurisdiction in
which such qualification is necessary. There are no
corporations or other entities with respect to which (i) CTI
owns any of the outstanding stock or other interest, or (ii)
CTI may be deemed to be in control because of factors or
relationships other than the percentage of outstanding stock
or other interest owned in such entity except as otherwise
disclosed in Exhibit 4.1 annexed hereto and by this
reference made a part hereof. CTI has all requisite
corporate power and authority to enter into this Agreement
and to consummate the transactions contemplated hereby.
SECTION 4.2 Charter Documents. Complete and correct
copies of the Articles of Incorporation and By-Laws of CTI
and all amendments thereto, have been or will be delivered
to Auxer prior to the Closing.
SECTION 4.3 Financial Statements / Assets and
Liabilities. CTI's financial statements for the period ended
December 31, 1994, a copy of which is annexed hereto as
Exhibit 4.3 and by this reference made a part hereof; are
true and complete in all material respects, having been
prepared in accordance with generally accepted accounting
principles applied on a consistent basis for the periods
covered by such statements, and fairly present the financial
condition of CTI and results of its operations for the
periods covered thereby. CTI has good and marketable title
to all of its assets and property to be delivered to Auxer
hereunder (by way of tendering all of its outstanding shares
of common stock to Auxer), free and clear of any and all
liens, claims and encumbrances, except as may be otherwise
set forth herein and in its financial statements or as
otherwise set forth in Exhibit 1.1.
SECTION 4.4 Tax Returns and Payments. All of CTI's
tax returns (federal, state, city, county or foreign) which
are required by law to be filed on or before the date of
this Agreement, have been duly filed or extended with the
appropriate governmental authority. CTI has paid all taxes
to be due on said returns, any assessments made against CTI
and all other taxes, fees and similar charges imposed on CTI
by any governmental authority (other than those, the amount
or validity of which is being contested in good faith by
appropriate proceedings). No tax liens have been filed and
no claims are being assessed with respect to any such taxes,
fees or other similar charges.
SECTION 4.5 Required Authorizations. There have
been or will be timely filed, given, obtained or taken, all
applications, notices, consents, approvals, orders,
registrations, qualifications waivers or other actions of
any kind required by virtue of execution and delivery of
this Agreement by CTI or the consummation by it of the
transactions contemplated hereby.
SECTION 4.6 Compliance with Law and Government
Regulations. CTI is in compliance with all applicable
statutes, regulations, decrees, orders, restrictions,
guidelines and standards affecting its properties and
operations, imposed by the United States of America or any
state to which CTI is subject.
SECTION 4.7 Litigation. There is no material
litigation, arbitration, proceeding or investigation pending
or threatened to which it is a party or which may result in
any material change in the business or condition, financial
or otherwise, of CTI or in any of its properties or assets,
or which if determined against CTI would have a material
adverse effect against CTI, or which might result in any
liability on the part of CTI, or which questions the
validity of this Agreement or of any action taken or to be
taken pursuant to or in connection with the provisions of
this Agreement, and to the best knowledge of CTI, there is
no basis for any such litigation, arbitration, proceeding or
investigation.
SECTION 4.8 Patents, Trade Names and Rights
Exhibit 4.8 annexed hereto and by this reference made a part
hereof, contains a complete list of all patents, trademarks,
service marks, trademark and service mark registrations,
applications and licenses with respect to the foregoing
owned or held by M. CTI has no knowledge of any facts and
nothing has come to its attention that would lead it to
believe that it has infringed or misappropriated or is
infringing upon any trademark, copyright, patent or other
similar right of any person. No claim relating thereto is
pending or to the knowledge of CTI is threatened.
SECTION 4.9 Governmental Consent. No consent,
approval, authorization or order of, or registration,
qualification, designation, declaration or filing with, any
governmental authority on the part of CTI is required in
connection with the execution and delivery of this Agreement
or the carrying out of any transactions contemplated hereby.
SECTION 4.10 Authority . CTI and its Shareholders
representing no less than one hundred percent (100%) of the
issued and outstanding shares of CTI capital stock of
record, have approved this Agreement and duly authorized the
execution and delivery hereof. CTI has full power, authority
and legal right to enter into this Agreement on behalf of
CTI and its Shareholders and to consummate the transactions
contemplated hereby, and all corporate action necessary to
authorize the execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby has
been duly and validly taken. The execution and delivery of
this Agreement, the consummation of the transactions
contemplated hereby and compliance by CTI with the
provisions hereof will not (a) conflict with or result in a
breach of any provisions of, or constitute a default (or an
event which, with notice or lapse of time or both, would
constitute a default) under, or result in the creation of
any lien, security interest, charge or encumbrance upon any
of the properties or assets of CTI under, any of the terms,
conditions or provisions of the Articles of Incorporation or
By-Laws of CTI, or any note, bond, mortgage, indenture,
license, agreement or any instrument or obligation to which
CTI is party or by which it is bound; or (b) violate any
order, writ, injunction, decree, statute, rule or regulation
applicable to CTI or any of its properties or assets.
SECTION 4.11 Ownership of Shares. Shareholders
representing 100% of the CTI capital stock currently issued
and outstanding and which stock is to be transferred to
Auxer under this Agreement, have full power and authority to
transfer such shares of CTI capital stock to Auxer
hereunder, and such shares are free and clear of any liens,
charges, mortgages, pledges or encumbrances and such shares
are not subject to any claims as to the ownership thereof or
any rights, powers or interest therein, by any third party.
SECTION 4.12 Investment Purpose . CTI and
Shareholders represent that the recipients of the Auxer
Shares hereunder are acquiring the shares for investment
purposes only and acknowledges that the Auger Shares issued
hereunder are "restricted securities" and may not be sold,
traded or otherwise transferred without registration under
the 1933 Act or exemption therefrom.
SECTION 4.13 Full Disclosure. None of the
representations and warranties made by CTI and Shareholders
herein, or in any exhibit, certificate or memorandum
furnished or to be furnished by Auxer, on its behalf
contains or will contain any untrue statement of material
fact, or omit any material fact, the omission of which would
be misleading.
ARTICLE V
COVENANTS OF CTI
SECTION 5.1 Conduct Prior to the Closing. Between
the date hereof and the Closing:
(a) Except within the regular course of business,
CTI will not enter into any material agreement, contract or
commitment, whether written or oral, or engage in any
transaction, without the consent of Auxer;
(b) CTI will not declare any dividends or
distributions with respect to its capital stock or amend its
Articles of Incorporation or By-Laws, without the prior
consent of Auxer;
(c) Except within the regular course of business,
CTI will not incur any indebtedness for money borrowed or
issue any debt securities, or incur or suffer to be incurred
any liability or obligation of any nature whatsoever, or
cause or permit any lien, encumbrance or security interest
to be created or arise on or in any of its properties or
assets, without the consent of Auxer;
(d) CTI will comply with all requirements which
federal or state law may impose on it with respect to this
Agreement and the transactions contemplated hereby, and will
promptly cooperate with and furnish information to Auxer in
connection with any such requirements imposed upon the
parties hereto in connection therewith; and
(e) CTI shall grant to Auxer and its counsel,
accountants and other representatives, full access during
normal business hours during the period prior to the Closing
to all its respective properties, books, contracts,
commitments and records and, during such period, furnish
promptly to Auxer and such representatives all information
relating to CTI as Auxer may reasonably request, and shall
extend to Auxer the opportunity to meet with CTI's
accountants and attorneys to discuss the financial condition
of CTI.
SECTION 5.2 Affirmative Covenants. Prior to
Closing, CTI will do the following.
(a) Obtain the approval of its Board of Directors
and Shareholders to proceed with this Agreement;
(b) Use its best efforts to accomplish all actions
necessary to consummate this Agreement, including
satisfaction of all the conditions contained in this
Agreement; and
(c) Promptly notify Auxer in writing of any
materially adverse change in the financial condition,
business, operations or key personnel of CTI, any breach of
its representations or warranties contained herein, and any
material contract, agreement, license or other agreement
which, if in effect on the date of this Agreement, should
have been included in this Agreement.
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.1 Expenses. Whether or not the
transactions contemplated in this Agreement are consummated,
all costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby shall be
paid by the party incurring such expense or as otherwise
agreed to herein.
SECTION 6.2 Brokers and Finders. Each of the
parties hereto represents, as to itself, that no agent,
broker, investment banker or firm or person is or will be
entitled to any broker's or finder's fee or any other
commission or similar fee in connection with any of the
transactions contemplated by this Agreement.
SECTION 6.3 Necessary Actions. Subject to the terms
and conditions herein provided, each of the parties hereto
agree to use all reasonable efforts to take, or cause to be
taken, all action, and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws
and regulations to consummate and make effective the
transactions contemplated by this Agreement. In the event at
any time after the Closing, any further action is necessary
or desirable to carry out the purposes of this Agreement,
the proper officers and/or directors of Auxer or CTI, as the
case may be, shall take all such necessary action.
SECTION 6.4 Indemnification.
(a) CTI and Shareholders agree to defend and hold Auger
harmless against and in respect of any and all claims,
demands, losses, costs, expenses, obligations, liabilities,
damages, recoveries and deficiencies, including interest,
penalties, and reasonable attorney fees, that Auxer shall
incur or suffer, which arise out of, result from or relate
to any material breach of, or failure by CTI and/or
Shareholders to perform any of its representations,
warranties, covenants and agreements in this Agreement or in
any exhibit or other instrument furnished or to be furnished
by CTI and Shareholders under this Agreement.
(b) Auxer agrees to defend and hold CTI and
Shareholders harmless against and in respect of any and all
claims, demands, losses, costs, expenses, obligations,
liabilities, damages, recoveries and deficiencies, including
interest, penalties, and reasonable attorney fees, that CTI
and/or Shareholders shall incur or suffer, which arise out
of, result from or relate to any material breach of, or
failure by Auxer to perform any of its representations,
warranties, covenants and agreements in this Agreement or in
any exhibit or other instrument furnished or to be furnished
by Auxer under this Agreement.
SECTION 6.5 Confidentiality. All parties hereto
agree to keep confidential this Agreement and all
information and documents relating to this Agreement until
such time as the Agreement and the transactions contemplated
hereunder are made public by means of an appropriate press
release or by any other means reasonably assured to make
such information publicly available.
ARTICLE VII
CONDITIONS TO OBLIGATIONS OF TIE PARTIES
The obligations of the parties under this Agreement are
subject to the fulfillment and satisfaction of each of the
following conditions:
SECTION 7.1 Legal Action. No preliminary or
permanent injunction or other order by any federal or state
court which prevents the consummation of this Agreement or
any of the transactions contemplated by this Agreement shall
have been issued and remain in effect.
SECTION 7.2 Absence of Termination. The obligations
to consummate the transactions contemplated hereby shall not
have been canceled pursuant to Article X hereof.
SECTION 7.3 Required Approvals. Auger and CTI shall
have received all such approvals, consents, authorizations
or modifications as may be required to permit the
performance by Auxer and C77 of the respective obligations
under this Agreement, and the consummation of the
transactions herein contemplated, whether from governmental
authorities or other persons, and Auxer and CTI shall each
have received any and all permits and approvals from any
regulatory authority having jurisdiction required for the
lawful consummation of this Agreement.
SECTION 7.4 Blue Sky Compliance. There shall have
been obtained any and all permits, approvals and consents of
the Securities or "Blue Sky" Commissions of any
jurisdictions, and of any other governmental body or agency,
which counsel for Auxer may reasonably deem necessary or
appropriate so that consummation of the transactions
contemplated by this Agreement may be in compliance with all
applicable laws.
ARTICLE VIII
CONDITIONS PRECEDENT TO OBLIGATIONS OF AUXER
All obligations of Auxer under this Agreement are
subject to the fulfillment and satisfaction by CTI and
Shareholders prior to or at the time of the Closing, of each
of the following conditions, any one or more of which may be
waived by Auxer.
SECTION 8.1 Representations and Warranties True at
the Closing. All representations and warranties of CTI and
Shareholders contained in this Agreement will be true and
correct at and as of the time of the Closing, and CTI and
Shareholders shall have delivered to Auxer certificates,
dated the date of the Closing, to such effect and in the
form and substance satisfactory to Auxer, and signed, in the
case of CTI, by its president and secretary.
SECTION 8.2 Performance. The obligations of CTI and
Shareholders to be performed on or before the Closing
pursuant to the terms of this Agreement shall have been duly
performed at such time, and CTI and Shareholders shall have
delivered to Auxer a certificate, dated the date of the
Closing, to such effect and in form and substance
satisfactory to Auxer.
SECTION 8.3 Authority. All action required to be
taken by, or on the part of CTI and its Shareholders to
authorize the execution, delivery and performance of this
Agreement by CTI and Shareholders and the consummation of
the transactions contemplated hereby, shall have been duly
and validly taken.
SECTION 8.4 Absence of Certain Changes or Events.
There shall not have occurred, since the date hereof' any
adverse change in the business, condition, (financial or
otherwise), assets or liabilities of CTI or any event or
condition of any character adversely affecting CTI, and it
shall have delivered to Auxer, certificates, dated the date
of the Closing, to such effect and in form and substance
satisfactory to Auxer and signed, in the case of CTI, by its
president and secretary.
SECTION 8.5 Acceptance by CTI Shareholders. The
holders of record as of the Closing of an aggregate of not
less than one hundred percent (100%) of the issued and
outstanding shares of capital stock of CTI have agreed to
exchange their shares for the Auxer Shares specified herein.
ARTICLE IX
CONDITIONS PRECEDENT TO OBLIGATIONS OF CTI
All obligations of CTI and Shareholders under this
Agreement are subject to the fulfillment and satisfaction by
Auxer, prior to or at the time of Closing, of each of the
following conditions, any one or more of which may be waived
by CTI and Shareholders.
SECTION 9.1 Representations and Warranties True at
the Closing. All representations and warranties of Auxer
contained in this Agreement will be true and correct at and
as of the time of the Closing, and Auxer shall have
delivered to CTI a certificate, dated the date of the
Closing, to such effect and in the form and substance
satisfactory to CTI and Shareholders, and signed, in the
case of Auxer, by its president and secretary.
SECTION 9.2 Performance. Each of the obligations of
Auxer to be performed on or before the Closing pursuant to
the terms of this Agreement shall have been duly performed
at the time of the Closing, and Auxer shall have delivered
to CTI a certificate, dated the date of the Closing, to such
effect and in form and substance satisfactory to CTI and
Shareholders, and signed, in the case of Auxer, by its
president and secretary.
SECTION 9.3 Authority. All action required to be
taken by, or on the part of Auxer, to authorize the
execution, delivery and performance of this Agreement by
Auxer, and the consummation of the transactions contemplated
hereby shall be duly and validly taken.
SECTION 9.4 Absence of Certain Chances or Events.
There shall not have occurred, since the date hereof, any
adverse change in the business, condition, (financial or
otherwise), assets or liabilities of Auxer or any event or
condition of any character adversely affecting Auxer and it
shall have delivered to CTI, certificates, dated the date of
the Closing, to such effect and in form and substance
satisfactory to CTI and Shareholders and signed, in the case
of Auxer, by its president and secretary.
SECTION 9.5 Action by Auxer Shareholders. Prior to
the Closing of this Agreement, the shareholders of Auxer
shall have approved this Agreement and the transactions
contemplated hereunder, approved the amendments to the Auxer
Articles of Incorporation as set forth in Section 1.4 above,
and shall have elected new directors as specified in Section
1.4(d) above. The current directors and officers of Auxer
shall have submitted their resignations as directors and
officers of Auxer effective on the Closing of this
Agreement.
ARTICLE X
TERMINATION
SECTION 10.1 Termination. Notwithstanding anything
herein or elsewhere to the contrary, this Agreement may be
terminated:
(a) By mutual agreement of all the parties hereto at
any time;
(b) By the board of directors of Auxer at any time
prior to the Closing if
(i) a condition to performance by Auxer under
this Agreement or a covenant of CTI and/or Shareholders
contained herein shall not be fulfilled on or before the
time of the Closing or at such other time and date specified
for the fulfillment for such covenant or condition; or
(ii) a material default or breach of this
Agreement shall be made by CTI; or
(iii) if the Closing shall not have taken place
on or prior to May 31, 1995.
(c) By the board of directors of CTI at any time
prior to the Closing if
(i) a condition to CTI's and Shareholders'
performance under this Agreement or a covenant of Auxer
contained in this Agreement shall not be fulfilled on or
before the Closing or at such other time and date specified
for the fulfillment of such covenant or conditions;
(ii) a material default or breach of this
Agreement shall be made by Auger; or
(iii) if the Closing shall not have taken place
on or prior to May 31, 1995.
SECTION 10.2 Effect of Termination. If this
Agreement is terminated, this Agreement, except as to
Section 11.1 and Section 11.2, shall no longer be of any
force or effect and there shall be no liability on the part
of any party or its respective directors, officers or
stockholders; provided however, that in the case of a
Termination without cause by a party or a termination
pursuant to Sections 10.1(b)(i) or 10.1(c)(i) hereof because
of a prior material default under or a material breach of
this Agreement by another party, the damages which the
aggrieved party or parties may recover from the defaulting
party or parties shall in no event exceed the amount of
out-of-pocket costs and expenses incurred by such aggravated
party or parties in connection with this Agreement, and no
party to this Agreement shall be entitled to any injunctive
relief.
ARTICLE XI
MISCELLANEOUS
SECTION 11.1 Cost and Expenses. All costs and
expenses incurred in connection with this Agreement will be
paid by the party incurring such expenses. In the event of
any termination of this Agreement pursuant to Section 10.1,
subject to the provisions of Section 10.2, Auxer and CTI
will each bear their own respective expenses.
SECTION 11.2 Extension of Time: Waivers. At any time
prior to the Closing date:
(a) Auxer may (i) extend the time for the
performance of any of the obligations or other acts of CTI
and/or Shareholders, (ii) waive any inaccuracies in the
representations and warranties of CTI and Shareholders
contained herein or in any document delivered pursuant
hereto by CTI and Shareholders, and (iii) waive compliance
with any of the agreements or conditions contained herein to
be performed by CTI and Shareholders. Any agreement on the
part of Auxer to any such extension or waiver shall be valid
only if set forth in an instrument, in writing, signed on
behalf of Auxer;
(b) CTI may (i) extend the time for the performance of
any of the obligations or other acts of Auxer, (ii) waive
any inaccuracies in the representations and warranties of
Auxer contained herein or in any document delivered pursuant
hereto by Auxer and (iii) waive compliance with any of the
agreements or conditions contained herein to be performed by
Auxer. Any agreement on the part of CTI and to any such
extension or waiver shall be valid only if set forth in an
instrument, in writing, signed on behalf of CTI.
SECTION 11.3 Notices. Any notice to any party
hereto pursuant to this Agreement shall be in writing and
given by Certified or Registered Mail or by facsimile,
addressed as follows:
The Auger Gold Mines
c/o Leonard E. Neilson
Attorney at Law
1121 East 3900 South, Suite 200
Salt Lake City, Utah 84124
CT Industries, Inc.
P.O. Box 22895
Newark, New Jersey 07101-9998
Additional notices are to be given as to each party, at
such other address as should be designated in writing
complying as to delivery with the terms of this Section
11.3. All such notices shall be effective when sent,
addressed as aforesaid.
SECTION 11.4 Parties in Interest. This Agreement
shall inure to the benefit of and be binding upon the
parties hereto and the respective successors and assigns.
Nothing in this Agreement is intended to confer, expressly
or by implication, upon any other person any rights or
remedies under or by reason of this Agreement.
SECTION 11.5 Counterparts. This Agreement may be
executed in one or more counterparts, each of which shall be
deemed an original and together shall constitute one
document. The delivery by facsimile of an executed
counterpart of this Agreement shall be deemed to be an
original and shall have the full force and effect of an
original executed copy.
SECTION 11.6 Severability. The parties hereto agree
and affirm that none of the provisions herein is dependent
upon the validity of any other provision, and if any part of
this Agreement is deemed to be unenforceable, the remainder
of the Agreement shall remain in full force and effect.
SECTION 11.7 Headings. The Article and Section
headings are provided herein for convenience of reference
only and do not constitute a part of this Agreement.
SECTION 11.8 Governing Law. This Agreement shall be
governed by the laws of the State of Utah.
SECTION 11.9 Survival of Representations and
Warranties. All terms, conditions, representations and
warranties set forth in this Agreement or in any instrument,
certificate, opinion, or other writing providing for in it,
shall survive the Closing and the delivery of the Auxer
Shares issued hereunder at the Closing, for a period of one
year from the Closing regardless of any investigation made
by or on behalf of any of the parties hereto.
SECTION 11.10 Assignability. This Agreement shall
not be assignable by any of the parties hereto without the
prior written consent of the other parties.
SECTION 11.11 Amendment. This Agreement may be
amended with the approval of Shareholders and the boards of
directors of Auxer and C77 at any time before or after
approval thereof by stockholders of Auxer, if required, and
CTI; but after such approval by the Auxer shareholders, no
amendment shall be made which substantially and adversely
changes the terms hereof. This Agreement may not be amended
except by an instrument, in writing, signed on behalf of
each of the parties 'hereto.
IN WITNESS WHEREOF, the parties hereto have executed and
delivered this Agreement in a manner legally binding upon
them as of the date first above written.
"Auxer"
THE AUXER GOLD MINES Attest:
By:
Its: President Secretary
"CTI"
CT INDUSTRIES, INC.
By: (s) Eugene Chiaramonte (s) Howard Tapen
----------------------- -----------------
President Secretary
"Shareholders"
(s) Eugene Chiaramonte
------------------------
EUGENE CHIARAMONTE, JR.
(s) Howard Tapen
-----------------
HOWARD TAPEN
EXHIBIT 10.2 - ACQUISITION AGREEMENT OF HARVEY-WESTBURY
CORP.
- - -------------------------------------------------------
ACQUISITION AGREEMENT OF
HARVEY-WESTBURY CORP.
BY
INDUSTRIES, INC.
This agreement and plan of acquisition (the
"Agreement") dated October 25. 1996. by and between
Harvey-Westbury Corp., a New York corporation, the address
of which is 15 Heisser Court, Farmingdale, New York 1 1738,
("H/W"), and Auxer Industries, Inc.. an Idaho corporation,
the address of which is 230 Dayton Street, Ridgewood, New
Jersey 07450 ("Auxer" or the "Acquiring Corporation") [H/W
and Auxer being herein sometimes called the "Parties" or
"Constituent Corporations"].
I. ACQUIRING CORPORATION; CERTIFICATE OF INCORPORATION AND
BY-LAWS; BOARD OF DIRECTORS; OFFICERS.
1.01 Acquiring Corporation.
The corporation which shall be the acquiring
corporation is Auxer.
1.02 Certificate of Incorporation and By-laws.
The certificate of incorporation, as amended, and
the by-laws of Auxer as contained in Attachment "A" are in
effect at the date of the Agreement are the certificate of
incorporation and the by-laws of the Acquiring Corporation
until they are amended.
1.03 Board of Directors. From the date of the Agreement
until December 31, 1999, the Auxe- board of directors shall
consist of three directors.
II. STATUS AND CONVERSION OF SECURITIES AND PROVISION FOR
ADDITIONAL CONSIDERATION
2.01 Shares of H/W
(a) H/W Common Stock. All the shares of the
common stock of H/W (being 200 Shares) ("H/W Shares") shall
be converted into and exchanged for 170,000 shares of common
stock, of Auxer ("Auxer Shares" or "Auxer Common Stock") to
be issued to the sole shareholder of H/W, Gerald J. Harvey
("Harvey") or his designee(s). Harvey and all designee(s) or
spouses of such designees(s) which receive Auxer Shares
pursuant to this paragraph agree that they will not enter
any of the businesses in which H/W is presently involved for
a period of three years in the "tri-state" area of New York,
New Jersey and Connecticut.
(b) Surrender and Exchange, of H/W Shares. Subject
to the provisions of Paragraphs 2.01 (b) and (c), each
holder of an outstanding certificate or certificates (the
"Old Certificates") therefore representing H/W Shares ("H/W
Shareholder"), upon surrender thereof shall receive in
exchange therefore a certificate or certificates (the "New
Certificates") representing the number of whole Auxer Shares
into and for which the H/W Shares therefore represented by
such surrendered Old Certificates have been converted. There
are no dividends due to holders of H/W Shares. H/W shall
provide written instructions to Auxer indicating the number
of' Auxer Shares to be issued to Harvey and/or his
designee(s). Shares not surrendered shall be marked as
canceled on the stock registry of the Company.
(c) "Current Market Price Per Share" of one
share of Auxer Common Stock shall be the average closing
price of the shares of the NASD Electronic Bulletin Board
for the five trading days preceding the date of the
Agreement.
(d) "Value Per Share" of one share of Auxer
Common Stock shall be one-half the Current Market Price Per
Share.
(e) No certificates or scrip for fractional
Auxer Shares will be issued and no payment will be made in
respect thereof. Any fractional shares which result shall be
rounded up to the nearest whole Auxer Share. If more than
one certificate representing H/W Shares shall be
surrendered for the account of the same Shareholder. the
number of full Auxer Shares for which certificates shall be
delivered to a Shareholder shall be computed on the basis of
the aggregate number of shares represented by the
certificates surrendered by thatShareholder.
(f) In the event. Harvey, during the initial six
months after the Auxer Shares received pursuant to paragraph
201(b) become publicly tradable, sells such stock in
brokerage transactions at market for an average price less
than S 1.50 per share, Auxer will, at Harvey's option,
either transfer additional shares to Harvey so that the
average sales price of all his Auxer Shares equals $1.50 per
share or pay Harvey the difference between such average
sales price and S 1.50 in cash.
It is understood by the Parties that the closing of the
transactions contemplated herein shall take place
simultaneously with the execution of the Agreement.
2.02 Additional Consideration
Auxer will assume and promptly pay the following
liabilities as of the date of the Agreement related to:
commission sales personnel not to exceed $37,000
accounts payable not to exceed $55,000 (of which the payment
of legal fees due Hollenberg, Levin et al of $3,362.50 will
be paid simultaneously with the closing of the transactions
contemplated by the Agreement); payroll not to exceed
$5,500; and landlord not to exceed $5,900.
In the event Auxer pays liabilities of H/W which equal
these limits for any group of creditors for accounts payable
only, Harvey will assume any additional liabilities to that
group. Auxer will document all payments by statements and
canceled checks.
III. COVENANTS
3.01 Covenants of Auxer
Auxer covenants, that:
(a) Certificate of Incorporation. No amendment,
change of state of incorporation or other change has been
made in the certificate of incorporation of Auxer as
attached to the Agreement.
(b) Securities. There are 8,079,929 Shares
outstanding.
(c) Dividends and Purchases of Stock. No
dividend, distribution or stock split or recapitalization
has been authorized, declared, paid or effected by Auxer in
respect of the outstanding Auxer Shares.
(d) Borrowing Money. Auxer has not borrowed,
guaranteed the borrowing of money. engaged in any
transaction or entered into any material agreement, except
in the ordinary course of business.
(e) Access. Auxer has afforded the officers,
directors, employees, counsel, agents, investment bankers,
accountants and other representatives of H/W free and full
access to the proper ties, books and records of Auxer, has
permitted them to make extracts from and copies of
such books and records and has furnished H/W with such
additional financial and operating data and other
information as to the financial condition, results or
operations. business, properties. assets, liabilities or
future prospects of Auxer as H/W from time to
time has requested.
(f) Confidentiality. Auxer insures that, for a
period of six months from the date of the Agreement, all
confidential information which Auxer or any of its officers,
directors, employees, counsel, agents, investment barkers,
or accountants may now possess or create or obtain relating
to the financial condition, results of operations, business
properties, assets. liabilities, or future prospects of
H/W, any affiliate or any customer or supplier of H/W
shall not be published, disclosed, or made accessible to any
other person or entity at any time in each case without the
prior consent of Harvey subject to paragraphs 3.01 (g) and
(h).
(g) Public Statements. Before Auxer releases any
information concerning the Agreement. or any of the other
transactions contemplated by the Agreement which is intended
or may result in public dissemination thereof, Auxer, for a
period of six months from the date of the Agreement, shall
cooperate with Harvey, shall furnish drafts of all documents
or proposed oral statements to Harvey for comments, and
shall not release any such information without the written
consent of Harvey. Nothing contained herein shall prevent
Auxer from releasing any information if required to do so by
federal or state securities law.
(h) Material for Registration Statement. Auxer
represents that any future filings to be made by it with the
Securities and Exchange Commission ("SEC") will be prepared
in accordance with the then existing requirements of the
Securities Act of 1933 (the "Securities Act"), and/or the
Securities Exchange Act of 1934 (the "Securities Exchange
Act") and the rules and regulations thereunder. Auxer shall
furnish or cause to be furnished, for inclusion in any
registration statement required to be filed with the SEC
covering the Acquisition, information about Auxer or Auxer's
security holders as may be required and shall continue to
furnish or cause to be furnished such information for the
purposes of supplementing any such proxy statement or
amending any registration statement.
(i) Indemnification. Auxer agrees to indemnify
and hold harmless H/W and its present officers, directors,
employees, agents and counsel and each person who controls
H. W within the meaning of Section 15 of the Securities Act
of Section 20(a) or the Securities Exchange Act and if the
Acquisition is abandoned or terminated, except solely as a
result of a breach of the Agreement by H/W and/or Harvey,
against any and all losses, liabilities, claims, damages and
expenses whatsoever, including attorneys' fees and expenses,
as and when incurred arising out of, based upon or in
connection with any untrue statement or alleged untrue
statement of a material fact relating to and supplied by
Auxer contained in any post-effective registration
statement, proxy statement or any amendment
or supplement thereto or any application or other document
or communication filed in any jurisdiction under the
"blue-sky," securities, or takeover laws thereof or filed
with the SEC. The foregoing agreement to indemnify shall be
in addition to any liability Auxer may otherwise have,
including liabilities arising under the Agreement.
3.02 Covenants of H/W From the Date of the Agreement
(a) Certificate of Incorporation and By-laws. No
amendment has been made in the certificate of incorporation
or by-laws of H/W other than as attached hereto as
Attachment "B".
(b) Dividends and Purchases of Stock. No
dividend, distribution or stock split or recapitalization
has been authorized, declared, paid or effected by H/W in
respect of the outstanding H/W Shares.
(c) Borrowing Money. H/W has not borrowed,
guaranteed the borrowing of money, engaged in any
transaction or entered into any material agreement, except
in the ordinary course of business as disclosed in the
financial statements delivered to Auxer.
(d) Access. H/W has afforded the officers,
directors, employees, counsel, agents, investment bankers,
accountants and other representatives of Auxer and lenders,
investors and prospective lenders and investors free and
full access to the properties, books and records of H/W and
has permitted them to make extracts from and copies of such
books and records, and will from time to time furnish Auxer
with such additional financial and operating data and other
information as to the financial condition, results or
operations, business, properties, assets, liabilities or
future prospects of H/W as Auxer from time to time has
requested. H/W will cause the independent certified public
accountants of H/W to make available to Auxer and its
independent certified public accountants all work
papers relating to H/W referred to herein.
(e) Conduct of Business. H/W has used reasonable
efforts to preserve the business operations of H/W intact,
to keep available the services of is present personnel, to
preserve in full force and effect the contracts, agreements,
instruments, leases, licenses, arrangements and
understandings of H/W and to preserve the good will to
others having business relations with it.
(f) Advice of Changes. H/W has advised Auxer of
any fact or occurrence or any pending or threatened
occurrence of which it obtains knowledge and (i) which,
would make the performance by any party of a covenant
contained in the Agreement impossible or make such
performance materially more difficult than in the absence of
such fact or occurrence or (ii) which would cause a
condition to any party's obligation under the Agreement not
to be fully satisfied.
(g) Confidentialirv. H/W shall insure that all
confidential information which H/W or any of its officers,
directors, employees, counsel, agents, investment bankers,
or accountants may now possess or may hereafter create or
obtain relating to the financial condition, results of
operations, business properties, assets, liabilities, or
future prospects of Auxer, or any affiliate shall not be
published, disclosed, or made accessible to any other person
or entity at any time or used in the business and for the
benefit of H/W in each case without the prior written
consent of Auxer.
(h) Public Statements. Before the present
officers or ,directors of H/W release any information
concerning the Agreement, or any of the other transactions
contemplated by the Agreement which is intended for or may
result in public dissemination thereof, they shall
cooperate with Auxer, shall furnish drafts of all documents
or proposed oral statements to Auxer for comments, and shall
not release any such information without the written
consent of Auxer. Nothing contained herein shall prevent H/W
from releasing any information if required to do so by law.
(i) Material for Registration Statement. In the
event Auxer files a registration statement with the SEC,
Harvey will provide such information relating to H/W as may
be required which he can obtain without unreasonable effort
or more than nominal cost.
(j) Indemnification. HAW agrees to indemnify
Auxer and its officers, directors, employees, agents and
counsel against any and all losses, liabilities, claims,
damages and expenses whatsoever, including counsel's fees
and expenses as and when incurred arising out of, based upon
or in connection with representations which induced Auxer to
enter into the Agreement.
(k) Capitalization. H/W's capital structure
consists of 1,000 shares of common stock without par value
of which 200 shares are issued and outstanding. Each
outstanding share is validly authorized, validly issued,
fully paid and, nonassessable, has not been issued and
is not owned or held in violation of any preemptive right of
shareholders.
IV. REPRESENTATIONS AND WARRANTIES
4.01 Certain Representations and Warranties of Auxer
Auxer represents and warrants to H/W as follows:
(a) Organization and Qualification. Auxer is
validly existing and in good standing and has authority to
own, lease, license and use its properties and assets and to
carry business in which it is now engaged and will continue
to be duly qualified.
(b) Capitalization. Auxer's capital structure
consists of 50,000,000 shares of common stock $.001 par
value per share of which 8,092,929 shares are issued and
outstanding. Each outstanding Auxer Share is validly
authorized, validly issued, fully paid and, nonassessable,
has not been issued and is not owned or held in violation of
any preemptive right of shareholders.
(c) Financial Condition. Auxer has delivered to H/W
true and correct copies of its financial statements. The
financial statements have been prepared in accordance with
generally accepted accounting principles consistently
applied throughout the periods involved and are in
accordance with the books and records of Auxer. Since the
date of the financial statements:
i. There has at no time been a material
undisclosed adverse change in the financial condition of
Auxer.
ii. Auxer has not declared, paid or
effected any dividend or liquidating or other distribution
in respect of its shares of common stock or any direct or
indirect redemption, purchase, or other acquisition of any
Auxer Shares.
iii. The operations and business of Auxer
have been conducted in all respects only in the ordinary
course.
iv. Auxer has not suffered an
extraordinary loss not disclosed in its financial statements
(whether or not covered by insurance) or waived any right of
substantial value.
There is no fact known to Auxer which materially
adversely affects or in the future (as far as Auxer can
foresee) may materially adversely affect the financial
condition, results of operations, business, properties,
assets, liabilities, or future prospects of Auxer.
(d) Tax and Other Liabilities. Auxer has no
undisclosed liability of any nature, accrued or
contingent, including without limitation liabilities for
federal, state or local taxes and liabilities.
(e) Litigation and Claims. There is no undisclosed
litigation, arbitration, claim, governmental or other
proceeding (formal or informal) or investigation pending,
threatened or in prospect (or any basis therefor known to
Auxer) with respect to Auxer or its business or assets.
(f) Properties. Auxer has title to or has leased
the real and personal property as set forth in the financial
statements.
(g) Patent,. Trademarks, Etc. Auxer's ownership or
patents. trademarks or any other intellectual property is as
listed on its financial statements.
(h) Authoritv to Enter and Perform the Agreement.
Auxer has all requisite power and authority to execute,
deliver and perform the Agreement. All necessary corporate
proceedings of Auxer have been duly taken to authorize the
execution, delivery and performance of the Agreement by
Auxer, other than approval of the holders of Auxer Shares.
The Agreement constitutes the legal, valid and binding
obligation of Auxer and is enforceable as to it in
accordance with its terms and no consent, authorization,
approval, order, license, certificate of or from, or
declaration or filing with any federal, state, local or
other government authority or any court or other tribunal is
required by Auxer.
(i) Auxer warrants that in the event it files a
registration statement with the SEC, it will include on a
"piggy-back" basis the Auxer Shares issued to Harvey and/or
designee(s) pursuant to Paragraph 201 (a) of the Agreement
at no cost to Harvey except underwriter's commissions, if
any.
4.02 Certain Representations and Warranties of H/VI/
H/W represents and warrants to Auxer as follows:
(a) Organization and Qualification. H/W has no
subsidiaries. H/W is a corporation duly organized, validly
existing and in good standing under the laws of The State of
New York with all requisite power and authority and all
necessary consents, authorization, approvals, orders,
licenses, certificates and permits of and from, and
declarations and filings with, all federal, state, local and
other governmental authorities to own, lease, license and
use its properties and assets and to carry on the business
in which it is now engaged and the business in which it
contemplates engaging. H/W is duly qualified to transact the
business in which it is engaged and is in good standing as a
foreign corporation in every jurisdiction in which its
ownership, leasing, licensing, or use of property or assets
or the conduct of its business makes such qualification
necessary.
(b) Capitalization. Each of the outstanding H/W
Shares is validly authorized, validly issued, fully paid
and, nonassessable, has not been issued and is not owned or
held in violation of any preemptive right of shareholders.
The names of stockholders and the number of shares held by
each are listed on Attachment "C."
(c) Financial Condition. H/W has delivered to
Auxer true and correct copies of its unaudited financial
statements for the years ended December 31, 1994 and 1995
and for the eight months ended August 31, 1996 and a list of
all receivables and payables as of August 31, 1996 and a
schedule of inventory as of that date. Since the date of the
financial statements:
i. There has at no time been a material adverse
change in the financial condition of H/W.
ii. H/W has not authorized. declared, paid or
effected any dividend or liquidating or other distribution
in respect of its shares of common stock or any direct or
indirect redemption, purchase, or other acquisition of any
H/W shares of common stock. All accrued but unpaid dividends
have been waived by the H/W shareholders entitled to receive
such dividends in connection with the Agreement.
iii. H/W has not suffered an extraordinary loss
(whether or not covered by insurance) or waived any right
of substantial value.
There is no fact known to H/W which materially
adversely affects the financial condition, results of
operations, business, properties, assets, liabilities, or
future prospects of H/W.
(d) Tax and Other Liabilities. H/W has no
undisclosed liability of any nature, accrued or contingent,
including without limitation liabilities for federal, state
or local taxes and liabilities to customers or suppliers,
other than the following:
i. Liabilities for which full provision has
been made on the financial statements of H/W
ii. Other liabilities arising since the last
H/W financial statement in the ordinary course of business.
Without limiting the generality of the foregoing, the
amounts set up as provision for taxes on the last H/W
financial statement are sufficient for all accrued and
unpaid taxes of H/W.
(e) Litigation and Claims. There is no litigation,
arbitration, claim, governmental or other proceeding (formal
or informal) or investigation pending, threatened or in
prospect which adversely impact H/W or its business or
assets.
(f) Properties. H/W has good and marketable title
to all property and assets used in its business or owned by
it, as listed on its financial statements. The real and
other properties and assets (including intangibles) leased
or licensed by H/W constitute all such properties
and assets which are necessary to the business of H/W as
presently conducted.
(g) Contracts and Other Instruments. H/W has made
available to Auxer through the financial statements or
otherwise in writing, all contracts, agreements, leases,
instruments, licenses, arrangements or understandings with
respect to H/W, listed on its financial statements
and otherwise. H/W is not a party nor is it bound by any
contract, agreement, instrument, lease, license,
arrangement, or understanding which may, in the future, have
a material adverse effect on the financial condition,
results of operations, business, properties, assets,
liabilities or future prospects of H/W.
(h) Patents, Trademarks, Etc. H/W's ownership of
patents, trademarks or any other intellectual property (if
any) is listed on its financial statements.
(i) Authority to Enter into and Perform the
Agreement. H/W has all requisite power and authority to
execute, deliver and perform the Agreement. All necessary
corporate proceedings of H/W have been duly taken to
authorize the execution, delivery and performance of the
Agreement by H/W, other than approval of the holders of H/W
Common Stock. The Agreement constitutes the legal, valid and
binding obligation of H/W and is enforceable as to it in
accordance with its terms and no consent, authorization,
approval, order, license, certificate or permit of or from,
or declaration or filing with any federal, state, local or
other government authority or any court or other tribunal is
required by H/W.
V. ABANDONMENT AND TERMINATION
5.01 Right of H/W to Abandon.
H/W's Board of Directors shall have the right to
abandon or terminate the Acquisition if any of the following
shall not be true.
(a) Accuracy of Representations and Compliance with
Conditions. All representations and warranties of Auxer
contained in the Agreement shall be accurate regardless of
knowledge or lack thereof on the part of Auxer or changes
beyond its control; Auxer shall have performed and complied
with all covenants and agreements and satisfied all
conditions required to be performed and complied with by it
by the Agreement; and H/W shall have received a certificate
executed by the chief executive officer and the chief
financial officer of Auxer dated this date to that effect,
(b) Opinion of Auxer's Counsel. H/W shall have
received a letter of Auxer's Counsel, in form and substance
satisfactory to H/W and its counsel, to the effect that:
i. Auxer is an Idaho corporation validly
existing and in good standing with all requisite corporate
power and authority to own, lease, license and use its
properties and assets and to carry on the business in which
it is now engaged;
ii. Auxer is and will be duly qualified to
transact the business in which it is engaged and is not
required to register to do business in any other
jurisdiction;
iii. The authorized and outstanding capital
stock of Auxer is as set forth in the Agreement and all the
outstanding shares of the capital stock of Auxer are validly
authorized, validly issued, fully paid and nonassessable;
iv. All necessary corporate proceedings of
Auxer have been duly taken to authorize the execution,
delivery and performance of the Agreement by Auxer;
v. Auxer has all requisite corporate power
and authority to execute, deliver and perform the Agreement
and the Agreement has been duly authorized, executed
and delivered by Auxer, constitutes the legal, valid and
binding obligation of Auxer, and (subject to applicable
bankruptcy, insolvency and other laws affect-
ing the enforceability of creditors' rights generally) is
enforceable as to Auxer in accordance with its terms;
vi. The execution, delivery and performance of
the Agreement by Auxer will not violate or result in a
breach of any term of Auxer's certificate of incorporation
or of its by-laws or violate, result in a breach of,
conflict with, or (with or without the giving of notice or
the passage of time or both) entitle any party to terminate
or call a default under, entitle any party to rights or
privileges that did not exist immediately before the
Agreement was executed under, or create any obligation on
the part of Auxer under the terms of any agreement that did
not exist immediately before the Agreement was executed;
vii. After reasonable investigation, Counsel
has no actual knowledge of any consent, authorization,
approval, order, license, certificate or permit of or from
or declaration or filing with any federal, state, local or
other governmental authority or any court or other tribunal
which is required of Auxer for the execution, delivery or
performance of the Agreement by Auxer.
viii. After reasonable investigation, Counsel
has no actual knowledge of any litigation, arbitration,
government or other proceeding (formal or informal over and
above the disclosure contained in the financial statements),
or investigation pending or threatened with respect to Auxer
or any of its businesses, properties or assets than can
reasonably be expected to result in any materially adverse
change in the financial condition-, results of operations,
business, properties, assets, liabilities or future
prospects of Auxer or seeks to prohibit or otherwise
challenge the Agreement or the consummation of the
Acquisition or any of the other transactions contemplated
hereby or to obtain substantial damages with . respect
thereto, except as disclosed in the Agreement.
5.02 Right of Auxer to Abandon.
Auxer's Board of Directors shall have the right to
abandon or terminate the Acquisition if any of the following
shall not be true.
(a) Accuracy of Representations and Compliance
with Conditions. All representations and warranties of H/W
contained in the Agreement shall be accurate when made and
H/W shall have performed and complied with all covenants and
agreements and satisfied all conditions required to be
performed and complied with by it by the Agreement; and
Auxer shall have received a certificate executed by the
chief executive officer and the chief financial officer of
H/W dated the date of the Agreement to that effect.
(b) Certificate of the President of H/W. Auxer
shall receive a certificate of the Chairman of the Board and
Sole Stockholder of H/W in' form and substance satisfactory
to Auxer and its counsel, to the effect that:
i. H/W is a corporation validly existing and in
good standing under the laws of the State of New York with
all requisite corporate power and authority to own,
lease, license and use its properties and assets and to
carry on the business in which it is now engaged.
ii. H/W is qualified to transact the business in
which it is engaged and is registered as a foreign
corporation in all jurisdictions in which it does business.
iii. The authorized and outstanding capital stock
of H/W is as set forth in the Agreement and all the
outstanding shares of the capital stock of H/W are validly
authorized, validly issued, fully paid and nonassessable;
iv. All necessary corporate proceedings of H/W have
been duly taken to authorize the execution, delivery and
performance of the Agreement by H/W;
v. H/W has all requisite corporate power and
authority to execute, deliver and perform the Agreement and
the Agreement has been duly authorized, executed
and delivered by H/W, constitutes the legal, valid and
binding obligation of H/W, and (subject to applicable
bankruptcy, insolvency and other laws affecting the
enforceability of creditors' rights generally) is
enforceable as to H/W in accordance with its terms;
vi. The execution, delivery and performance of the
Agreement by H/W will not violate or result in a breach of
any term of H/W's certificate of incorporation or of its
by-laws or violate, result in a breach of, conflict with, or
(with or without the giving of notice or the passage of time
or both) entitle any party to terminate or call a default
under, entitle any party to rights or privileges that did
not exist immediately before the Agreement was executed
under, or create any obligation on the part of H/W under the
terms of any agreement that did not exist immediately before
the Agreement was executed;
vii. He has no actual knowledge of any consent,
authorization, approval, order, license, certificate or
permit of or from or declaration or filing with any federal,
state, local or other governmental authority or any court or
other tribunal which is required of H/W for the execution,
delivery or performance of the Agreement by WW.
viii. He has no actual knowledge of any litigation,
arbitration, government or other proceeding (formal or
informal), or investigation pending or threatened with
respect to H/W or any of its businesses, properties or
assets than can reasonably be expected to result in any
materially adverse change in the financial condition,
results of operations, business, properties, assets,
liabilities or future prospects of H/W or seeks to prohibit
or otherwise challenge the Agreement or the consummation of
the Acquisition or any of the other transactions
contemplated hereby or to obtain substantial damages with
respect thereto, except as disclosed in the Agreement.
VI. MISCELLANEOUS.
6.01 Further Actions
At any time and from time to time, each Party
agrees, at its expense, to take such actions and to execute
and deliver such documents as may be reasonably necessary to
effectuate the purposes of the Agreement.
6.02 Availability of Equitable Remedies
Since a breach of the provisions of the Agreement
could not adequately be compensated by money damages, either
Party shall be entitled, in addition to any other right or
remedy available to it, to an injunction restraining such
breach or threatened breach and to specific performance of
any such provision of the Agreement, and, in either case, no
bond or other security shall be required in connection
therewith, and the Parties hereby consent to the issuance of
such an injunction and to the ordering of specific
performance.
6.03 Modification
The Agreement sets forth the entire understanding
of the Parties with respect to the subject matter hereof.
The Agreement may be amended by a written instrument
executed by H/W and Auxer with the approval of their
respective Boards of Directors. A change in the number of
shares issued or the number and exercise price of options
due to a stock split or recapitalization of Auxer ratably
affecting all its stockholders and option holders will not
be construed as a modification of the Agreement.
6.04 Notices
Any notice or other communication required or permitted
to be given hereunder shall be in writing and shall be
mailed by certified mail, return receipt requested or
overnight delivery or courier service or delivered in person
or by facsimile against receipt to the Party to whom it is
to be given at the address of such Party set forth in the
preamble to the Agreement (or to such other address (or
facsimile telephone number) as the party shall have
furnished in writing to the other Party. Any notice shall be
addressed to the attention of the Corporate Secretary.
EXHIBIT 10.3 - CARQUEST PRODUCTS, INC. LICENSE AGREEMENT
- - --------------------------------------------------------
AGREEMENT
THIS AGREEMENT (the "Agreement") is made and entered
into this 10th day of October 1998, by and between CARQUEST
Products, Inc., a corporation organized and existing under the
laws of the state of North Carolina (the "Company"), and
Harvey Westbury, a corporation organized and existing under
the laws of the state of ________ (the "Supplier").
BACKGROUND
The Company is licensed by The CARQUEST Corporation
("CARQUEST Corp.*) to use and to grant licenses to use certain
trademarks owned by CARQUEST Corp. The Company has developed
and will continue to develop a program identified by such
marks to assist its Members (the "Members") and their
customers in the promotion,
marketing, distribution and sales of quality automotive parts,
supplies, accessories, and equipment. Each Member is a
wholesale distributor of automotive replacement parts.
The Company desires by this Agreement to permit the Supplier
to use the trademark CARQUEST, as shown on Exhibit, A hereto
on certain automotive parts to be produced packaged by the
Supplier for the Company and/or one or more Members.
NOW, THEREFORE, in consideration of the premises and the
mutual covenant and agreements herein contained, and other
good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the Company and Supplier
agree as follows:
SECTION 1
License
1.1 Grant of License. Subject to the terms and
conditions of the Agreement the Company hereby grants to the
Supplier the non-exclusive, nontransferable license and right
to use the mark "CARQUEST" and design, on merchandise items
approved by the Company (the "Products") to be manufactured,
sold or otherwise provided by the Supplier to the Company
and/or Members. This license and right shall continue with
respect to Supplier until the termination of the Agreement
pursuant to the terms hereof.
1.2 Ownership of Mark and Design. The Supplier
acknowledges The CARQUEST Corporation's exclusive right, tide
and interest in and to the mark "CARQUEST" and design; and the
Supplier shall not at any time do or cause to be done any act
or thing contesting or in any way impairing or tending to
impair any part of such right, title, and interest.
The Supplier acknowledges the Company's exclusive
right, title and interest in and to the mark "CARQUEST" and
design, and the rights of The CARQUEST Corporation, which are
licensed for purposes of this Agreement to the Company to the
marks
"CARQUEST", and the Supplier shall not at any time do or cause
to be done any act or thing contesting or in any way impairing
or tending to impair any part of such rights, title and
interest.
1.3 Rules, Regulations and Policies. The Supplier agrees
to comply with such reasonable rules, regulations and policies
as may from time to time be adopted and established by the
Company with respect to the use of "CARQUEST", in the sale of
the Products by the Supplier to the Company or to any Member.
1.4 Adverse Claims. The Supplier shall immediately
notify the Company in writing of any adverse claim made
against it with respect to the use of "CARQUEST".
1.5 Assignment and Use. The Supplier may not sell,
transfer, assign or sublicense its license and right to use
"CARQUEST".
SECTION 2
Additional Obligations of Supplier
2.1 Insurance. The Supplier represents, warrants and
agrees that it shall at all times during the continuation of
this Agreement maintain in full force and effect product
liability insurance in a minimum amount of one million dollars
($1,000,000) covering the Products. Such insurance shall
protect the interest of the Company, The CARQUEST Corporation,
and Members. Such insurance shall name as insureds, either
directly or by way of endorsement, the Company, The CARQUEST
Corporation, and Members. In addition, the Supplier, upon the
Company's request, agrees to furnish evidence of such
insurance to the Company.
2.2 Patent Specifications, Other Rules and Laws. The
Supplier represents, warrants, and agrees that it has not and
will not misappropriate or infringe upon the intellectual
property ('Including, without limitation, copyrights, patent
rights and trade secrets) of others in connection with the
manufacture and sale of the Products. The Supplier further
represents, warrants and agrees that the Products will comply
with all applicable laws, ordinances, rules, arid regulations,
either state, federal or local. The Supplier shall provide any
and all information needed by the Company to comply with all
applicable law ordinances, rules and regulations, either
state, federal or local. This information will include, but
not be limited to, the lawful handling, storage,
transportation and sale of the Products.
2.3 Quality of Products. The Supplier
represents, warrants and agrees that the Products will be
merchantable and fit for the purpose or purposes intended.
2.4 Indemnification. (a) The Supplier shall
indemnify and hold harmless the Company and each Member
against any and all liabilities, losses, damages, costs, and
expenses, including court costs and reasonable attorney's
fees, that the Company or any Member may incur or sustain by
reason of any claim, demand, legal actions or judgment
based upon or arising out of (i) any alleged or actual
misappropriation or infringement by the Supplier of the trade
secrets, patent rights, trademarks, copyrights or other
industrial property rights of others in connection with the
Supplier's manufacture and/or sale of the Products, or (ii)
any alleged or actual defects of any kind in the design,
manufacture, preparation, or handling of the Products;
provided that the Supplier shall not be liable for the gross
negligence or willful misconduct of the Company or any Member.
The Supplier agrees to defend any action, suit, or proceeding
brought against the Company or any Member insofar as such
action, suit, or proceeding is based upon or arises out of the
matters referred to in this section 2.4(a); provided that,
upon the Supplier's assumption of such defense, the Supplier
shall not be liable for any attorney's fees of the Company or
any Member. The Company or any Member claiming indemnification
hereunder shall provide prompt notice to the Supplier of any
claim, demand or legal action in respect of which
indemnification may be claimed; provided that the failure to
provide such notice shall not release the Supplier for any
liability except and solely to the extent that the Supplier is
materially prejudiced by such failure. The Supplier shall not
be liable for any settlement without its prior written
consent.
(b) The Company shall indemnify and hold
harmless the Supplier against any and all liabilities, losses,
damages, costs, and expenses, including court costs - and
reasonable attorneys fees, that the Supplier may incur or
sustain by reason of any claim, demand, legal actions or
judgment based upon or arising out of any alleged or actual
infringement of the trademarks, copyrights or other industrial
property rights of others in connection with the Supplier's
use of the "CARQUEST" trademark and design in accordance with
this went; provided that the Company shall not be liable for
the gross negligence or willful misconduct of the Supplier.
The Company agrees to defend any action, suit, or proceeding
brought against the Supplier insofar as such action, suit or
proceeding is based upon or arising out of the matters
referred to in this section 2.4(b); provided that, upon the
Company's assumption of such defense, the Company shall not be
liable for any attorney's fees of the Supplier. The Supplier
shall provide prompt notice to the Company of any claim,
demand or legal action in respect of which indemnification may
be claimed; rovi ell that the failure to provide such notice
shall not release the Company from any liability except and
solely to the extent that the Company is materially prejudiced
by such failure. The Company shall not be liable for any
settlement without its prior written consent.
2.5 Miscellaneous. The Supplier agrees that it shall
not produce and/or sell any Products or any other product or
products under the mark "CARQUEST" and design, except to the
Company or to a Member. The Supplier further agrees that it
will not adopt or use any word or mark that is likely to be
similar to or confusing with the mark "CARQUEST" and design,
or on any products that it supplies to other companies,
including, but not limited to, the use of any reproduction,
counterfeit copy, or colorable imitation of the designation of
"CARQUEST", or in any sale, offering for sale or advertising
of any such products.
SECTION 3
Termination
3.1 Termination. This Agreement may be terminated by the
Company or Supplier at any time after 30 days written notice
given by the terminating party to the other party to this
Agreement.
3.2 Effect of Termination. Upon termination of this
Agreement, the Supplier shall immediately (i) pay to the
Company the full amount, if any, which it then owes to the
Company under this Agreement, (ii) discontinue all use of
"CARQUEST" as a trademark, service mark, or trade name on the
Products, and (iii) refrain from doing any acts, whether or
not specified above, which would indicate that the Supplier is
or was authorized to use the mark "CARQUEST" and design on the
Products; provided, however. that notwithstanding the
termination of the Agreement, the Supplier shall have the
right and license to use "CARQUEST" to the extent permitted by
any other agreements with the Company and any Member unless
such other agreements are also terminated. Upon termination of
this Agreement, the Company shall immediately (i) pay to the
Supplier the full amount, if any, which the Company then owes
to the Supplier pursuant to this Agreement, and (ii) purchase
from the Supplier all Products ordered by the Company from the
Supplier in containers bearing the mark "CARQUEST" and design,
provided, however. the Supplier acknowledges and agrees that
the Company shall not be responsible for and by executing this
Agreement has not and is not guaranteeing the obligations of
any Member to the Supplier for Products purchased or ordered
from the Supplier by any Member.
3.3 Termination Costs. Upon termination of this
Agreement, the Supplier agrees to reimburse the Company for
all costs and expenses incurred by it, including attorney's
fees, as a result of the Supplier's failure or refusal to
comply with the terms of section 3.2 above or with any other
terms and conditions of this Agreement. Upon termination of
this Agreement, the Company agrees to reimburse the Supplier
for all costs and expenses incurred by it, including
attorney's fees, as a result of the Company's failure or
refusal to comply with the terms of section 3.2 above or with
any other terms and conditions of the Agreement.
SECTION 4
Miscellaneous
4.1 Specific Performance. The parties hereby declare
that it is impossible to measure in money the damages that
will accrue to a party to the Agreement by reason of the
failure of any party to perform any of its obligations under
this Agreement. Accordingly, if a party to this Agreement
shall institute any actions or proceedings to enforce the
provisions of this Agreement, any party against whom such
action or proceeding is brought hereby waives the claim or
defense therein that such party has an adequate remedy at law,
and such party shall not urge in any such action or proceeding
the claim or defense that however, shall not prevent any party
from seeking a remedy at law for any breach of this Agreement.
4.2 Notice. Any and all notices, offers, acceptances, or
any other communication provided for in this Agreement shall
be given in writing by personal delivery by registered or
certified mail which shall be addressed to the address set
forth below for each party or such other address as may be
designated by any party by notice given to the other parties
hereto.
4.3 Separability of Provisions. The invalidity or
unenforceability of any particular provision of the Agreement
shall not affect the other provisions of this Agreement, and
this Agreement shall be construed in all respects as if such
invalid or unenforceable provision were omitted.
4.4 Entire Agreement; Modifications. This Agreement
constitutes the entire understanding between the parties with
respect to the subject matter hereof and shall
supersede any prior agreements and understandings between the
parties with respect to subject-matter. This Agreement may not
be modified or amended except in writing signed
by each of the parties hereto. This Agreement shall not be
modified or amended -W-the terms of any purchase order,
acknowledgment or confirmation of sale; `or other similar
documents issued by the Company, the Supplier, or any Member
in connection with the purchase or sale of the Products.
4.5 Benefits. All of the terms, covenants, agreements and
conditions contained in this Agreement shall be binding upon
and inure to the benefit of all parties hereto, and their
respective successors, assigns and legal representatives,
unless prohibited in this Agreement.
4.6 Governing Law. This Agreement shall be governed by
and construed and enforced in accordance with the laws of the
State of Indiana.
IN WITNESS WHEREOF, the parties hereto have duly
executed this Agreement as of the day and year first above
written.
CARQUEST Products, Inc.
By (s) MikeLowe
----------------
Title: Product manager
299 E. County Road 300 S.
New Castle, IN 47362
SUPPLIER
Harvey Westbury Corp.
By: (s) Ronald M. Shaver
------------------------
Title: President
Address: 30 Galesi Dr.,
Wayne, NJ 07470
EXHIBIT 10.4 - AGREEMENT OF BUSINESS COMBINATION BY EXCHANGE
OF ASSETS FOR STOCK BETWEEN THE AUXER GROUP, INC. AND ERNEST
DESAYE, JR. DOING BUSINESS AS HARDYSTON DISTRIBUTORS
- - ------------------------------------------------------------
AGREEMENT OF BUSINESS COMBINATION
BY EXCHANGE OF ASSETS FOR
STOCK
AGREEMENT dated this 22 day of April, 1999, by and
between THE AUXER COUP, INC., a corporation having its
principal place of business at 30 Galesi Drive, Suite 304,
Wayne, New ,jersey 07470 ("PURCHASER"), and Mr. Ernest
DeSaye, Jr., doing business as Hardyston Distributors, having
his principal place of business at 22-B Lasinski Road,
Franklin, NJ 07416 (the "COMPANY").
W I T N E S S E T H
WHEREAS, The COMPANY is desirous of exchanging all or
substantially all of its assets; and
WHEREAS, PURCHASER is desirous of acquiring all of the
assets of the Company; and,
WHEREAS, the PURCHASER wishes to employ Mr. Ernest R. DeSaye,
Jr. ("Employee"); and,
WHEREAS, Employee wishes to be employed by the PURCHASER;
and,
WHEREAS, PURCHASER is a holding company which is publicly
held and which owns automotive related products; and,
WHEREAS, the COMPANY is an automotive distributor in
Northwest New Jersey;
IT IS NOW THEREFORE AGREED that in consideration of the
mutual covenants and agreements hereinafter set forth, the
parties hereto agree as follows:
1.Exchange of Assets.
1.1 Subject to the terms and conditions of this
Agreement and the performance by the parties hereto of their
respective obligations hereunder, then Company shall
exchange, transfer, convey, assign and deliver to PURCHASER,
and PURCHASER shall receive, acquire and accept on the
Closing Date (as such term is hereinafter defined) all of the
right, title and interest of the Company, including all
aspects to the business, assets, goodwill, and rights of
Company as shall exist on the Closing Date, including,
without limitation, inventory, accounts receivable, goodwill,
rights in tradenames, trademarks and copyrights, all rights
relating to or arising out of the business conducted by the
Company under express or implied warranty (as from the
suppliers of the Company with respect to the Assets being
transferred to PURCHASER), all books and records,
correspondence, employment records and files of or relating
to the business or Assets of the Company being exchanged with
PURCHASER and all of the Company's right, title and interest
in and to each lease, contract, agreement, purchase order or
commitment to which the Company is a party or in which the
Company has rights, (all of such assets are collectively
referred to hereinafter as the "Assets"), free and clear of
all liabilities, obligations, liens and encumbrances, except
as expressly assumed by PURCHASER under Section 2 below.
1.2 The transfer of the Assets as herein provided shall
be effected by bills of sale, endorsements, assignments,
drafts, checks, deeds and other instruments of transfer and
conveyance delivered to PURCHASER on the Closing Date in form
sufficient to transfer the Assets as contemplated by this
agreement and as shall be reasonably requested by PURCHASER.
Company covenants that (i) it will, at any time and from time
to time after the Closing Date, execute and deliver such
other instruments of transfer and conveyance and do all such
further acts and things as may be reasonably requested by
PURCHASER to transfer and deliver to PURCHASER or to aid and
assist PURCHASER in collecting and reducing to possession,
any and all of the Assets; (ii) PURCHASER, after the Closing
Date, shall have the right and authority to collect, for the
account of PURCHASER, all checks, notes and other evidences
of indebtedness or obligations to make payment of money and
other items which shall be transferred to PURCHASER as
provided herein and to endorse with the name of Company any
such checks, notes or other instruments received after the
Closing Date; and (iii) Company will transfer and deliver to
PURCHASER any cash or other property that Company may receive
after the Closing Date in respect of or arising out of the
business conducted by Company. After the Closing Date, at
reasonable times and upon reasonable notice, Company shall
have access to the books and records conveyed to PURCHASER
hereunder, and PURCHASER shall have access to any minute
books, stock books and similar corporate records retained by
Company.
1.3 Company covenants that between the date hereof and
the Closing Date and, if reasonably requested by PURCHASER,
after the Closing Date, Company shall use its best efforts to
obtain the consent of any parties to any contracts, licenses,
leases, commitments, sales orders, purchase orders or other
agreements being assigned by Company to PURCHASER hereunder
as shall be reasonably requested by PURCHASER. If any such
required consent is not obtained, this agreement shall not
constitute an agreement to assign the instrument relating
thereto, however Company shall cooperate with PURCHASER in
any reasonable arrangement to provide for PURCHASER the
benefits under any such contract, license, lease, commitment,
sales order, purchase order or other agreement, including
enforcement, at the cost and for the benefit of PURCHASER, of
any and all rights of Company against the other party thereto
arising out of the breach or cancellation by such party or
otherwise.
2. Assumption of Liabilities. PURCHASER shall assume no
liabilities of Company, except as specified in the list of
liabilities which is attached hereto as Exhibit II.
3. Closing. The Closing hereunder (the "Closing") shall
take place on or about the 8th day of April, 1999 at the
offices of Roger L. Fidler, Esq. 400 Grove street, Glen Rock,
New Jersey 07452 or at such other time and place as may be
agreed by PURCHASER and the Company (the "Closing Date").
4.Exchange Terms; Allocation.
4.1 In consideration of the exchange and transfer of the
Assets herein contemplated, on the Closing Date, PURCHASER
shall deliver at Closing to Employee the sum of five thousand
dollars ($5,000.00) in cash. Certificates for shares of said
PURCHASER'S common stock shall be issued to Employee not
later than 90 days after closing. The number of these shares
shall be equal to the value of the assets less $15,000
divided by the average of the bid and asked price on the day
before the Closing. The value of the assets shall be
determined by taking the sum of the cost of inventory, plus
the collectable value of the accounts receivable, plus the
fair market value of the equipment and rolling stock
multiplied by 1.05. No other factors shall be taken into
account when calculating the value of the assets for the
purpose of this Agreement. In addition, Employee shall
receive two additional payments of $5,000.00 each to be paid
60 and 120 days after the date of Closing. Employee shall
also execute at Closing, the attached Employment Agreement.
4.2 On the date of Closing, PURCHASER represents that in
addition to the above mentioned shares to be delivered to
Employee, there shall remain outstanding, in addition
thereto, only the following shares held by other
shareholders, to wit:
Fifty Five Million (55,000,000).
5.Representations and Warranties of Company. Company
hereby represents and warrants as follows:
5.1 Company is a sole proprietorship operating under the
name of Hardyston Distributors under the laws of the State of
New Jersey and has full power and authority to own its
properties and carry on its business as and in the places
where such properties are now owned or such business is now
being conducted. on or before closing Company shall establish
to the satisfaction of PURCHASER that it has title to the
Assets and authority to convey the same in accordance with
the terms of this Agreement. Complete and correct copies of
such documents as the PURCHASER may demand will be turned
over prior to Closing. The Company is duly qualified to do
business and is in good standing in all jurisdictions in
which such qualification is necessary because of the
character of the properties owned by it or
the nature of its activities. Company has taken no action and
has not failed to take any action, which action or failure
would preclude or prevent Company from conducting the
business of Company in the manner heretofore conducted.
5.2 Company has no subsidiaries.
5.3 Company is solely owned by the Employee.
5.4 Employee has full power and authority, corporate and
otherwise, to enter into this agreement on behalf of Company
and to cause Company to assume and perform its, his or her
obligations hereunder. The execution and delivery of this
agreement and the performance by Company of its obligations
hereunder have been duly authorized by the Board of Directors
of Company, if any, and no further action or approval,
corporate or otherwise, is required in order to constitute
this agreement as a binding and enforceable obligation of
Company. The execution and delivery of this agreement and the
performance by Company of its obligations hereunder do not
and will not violate any provision of, nor conflict with or
result in any breach of any condition or provision of, or
constitute a default under, or result in the creation or
imposition of any lien, charge or encumbrance upon any of the
Assets by reason of the terms of any contract, mortgage,
lien, lease, agreement indenture, instrument, judgment or
decree to which Company is a party or which is or purports to
be binding upon Company or which affects or purports to
affect any of the Assets.
5.4 No action, approval, consent or authorization,
including but not limited to any action, approval, consent or
authorization by any governmental or quasi-governmental
agency, commission, board, bureau or instrumentality is
necessary as to Company in order to constitute this agreement
as a binding and enforceable obligation of Company in
accordance with its terms.
5.5 Company has not incurred any obligation or liability
(absolute or contingent, liquidated or unliquidated, choate
or inchoate) except current obligations and liabilities
incurred in the ordinary course of their businesses which
would act as a lien against the Assets.
5.6 Company has not leased or effected any transfer of
any of the Assets;
6. Representations and Warranties of PURCHASER.
PURCHASER hereby represents and warrants that on the closing
date all of the following will be true:
6.1 PURCHASER is a corporation duly organized, validly
existing and in good standing under the laws of the state of
Delaware. PURCHASER is not conducting any business in any
location. Complete and correct copies of the Certificate of
incorporation of
Company and all amendments thereto, certified in each
case by the Secretary of State of the State of Delaware, and
of the By-Laws of PURCHASER, and all amendments thereto,
certified by the Secretary of PURCHASER, have been or will be
delivered to Company on or prior to the Closing Date by
PURCHASER. PURCHASER will present at closing a certificate of
good standing for the State of Delaware. PURCHASER has taken
no action and has not failed to take any action, which action
or failure would preclude or prevent Company from conducting
the business of Company in the manner heretofore conducted.
PURCHASER is approved for trading in the over-the-counter
market with not less than two market makers.
6.2 PURCHASER has subsidiaries.
6.3 PURCHASER has no authorized or outstanding
securities other than its common stock, x.0001 par value per
share (the "Common Stock"), which consists of 80,000,000
authorized shares of which not more than 55,000,000 shares
are currently outstanding. All outstanding Common stock is
duly authorized, validly issued, fully-paid and
non-assessable (except for such statutory and constitutional
obligations as may be imposed notwithstanding full payment
for and valid issuance of such shares), and there are no
presently issued or outstanding securities of PURCHASER
convertible into common stock nor are there any outstanding
options, warrants, agreements, rights or commitments of any
kind relating to the authorized but unissued Common Stock.
All transfer taxes, if any, with respect to transfers of
securities of PURCHASER made prior to the date hereof have
been paid. All of the common stock is owned, both
beneficially and of record, free of any security interests,
liens, pledges, claims, charges, escrows encumbrances,
options, rights of first refusal, mortgages, indentures,
security agreements or other contracts (whether or not
relating in any way to credit or the borrowing of money) and
the designated owner thereof has the unrestricted right to
vote such Common Stock. PURCHASER also has authorized shares
of Preferred Stock having a par value of $.001 per share,
none of which are issued and/or outstanding.
6.4 PURCHASER' s Board of Director's will recommend to
certain controlling shareholders, as soon as practicable
after receipt of Company's certified financial statements,
approval of the transaction contemplated herein and obtain
written consent to take such acts and actions as may be
deemed necessary or advisable by counsel to Company to fully
empower PURCHASER and its Board of Directors to enter into
and consummate this transaction.
6.5 PURCHASER has full power and authority, corporate
and otherwise, to enter into this agreement and to assume and
perform its, his or her obligations hereunder. The execution
and delivery of this agreement and the performance by
PURCHASER of its obligations hereunder have been duly
authorized by the Board of Directors of PURCHASER and no
further action or approval, except shareholder approval,
corporate or otherwise, is required in order to constitute
this agreement as a binding and enforceable obligation of
PURCHASER. The execution and delivery of this agreement and
the performance by PURCHASER of its obligations hereunder do
not and will not violate any provision of the Certificate of
incorporation or By-Laws of PURCHASER and do not and will not
conflict with or result in any breach of any condition or
provision of, or constitute a default under, or result in the
creation or imposition of any lien, charge or encumbrance
upon.any of its assets by reason of the terms of any
contract, mortgage, lien, lease, agreement indenture,
instrument, judgment or decree to which PURCHASER is a party
or which is or purports to be binding upon Company or which
affects its assets.
6.6 No action, approval, consent or authorization,
including but not limited to any action, approval, consent or
authorization by any governmental or quasi-governmental
agency, commission, board, bureau or instrumentality is
necessary as to PURCHASER in order to constitute this
agreement as a binding and enforceable obligation of
PURCHASER in accordance with its terms.
6.7 PURCHASER has not during the last 30 days, except as
may be required to satisfy the terms of this Agreement:
6.7.1 authorized, issued, sold or converted any
securities, or entered into any agreement with respect
thereto;
6.7.2 declared, set aside or made any dividend or other
distribution or purchased, redeemed or reclassified any of
their capital stock or effected any stock split, stock
dividend, exchange or recapitalization or entered into any
agreement in respect of the foregoing;
6.7.3 incurred any damage, destruction or similar loss,
whether or not covered by insurance, materially affecting
their businesses or. properties;
6.7.4 sold, assigned or transferred- any of their
tangible assets or any patent, trademark, trade name,
copyright, license, franchise, design or other intangible
assets or properties;
6.7.5 mortgaged, pledged, granted or suffered to exist
any lien or other encumbrance or charge on any of their
assets or properties, tangible or intangible;
6.7.6 waived any rights of material value or canceled,
discharged, satisfied or paid any material debts or claims;
6.7:7 incurred any obligation or liability (absolute or
contingent, liquidated or unliquidated, choate or inchoate);
6.7.8 leased or effected any transfer of any of their
assets or properties;
6.7.9 entered into, made any amendment of or terminated
any lease, material contract or license;
6.7.10 amended its Certificate of Incorporation or
By-Laws;
6.7.11 effected any change in their accounting
practices, procedures or methods;
6.7.12 became obligated to make any payment to any
shareholder of PURCHASER in any capacity, or entered into any
transaction of any nature with any shareholder of PURCHASER
in any capacity;
6.7.13 increased the compensation payable to any of
their directors, officers or employees or became obligated to
increase any such compensation;
6.7.14 entered into any transaction other than in the
ordinary course of business, or changed in any way any of
their business policies or practices.
6.8 PURCHASER is not a party to or has any contract or
commitment of any kind or nature whatsoever, written or oral,
formal or informal, including, without limitation, any lease,
license, franchise, employment, maintenance, consultant or
commission agreement, pension, profit-sharing, bonus, stock
purchase, stock option, retirement, severance,
hospitalization, accident, insurance or-other plan or
arrangement involving employee benefits, contract with any
labor union or contract for services, materials, supplies,
merchandise, inventory or equipment, for the sale or purchase
of any of its services, products or assets, for the borrowing
of money or for a line or letter of credit, with any current
or former director, officer or employee of PURCHASER which
will be in effect on the Closing Date, with any government or
agency thereof, pursuant to which its right to compete with
any entity or person in the conduct of its business is
restrained or restricted for any reason or in any way,
guaranteeing the performance, liabilities or obligations of
any Entity or person, for capital improvements or
expenditures or with any contractor or subcontractor for in
excess of $100.00, for charitable contributions aggregating
in excess of $100.00, or involving in excess of ;100.00 in
cash over its term (including any periods covered by any
options to renew by any party).
6.9. PURCHASER has no liabilities except as shown on its
financial statements, no contracts or other obligations
whatsoever including any contingent liabilities.
7. Financial Statements and Form 10.
Company shall deliver to PURCHASER, on or before the
Closing Date, sufficient financial information in a form
acceptable to the United States Securities and Exchange
Commission for consolidation with PURCHASER'S financial
statements and will be in compliance with generally accepted
accounting principles and Regulation SX promulgated under the
Securities Act of 1933, as amended, and as it applies to
corporations which have registered securities upon Form 10 or
Form 10SB under the 1934 Securities Exchange Act. After
closing, the new management represents that it will promptly
update Company's Form 10-SE and timely file the same and all
other forms required by the United States Securities and
Exchange Commission.
8.Miscellaneous.
a)This Agreement shall constitute the entire agreement
of the parties hereto and may not be amended, except by
written consent of the parties hereto in writing executed by
them.
b) This Agreement shall be construed according to the
laws of the State of New Jersey and shall be enforceable in
any court of competent jurisdiction located therein.
c) This Agreement shall inure to the benefit of the
parties and their successors in interest, if any, but shall
not otherwise be assignable.
d) Where in this Agreement one gender or the other is
used, of the singular or the plural is used, and if to effect
the intent of the parties hereto the use of the other gender
or number is needed then it is understood that such gender or
both or such number or both is implied.
e) This Agreement may be executed in counterparts and
receipt-of facsimile transmission of signatures shall be
sufficient to effect acceptance of this Agreement, although
the parties hereto agree to submit within a reasonable time
duplicate original signed copies of this Agreement to each
other.
9. Indemnification.
Each party to this Agreement shall indemnify and hold
harmless each other party at all times after the date of
closing against and in respect of any liability, damage or
deficiency, all actions, suits, proceedings, demands,
assessments, judgments, costs and expenses, including
attorney's fees incident to any of the foregoing, resulting
from any misrepresentation, breach of covenant or warranty
for non-fulfillment of any agreement on the part of such
party under this Agreement, or from any misrepresentation in
or omission from any certificate furnished or to be furnished
to a party hereunder. Subject to the terms of this Agreement,
the defaulting party shall reimburse the other party or
parties on demand for any reasonable payments made by said
parties at any time after the date of closing, in respect to
any liability or claim to which the foregoing indemnity
relates, if such payment is made after reasonable notice to
the other party to defend or satisfy the same, and such party
failed to defend or satisfy the same.
10.Covenant Not to Disclose.
(a) I shall not at any time during or after the
termination of my employment by Company reveal, divulge, or
make known to any person (other than Company or its
Affiliates) or use for my own account any confidential
information used by Company or any of its Affiliates during
my employment by Company before and during the term of this
Agreement and made known to me by reason of my employment by
Company. I shall retain all such knowledge and information
which I may acquire during my employment by Company in trust
for the sole benefit of Company and its Affiliates and their
successors and assigns.
(b) As used in this Agreement, the term "Affiliate"
shall mean any corporation, company, partnership or other
person or entity that directly or indirectly through one or
more intermediaries, controls or is controlled by or is under
common control with the person of which such corporation,
company, partnership or other person or entity is an
affiliate.
11. Brokers. No brokers have been utilized in connection
with this transaction. PURCHASER shall not be liable for the
payment of any finder's or consultant's fees except as
specifically provided herein.
IN WITNESS WHEREOF THE PARTIES HERETO, CORPORATE PARTIES
HAVING BEEN DULY AUTHORIZED BY THEIR RESPECTIVE BOARDS OF
DIRECTORS, HAVE SET THEIR HANDS AND SEALS ON THE DATE FIRST
ABOVE WRITTEN.
THE AUXER GROUP, INC.
By: (s) Eugene Chiaramonte By: (s) Ernest DeSaye
---------------------- ----------------
Eugene Chiaramonte, Jr. Ernest R. DeSaye, Jr.
PRESIDENT d/b/a Hardyston
Distributor
EXHIBIT 10.5 - AGREEMENT AND PLAN OF ACQUISITION BETWEEN
AUXER INDUSTRIES, INC. AND UNIVERSAL FILTRATION INDUSTRIES,
INC.
- - -----------------------------------------------------------
This agreement and plan of acquisition (the "Agreement")
dated December 20, 1996, by and between Universal Filtration
Industries, Inc.., a New York corporation, the address of
which is 16 Grace Lane, East Norwich, New York 11732,
("Universal Filtration"), and Auxer Industries, Inc., a Idaho
corporation, the address of which is 230 Dayton Street,
Ridgewood, New Jersey 07450 ("Auxer" or the "Acquiring
Corporation") [Universal Filtration and Auxer being herein
sometimes called the "Parties" or "Constituent Corporations"].
WHEREAS, the Parties orally agreed on February 10, 1996, that
Auxer would exchange shares of its common stock for all the
issued and outstanding capital stock of Universal Filtration;
and
WHEREAS, the Parties entered into an agreement dated August 7,
1996 embodying the oral understandings; and
WHEREAS, the Parties have agreed to modify the agreement
because certain representations of Universal relating to
revenue and profitability projections have not been met;
WHEREAS, the Parties desire to enter into a new restated
written document which will replace any and all prior oral and
written understandings between the Parties.
NOW THEREFORE, IN CONSIDERATION OF THE PREMISES AND THE
UNDERTAKINGS HEREINAFTER STATED, THE PARTIES AGREE AS FOLLOWS:
I. ACQUIRING CORPORATION; CERTIFICATE OF INCORPORATION AND
BY-LAWS; BOARD OF DIRECTORS; OFFICERS.
1.01 Acquiring Corporation.
The corporation which shall be the acquiring corporation is
Auxer.
1.02 Certificate of Incorporation and By-laws.
The certificate of incorporation, as amended, and the by-laws
of Auxer as contained in Attachment "A" are in effect at the
date of the Agreement are the certificate of incorporation and
the by-laws of the Acquiring Corporation until they are
amended.
1.03 Board of Directors. From the date of the Agreement until
December 31, 1999, the Auxer board of directors shall consist
of not more than three directors.
II. STATUS AND CONVERSION OF SECURITIES
2.01 Shares of Universal Filtration
(a) Universal Filtration Common Stock. All the shares of
the common stock of Universal Filtration ("Universal
Filtration Shares") shall be converted into and exchanged for
1,000,000 shares of common stock, ("Auxer Shares") of Auxer
("Auxer Common Stock") valued at $.05 per share. Certificates
representing 1,000,000 Auxer Shares shall be immediately
delivered to the shareholders of Universal Filtration.
(b) Surrender and Exchange of Universal Filtration Shares.
Subject to the provisions of Paragraphs 2.01(b) and (c), each
holder of an outstanding certificate or certificates (the "Old
Certificates") therefore representing Universal Filtration
Shares ("Universal Filtration Shareholder"), upon surrender
thereof shall receive in exchange therefore a certificate or
certificates (the "New Certificates") representing the number
of whole Auxer Shares into and for which the Universal
Filtration Shares therefore represented by such surrendered
Old Certificates have been converted. There are no dividends
due to holders of Universal Filtration Shares. Filtration
shall provide written instructions to Auxer indicating the
number of Auxer Shares and to be issued to each Universal
Filtration Shareholder. Shares not surrendered shall be marked
as canceled on the stock registry of the Company.
(c) "Current Market Price Per Share" of one share of Auxer
Common Stock shall be the average closing price of the shares
of the NASD Electronic Bulletin Board for the five trading
days preceding the date of the Agreement.
(d) "Value Per Share" of one share of Auxer Common Stock
shall be S.05 per share.
(e) No certificates or scrip for fractional Auxer Shares
will be issued and no payment will be made in respect thereof.
Any fractional shares which result shall be rounded up to the
nearest whole Auxer Share. If more than one certificate
representing Universal Filtration Shares shall be surrendered
for the account of the same Shareholder, the number of full
Auxer Shares for which certificates shall be delivered to a
Shareholder shall be computed on the basis of the aggregate
number of shares represented by the certificates surrendered
by that Shareholder.
III. COVENANTS
3.01 Covenants of Auxer
Auxer covenants, that:
(a) Certificate of Incorporation. No amendment, change of
state of incorporation or other change has been made in the
certificate of incorporation of Auxer as attached to the
Agreement.
(b) Securities. There are 7,192,929 Shares outstanding.
(c) Dividends and Purchases of Stock. No dividend,
distribution or stock split or recapitalization has been
authorized, declared, paid or effected by Auxer in respect of
the outstanding Auxer Shares.
(d) Borrowing Money. Auxer has not borrowed, guaranteed
the borrowing of money, engaged in any transaction or entered
into any material agreement, except in the ordinary course of
business.
(e) Access. Auxer has afforded the officers, directors,
employees, counsel, agents, investment bankers, accountants
and other representatives of Universal Filtration free and
full access to the properties, books and records of Auxer, has
permitted them to make extracts from and copies of such books
and records and has furnished Universal Filtration with such
additional financial and operating data and other information
as to the financial condition, results or operations,
business, properties, assets, liabilities or future prospects
of Auxer as Universal Filtration from time to time has
requested.
(f) Confidentiality. Auxer insures that, for a period of
six months from the date of the Agreement, all confidential
information which Auxer or any of its officers, directors,
employees, counsel, agents, investment bankers, or accountants
may now possess or create or obtain relating to the financial
condition, results of operations, business properties, assets,
liabilities, or future prospects of Universal Filtration, any
affiliate or any customer or supplier of Universal Filtration
shall not be published, disclosed, or made accessible to any
other person or entity at any time or used in the business and
for the benefit of Auxer in each case without the prior
consent of Ronald Michael Shaver, President, subject to
paragraphs 3.01 (g) and (h).
(g) Public Statements. Before Auxer releases any
information concerning the Agreement, or any of the other
transactions contemplated by the Agreement which is intended
for or may result in public dissemination thereof, Auxer, for
a period of six months from the date of the Agreement, shall
cooperate with Universal Filtration, shall furnish drafts of
all documents or proposed oral statements to Universal
Filtration for comments, and shall not release any such
information without the written consent of Universal
Filtration. Nothing contained herein shall prevent Auxer from
releasing any information if required to do so by federal or
state securities law.
(h) Material for Registration Statement. Auxer represents
that the filings to be made by it with the Securities and
Exchange Commission ("SEC") will be prepared in accordance
with the then existing requirements of the Securities Act of
1933 (the "Securities Act"), and the rules and regulations
thereunder. Auxer shall furnish or cause to be furnished, for
inclusion in any registration statement required to be filed
with the SEC covering the Acquisition, information about Auxer
or Auxer's security holders as may be required and shall
continue to famish or cause to be furnished such information
for the purposes of supplementing any such proxy statement or
amending any registration statement.
(i) Indemnification. Auxer agrees to indemnify and hold
harmless Universal Filtration and its present officers,
directors, employees, agents and counsel, and each person who
controls, controlled or will control Universal Filtration
within the meaning of Section 15 of the Securities Act of
Section 20(a) or the Securities Exchange Act of 1934 (the
"Exchange Act") and if the Acquisition is abandoned or
terminated, except solely as a result of a breach of the
Agreement by Universal Filtration, against any and all losses,
liabilities, claims, damages and expenses whatsoever,
including attorneys' fees and expenses, as and when incurred
arising out of, based upon or in connection with any untrue
statement or alleged untrue statement of a material fact
relating to and supplied by Auxer contained in any
post-effective registration statement, proxy statement or any
amendment or supplement thereto or any application or other
document or communication filed in any jurisdiction under the
"blue-sky," securities, or takeover laws thereof or filed with
the SEC. The foregoing agreement to indemnify shall be in
addition to any liability Auxer may otherwise have, including
liabilities arising under the Agreement.
3.02 Covenants of Universal Filtration From the Date of the
Agreement
(a) Certificate of Incorporation and By-laws. No amendment
has been made in the certificate of incorporation or by-laws
of Universal Filtration other than as attached hereto as
Attachment "B".
(b) Dividends and Purchases of Stock. No dividend,
distribution or stock split or recapitalization has been
authorized, declared, paid or effected by Universal Filtration
in respect of the outstanding Universal Filtration Shares.
(c) Borrowing Money. Universal Filtration has not
borrowed, guaranteed the borrowing of money, engaged in any
transaction or entered into any material agreement, except in
the ordinary course of business as disclosed in the financial
statements delivered to Auxer.
(d) Access. Universal Filtration has afforded the
officers, directors, employees, counsel, agents, investment
bankers, accountants and other representatives of Auxer and
lenders, investors and prospective lenders and investors free
and full access to the properties, books and records of
Universal Filtration and has permitted them to make extracts
from and copies of such books and records, and will from time
to time furnish Auxer with such additional financial and
operating data and other information as to the financial
condition, results or operations, business, properties,
assets, liabilities or future prospects of Universal
Filtration as Auxer from time to time has requested. Universal
Filtration will cause the independent certified public
accountants of Universal Filtration to make available to Auxer
and its independent certified public accountants all work
papers relating to Universal Filtration referred to herein.
(e) Conduct of Business. Universal Filtration has used
reasonable efforts to preserve the business operations of
Universal Filtration intact, to keep available the services of
is present personnel, to preserve in full force and effect the
contracts, agreements, instruments, leases, licenses,
arrangements and understandings of Universal Filtration and to
preserve the good will to others having business relations
with it.
(f) Advice of Changes. Universal Filtration has advised
Auxer of any fact or occurrence or any pending or threatened
occurrence of which it obtains knowledge and (i) which, would
make the performance by any party of a covenant contained in
the Agreement impossible or make such performance materially
more difficult than in the absence of such fact or occurrence
or (ii) which would cause a condition to any party's
obligation under the Agreement not to be fully satisfied.
(g) Confidentiality. Universal Filtration shall insure
that all confidential information which Universal Filtration
or any of its officers, directors, employees, counsel, agents,
investment bankers, or accountants may now possess or may
hereafter create or obtain relating to the financial
condition, results of operations, business properties, assets,
liabilities, or future prospects of Auxer, or any affiliate
shall not be published, disclosed, or made accessible to any
other person or entity at any time or used in the business and
for the benefit of Universal Filtration in each case without
the prior written consent of Auxer.
(i) Public Statements. Before the present officers or
directors of Universal Filtration release any information
concerning the Agreement, or any of the other transactions
contemplated by the Agreement which is intended for or may
result in public dissemination thereof, they shall cooperate
with Auxer, shall famish drafts of all documents or proposed
oral statements to Auxer for comments, and shall not release
any such information without the written consent of Auxer.
Nothing contained herein shall prevent Universal Filtration
from releasing any information if required to do so by law.
(j) Material for Registration Statement. Universal
Filtration shall furnish or cause to be furnished, for
inclusion in any proxy statement or post effective
registration statement required to be filed with the SEC
covering the Acquisition such information about Universal
Filtration or Universal Filtration's security holders as may
be required or may be reasonably requested by Auxer and shall
continue to famish or cause to be furnished such information
for the purposes of supplementing any such proxy statement, or
amending the post-effective registration statement. Universal
Filtration represents and warrants that the information so
supplied does not now, and will not at any time contain an
untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to
make the statements therein not false or misleading.
(k) Indemnification. Universal Filtration agrees to
indemnify and hold harmless Auxer and its officers, directors,
employees, agents and counsel, and each person who controls,
controlled or will control Universal Filtration within the
meaning of Section 15 of the Securities Act of Section 20(a)
of the Securities Exchange Act and if the Acquisition is
abandoned or terminated except solely as a result of a breach
of the Agreement by Auxer against any and all losses,
liabilities, claims, damages and expenses whatsoever,
including counsel's fees and expenses as and when incurred
arising out of, based upon or in connection with any untrue
statement or alleged untrue statement of a material fact
relating to and supplied by Universal Filtration contained in
any post-effective registration statement, proxy statement or
any amendment or supplement thereto or any application or
other document or communication filed in any jurisdiction in
order to qualify the Auxer Shares to be issued in the
Acquisition under the "blue-sky," securities, or takeover laws
thereof or filed with the SEC. The foregoing agreement to
indemnify shall be in addition to any liability Universal
Filtration may otherwise have, including liabilities arising
under the Agreement.
(l) Capitalization. Universal Filtration's capital
structure consists of 200 shares of common stock without par
value of which 200 shares are issued and outstanding. Each
outstanding share is validly authorized, validly issued, fully
paid and, nonassessable, has not been issued and is not owned
or held in violation of any preemptive right of shareholders.
V. REPRESENTATIONS AND WARRANTIES
4.01 CERTAIN REPRESENTATIONS AND WARRANTIES OF AUXER
Auxer represents and warrants to Universal Filtration as
follows:
(a) Organization and Qualification. Auxer is validly
existing and in good standing and has authority to own, lease,
license and use its properties and assets and to carry on the
business in which it is now engaged and will continue to be
duly qualified.
(b) Capitalization. Auxer's capital structure consists of
50,000,000 shares of common stock $.001 par value per share of
which 7,192,929 shares are issued and outstanding. Each
outstanding Auxer Share is validly authorized, validly issued,
fully paid and, nonassessable, has not been issued and is not
owned or held in violation of any preemptive right of
shareholders.
(c) Financial Condition. Auxer has delivered to Universal
Filtration true and correct copies of its financial
statements. The financial statements have been prepared in
accordance with generally accepted accounting principles
consistently applied throughout the periods involved and are
in accordance with the books and records of Auxer. Since the
date of the financial statements:
i. There has at no time been a material undisclosed
adverse change in the financial condition of Auxer.
ii. Auxer has not declared, paid or effected any
dividend or liquidating or other distribution in respect of
its shares of common stock or any direct or indirect
redemption, purchase, or other acquisition of any Auxer
Shares.
iii. The operations and business of Auxer have been
conducted in all respects only in the ordinary course.
iv. Auxer has not suffered an extraordinary loss not
disclosed in its financial statements (whether or not covered
by insurance) or waived any right of substantial value.
There is no fact known to Auxer which materially adversely
affects or in the future (as far as Auxer can foresee) may
materially adversely affect the financial condition, results
of operations, business, properties, assets, liabilities, or
future prospects of Auxer.
(d) Tax and Other Liabilities. Auxer has no undisclosed
liability of any nature, accrued or contingent, including
without limitation liabilities for federal, state or local
taxes and liabilities.
(e) Litigation and Claims. There is no undisclosed
litigation, arbitration, claim, governmental or other
proceeding (formal or informal) or investigation pending,
threatened or in prospect (or any basis therefor known to
Auxer) with respect to Auxer or its business or assets.
(f) Properties. Auxer has title to or has leased the real
and personal property as set forth in the financial
statements.
(g) Patents, Trademarks, Etc. Auxer's ownership or
patents, trademarks or any other intellectual property is as
listed on its financial statements.
(h) Authority to Enter and Perform the Agreement. Auxer
has all requisite power and authority to execute, deliver and
perform the Agreement. All necessary corporate proceedings of
Auxer have been duly taken to authorize the execution,
delivery and performance of the Agreement by Auxer, other than
approval of the holders of Auxer Shares. The Agreement
constitutes the legal, valid and binding obligation of Auxer
and is enforceable as to it in accordance with its terms and
no consent, authorization, approval, order, license,
certificate or permit of or from, or declaration or filing
with any federal, state, local or other government authority
or any court or other tribunal is required by Auxer.
4.02 Certain Representations and Warranties of Universal
Filtration
Universal Filtration represents and warrants to Auxer as
follows:
(a) Organization and Qualification. Universal Filtration
has no subsidiaries. Universal Filtration is a corporation
duly organized, validly existing and in good standing under
the laws of The State of New York with all requisite power and
authority and all necessary consents, authorization,
approvals, orders, licenses, certificates and permits of and
from, and declarations and filings with, all federal, state,
local and other governmental authorities to own, lease,
license and use its properties and assets and to carry on the
business in which it is now engaged and the business in which
it contemplates engaging. Universal Filtration is duly
qualified to transact the business in which it is engaged and
is in good standing as a foreign corporation in every
jurisdiction in which its ownership, leasing, licensing, or
use of property or assets or the conduct of its business makes
such qualification necessary.
(b) Capitalization. Each of the outstanding Universal
Filtration Shares is validly authorized, validly issued, fully
paid and, nonassessable, has not been issued and is not owned
or held in violation of any preemptive right of shareholders.
The names of stockholders and the number of shares held by
each are listed on Attachment "C."
(c) Financial Condition. Universal Filtration has
delivered to Auxer true and correct copies of its financial
statements for the years 1994 and 1995 and comparative
financial statements for the six months ended June 30, 1996
and a list of all receivables and payables as of June 30,
1995, the dates on which they arose. Since the date- of the
financial statements:
i. -There has at no time been a material adverse
change in the financial condition of Universal Filtration.
ii. Universal Filtration has not authorized,
declared, paid or effected any dividend or liquidating or
other distribution in respect of its shares of common stock or
any direct or indirect redemption, purchase, or other
acquisition of any Universal Filtration shares of common
stock. All accrued but unpaid dividends have been waived by
the Universal Filtration shareholders entitled to receive such
dividends in connection with the Agreement.
iii. Universal Filtration has not suffered an
extraordinary loss (whether or not covered by insurance) or
waived any right of substantial value.
There is no fact known to Universal Filtration which
materially adversely affects the financial condition, results
of operations, business, properties, assets, liabilities, or
future prospects of Universal Filtration.
(d) Tax and Other Liabilities. Universal Filtration has no
undisclosed liability of any nature, accrued or contingent,
including without limitation liabilities for federal, state or
local taxes and liabilities to customers or suppliers, other
than the following:
i. Liabilities for which full provision has been made
on the financial statements of Universal Filtration
ii. Other liabilities arising since the last
Universal Filtration financial statement in the ordinary
course of business.
Without limiting the generality of the foregoing, the amounts
set up as provision for taxes on the last Universal Filtration
financial statement are sufficient for all accrued and unpaid
taxes of Universal Filtration.
(e) Litigation and Claims. There is no litigation,
arbitration, claim, governmental or other proceeding (formal
or informal) or investigation pending, threatened or in
prospect which adversely impact Universal Filtration or its
business or assets.
(f) Properties. Universal Filtration has good and
marketable title to all property and assets used in its
business or owned by it, as listed on its financial
statements. The real and other properties and assets
(including intangibles) leased or licensed by Universal
Filtration constitute all such properties and assets which are
necessary to the business of Universal Filtration as presently
conducted.
(g) Contracts and Other Instruments. Universal Filtration
has made available to Auxer through the financial statements
or otherwise in writing, all contracts, agreements, leases,
instruments, licenses, arrangements or understandings with
respect to Universal Filtration, listed on its financial
statements and otherwise. Universal Filtration is not a party
nor is it bound by any contract, agreement, instrument, lease,
license, arrangement, or understanding which may, in the
future, have a material adverse effect on the financial
condition, results of operations, business, properties,
assets, liabilities or future prospects of Universal
Filtration.
(h) Patents, Trademarks, Etc. Universal Filtration's
ownership of patents, trademarks or any other intellectual
property (if any) is listed on its financial statements.
(i) Authority to Enter into and Perform the Agreement.
Universal Filtration has all requisite power and authority to
execute, deliver and perform the Agreement. All necessary
corporate proceedings of Universal Filtration have been duly
taken to authorize the execution, delivery and performance of
the Agreement by Universal Filtration, other than approval of
the holders of Universal Filtration Common Stock. The
Agreement constitutes the legal, valid and binding obligation
of Universal Filtration and is enforceable as to it in
accordance with its terms and no consent, authorization,
approval, order, license, certificate or permit of or from, or
declaration or filing with any federal, state, local or other
government authority or any court or other tribunal is
required by Universal Filtration.
V. ABANDONMENT AND TERMINATION
5.01 Right of Universal Filtration to Abandon.
Universal Filtration's Board of Directors shall have the right
to abandon or terminate the Acquisition if any of the
following shall not be true.
(a) Accuracy of Representations and Compliance with
Conditions. All representations and warranties of Auxer
contained in the Agreement shall be accurate regardless of
knowledge or lack thereof on the part of Auxer or changes
beyond its control; Auxer shall have performed and complied
with all covenants and agreements and satisfied all conditions
required to be performed and complied with by it by the
Agreement; and Universal Filtration shall have received a
certificate executed by the chief executive officer and the
chief financial officer of Auxer dated this date to that
effect.
(b) Opinion of Auxer's Counsel. Universal Filtration shall
have received a letter of Auxer's Counsel, in form and
substance satisfactory to Universal Filtration and its
counsel, to the effect that:
i. Auxer is an Idaho corporation validly existing
and in good standing with all requisite corporate power and
authority to own, lease, license and use its properties and
assets and to carry on the business in which it is now
engaged;
ii. Auxer is and will be duly qualified to transact
the business in which it is engaged and is not required to
register to do business in any other jurisdiction;
iii. The authorized and outstanding capital stock of
Auxer is as set forth in the Agreement and all the outstanding
shares of the capital stock of Auxer are validly authorized,
validly issued, fully paid and nonassessable;
iv. All necessary corporate proceedings of Auxer have
been duly taken to authorize the execution, delivery and
performance of the Agreement by Auxer;
v. Auxer has all requisite corporate power and
authority to execute, deliver and perform the Agreement and
the Agreement has been duly authorized, executed and delivered
by Auxer, constitutes the legal, valid and binding obligation
of Auxer, and (subject to applicable bankruptcy, insolvency
and other laws affecting the enforceability of creditors'
rights generally) is enforceable as to Auxer in
accordance with its terms;
vi. The execution, delivery and performance of the
Agreement by Auxer will not violate or result in a breach of
any term of Auxer's certificate of incorporation or of its
by-laws or violate, result in a breach of, conflict with, or
(with or without the giving of notice or the passage of time
or both) entitle any party to terminate or call a default
under, entitle any party to rights or privileges that did not
exist immediately before the Agreement was executed under, or
create any obligation on the part of Auxer under the terms of
any agreement that did not exist immediately before the
Agreement was executed;
vii. After reasonable investigation, Counsel has no
actual knowledge of any consent, authorization, approval,
order, license, certificate or permit of or from or
declaration or filing with any federal, state, local or other
governmental authority or any court or other tribunal which is
required of Auxer for the execution, delivery or performance
of the Agreement by Auxer.
viii. After reasonable investigation, Counsel has no
actual knowledge of any litigation, arbitration, government or
other proceeding (formal or informal over and above the
disclosure contained in the financial statements), or
investigation pending or threatened with respect to Auxer or
any of its businesses, properties or assets than can
reasonably be expected to result in any materially adverse
change in the financial condition, results of operations,
business, properties, assets, liabilities or future prospects
of Auxer or seeks to prohibit or otherwise challenge the
Agreement or the consummation of the Acquisition or any of the
other transactions contemplated hereby or to obtain
substantial damages with respect thereto, except as disclosed
in the Agreement.
ix. The persons named in such opinion as affiliates
are, to the best of Counsels knowledge, the only persons who
may reasonably be deemed to be affiliates of Auxer within the
meaning of Rule 145 under the Securities Act.
5.02 Right of Auxer to Abandon.
Auxer's Board of Directors shall have the right to abandon or
terminate the Acquisition if any of the following shall not be
true.
(a) Accuracy of Representations and Compliance with
Conditions. All representations and warranties of Universal
Filtration contained in the Agreement shall be accurate when
made and Universal Filtration shall have performed and
complied with all covenants and agreements and satisfied all
conditions required to be performed and complied with by it by
the Agreement; and Auxer shall have received a certificate
executed by the chief executive officer and the chief
financial officer of Universal Filtration dated the date of
the Agreement to that effect.
(b) Certificate of the President of Universal Filtration.
Auxer shall receive a certificate of the President of
Universal Filtration in form and substance satisfactory to
Auxer and its counsel, to the effect that:
i. Universal Filtration is a corporation validly
existing and in good standing under the laws of the State of
New York with all requisite corporate power and authority
to own, lease, license and use its properties and assets and
to carry on the business in which it is now engaged.
ii. Universal Filtration is qualified to transact the
business in which it is engaged and is registered as a foreign
corporation in all jurisdictions in which it does business.
iii. The authorized and outstanding capital stock of
Universal Filtration is as set forth in the Agreement and all
the outstanding shares of the capital stock of Universal
Filtration are validly authorized, validly issued, fully paid
and nonassessable;
iv. All necessary corporate proceedings of Universal
Filtration have been duly taken to authorize the execution,
delivery and performance of the Agreement by Universal
Filtration
v. Universal Filtration has all requisite corporate
power and authority to execute, deliver and perform the
Agreement and the Agreement has been duly authorized,
executed and delivered by Universal Filtration, constitutes
the legal, valid and binding obligation of Universal
Filtration, and (subject to applicable bankruptcy,
insolvency and other laws affecting the enforceability of
creditors' rights generally) is enforceable as to Universal
Filtration in accordance with its terms;
vi. The execution, delivery and performance of the
Agreement by Universal Filtration will not violate or result
in a breach of any term of Universal Filtration' certificate
of incorporation or of its by-laws or violate, result in a
breach of, conflict with, or (with or without the giving of
notice or the passage of time or both) entitle any party to
terminate or call a default under, entitle any party to rights
or privileges that did not exist immediately before the
Agreement was executed under, or create any obligation on the
part of Universal Filtration under the terms of any agreement
that did not exist immediately before the Agreement was
executed;
vii. He has no actual knowledge of any consent,
authorization, approval, order, license, certificate or permit
of or from or declaration or filing with any federal, state,
local or other governmental authority or any court or other
tribunal which is required of Universal Filtration for the
execution, delivery or performance of the Agreement by
Universal Filtration.
viii. He has no actual knowledge of any litigation,
arbitration, government or other proceeding (formal or
informal), or investigation pending or threatened with respect
to Universal Filtration or any of its businesses, properties
or assets than can reasonably be expected to result in any
materially adverse change in the financial condition, results
of operations, business, properties, assets, liabilities or
future prospects of Universal Filtration or seeks to prohibit
or otherwise challenge the Agreement or the consummation of
the Acquisition or any of the- other transactions contemplated
hereby or to obtain substantial damages with respect thereto,
except as disclosed in the Agreement.
VI. MISCELLANEOUS.
6.01 Further Actions
At any time and from time to time, each Party agrees, at its
expense, to take such actions and to execute and deliver such
documents as may be reasonably necessary to effectuate the
purposes of the Agreement.
6.02 Availability of Equitable Remedies
Since a breach of the provisions of the Agreement could not
adequately be compensated by money damages, either Party shall
be entitled, in addition to any other right or remedy
available to it, to an injunction restraining such breach or
threatened breach and to specific performance of any such
provision of the Agreement, and, in either case, no bond or
other security shall be required in connection therewith, and
the Parties hereby consent to the issuance of such an
injunction and to the ordering of specific performance.
6.03 Modification
The Agreement sets forth the entire understanding of the
Parties with respect to the subject matter hereof. The
Agreement may be amended by a written instrument executed by
Universal Filtration and Auxer with the approval of their
respective Boards of Directors. A change in the number of
shares issued or the number and exercise price of options due
to a stock split or recapitalization of Auxer ratably
affecting all its stockholders and option holders will not be
construed as a modification of the Agreement.
6.04 Notices
Any notice or other communication required or permitted to be
given hereunder shall be in writing and shall be mailed by
certified mail, return receipt requested or overnight delivery
or courier service or delivered in person or by facsimile
against receipt to the Party to whom it is to be given at the
address of such Party set forth in the preamble to the
Agreement (or to such other address (or facsimile telephone
number) as the party shall have furnished in writing to the
other Party. Any notice shall be addressed to the attention of
the Corporate Secretary. Any notice or other communication
given pursuant to the paragraph shall be given at the time or
certificate or comparable act thereof except for a notice
changing a party's address which will be deemed given at the
time or receipt thereof. Any notice given by other means than
permitted by this paragraph shall be deemed given at the time
of receipt thereof.
6.05 Waiver
Any waiver by either Party of a breach of any provision of the
Agreement shall not operate as or be construed to be a waiver
of any other breach of that provision or of any breach of any
other provision of the Agreement. The failure of a Party to
insist upon strict adherence to any term of the Agreement on
one or more occasions will not be considered a waiver or
deprive that Party of the right thereafter to insist upon
strict adherence to that term or any other term of the
Agreement. Any waiver must be in writing and be authorized by
a resolution of the Board of Directors of the waiving Party.
6.06 Binding Effect
The provisions of the Agreement shall be binding upon and
inure to the benefit of Universal Filtration and Auxer and
their respective successors and assigns and shall inure to the
benefit of either Universal Filtration or Auxer individually
and his/her/its assigns, heirs and personal representatives,
as the case may be.
6.07 No Third Party Beneficiaries
The Agreement does not create, and shall not be construed as
creating, any rights enforceable
6.08 Separability
If any provision of the Agreement is invalid, illegal, or
unenforceable, the balance of the Agreement shall remain in
effect, and if any provision is inapplicable to any person or
circumstance, it shall nevertheless remain applicable to all
other persons and circumstances.
6.09 Headings
The headings in the Agreement are solely for convenience of
reference and shall be given no effect in the construction or
interpretation of the Agreement.
6.10 Counterparts; Governing Law
The Agreement may be executed in any number of counterparts,
each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. The
Agreement shall be governed by and construed in accordance
with the laws of the State of New Jersey, without giving
effect to conflict of laws. Any action, suit or proceeding
arising out of, based, on, or in connection with the
Agreement, the Acquisition, or the other transactions
contemplated hereby may be brought only in the United States
District Court for New Jersey and each Party covenants and
agrees not to assert, by way of motion, as a defense, or
otherwise, in any such action, suit, or proceeding, any claim
that it is not subject personally to the jurisdiction of such
court, that its property is exempt or immune from attachment
or execution, that the action, suit or proceeding is brought
in an inconvenient forum, that the venue of the action, suit,
or proceeding is improper, or that the Agreement or the
subject matter hereof may not be enforced in or by such court.
IN WITNESS WHEREOF, the Agreement has been approved by
resolution duly adopted by the Board of Directors of each of
the Constituent Corporations and has been signed by duly
authorized officers of each of the Constituent Corporations,
all as of the date first above written.
UNIVERSAL FILTRATION INDUSTRIES, INC.
By: (s) Ronald M. Shaver
--------------------
Ronald M. Shaver,
President
AUXER INDUSTRIES, INC.
By: (s) Eugene Chiaramonte
-----------------------
Eugene J. Chiaramonte, Jr.
EXHIBIT 10.6 - FINOVA CAPITAL CORPORATION AGREEMENT
- - ----------------------------------------------------
F I N 07A
FINANCIAL INNOVATORS
FINOVA CAPITAL CORPORATION
GROWTH FINANCE
15 W. 44TH STREET
STM FLOOR
NEW YORK, NY 10036
TEL 212 843 0808
FAX 212 843 0817
March 2, 1999
Harvey Westbury Corporation
15 Heisser Court
Farmingdale, NY 11735
Gentlemen:
The security agreement between you and our predecessor, United
Credit Corporation, is hereby modified in the following
respects:
1. Paragraph FIRST (b) is changed to read as follows: The
borrowing base shall mean an amount equal to 75% of the net
security value of accounts as defined in subparagraph
"THIRTEENTH (b)" hereof minus any amounts past due in
accordance with the terms of this agreement, and the
"permissible line" shall mean $150,000.00.
2. Paragraph FIRST (c), is changed to read as follows: The
Borrower shall pay United basic interest on the daily unpaid
cash balances outstanding during each month at a rate equal to
the highest prime rate in effect in New York City during such
month as generally reported, plus 8% per annum, but the basic
rate hereunder shall not be less than 16 3/4% per annum nor
more than the maximum permitted by applicable law.
3. Paragraph FIRST (d) is changed to read as follows: The
Borrower shall pay United, as a commitment fee for United's
agreements hereunder (i)$500.00 per month (prorated for
periods less than a full calendar month) each month that this
agreement is to remain in effect, as stated below or as
renewed or extended, against which the interest charge under
paragraph FIRST (c) shall be applied; but interest or fees
charged in connection with any "over-advance" as referred to
in subparagraph "SIXTH A" or any "installment loan" as defined
in subparagraph "THIRTEENTH (c) or any other fees payable
hereunder, shall not be so applied; and (ii), commencing
February 1, 2000 and each February l'` thereafter that this
agreement is in effect, an annual commitment fee of $1,750.00.
4. Paragraph FIRST (e) is changed to read as follows: This
agreement shall remain in effect until January 31, 2001.
The foregoing amendments shall take effect February 1, 1999.
You agree that your indebtedness to us as of February 28, 1999
was $22,998.87, including charges of $60.00 for P&T and a
$12.00 miscellaneous charge, but exclusive of all other
charges for the month of February, 1999.
If the foregoing correctly sets forth our understanding please
sign below and return a copy of this letter so endorsed.
Please call if you have any questions.
Sincerely,
FINOVA CAPITAL CORPORATION
DBA UNITED CREDIT
AGREED:
HARVEY WESTBURY CORPORATION
BY
EXHIBIT 10.7 - PMR AND ASSOCIATES INVESTOR RELATION AGREEMENT
DATED JANUARY 4, 1999.
- - ------------------------------------------------------------
PMR and ASSOCIATES
1042 North El Camino Real, Suite B-266
Encinitas, California, 92024
760-612-3643 Phone
Mr. Gene Chiramonte Chairman
Auxer Group
RE: Investor Relations Proposal--Auxer Group
(OTC-BB "AUXER")
Dear Mr. Chiramonte;
Thank you for your interest in PMR and Associates' services in
the investor relations field. Enclosed please
find my firms marketing contract and promotional materials.
Should you or your attorney have any questions
regarding this proposal please do not hesitate to contact me
at your earliest convenience.
PROPOSAL OUTLINE
PMR and Associates will provide full investor relations
services for Auxer Group, Inc. pursuant to the terms and
conditions in the attached agreement,
COMPENSATION
-------------
A. Retainer: $3,500 per month- three month minimum
contract payable, in free trading common stock
B. Arrange for financing or investment capital according
to a separate finder's foe agreement.
C. Auxer Group Inc. agrees to grant Patrick M. Rest or his
assigns an option to purchase 5,000,000 (five million) free
trading shares of common stock for a purchase price of.04
(four cents). The option expires on February 15, 1999.
SERVICES PROVIDED
-----------------
A. Assist in the creation of a investor relations
package.
B. Broker/Dealer Relations: Disseminate Ilk packages M
pre qualified brokers.
C. Introduction to Market Makers interested in making a
market in AXGI
D. Increase awareness amongst institutional and
Individual investors.
E. Introduce industry analyst to the company.
F. Assist in the development of an investor relations web
site.
G. Assist In the drafting, and dissemination of press
releaser through appropriate wire services.
H. Maintain broadcast fax list and/mailing list for new
press releases and corporate updates.
I. Answer all shareholder inquiries.
J. Organise and attend an conferences or industry forums
on behalf of AXGI.
Thank you for your time and I look forward to a
successful future between our two companies.
AGREED Upon By /s/Patrick M. Rost, PMR & Associates
1-4-99 DATE
AGREED Upon By: /s/ Gene Chiaramonte, Chairman Auxer
1-4-99 DATE
Sincerely;
Patrick N1. Rust
PMR and Associates
EXHIBIT 10.8 - PMR AND ASSOCIATES INVESTOR RELATIONS SERVICES
AGREEMENT DATED APRIL 6, 1999.
- - ------------------------------------------------------------
AGREEMENT OF INVESTOR RELATIONS SERVICES
AGREEMENT dated this 6th day of April, 1999, by and between
The Auxer Group, Inc. (the "Company") having its principal
place of business at 30 Galesi Drive, Wayne, NJ 07470 and PMR
and Associates, LLC (the "Consultant") having its principal
place of business at 162 S. Santa Fe Road; Suite F-50,
Encinitas, CA 92024.
WHEREAS, The Company desires acquire the services of PMR and
Associates, LLC; and
WHEREAS, PMR and Associates is a consultant with special
knowledge, skills and experience within the investment and
business community;
THEREFORE, it NOW agreed that in consideration of the mutual
convenants and agreements hereinafter set forth, the parties
hereto agree as follows:
1. Services
The Consultant shall provide the following services:
Maintain investor package
Liaison between the Company and shareholders
Assist in development of investor website
Assist in drafting and dissemination of press releases
Maintain mailing lists
Introduce industry analyst
2. Compensation & Terms
1.1 Retainer equal to $2000 per month for a minimum of
three (3) months from the date of this agreement.
1.2 Finder's Fees of 10% of any funding arrangements
originating through introductions through the Consultant
3. Other Convenants
2.1 The Company shall indemnify and hold harmless the
Consultant for any acts conducted by the Company relating to
this agreement;
2.2 The Consultant shall indemnify and hold harmless the
Company for any acts conducted by the Consultant relating to
this agreement;
2.3 The Consultant shall abide by all federal and state
laws and regulations concerning investor relations, stock
promotions and public disclosure requirements
2.4 The Consultant shall keep confidential all materials
and information obtained and derived as result of this
agreement and this relationship with the Company
Agreed Upon By: Patrick M. Rost, PMR & Assoc
Dated:
Agreed Upon By: Eugene Chiaramonte, Auxer
Group
Dated:
EXHIBIT 10.9 - PMR AND ASSOCIATES MANAGEMENT CONSULTING
SERVICES AGREMEENT DATED JULY 1, 1999.
- - ------------------------------------------------------------
AGREEMENT OF MANAGEMENT CONSULTING SERVICES
AGREEMENT dated this 1st day of July, 1999, by and between The
Auxer Group, Inc. (the "Company") having its principal place
of business at 30 Galesi Drive, Wayne, NJ 07470 and PMR and
Associates, LLC (the "Consultant") having its principal place
of business at 162 S. Santa Fe Road; Suite F-50, Encinitas, CA
92024.
WHEREAS, The Company desires acquire the services of PMR and
Associates, LLC; and
WHEREAS, PMR and Associates is a consultant with special
knowledge, skills and experience related to finance and
marketing;
THEREFORE, it NOW agreed that in consideration of the mutual
convenants and agreements hereinafter set forth, the parties
hereto agree as follows:
1. Services
The Consultant shall provide the following services:
Assist in website development
Assist in strategic acquisition development
Assist in internet program development
Assist in business and relationship development
2. Compensation & Terms
The Company shall grant the Consultant an option to
purchase a minimum of 1,000,000 (One Million Shares) of free
trading shares of common stock of The Auxer Group, Inc at a
purchase price of $0.13 (Thirteen Cents). This option to
purchase stock will expire three (3) months from the date of
this agreement.
3. Other Convenants
2.1 The Company shall indemnify and hold harmless the
Consultant for any acts conducted by the Company relating to
this agreement;
2.2 The Consultant shall indemnify and hold harmless the
Company for any acts conducted by the Consultant relating to
this agreement;
2.3 The Consultant shall abide by all federal and state
laws and regulations concerning investor relations, stock
promotions and public disclosure requirements
2.4 The Consultant shall keep confidential all materials
and information obtained and derived as result of this
agreement and this relationship with the Company
Agreed Upon By: Patrick M. Rost, PMR & Assoc
Dated:
Agreed Upon By: Eugene Chiaramonte, Auxer Group
Dated:
EXHIBIT 21 - SUBSIDIARIES OF THE ISSUER
- - ---------------------------------------
. CT Industries, Inc. - State of New York
. Universal Filtration Industries, Inc. - State of
New York
. Harvey-Westbury Corp. - State of New York
EXHIBIT 27 - FINANCIAL DATA SCHEDULE
- - ------------------------------------
[DESCRIPTION] ART. 5 FDS FOR FORM 10-SB
[ARTICLE] 5
[MULTIPLIER] 1,000
<TABLE>
<S> <C>
[PERIOD-TYPE] 9-MOS
[FISCAL-YEAR-END] DEC-31-1999
[PERIOD-END] SEP-30-1999
[CASH] 31,439
[SECURITIES] 0
[RECEIVABLES] 193,654
[ALLOWANCES] 0
[INVENTORY] 317,015
[CURRENT-ASSETS] 542,108
[PP&E] 66,819
[DEPRECIATION] 35,867
[TOTAL-ASSETS] 927,964
[CURRENT-LIABILITIES] 296,550
[BONDS] 0
[PREFERRED-MANDATORY] 0
[PREFERRED] 27,500
[COMMON] 54,037
[OTHER-SE] 577,377
[TOTAL-LIABILITY-AND-EQUITY] 927,964
[SALES] 651,478
[TOTAL-REVENUES] 651,478
[CGS] 427,076
[TOTAL-COSTS] 427,076
[OTHER-EXPENSES] 723,432
[LOSS-PROVISION] 0
[INTEREST-EXPENSE] 8,620
[INCOME-PRETAX] <499,030>
[INCOME-TAX] 0
[INCOME-CONTINUING] <499,030>
[DISCONTINUED] 0
[EXTRAORDINARY] <253,220>
[CHANGES] 0
[NET-INCOME] <752,250>
[EPS-BASIC] <.01>
[EPS-DILUTED] <.01>
</TABLE>
