U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
<P>
AMENDMENT NO. 2 TO FORM 10-SB
<P>
General Form for Registration of Securities of Small
Business issuers Under Section 12(b) or 12(g) of the
Securities Act of 1934
<P>
THE AUXER GROUP, INC.
(Name of Small Business Issuer in its Charter)
<P>
Delaware 22-3537927
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or organization) Identification No.)
<P>
30 Galesi Drive, Wayne, New Jersey 07470
(Address of Principal Executive Offices) (Zip Code)
<P>
(973) 890-1331
(Issuer's Telephone Number)
<P>
Securities to be registered under Section 12(b) of the Act:
None
<P>
Securities to be registered under Section 12(g) of the Act:
Common Stock, $.001 Par Value
<P>
(Title of Class)
PAGE 1
<P>
TABLE OF CONTENTS
<TABLE>
<S> <C> PAGE #
ITEM 1. DESCRIPTION OF BUSINESS 3
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION 24
ITEM 3. DESCRIPTION OF PROPERTY 39
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT 40
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS 43
ITEM 6. EXECUTIVE COMPENSATION 45
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 50
ITEM 8. LEGAL PROCEEDINGS 51
ITEM 9. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. 53
ITEM 10. RECENT SALE OF UNREGISTERED SECURITIES 57
ITEM 11. DESCRIPTION OF SECURITIES 70
ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS 74
ITEM 13. FINANCIAL STATEMENTS 77
ITEM 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE 77
ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS 78
</TABLE>
PAGE 2
<P>
Part I
<P>
Item 1. Description of Business
-------------------------------
<P>
BUSINESS DEVELOPMENT
<P>
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.
<P>
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,
specifically Formula 2000. 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.
<P>
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
manufactured and delivered products for dry cleaners. On
March 24, 1999, the Company's board of directors approved
closing down Universal Filtrations operating account.
Currently, Universal Filtration is dormant with no
operating activity. Auxer issued 1,500,000 of its
shares of common stock to Universal Filtration
shareholders for all the outstanding shares of Universal
Filtration. 500,000 of the 1,500,000 shares were issued
and delivery was contingent upon meeting various
performance objectives. Universal Filtration is no
longer an active subsidiary. Secondly, on October 25,
1996, Auxer acquired Harvey Westbury Corporation,
Inc.("Harvey Westbury") a light manufacturer and
<P>
Page 3
<P>
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.
<P>
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.
<P>
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.
<P>
In June 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 certain criteria being met. As of September
30, 1999, the Company determined the collectability of
the promissory note was doubtful
and wrote it off.
<P>
Page 4
<P>
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.
<P>
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.
<P>
The following sets forth the valuation of the above-
referenced acquisitions based on the value per share:
<P>
<TABLE>
<S> <C> <C>
Acquisition Price Per Share Less than Fair
Market Value
(i)Universal Filtration $.05 No
(ii) Harvey Westbury $.50 No
(iii) Hardyston Distributors $.1075 No
(iv) CT Industries $.001 No
</TABLE>
<P>
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.
<P>
Our auditors have stated in their opinion that there is
substantial doubt regarding our ability to continue as a
going concern. We were a development stage company with
limited revenues, a history of significant losses and a
substantial accumulated deficit as at the end of our
calendar year 1997. However, presently we are not a
development stage company.
<P>
Page 5
<P>
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.
<P>
BUSINESS OF THE ISSUER
<P>
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 54% of the Company's total
revenue in 1999. 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 45% of the Company's revenue in 1999. CT
Industries, Inc. is a subsidiary currently set up to
house the Internet and retail sales which account for
less than 1% of the Company's total revenue. The Company
intends to continue these operations in the future.
<P>
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
<P>
Page 6
<P>
direct a majority of the arranged financing for the
automotive companies to the software investment.
<P>
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.
<P>
In 1999, management focused on marketing the Garry's
Royal Satin marine care products line and developing the
Easy Test line. Additionally, management focused on
developing Hardyston Distributors.
REVIEW OF PRODUCTS
<P>
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 45%
of the Company's revenue during the year ending December
31, 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 (approximately 54%). During the year ending
December 31, 1999, Harvey Westbury's sales by product
breaks down as follows: Easy Test Mobile A/C
Accessories - 28%; Easy Test Anti-freeze & Battery
Testers - 25%; Garry's Royal Satin Automotive - 13%;
Garry's Royal Satin Marine - 10%; Easy Test Drain Plug
Series - 10%; Easy Test Fleet Drain Plug Series - 3%;
Carbon Monoxide Testers - 3%; Easy Test Hatchback Lights
- 1%; and Formula 2000 Ultimate - less than 1%; Garry's
It Silicone and T-Bolt Rust Penetrant - less than 1%;
Miscellaneous Products - 9%.
<P>
Page 7
<P>
Garry's Royal Satin Automotive Product Line:
--------------------------------------------
<P>
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.
<P>
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.
<P>
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.
<P>
Garry's Royal Satin Marine Products:
------------------------------------
<P>
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.
<P>
Cream Paste Cleaner Wax: The product is used by detailing
professionals. Its blend of waxes and cleaner offers a
one-step cleaning and waxing option or can be applied
after a compound in detailing practices.
<P>
Heavy Duty Rubbing Compound: This product is intended to
complement to the Company's cleaner wax for difficult
oxidation problems that are too difficult for normal
oxidation.
<P>
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 extra months of added shine and protection
from oxidation.
<P>
Boat Wash: In this product, the Company has attempted to
formulate a product to clean and prep a boat for the
deoxidization process.
<P>
Page 8
<P>
It Silicone and T-Bolt Rust Penetrant:
--------------------------------------
<P>
Harvey Westbury markets a silicone and multipurpose
lubricant under the brand name It and T-Bolt.
<P>
Formula 2000 Ultimate Product Line:
-----------------------------------
<P>
Harvey Westbury markets a synthetic lubrication product
designed for engines and transmission lubrication
enhancement. In 1997, the Company created a new formula
and now markets this formula under the name "Formula 2000
Ultimate."
<P>
EasyTest Product Line:
----------------------
<P>
The Easy Test product series was founded by Harvey
Westbury. 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.
<P>
Antifreeze & Battery Testers:
-----------------------------
<P>
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.
<P>
Mobile Air Conditioning Accessories:
------------------------------------
<P>
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
<P>
Page 9
<P>
goggles. Additionally, the accessory items are designed
to service all R-12 (CFC-12 or Freon) and R134a (HFC-134a)
automotive systems.
<P>
Crankcase Drain Plug Series (CDPs & EDPs):
------------------------------------------
<P>
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.
<P>
Carbon Monoxide Testers:
------------------------
<P>
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.
<P>
Fleet Drain Plug Series (RDPs):
-------------------------------
<P>
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.
<P>
Miscellaneous Products:
-----------------------
<P>
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
December 31, 1999 the Company reported inventory of
$209,609. Carrying amount of inventory in miscellaneous
product is less than 2%. Products that are considered
<P>
Page 10
<P>
obsolete are "written off" in accordance with generally
accepted accounting principles.
<P>
MARKETING
<P>
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.
<P>
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.
<P>
In June 1999, Harvey Westbury entered into an advertising
agreement with the Veritas Group, Ltd. (in Mexico) 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.
<P>
The Company produced infomercials for test marketing on
television in 1995 for its Formula 2000 product line.
The infomercials consisted of 30 minute TV spots for
Direct Response Television. In October through December
1996, CT Industries ran test market spots on local cable
and national TV channels. After evaluation of the
initial results, the Company decided to stop advertising
the commercials on TV due to low response. The Company
considers the commercial segments available for future
use should the Company determine an opportunity through
advertising the Formula 2000 product line on television
is productive. At this time, the Company does not plan
to advertise Formula 2000 on television in the next
twelve months.
<P>
Page 11
<P>
The Company's web sites, which were introduced in 1999,
are designed to assist in marketing and sales lead
generation. Due to the introduction of the Company's web
sites, the Company's Formula 2000, Easy Test, and Garry's
product lines have received requests for information on
distribution both domestically and internationally. The
<P>
Page 11
<P>
Company plans to design an export section to the web
sites that oriented towards export buyers outside the
United States. This section is intended to provide
information to assist the export buyer in purchasing
decisions for the Company's products.
<P>
The Company is currently employing the strategies
outlined below:
<P>
Garry's Royal Satin Automotive Product Line:
--------------------------------------------
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. The
Company intends to repackage Garry's Royal Satin in new
plastic containers and labels.
<P>
Garry's Royal Satin Marine Products:
------------------------------------
In 2000, the Company intends to continue focus on its
sales and distribution efforts for its marine products in
the Northeast and Southeast region of the United
States. The Company intends to promote Garry's Royal
Satin Marine products through local and regional magazine
advertisements, discounted sales promotions, and
distribution of samples.
<P>
It Silicone and T-Bolt Rust Penetrant:
--------------------------------------
The Company sells limited quantities (less than 1% of
total revenues) of these products. No current marketing
programs are in place.
<P>
Formula 2000 Ultimate Product Line:
-----------------------------------
The Company introduced Formula 2000 Ultimate to the
market in 1998. In 1999, the Company introduced the
product on the Internet and intends to test market
several Internet banner concepts on automotive Internet
sites.
<P>
Engine treatment products are a competitive market place
and will need to be unique in order to differentiate
itself between other products. The Company had
independent lab tests performed by FES (Fluid Engineering
Services), Inc. in Stillwater, Oklahoma. FES, Inc. is a
fluids engineering and testing service. Fees were paid
for independent lab tests performed by FES. FES is
qualified to conduct most standard fluid tests related to
testing and evaluating anti-wear and lubrication
properties of system fluids in accordance with ISO, NFPA,
ASTM, SAE and MIL standards. 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
<P>
Page 12
<P>
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.
<P>
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.
<P>
Mobile Air Conditioning Accessories:
------------------------------------
The Company plans to introduce a line of AC accessories
and chemicals with a new catalog. The Company intends to
be a low cost supplier of these accessory products.
<P>
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.
<P>
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.
<P>
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.
<P>
SOURCES AND SUPPLIERS
<P>
Page 13
<P>
Neither the Company nor any of its subsidiaries currently
have any contracts or arrangements with any
subcontractors and/or suppliers. Therefore, the
Company may be unable to obtain Products from its
manufacturers in a timely fashion. The raw materials for
all of the Company's current products are easily
accessible and several sources exist.
<P>
Harvey Westbury's Easy Test Anti-freeze and Battery
Testers. The 501 series testers are assembled and
packaged in Harvey Westbury's Farmingdale, New York
facility. The 701 and 901 series testers are assembled
by the supplier and packaged in Harvey Westbury's
Farmingdale, New York facility. Harvey Westbury's Easy
Test Mobile Air Conditioning Accessories are assembled by
the supplier and packaged in Harvey Westbury's
Farmingdale, New York facility. The Company does not
have any contractual agreements or licensing arrangements
with its suppliers for these products. There are no
patents held by third parties.
<P>
Harvey Westbury's Garry's chemical based products are
manufactured and packaged by a third-party chemical
manufacturer in New York. The Company does not have any
contractual agreements or licensing arrangements with its
suppliers for these products. There are no patents held
by third parties. The formulations for the products were
developed by the manufacturer. Harvey Westbury created
the formulas for Garry's Royal Satin and Garry's Royal
Satin Liquid.
<P>
Formula 2000 products are manufactured and packaged by
third-party chemical manufacturers in New York. The
Company does not have any contractual agreements or
licensing arrangements with its suppliers for these
products. There are no patents held by third parties.
Auxer created the formula for these products which is
currently marketed under the "Formula 2000 Ultimate"
name.
<P>
Hardyston Distributors purchases automotive parts from
several local distributors in Northern New Jersey.
Products are manufactured and packaged by the supplier or
manufacturer. The Company does not have any contractual
agreements or licensing arrangements with its suppliers
for these products. Hardyston Distributors purchases
automotive parts for resale.
<P>
Harvey Westbury's Easy Test Testers and Accessories are
imported from the following suppliers in Taiwan and
China: Pan Taiwan Enterprises, Co., Ltd, Yen Jen, Three-
In-One Enterprises and DHC. In Addition, another
supplier is ATS, based in the United States. The 501
series testers are assembled in Harvey Westbury's
<P>
Page 14
<P>
Farmingdale, NY facility. Harvey Westbury's Easy Test
Mobile Air Conditioning Accessories are imported from
such suppliers as Yen Jen and Pan Taiwan Enterprises,
Co., Ltd. in Taiwan; Airosol basedin Kansas, TCC based in
Texas; du Pont based in Wilmington, Delaware,
Environmental Material Corp. based on New Jersey and
Allied Signal based in New Jersey. Some products are
manufactured at the Harvey Westbury Farmingdale, NY
facility. Harvey Westbury's Garry's Royal Satin and
Formula 2000 products are manufactured and supplied by
John Prior, Inc. and Innovative Chemical both based in
New York; CRC based on Pennsylvania; Penray based on
Illinois; and Bernard Laboratories based in Ohio.
Hardyston Distributors purchases automotive parts from
several local distributors in Northern New Jersey
including B&B Auto Parts and Allendale Automotive
Enterprises.
<P>
COMPETITION AND RELATED MATTERS
<P>
We have a market position of less than 5% for any of our
products.
<P>
Garry's Royal Satin Product Line for Automotive, Marine &
Aviation: The Wax and Polish market is mainly comprised
of waxes, polishes, and Protectants.
<P>
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.
<P>
In addition to the Automotive Industry, the Company is
also involved in the Marine Waxes and Polishes industry.
<P>
The wax market primarily consists of what the company
terms Do It Yourselfer ("DIYer") client base. 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.
<P>
Major retailers command a larger influence in the
industry by being their own distributors. 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 retailer can now
handle more volume than the distributor, in most cases,
<P>
Page 15
<P>
and is able to demand lower purchase levels. Electronic
Data Inquiry ("EDI") systems are also becoming more
accepted by major retailers. These systems make it easier
to order directly from the manufacturer.
<P>
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 & Protectants.
<P>
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. 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.
<P>
The following is an overview of the competition:
<P>
(1) FIRST BRANDS located in Danbury, Connecticut. This
public company (NYSE:FBR) sells car care products
consisting of waxes and polishes (30-50% of the
market). Its principal brand name is STP, which is an
automotive additive. The brand name for which it markets
its wax is known as Simoniz. The product has been in
existence since the mid 1900's and is traditionally
packaged in a yellow metal container to include various
sizes.
<P>
(2) TURTLE WAX, INC. located in Chicago, Illinois
This private company has several branches located
throughout 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 is Turtle Wax. Turtle Wax, Inc. has strong
distributor and major retailer penetration and undertakes
extensive marketing and advertising to help support its
products.
<P>
Minnesota, Mining and Manufacturing (3M) located in St.
Paul, Minnesota: This public company (NYSE: MMM) is a
major leader in several industries including the
Automotive and Marine industries. 3M's strength is its
brand name recognition.
<P>
Other Competition:
<P>
Page 16
<P>
Other major competitors in the wax and polish industry
include BLUE CORAL, recently acquired by Quaker State and
StarBrite Distributors, Inc. located in Florida.
Another popular brand name called MOTHER'S located in
Huntington Beach, California has recently introduced a
complete car care product line to compliment its wax
items.
<P>
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.
<P>
Formula 2000 Ultimate Product Line:
-----------------------------------
The Engine Treatment and Oil Additive market is part of
the Automotive Aftermarket Parts & Accessories
Industry and the Company categorizes within the chemical
products group.
<P>
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.
<P>
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.
<P>
The mid-range products consist of non-brand name products
and private label such as TM8, Tech2000 (Wal-Mart),
Lubricator2001 (Turtlewax). 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.
<P>
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.
<P>
First Brands: This company has a recognized name in oil
additives and engine treatments with its brand name,
STP. 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. STP offers a
full line of additive products.
<P>
Page 17
<P>
Quaker State: Is a public company recognized for its line
of motor oil products. However, the company owns the
well recognized car care products company, Blue
Coral. Blue Coral acquired the Slick50 in 1994.
<P>
Slick50's initial engine treatment product was primarily
a quality motor oil and PTFE, sometimes better recognized
as DuPont's Teflon. Additionally, Blue Coral has
introduced a full line of additives and gas treatments as
well as semi-synthetic and full synthetic engine
treatments.
<P>
Prolong: This company is private and is located in
California. Prolong can be found in the West region of
the United States. The company has not changed its
format from a single showcase product, although the
company has a full line of additive products.
<P>
Prolong and DuraLube are typically not offered together;
but either Prolong or DuraLube are sold with Slick50.
<P>
DuraLube: This company is private and located in Eden,
New York. DuraLube is most noted for introduction of the
chlorine-based treatments. DuraLube contends its product
is no longer chlorine-based.
<P>
DuraLube offers a full line of additives and treatments.
<P>
MotorUp: MotorUp is private and represents a small
share of the market (1% to 3%). MotorUp is located in
Philadelphia. Additionally, this company popularized
the 15 oz. bottle, satisfaction guaranteed and A No
Oil Change product.
<P>
MotorUp has a full line of additives including simple
quality oil mixed with a strong additive package.
Currently, MotorUp is moving away from infomercials and
establishing distributors and retailers. The product
can be found in some of the less prominent retailers
on special isle shelving.
<P>
Other Competition:
------------------
The Company's other competition is comprised of many mid-
tier companies that offer engine treatments as part of
their additive product lines or private label vendors.
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.
<P>
Page 18
<P>
Another indirect competitor to the engine treatment
market is the recently growing synthetic motor oils.
Mobile introduced the Mobile One technology, and has
recently introduced TMP technology. Today, Mobile
synthetic motor oil technology nearly parallels Formula
2000's synthetic technology.
<P>
EasyTest Product Line:
----------------------
Antifreeze & Battery Testers:
-----------------------------
The tester market primarily consists of a DIY (do it
yourselfer) client base. 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.
<P>
Harvey Westbury Corp. is a manufacturer 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.
<P>
The following is an overview of the competition:
<P>
JONI ENTERPRISES, LTD.- located in Taiwan, Republic of
China.
<P>
This company has been competing with Harvey Westbury for
over twenty years and currently leads the market as the
primary manufacturer. Joni also carries a small
automotive windshield accessory line.
<P>
THEXTON MFG., CO. - located in Minneapolis, Minnesota.
<P>
This company only makes the larger, professional type
testers, which, furthermore, represents less than
twenty percent of its entire revenue. The Company
primarily specializes in automobile repairs and service
equipment.
<P>
WILMAR CORPORATION - located in Seattle, Washington.
<P>
This company specializes in the manufacturing of
plastic products. It is currently importing several
items to increase its catalog selection and acts as a
distributor to several major retail chains.
<P>
CUSTOM ACCESSORIES, INC. - located in Niles, Illinois.
This private company specializes in automotive parts.
<P>
Page 19
<P>
Mobile Air Conditioning Accessories:
------------------------------------
This vast market consists of compressors, hoses, valves,
refrigerants, refrigerant recovery, retrofit servicing,
and accessories.
<P>
The automotive air conditioning accessories market
primarily consists of Jobbers and Do It Yourselfers
(DIY). 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.
<P>
The following is an overview of the competition:
<P>
AEROQUIP CORP. - located in Maumee, Ohio.
<P>
This private company is headquartered 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.
<P>
WATSCO COMPONENTS, INC. - located in Hialeah, Florida.
<P>
This public company (NYSE: WSO) retrofits refrigerant
access valves, vacuum pumps, refrigerant recovery
machines & filters.
<P>
INTERDYNAMICS, INC. - located in Brooklyn, New York.
<P>
This private company specializes in the manufacture of
automobile parts and equipment. Its share of the AC
accessories market includes AC testing and charging
accessories, refrigerants, and electronic climate
control systems. Its items can be found in the major
discount chains such as Pep Boys, Western Auto, and R&S
Strauss.
<P>
Other Competition:
<P>
Another significant competitor in the accessories
industry is SCHRADER-BRIDGEPORT located in Altavista,
Virginia.
<P>
CASTROL INDUSTRIAL North America, INC. located in Downers
Grove, Illinois. It manufactures Retrofit Kits found in
the market to include its own brand name CASTROL.
<P>
Crankcase Drain Plug Series (CDPs & EDPs):
The other vendors currently known to manufacture this
product are Difco, Inc. and Cargo, Inc.
<P>
Page 20
<P>
Fleet Drain Plug Series (RDPs):
The markets for this product are companies with
maintenance sections who perform regular maintenance
requirements on fleet operations, trucking outlets and
repair centers. There is only one other known
distributor, IAS, in the United States.
<P>
Carbon Monoxide Testers:
<P>
Market & Competition:
<P>
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.
<P>
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. The third aspect of
growth is in technology. 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.
<P>
The competition within this industry is as follows:
<P>
FIRST ALERT, INC. - located in Aurora, Illinois.
<P>
This is a public company that introduced the CO
detector. This company's primary source of revenue is
from smoke detectors. First Alert, Inc. products are
retailed under the brand name First Alert that offers a
complete line of gas detectors.
<P>
QUANTUM GROUP, INC. - located in San Diego, California.
<P>
This private company specializes in safety equipment and
measuring device manufacturing. The company's full line
of products is marketed under two brand names, COSTARJ,
and Quantum.
<P>
Other Competition:
<P>
Page 21
Several other brand name companies exist in the market.
Such competitive brand names are Nighthawk, Lifesaver, S-
Tech, American Sensors, Air-Zone, Emerson, Macurco, and
Safety1st.
<P>
POINTS OF OPERATION
<P>
Auxer, CT Industries, Harvey Westbury and Hardyston all
maintain their headquarters and administrative operations
in West Paterson, New Jersey. Additionally, Harvey
Westbury 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.
<P>
GOVERNMENT REGULATION
<P>
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.
<P>
INTELLECTUAL PROPERTY
<P>
The Company does not own any material property in the
form of patents.
<P>
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
<P>
Page 22
<P>
Westbury has continued to distribute the product under
the trade name "Garry's Royal Satin."
<P>
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.
<P>
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.
Subsequently, the Company created a new formula,
specifically Formula 2000 Ultimate, which Harvey-Westbury
markets and sells.
<P>
Harvey Westbury does not have any contractual agreements
or licensing arrangements with its suppliers for Garry's
Royal Satin products. There are no patents held by third
parties or by Harvey Westbury.
<P>
Harvey Westbury does not have any contractual agreements
or licensing arrangements with its suppliers for these
products. There are no patents held by third parties.
The formulations for the products were developed by the
manufacturer. Harvey Westbury owns the rights to the
formulas for Garry's Royal Satin and Garry's Royal Satin
Liquid. The supplier owns the rights to the formulas for
the rest of the products under the Garry's line.
Auxer does not have any contractual agreements or
licensing arrangements with its suppliers for the Formula
2000 products. There are no patents held by third
parties. Auxer owns the rights to the formula for these
products.
<P>
Hardyston Distributors does not have any contractual
agreements or licensing arrangements with its suppliers
for Garry's Royal Satin products. Hardyston Distributors
purchases automotive parts for resale.
<P>
Page 23
<P>
Item 2. Management's Discussion and Analysis or Plan of
Operation
--------------------------------------------------------
<P>
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. 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.
<P>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS
<P>
Management's Discussion and Analysis of Financial
Condition and Results of Operations for the Years
December 31, 1998 and 1999. The financial statements for
the years ended December 31, 1998 and 1999 have been
prepared on a going concern basis. The issuance of a
going concern opinion by the auditors indicates that the
auditors have substantial doubt about the company's
ability to continue as a going concern. The Company
incurred net losses of $4,828,817 for period from April
18, 1995 to December 31, 1999. These factors indicate
that the Company's continuation, as a going concern is
dependent upon its ability to obtain adequate financing.
If the Company is unable to obtain adequate financing
necessary to support the Company's ability to continue
its operations, advance its plan of operations, increase
its sales, increase its inventory and working capital,
the Company would be substantially limited. If the
Company is unable to properly fund its plan of
operations, the Company's continuation would be
jeopardized.
<P>
Management's plan to overcome its financial difficulties
consists of raising additional capital and increasing
revenues from its subsidiaries. The plan of operations
discloses the Company's plan to grow its subsidiaries
sales. The Company requires additional funding in the
next twelve months to invest in the marketing programs,
inventory, equipment and working capital requirements.
<P>
The Company estimates its cash and capital commitments
during the next twelve months to be as follows:
<TABLE>
<S> <C>
Requirement Commitment 12 Month Cash Requirement
----------------------- -------------------------
Raw materials $2,500,000
<P>
Page 24
<P>
Payroll 600,000
<P>
Legal settlements 50,000
Debt payments 50,000
Leases 125,000
Insurance 50,000
Supplies 25,000
Marketing/Advertising 200,000
Maintenance/Repairs 10,000
General & Administrative 300,000
------------------------
TOTAL: $3,910,000.00
</TABLE>
<P>
The Company plans to increase its line of credit to
assist in financing the raw material requirements. The
Company will require a credit line up to $2.5 million.
Additionally, the Company plan's to support its
operations through increased revenues. Lastly, the
Company plans to raise additional capital to assist the
Company in meeting its commitments.
<P>
The Company will require additional financing to
capitalize the plans outlined above. The Company plans
to raise additional capital of $2,000,000 through a
private placement and/or registered offering in the
or 2nd or 3rd quarter of 2000. The proceeds of this
planned offering will be used to fund the above expansion
plans and operating expenses.
<P>
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. In December 1999, the Company amended its
offering to sell up to 10,000,000 shares. As of December
31, 1999, the Company has sold 7,900,000 shares. The
Company expects to sell the remaining shares by the end
of January to satisfy the short term capital requirements
for the Company. Subsequently, the offering was closed
effective January 20, 2000 and no additional shares were
sold.
<P>
In Footnote 12 of the financial statements, during 1998,
errors were discovered in which stock was issued and
recorded at the incorrect price. Such issues have been
corrected. The shares in question were issued by the
Company. The shareholders who received these shares were
Creative Capital, an investment company, in consideration
<P>
Page 25
<P>
for reduction to loans payable and International
Development Corp., a finance and public relations firm in
consideration for professional services rendered. On
September 4, 2996, Creative Capital received 250,000
shares in consideration for $102,000 and on July 22,
1997, International Development received 70,000 shares in
consideration of $17,500. The Company has implemented a
new procedure which requires the Company to maintain a
stock ledger which is updated with every stock issuance.
After each issuance the Company's stock ledger is
reconciled with the transfer agents records. The ledgers
are reviewed by the Company's Board of Directors on a
monthly basis. These errors were corrected by restating
note 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 increase in stockholders' equity of
$102,000.
<P>
In addition, the Company in error accrued as salary for
the President for the years ended December 31, 1995, 1996
and 1997 at $100,000 per year for a total of $300,000.
On July 6, 1999, the parties agreed that the accrued
compensation would not be paid. There was no accrual
made for year ended December 31, 1998. 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 increase in
stockholders equity of $300,000.
<P>
In conjunction with the Company filing Form 10SB for
Registration of Securities of small business issuers, the
effect of a one time change in accounting principles is
accounted for by retroactively restating financial
statements for the years ended December 31, 1998 and
1997.
<P>
As a result, certain costs that were capitalized and
amortized were restated and charged to operations as
incurred. The financial statements were restated to
reflect the effect of expensing these costs in the
periods incurred, increasing net loss by $540,967, and
decreasing net loss by $136,603 for the years ended
December 31, 1997 and 1998, respectively. The net change
in stockholders' equity as a result of the restatement
was a increase of $136,603 and a decrease of $540,967 at
December 31, 1998 and December 31, 1997 respectively.
<P>
Also in conjunction with the Company filing a Form 10SB
for Registration of Security of small business issuers,
the effects of a change in the value of services paid for
through the issuance of the Company's common stock and
the recognition as a loss of the Company's investment in
<P>
Page 26
<P>
Auxer UK were accounted for by retroactively restating
the financial statements for the years ended December 31,
1998 and 1997.
<P>
As a result, the value of services received were changed
to reflect the fair value of the Company's common share
issued, increasing net losses by $336,135 and $515,791 or
the years ended December 31, 1998 and 1997. The company
also increased net losses by recognizing a loss on the
investment Auxer UK of $353,000 for the year ended
December 31, 1998. The net change in stockholders'
equity as a result of these changes was $353,000 for the
year ended December 31, 1998.
<P>
The net effect of the above changes covered by the
restatement on stockholders' equity was a decrease of
$216,397 and $158,967 at December 31, 1998 and 1997
respectively. The effect of the restatement on the
related per share data was to increase the loss by $.02
and $.08 per common share and per common share assuming
dilution for the year ended December 31, 1998 and 1997.
<P>
In 1996, 400,000 shares of common stock were issued, but
held for delivery contingent upon performance objectives
of Universal Filtration Industries being achieved. These
shares were rescinded when these objectives were not
achieved.
<P>
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 was 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.
<P>
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 45%
of the Company's revenue during the year ending December
31, 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 (approximately 54%). During the year ending
December 31, 1999, Harvey Westbury's sales by product
breaks down as follows: Easy Test Mobile A/C Accessories
28%; Easy Test Anti-freeze & Battery Testers - 25%;
Garry's Royal Satin Automotive - 13%; Garry's Royal Satin
Marine - 10%; Easy Test Drain Plug Series - 10%; Easy
<P>
Page 27
<P>
Test Fleet Drain Plug Series - 3%; Carbon Monoxide
Testers - 3%; Easy Test Hatchback Lights - 1%; and
Formula 2000 Ultimate - less than 1%; Garry's It Silicone
and T-Bolt Rust Penetrant - less than 1%; Miscellaneous
Products - 9%.
<P>
Results of operations for periods ended December 31, 1998
and 1999
<TABLE>
<S> <C> <C> <C>
Year ended Year ended +/- %
Dec. 31, 1998 Dec. 31, 1999
------------- ------------- ------
<P>
Net Sales $287,456 871,259 +203%
Gross Profit 49,504 249,049 + 8%
Selling, General &
Administrative Expenses 1,053,887 1,302,418 + 24%
Research & Development Costs 1,106 0 -100%
Depreciation Costs 12,928 11,626 - 10%
Amortization Costs 0 0 0%
Interest 20,790 31,964 - 49%
Net Income (Loss) (1,392,207) (975,127)
Inventory 164,302 290,725 + 77%
</TABLE>
<P>
Net Sales
<P>
The company had sales of sales of $871,259 in 1999
compared to sales of $287,456 in 1998 representing a
increase of $583,803 or 203%. The increase in sales in
1999 was due to an increase in revenue generated from
Harvey Westbury and sales from Hardyston Distributors,
the Company's two primary operating subsidiaries. Harvey
Westbury's sales increased from $283,528 to $474,344.
Additionally, sales from Hardyston were $393,225.
<P>
Gross Profit Margins
<P>
The company had gross profits of $249,049 and a gross
margin of 29% in 1999 compared to gross profits of
$49,504 and a gross margin of 21% in 1998 representing a
increase in the gross margin of 8%. The increase in
gross profit was a result of the companies ability to
buy raw materials in large volume to obtain volume
discounts.
<P>
Selling, General & Administrative Expenses
<P>
The company had general and administrative expenses of
$1,302,418 in 1999 compared to $1,053,887 in 1998
representing an increase of $248,531 or 24%. The increase
<P>
Page 28
<P>
in these expenses was a result of increased spending in
marketing and sales of Harvey Westbury's products.
<P>
Research & Development Costs
<P>
The company had research and development costs of $0
in 1999 compared to $1,106 in 1998 representing a
decrease of $1,106 or 100%. The decrease in these
costs was a result of the completion of developing the
Easy Test and Garry's Royal Satin product lines under
Harvey Westbury. The company's primary focus in 1999 was
marketing and selling these products.
<P>
Depreciation
<P>
The company had depreciation expenses of $11,626 in 1999
compared to $12,928 in 1998 representing an decrease of
$1,302 or 10%. The decrease in these expenses was a
result of an decrease in the equipment depreciation.
<P>
Amortization Costs
<P>
The company had amortization expenses of $0 in 1999
compared to $0 in 1998 representing no change. There
were no costs that were capitalized or amortized. All
costs were expenses in the period they incurred.
<P>
Interest
<P>
The company had interest expenses of $10,618 in 1999
compared to $20,790 in 1998 representing a decrease of
$10,172 or 49%. The decrease in these expenses was a
result of a lower average principal outstanding on Harvey
Westbury's credit facility in 1998.
<P>
Net Income (Loss)
<P>
The company had net losses of $975,127 or a loss of $0.02
per share in 1999 compared to losses of $1,392,207 or a
loss of $0.04 per share in 1998 representing a decrease
in losses of $417,080 or $0.02 per share. The decrease
in losses was a result of increase in sales, as well as,
an increase in gross profits in 1999.
<P>
Inventory
<P>
The company had inventory of $296,725 on December 31,
1999 compared to inventory of $164,302 on December 31,
1998 representing an increase of $126,423 or 77%. The
increase in inventory was a result of the company's
inability to fund Harvey Westbury's inventory
requirements during 1999.
<P>
Page 29
<P>
Plan of Operation
<P>
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 2nd quarter, 2000.
The company also plans to startup or to invest in an
Internet technology business or business that plans to
enter into Internet-related activity within the next
twelve months.
<P>
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.
<P>
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.
<P>
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.
<P>
Trends, Events, or Uncertainties with Material Impacts
<P>
During 1997, the Company formed Auxer UK Ltd., a wholly
owned foreign corporation based in the United Kingdom.
This company invested in software technologies in the
United Kingdom. The Company invested $218,000 and
$135,000 in 1997 and 1998 respectively. In June 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
<P>
Page 30
<P>
upon certain criteria being met. As of September 30,
1999, the Company determined the collectability of the
note is doubtful and has written it off.
<P>
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.
<P>
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.
<P>
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.
<P>
The Company's subsidiary, Harvey Westbury agreed to
package its Easy Test products for Warren Distribution
under the trademark Polar for distribution throughout
Warren Distribution's network of warehouse distributors
and retail outlets. This arrangement began 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 that additional products may be added which
may generate additional revenue. If the current
relationship is discontinued in the next twelve months,
the company does not believe this event would have a
material impact on the company.
<P>
The Company's subsidiary, Harvey Westbury entered a
licensing agreement with Carquest to use the trademark
<P>
Page 31
<P>
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.
<P>
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.
<P>
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.
<P>
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
<P>
Page 32
<P>
in Puerto Rico over the next twelve months is necessary
in order to increase revenues from sales in Puerto Rico.
<P>
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 year ended December
31, 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.
<P>
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 a domain name. The letter of
intent consists of the Company entering into negotiations
with the intention of purchasing an internet domain name,
TheLoadingDock.com. At this time, a price for the rights
to the name has not been agreed upon. The purchase
has not closed and no time has been established to close.
The Company expects to conclude negotiations in the next
twelve months. At this time, the Company doesn't know
what impact it will have on its financial audit or the
result of the operation. 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.
<P>
Internal and External Sources of Liquidity
<P>
The company's subsidiary, Harvey Westbury has a credit
facility agreement with Finova Capital (formerly United
Credit Corp.) The credit facility currently permits
borrowings of up to $150,000 against a fixed percentage
of 75% of eligible accounts receivable. The interest rate
on the line of credit is basic interest on the daily
unpaid cash balances outstanding during each month at a
rate equal to the prime rate plus 8% per annum. The rate
shall not be less than 16 3/4% per annum nor more than
maximum permitted by applicable law. The credit facility
agreement requires a commitment fee of $1,750 per annum.
<P>
Page 33
<P>
For year ending December 31, 1998, the Company paid for
operations by raising $1,054,400 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 notes were converted at 70% of the 5 day
average bid price prior to conversion. 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 $51,159,960 through the sale and issuance of common
stock to provide for services rendered, consulting
requirements and operating and investment activities.
<P>
For the year ended December 31, 1999, paid for
operations by raising $1,261,714 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 $82,523 on December 31, 1999. The
Company borrowed and made payments of $5,575 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 June 1, 1999, the
Company's subsidiary Hardyston Distributors entered into
a vehicle loan agreement for $5,000 with Hudson United
Bank. The period of the loan is for 24 months at rate of
13.5% per annum. On January 2, 1999, the Company issued
preferred stock of $412,500. The Company raised capital
of $894,464 through the sale and issuance of common stock
to provide for services rendered, consulting requirements
and operating and investment activities.
<P>
The table below outlines the debt outstanding as of
December 31, 1999:
<TABLE>
<S> <C> <C> <C>
Amount of Debt Interest Rate Maturity Convertible into
common Shares
-------------------------------------------------------------------
$107,887 None Various No
-------------------------------------------------------------------
<P>
Page 34
<P>
$31,368 8% - 30 days No
Floating
-------------------------------------------------------------------
$80,000 8% Demand No
-------------------------------------------------------------------
$3,698 13.5% 24 months No
-------------------------------------------------------------------
$77,390 None Demand Yes
</TABLE>
<P>
Presently, we do not have any unused sources of liquidity
available to us. In addition, it has been difficult to
raise cash through capital transactions based on our
delisting of our stock from the OTC Electronic Bulletin
Board to the National Quotations Bureau Pink Sheets.
<P>
Year 2000 Compliance
<P>
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 through 2nd quarter 2000.
<P>
Page 35
<P>
Item 3. Description of Property
--------------------------------
<P>
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. 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.
Subsequently, on February 1, 2000, The Auxer Group, Inc.
and its subsidiaries moved its headquarters and
administrative offices to 12 Andrews Drive, West
Paterson, NJ. Additionally, the Company moved the
Farmingdale, NY operations to this location. The
property is a warehouse and offices flex space. The
Company entered into a five-year lease agreement with a
non-affiliated party beginning on February 1, 2000 and
expiring January 31, 2005. A Security deposit of $15,583
was required. Rental payments for February 1, 2000 to
January 31, 2001 are $85,000 annually (monthly payments
of $7,083.34). Rental payments for February 2001, to
January 31, 2002 are $89,250 (monthly payments of
$7,437.50). Rental payments for February 1, 2002 to
January 31, 2003 are $93,500 annually (monthly payments
of $7,791.67). Rental payments for February 2003 to
January 31, 2004 are $97,750 annually (monthly payment of
$8,145.84). Rental payments for February 1,2004 to
January 31, 2005 are $102,000 annually (monthly payments
of $8,500). In addition to the minimum monthly rental
payments, the company must pay real estate taxes,
insurance and utilities of approximately $1,700 per
month.
<P>
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.
<P>
Page 36
<P>
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).
Subsequently, the Company moved the operations to 12
Andrews Drive, West Paterson, NJ on February 15, 2000.
<P>
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). Subsequently, the
Company renewed its lease at this location for an
additional 2 year term. Rental payments for March 1,
2000 to February 28, 2001 are $9,000 annually (monthly
payments of $750). Rental payments for March 1, 2001 to
February 28, 2002 are $9,300 annually (monthly payments
of $775).
<P>
Page 37
<P>
Item 4. Security Ownership of Certain Beneficial Owners
and Management
--------------------------------------------------------
<P>
The following table sets forth certain information
regarding the Company's common and preferred stock
beneficially owned on December 31, 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 December 31, 1999, there were 56,736,797 (84,236,797
on a fully diluted basis if preferred shares were
converted) shares of common stock outstanding and
2,750,000 shares of preferred stock outstanding.
<P>
Class of Security- Common Stock
<P>
<TABLE>
<S> <C> <C>
Name and Address of Beneficial Owner: No. of Shares Percent of Class:
Beneficially
Owned
----------------------------------------------------------------------------
Eugene Chiaramonte, Jr. (1) 2,173,886 308%
(17,173,886) (20.4%)
12 White Birch Court,
Branchville, NJ 07826
Ronald Shaver (2) 600,000 1.1%
<P>
18 Caraway Court, (13,100,000) (15.6%)
Princeton, NJ 08540
Ernest DeSaye, Jr. (3) 836,700 1.5%
112 Clove Road, Sussex, NJ 07461 (1.0%)
<P>
All Executive Officers and Directors
as a Group (3 persons) 3,610,586 6.4%
(31,110,586) (36.7%)
</TABLE>
<P>
Page 38
<P>
Class of Security- Preferred Stock
<TABLE>
<S> <C> <C>
Name and Address of Beneficial Owner: No. of Shares Percent of Class:
Beneficially
Owned
----------------------------------------------------------------------------
Eugene Chiaramonte, Jr. (1) 1,500,000 54.5%
<P>
Converts to
12 White Birch Court, 15,000,000 of
Branchville, NJ 07826 Common Stock
<P>
Ronald Shaver (2) 1,250,000 45.5%
<P>
18 Caraway Court, Converts to
Princeton, NJ 08540 12,500,000 of
Common Stock
<P>
All Executive Officers and Directors
as a Group (3 persons) 2,750,000 100%
</TABLE>
<P>
(1) Shares held of record in common stock total
2,173,886 or 3.8% 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 20.4% of the total
outstanding shares of common stock.
<P>
(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 15.6% of the total
outstanding shares of common stock.
<P>
(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.
<P>
Page 39
<P>
Item 5. Directors, Executive Officers, Promoters and
Control Persons
-----------------------------------------------------
<P>
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.
(2)<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>
<P>
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.
<P>
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.
<P>
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.
<P>
Page 40
<P>
Item 6. Executive Compensation
-------------------------------
<P>
The following table shows, for the three-year period
ended December 31, 1999.
SUMMARY COMPENSATION TABLE
<TABLE>
<S> <C> <C> <C> <C>
Name & Other All
Principal Position Year Salary Bonus Annual Other
Compensation Compensation
------------------ ----- ------- ------ ------------- ------------
Eugene Chiaramonte, Jr. (1)(4) 1999 $60,000 $0 $0 $208,500
Chief Executive Officer 1998 $ 0 $0 $0
1997 $ 0 $0 $0
Ronald Shaver (2) 1999 $70,000 $0 $0 $173,750
Operations & Finance 1998 $ 0 $0 $40,000
1997 $ 0 $0 $83,625
Ernest DeSaye Jr. (3) 1999 $45,000 $0 $0
Hardyston Operations 1998 $ 0 $0 $0
1997 $ 0 $0 $0
</TABLE>
<P>
(1) In January 1999, Mr. Chiaramonte was issued
1,500,000 shares of the Company's Preferred Stock valued
at $225,000 of which $15,000 was issued to repay a loan
and $208,000 was issued as deferred compensation. Mr.
Chiaramonte was paid no compensation during the
years of 1997 and 1998. Beginning in April 1999, the
Company paid Mr. Chiaramonte a salary at the rate of
$60,000 per annum.
<P>
(2) In January 1999, Mr. Chiaramonte was issued
1,250,000 shares of the Company's Preferred Stock valued
at $187,500 of which $12,500 was reimbursement of
expenses and $173,750 was issued as deferred
compensation. In 1998 and 1999 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.
<P>
(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.
<P>
(4) The Company in error accrued as salary for Mr.
Chiaramonte for the years ended December 31, 1995, 1996,
and 1997 at $100,000 per year for the total of $300,000.
On July 6, 1999, the parties agreed that the accrued
compensation would not be paid. In addition and in
conjunction with the Company filing this registration
document, the Company retroactively restated the
financial statements for the years ended December 31,
1998 and 1997 to reflect a one time change in accounting
principals.
<P>
Page 41
<P>
The following table sets forth information with respect
to the grant of options to purchase shares of common
stock during the fiscal year ended December 31, 1999, to
each person named in the Summary Compensation Table.
<P>
OPTION GRANTS IN THE LAST FISCAL YEAR
<P><TABLE>
<S> <C> <C> <C> <C>
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO EXERCISE OR EXPIRATION
OPTIONS EMPLOYEES BASE PRICE DATE
NAME GRANTED (#) IN FISCAL YEAR ($/SH)
----- -------------- ------------ ------------- ----------
Eugene Chiaramonte, Jr. 0 0 0
Ronald Shaver 0 0 0
Ernest DeSaye, Jr. 0 0 0
</TABLE>
<P>
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.
<P>
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.
<P>
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.
<P>
Page 42
<P>
All options granted under the Plan shall be subject to
the following terms and conditions:
<P>
(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;
<P>
(b) Period of an Option shall not exceed five years
from the date of grant;
<P>
(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.
<P>
(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.
<P>
(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.
<P>
(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.
<P>
(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.
<P>
(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.
<P>
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,
<P>
Page 43
<P>
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.
<P>
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.
<P>
As of December 31, 1999, no options had been granted
pursuant to the Plan and no options had been exercised.
<P>
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, 1999, to
each person named in the Summary Compensation Table and
the unexercised options held as of the end of 1999 fiscal
year.
<P>
AGGREGATED OPTION/EXERCISES IN LAST FISCAL YEAR AND 1999
FISCAL YEAR END OPTION/VALUES
<P>
<TABLE>
<S> <C> <C> <C> <C>
NUMBER OF VALUE OF
SECURITIES UNEXERCISED IN
SHARES VALUE UNDERLYING THE MONEY
ACQUIRED REALIZED UNEXERCISED OPTIONS AT
ON ($) OPTIONS AT 1999 FISCAL
EXERCISED 1999 FISCAL YEAR END (#)
(#) YEAR END (#) EXERCISABLE/UN
NAME EXERCISABLE/UN
EXERCISABLE
----- -------- --------- -------------- --------------
Eugene Chiaramonte, Jr. 0 0 NONE
<P>
Page 49
<P>
Ronald Shaver 0 0 NONE
Ernest DeSaye Jr. 0 0 NONE
</TABLE>
<P>
Page 44
<P>
LONG-TERM INCENTIVE PLANS-AWARDS IN LAST FISCAL YEAR
<TABLE>
<S> <C> <C> <C> <C>
NUMBER OF PERFORMANCE OR ESTIMATED FUTURE
SHARES, OTHER PERIOD PAYOUTS UNDER NON-
UNITS PER UNTIL STOCK PRICE-BASED
OTHER RIGHTS MATURATION PLANS
PAYOUT
NAME THRESHOLD TARGET
----- ------------ -------------- ------- -------
Eugene Chiarmonte, Jr. 0 0 0 0
Ronald Shaver 0 0 0 0
Ernest DeSaye Jr. 0 0 0 0
</TABLE>
<P>
EXECUTIVE EMPLOYMENT AGREEMENTS:
<P>
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. More specifically, the terms are
as follows: Gross salary: $1,731 bi-weekly with a 5%
increase on each anniversary of the agreement; Term: 5
years commencing April 22, 1999; Additional compensation:
1% of the gross profits of Hardyston Distributors derived
from accounts purchased by the Company on the date of the
acquisition (April 22, 1999); 2% of the gross profits on
all new clients for the initial 12 month period of the
client's billings; stock or stock options equal to 1% of
gross profits on all supervised accounts in excess of
$1,000,000 in total revenue for a fiscal year; stock or
stock options equal to .5% of gross profits on all
supervised accounts in excess of $2,000,000 in total
revenue for a fiscal year.
<P>
Page 45
<P>
Item 7. Certain Relationships and Related Transactions
-------------------------------------------------------
<P>
In 1996, the Company issued 1,500,000 shares in
connection with the acquisition of Universal Filtration
Industries ("UFI"). The shares were issued as follows:
300,000 shares to Mr. Shaver (a shareholder of UFI);
800,000 shares to Catherine Smith (a shareholder of UFI);
400,000 shares held in escrow pending satisfaction of
certain conditions in the acquisition agreement. The
conditions were never satisfied and the 400,000 shares
were returned to treasury. In addition to the above, our
Board of Directors approved the issuance of an additional
300,000 shares to Mr. Shaver for future consulting work.
Each issuance of 300,000 shares to Mr. Shaver was valued
at $15,000.
<P>
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.
<P>
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. In January 1999, Mr.
Chiaramonte was issued 1,500,000 shares of the company's
preferred stock valued at $225,000, of which $15,000 was
issued to repay a loan and $208,500 was issued as
deferred compensation. In January 1999, Mr. Shaver was
issued 1,250,000 shares of the company's preferred stock
valued at $187,500, of which $12,500 was issued to
reimburse expenses and $173,750 was issued as deferred
compensation.
<P>
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.
<P>
The Company has a consulting relationship with Mr.
Shaver. Mr. Shaver is a consultant to Harvey-Westbury
Corp. Mr. Shaver receives a weekly consulting fee of
$1,350.00.
<P>
Page 46
<P>
Item 8. Legal Proceedings
--------------------------
<P>
The Company has the following pending or threatened
litigation:
<P>
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.
<P>
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. To date, we can
not estimate the likelihood that Auxer will be successful
in defending this lawsuit.
<P>
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. The lawsuit was
commenced on June 16, 1999. Plaintiff sued 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.
Subsequently, this case was dismissed on March 27, 2000.
<P>
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
<P>
Page 47
<P>
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 are in a
position that is adverse to the issuer.
<P>
Page 48
<P>
Item 9. Market Price of and Dividends on the
Registrant's Common Equity and Related
Stockholder Matters.
------------------------------------------------
<P>
Market Information
<P>
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.
<P>
The reported high and low bid prices for the common stock
are shown below for each quarter during the last two
complete fiscal years. The high and low bid price for
the periods in 1997, 1998, and 1999 shown below are
quotations from the OTCBB. The high and low bid prices
for 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.
<P>
Page 49
<P>
<TABLE>
<S> <C> <C>
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
<P>
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
<P>
1999
First Quarter .22 0.001
Second Quarter 1.035 0.055
Third Quarter 0.09 0.0600
Fourth Quarter 0.08 0.01
</TABLE>
<P>
As of December 31, 1999, the Company had 150,000,000
authorized shares of common stock (at par value $.001)
whereas 56,736,797 shares were issued and outstanding. As
of December 31, 1999, the Company had 25,000,000
authorized shares of Preferred stock whereas 2,750,000
shares were issued and outstanding.
<P>
As of December 31, 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.
<P>
As of December 31, 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.
<P>
As of December 31, 1999, there were 2,100,000 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 7,900,000
have been sold to date.
<P>
As of December 31, 1999, there were no convertible notes
outstanding and no shares of Common stock reserved for
convertible notes.
<P>
Page 50
<P>
Holders
-------
<P>
The Company has approximately 3,000 holders of its common
stock.
<P>
Dividend Policy
---------------
<P>
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.
<P>
Penny Stock Considerations.
----------------------------
<P>
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.
<P>
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.
<P>
Page 56
<P>
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.
<P>
Page 51
<P>
Item 10. Recent Sales of Unregistered Securities
--------------------------------------------------
<P>
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.
<P>
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.
<P>
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.
<P>
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 Section 4(2) of the
Act.
<P>
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
<P>
Page 52
<P>
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.
<P>
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
4(2) of the Act.
<P>
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.
<P>
In January 1997, the Company issued 40,000 shares of its
Common Stock to Joel Pensely for legal services rendered
and were valued at $42,500. 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
Section 4(2) of the Act.
<P>
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
<P>
Page 53
<P>
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.
<P>
Page 59
<P>
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 Section 4(2) of the Act.
<P>
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 $129,376. 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.
<P>
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.
<P>
In May 1997, the Company issued 20,000 shares of its
Common Stock to Sherman Square Ltd. for marketing
consulting services rendered valued at $26,875. Joel
Pensely exercised control over Sherman Square Ltd. Such
investor was a qualified investor based on his financial
<P>
Page 60
<P>
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.
<P>
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 $261,338. Such investor was a
<P>
Page 54
<P>
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) under the Act.
<P>
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 $98,280. 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 Section
4(2) under the Act.
<P>
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 $89,875. 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 Section 4(2) of the Act.
<P>
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 $48,750. 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 Section 4(2) of the Act.
<P>
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 $87,030. 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.
<P>
Page 55
<P>
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 $24,750.
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.
<P>
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.
<P>
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
$100,250. 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 Section
4(2) under the Act.
<P>
In October 1997, the Company issued 300,000 shares of its
Common Stock to Mr. Shaver for consulting services
rendered valued at $94,500. 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.
<P>
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
<P>
Page 56
<P>
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:
<P>
<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
<P>
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 1,690,428
</TABLE>
<P>
Page 57
<P>
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.
<P>
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.
<P>
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 $121,000. 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
<P>
Page 64
<P>
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 Section 4(2) of the Act.
<P>
In April 1998, the Company issued 100,000 shares of its
Common Stock to Louis Szilezy for consulting services
rendered valued at $19,000. 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
Section 4(2) of the Act.
<P>
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 $32,230.
Paul Macaulay exercised control of Acebarn Limited. Brian
Aukett exercised control of Romande Limited. Such
investors were either sophisticated investors, had pre-
<P>
Page 58
<P>
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.
<P>
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 $183,250. 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 Section 4(2) of the
Act.
<P>
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 Section 4(2) under the Act.
<P>
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:
<P>
<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
<P>
Page 59
<P>
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>
<P>
Page 60
<P>
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.
<P>
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 and deferred compensation from the Company valued at
$412,500. 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.
<P>
In February 1999, the Company issued 489,000 shares of
its Common Stock to MYD Marine Distributor, Inc. ("MYD")
pursuant to a legal settlement valued at $39,240. In
March 1998, MYD filed a lawsuit against the Company and
Harvey-Westbury Corp. in Dade County, Florida. The
lawsuit was based on breach of contract under an
agreement to distribute goods between MYD and Harvey-Westbury.
In February 1999, the parties settled this
matter for the sum of $39,240. The Company issued
489,000 shares of its Common Stock to MYD as payment of
such settlement. Dan Delmonico exercised control over
MYD. 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.
<P>
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
<P>
Page 61
<P>
issuance of shares was exempt from the registration
requirements of the Act pursuant to Section 4(2) of the
Act under the Act.
<P>
In August 1999, through December 1999, the Company issued
7,900,000 shares of its Common Stock to investors in
connection with an offering pursuant to Regulation D,
Rule 504 valued at $395,000. The offering for 7,000,000
shares of Common Stock was amended to increase the
offering to 10,000,000 shares which if completed would
gross proceeds of $500,000. Subsequently, on January 20,
2000 the offering was closed and no further shares were
sold 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.
<P>
From January through December 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>
<P>Jared Shaw exercised control over J. Prince Inc.
<P>
Subsequently, in January 2000, the Company issued an
aggregate of 8,266,666 shares of its common stock in
connection with an offering pursuant to Regulation D,
Rule 504 in cash consideration of $248,000. The offering
<P>
Page 62
<P>
was closed in January 2000. 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.
<P>
Subsequently, in March 2000, the Company issued an
aggregate of 300,000 shares to Steve Trobiano valued at
$19,500 in connection with the exchange of assets
(vehicle). Such investor was a sophisticated investor,
had pre-existing relationship with members of management
of the Company and had access to or was provided with
relevant financial and other information relating to the
Company. Accordingly, the issuances of shares was exempt
from registration requirements of the Act pursuant to
Section 4(2) under the Act.
Subsequently, in March 2000, the issued an aggregate of
2,043,182 shares of its common stock in cash
consideration of $109,875 to Jan Talamo (209,091 shares),
Frank Palmieri (209,091 shares), Stewart & Jerry Schwartz
(1,125,000 shares) and Thomas Trobiano (500,000 shares).
Such investors were a sophisticated investors, had pre-existing
relationships with members of management of the
Company and had access to or were provided with relevant
financial and other information relating to the Company.
Accordingly, the issuances of shares were exempt from
registration requirements of the Act pursuant to Section
4(2) under the Act.
<P>
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 a
least two (2) years is entitled to sell such shares under
Rule 144 without regard to any of the limitations
described above.
<P>
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.
<P>
Page 63
<P>
Terms of Conversion for Convertible Notes
<P>
Terms of Conversion for Convertible Notes
For year ending December 31, 1997, the Company paid for
operations by raising $1,925,175 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 notes were converted at 70% of the 5 day average bid
price prior to conversion. 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 notes were converted at 70%
of the 5 day average bid price prior to conversion.
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 notes were converted at 70% of the 5 day average bid
price prior to conversion.
<P>
Page 64
<P>
Item 11. Description of Securities.
-------------------------------------
<P>
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 December 31, 1999, we had issued 56,736,797 of our
shares of Common Stock and 2,750,000 of our shares of
Preferred Stock.
<P>
As of December 31, 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.
<P>
As of December 31, 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.
<P>
As of December 31, 1999, there were 2,100,000 shares of
common stock reserved for an offering registered pursuant
to Rule 504 of Regulation D. Under the offering, the
Company is selling 10,000,000 shares, of which 7,900,000
have been sold to date.
<P>
The following brief description of our common stock and
preferred stock 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.
<P>
COMMON STOCK
<P>
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
<P>
Page 65
<P>
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.
<P>
Our common stock has no preemptive rights or no
subscription, redemption or conversion privileges.
<P>
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.
<P>
PREFERRED STOCK
<P>
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.
<P>
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.
<P>
Dividends
<P>
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 therefore.
<P>
Conversion
<P>
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.
<P>
Page 66
Redemption
<P>
The Preferred Stock is not redeemable.
<P>
Liquidation Rights
<P>
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.
<P>
Voting Rights
<P>
The holders of the Preferred Stock will have voting
rights equal to ten shares of Common Stock for each share
of Preferred Stock.
<P>
Reorganization/Recapitalization
<P>
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.
<P>
Anti-Dilution
<P>
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. In
addition, the Preferred Stock shall maintain its status
even if the Common Stock undertakes a reverse or forward
split of its shares. Therefore, the Preferred Stock can
not be diluted unless it is converted to Common Stock.
<P>
The transfer agent and registrar for our common stock is
Interstate Transfer Agent, 874 E. 5900 South, Salt Lake
City, Utah 84107.
<P>
Page 67
<P>
Item 12. Indemnification of Directors and Officers
---------------------------------------------------
<P>
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.
<P>
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.
<P>
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
<P>
Page 68
<P>
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.
<P>
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.
<P>
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.
<P>
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
<P>
Page 69
<P>
(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.
<P>
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 those 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.
<P>
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.
<P>
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.
<P>
Page 70
<P>
Item 13. Financial Statements
------------------------------
<P>
See Item 15(a) below.
<P>
Page 71
<P>
Item 14. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure.
-------------------------------------------------------
<P>
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.
<P>
The firm of Edelman and Kalosieh, Certified Public
Accountants, has been the Corporation's auditor for the
last two years.
<P>
Page 72
<P>
Item 15. Financial Statements and Exhibits
-------------------------------------------
<P>
Financial Statements
<P>
Index to Financial Statements
<P>
Index to Financial Statements
The Auxer Group, Inc.
The Auxer Group, Inc.
<TABLE>
<S> <C>
Report of Independent Auditors F-2-3
Consolidated Balance Sheets F-4-5
Consolidated Statement of Income and Retained Earnings F-6
Consolidated Statement of Changes in Stockholders Equity F-7
Consolidated Statement of Cash Flows F-8
Notes to Consolidated Financial Statements F-9
</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
<P>
GEORGE A. KALOSIEH, CPA
JOSEPH F. SHACKIL, CPA
PAUL MEOLA, CPA
MEMBERS AMERICAN INSTITUTE OF CERTIFIED PUBLIC
ACCOUNTANTS
N.N. 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 The Auxer Group, Inc. as of December
31, 1999 and 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.
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 material respects, the
financial position of The Auxer Group, Inc. as of
December 31, 1999 and 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 The Auxer Group, Inc. 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 The Auxer Group,
Inc. 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 1998 and 1997 financial statements have
been restated.
EDELMAN & KALOSIEH, CPAs PA
Fair Lawn, New Jersey
March 23, 2000
THE AUXER GROUP, INC.
CONSOLIDATED BALANCE SHEETS
Assets
<TABLE>
<S> <C> <C>
Year End Year End
December 31, December 31,
1999 1998
(Restated)
Current assets:
---------------
Cash $8,400 $3,087
<P>
Accounts receivable (net of allowances
$19,639 in 1999, $2,486 in 1998) 92,370 33,523
<P>
Inventory 290,725 164,302
<P>
Subscriptions Receivable -0- 15,125
<P>
Other receivables 23,283 23,283
------------------------------------------
Total current assets 414,778 239,320
------------------------------------------
Property and Equipment
----------------------
<P>
Vehicles 7,700 -0-
<P>
Furniture and fixtures 9,234 7,749
<P>
Machinery and equipment 44,129 41,751
<P>
Leasehold improvements 5,757 5,757
------------------------------------------
66,820 55,257
<P>
Less: accumulated depreciation (34,062) (22,436)
-------------------------------------------
Property and equipment (Net) 32,758 32,821
-------------------------------------------
Other assets:
--------------
<P>
Security deposit 24,299 7,852
--------------------------------------------
Total other assets 24,299 7,852
--------------------------------------------
Total assets $471,835 $279,993
=============================================
<P>
See accountants' report and accompanying notes to consolidated financial statements.
</TABLE>
THE AUXER GROUP, INC.
CONSOLIDATED BALANCE SHEETS
<P>
Liabilities and Stockholders' Equity
<TABLE>
<S> <C> <C>
Year End Year End
December 31, December 31,
1999 1998
(Restated)
Current liabilities
-------------------
Accounts payable and accrued expenses $107,887 $202,632
<P>
Credit Line 31,368 25,793
<P>
Notes payable 82,368 190,000
<P>
Notes payable-shareholders 77,390 21,893
--------------------------------------
Total current liabilities 299,168 440,318
<P>
Long Term Debt, less current maturities 1,155 36,361
<P>
Capital stock
-------------
Capital stock-authorized 150,000,000
share, $.001 par value per share,
56,736,797, 36,361,097 and
12,996,245 shares outstanding in
1999, 1998, respectively 56,747 36,361
<P>
Preferred stock - authorized 25,000,000
shares $.001 par value per share,
2,750,000 shares outstanding in 1999 2,750 -0-
<P>
Additional paid in capital 4,940,832 3,657,004
<P>
Accumulated deficit (4,828,817) (3,853,690)
-----------------------------------------
<P>
Total stockholders' equity 171,512 (160,325)
---------------------------------------
Total liabilities and
stockholders' equity $471,835 $279,993
========================================
<P>
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>
Year End Year End
December 31, December 31,
1999 1998
(Restated)
------------ ------------
Income $871,259 $287,456
<P>
Less cost of good sold 622,210 237,952
------------------------------------------------------
Gross profit 249,049 49,504
------------------------------------------------------
Operations:
-----------
General and administrative 1,302,418 1,053,887
<P>
Deprecation 11,626 12,928
<P>
Interest expense 10,618 20,790
<P>
Research and development -0- 1,106
<P>
---------------------------------------------------------
Total expenses 1,324,662 1,088,711
---------------------------------------------------------
<P>
Income (loss) from operations (1,075,613) (1,039,207)
<P>
Other Income (Expense)
<P>
Interest Income 706 -0-
<P>
Extraordinary item, gain on
forgiveness of debt 99,780 -0-
<P>
Lost on Investment -0- (353,000)
<P>
Net income (loss) (975,127) (1,392,207)
(1,308,659)
-------------------------------------------------------
accumulated deficit
at beginning (3,853,690) (2,461,483)
----------------------------------------------------------
Accumulated deficit at end ($4,828,817) ($3,853,690)
----------------------------------------------------------
Net income (loss) per
common share ($0.02) ($0.04)
==========================================================
Net income (loss) per common
share - assuming dilution ($0.02) ($0.04)
==========================================================
<P>
See accountants' report and accompanying notes to consolidated financial statements.
</TABLE>
THE AUXER GROUP, INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(1998 Restated)
<TABLE>
<S> <C> <C> <C>
Preferred Stock Preferred Stock Common Stock
Shares Par Value $.001 Shares
(A) Amount (B)
-------------------------------------------------------
Balances at December 31, 1997 0 $0 12,996,245
===========================================================
Common Stock Issued for cash 16,169,823
<P>
Common Stock Issued for services 2,525,000
<P>
Common Stock Issued for debt
extinguishment 4,288,362
-------------------------------------------------------
Common Stock Issued for
subscriptions receivable 381,667
<P>
Net Loss for the year -0-
-------------------------------------------------------
Balance at December 31, 1998 0 $0 36,361,097
===========================================================
<P>
Common Stock Issued for cash 17,950,000
<P>
Common Stock Issued for services 589,000
<P>
Common Stock Issued for debt extinguishment 1,000,000
<P>
Common Stock Issued for acquisition 836,700
<P>
Stock Issued 2,750,000 2,750
<P>
Net Loss for the year
-----------------------------------------------------
Balances at December 31, 1999 2,750,000 $2,750 56,736,797
==========================================================
<P>
Preferred stock, par value $.001, convertible to 10 shares of common stock,
25,000,000 shares authorized, 2,750,000 shares and outstanding at December 31, 1999
<P>
Common stock, par value $.001, 150,000,000 shares authorized, 54,036,797 shares
issued and outstanding at December 31, 1999
<P>
See accountants' report and accompanying notes to consolidated financial statements.
<P>
</TABLE>
THE AUXER GROUP, INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(1998 Restated)
CONTINUE
--------
<TABLE>
<S> <C> <C> <C>
Common Stock Additional
Par Value $.001 Paid In Accumulated
Amount Capital Deficit
-------------------------------------------------------
Balances at December 31, 1997 $12,996 2,520,409 ($2,461,
===========================================================
Common Stock Issued for cash $16,170 456,930 -0-
<P>
Common Stock Issued for services 2,525 469,210
<P>
Common Stock Issued for debt
extinguishment 4,288 195,712
<P>
Common Stock Issued for
subscriptions receivables 382 14,743
-------------------------------------------------------
Net Loss for the year -0- -0- (1,392,2
-------------------------------------------------------
Balance at December 31, 1998 $36,361 $3,657,004 ($3,853,
===========================================================
<P>
Common Stock Issued for cash 17,960 732,099
<P>
Common Stock Issued for services 589 43,651
<P>
Common Stock Issued for
debt extinguishment 1,000 9,220
<P>
Common Stock Issued for
acquisition 837 89,108
<P>
Stock Issued 409,750
<P>
Net Loss for the year -0- -0- (975,12
------------------------------------------------------
Balances at December 31, 1999 $56,747 $4,940,832 ($4,828, )
==========================================================
<P>
(A) Preferred stock, par value $.001, convertible to 10 shares of common stock,
25,000,000 shares authorized, 2,750,000 shares and outstanding at December 31, 1999
<P>
(B) Common stock, par value $.001, 150,000,000 shares authorized, 54,036,797 shares
issued and outstanding at December 31, 1999
<P>
See accountants' report and accompanying notes to consolidated financial statements.
</TABLE>
<P>
THE AUXER GROUP, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<S> <C> <C>
Year End Year End
December 31, December 31,
1998 1997
(Restated) (Restated)
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES
<P>
Net profit (loss) $(975,127)
$(1,039,207)
Depreciation 11,626 12,928
Loss on Investment -0-
(353,000)
Extraordinary gain on
forgiveness of debt 99,780 -0-
------------------------------------------------------
(863,721)
(1,379,279)
<P>
(Increase) decrease:
<P>
Accounts receivable (58,847) 20,918
Inventory (126,423) 58,362
Prepaid expenses -0- 4,276
Subscriptions receivables 15,125
(15,125)
<P>
Increase (decrease):
<P>
Accounts payable &
accrued expenses (94,745) 13,269
-------------------------------------------------------
TOTAL CASH FLOW FROM OPERATIONS (1,128,611)
(1,297,579)
-------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
<P>
Purchase property, inventory
and equipment (111,343)
(2,735)
Investments -0- 218,000
Security deposit (16,447) -0-
-------------------------------------------------------
TOTAL CASH FLOWS FROM
INVESTING ACTIVITIES (127,790) 215,265
-------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
<P>
Borrowings/payments under line
of credit agreement (net) 5,575 (28,759)
Proceeds from short term debt -0- -0-
Payments on short term debt (110,000) (40,000)
Proceeds from long term debt 5,000 -0-
Payments on long term debt (1,322) -0-
Shareholder loan payable 55,497 (36,801)
Sale of common stock 894,464 1,159,960
Sale of preferred stock 412,500 -0-
------------------------------------------------------
<P>
TOTAL CASH FLOWS FROM
FINANCING ACTIVITIES 1,261,714 1,054,400
------------------------------------------------------
NET INCREASE IN CASH 5,313 (27,914)
<P>
CASH BALANCE BEGINNING OF PERIOD 3,087 31,001
------------------------------------------------------
CASH BALANCE END OF PERIOD 8,400 $3,087
=========================================================
<P>
See accountants' report and accompanying notes to consolidated financial statements.
</TABLE>
<P>
Note 1 - Organization of Company
-----------------------
<P>
Creation of the Company
<P>
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.
<P>
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.
<P>
Description of the Company
<P>
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.
<P>
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.
<P>
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.
<P>
On October 25, 1996, the Company acquired Harvey-Westbury
Corp. ("Harvey-Westbury"), a New York corporation. Based
in Farmingdale, New York, Harvey-Westbury is a
manufacturer and wholesaler of various automotive, marine
and aviation products.
<P>
On April 22, 1999, the Company formed Hardyston
Distributors, Inc., a Nevada corporation. Based in
northern New Jersey, Hardyston Distributors is an
automotive parts distributor.
<P>
Note 2 - Summary of Significant Accounting Policies
------------------------------------------
<P>
Basis of Financial Statement Presentation
<P>
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 $4,828,817 for period from April 18, 1995
to December 31, 1999. These factors indicate that the
Company's continuation as a going concern is dependent
upon its ability to obtain adequate financing.
<P>
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.
<P>
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.
<P>
Earnings per share
<P>
Earnings per share have been computed on the basis of the
total number of shares of common stock outstanding as of
December 31, 1999 of 56,736,797.
<P>
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.
<P>
Earnings per share - assuming dilution, have been
computed on the basis of the number of shares of common
stock outstanding as of December 31, 1999 of 84,236,797
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.
Conversion was omitted in determining the diluted
earnings per share because the effect was anti-dilutive.
<P>
Receivables
<P>
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 $19,639 at December 31, 1999 and $2,486
at December 31, 1998, respectively.
<P>
Property and Equipment
<P>
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.
<P>
<TABLE>
<S> <C> <C>
Cost at Accumulated
12/31/99 Depreciation
12/31/99
------------------------------
<P>
Vehicles $7,700 $1,540
Machinery and equipment 44,129 25,766
Office furniture
and fixtures 9,234 3,516
Leasehold improvements 5,757 3,240
Revenue recognition
<P>
Cost at Accumulated
12/31/98 Depreciation
12/31/98
------------------------------
Machinery and equipment 41,751 $17,780
Office furniture
and fixtures 9,234 2,423
Leasehold improvements 5,757 2,233
</TABLE>
<P>
Revenue recognition
<P>
Revenue is recognized when products are shipped or
services are rendered.
<P>
Investment
<P>
During 1997, the Company invested in Auxer UK Ltd., a
wholly-owned foreign corporation based in the United
Kingdom. Auxer UK Ltd. invests in software technologies
in the United Kingdom. The Company invested $218,000
and $135,000 in 1997 and 1998 respectively.
<P>
In June 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 certain criteria being met. As of
September 30, 1999 the Company determined that the
collectability of the note is doubtful and has written it
off as a loss on investment as of December 31, 1998. See
Note 12 restatement as to the effect of this change.
<P>
Research and development expenses
<P>
Research and development costs are charged to
operations when incurred.
<P>
Use of Estimates
<P>
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.
<P>
Impairment of Long-Lived Assets
<P>
In the event that facts and circumstances indicate
that the carrying value of long lived assets, including
associated intangibles, may be impaired, an evaluation of
recoverability is performed by comparing the estimated
future undiscounted cash flows associated with the asset
to the assets carrying amount to determine if a write
down to market value or discounted cash flows is
required.
<P>
Note 3 - Acquisitions
------------
<P>
Acquisition of CT Industries, Inc.
<P>
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. The transaction has been accounted for as a
reverse acquisition and using the purchase method of
accounting with historic costs being the basis of
valuation.
<P>
Acquisition of Universal Filtration Industries, Inc.
<P>
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. The transaction
has been accounted for as a reverse acquisition and using
the purchase method of accounting with historic costs
being the basis of valuation.
<P>
As of December 20, 1996, the acquisition agreement was
modified as follows because certain economic
representations of Universal were note met:
<P>
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.
<P>
Acquisition of Harvey-Westbury Corp.
<P>
On October 25, 1996, the Company issued 170,000 shares
of common stock for acquisition of Harvey-Westbury at
$.50 per share. The transaction has been accounted for as
a reverse acquisition and using the purchase method of
accounting with historic costs being the basis of
valuation.
<P>
Acquisition of the assets of Hardyston Distributors
<P>
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.
<P>
Note 4 - Inventory
--------
<P>
Inventory consists of raw materials, work in process and
finished goods and is valued at the lower of cost
determined on the first-in, first-out method or market.
<P>
Note 5 - Debt
----
Security Agreement
<P>
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.
<P>
Notes Payable
<P>
The following is a summary of short term debt at
December 31, 1999:
<P>
Notes Payable to Creative Capital in the amount of
$80,000 payable on demand plus interest at a rate of 8%.
<P>
The following is a summary of short term debt at
December 31, 1998:
<P>
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.
<P>
Notes Payable to Creative Capital in the amount of
$80,000 payable on demand plus interest at a rate of 8%.
<P>
Long term debt is as follows:
<P>
13.5% installment note, collateralized by vehicle with
a carrying value of $4,000, payable in monthly
installments of $239 with the final payment due May, 2001
<P>
$3,678
Less current maturities 2,523
<P>
1,155
<P>
The following is a summary of short term at December 31,
1998:
<P>
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%.
<P>
Note 6 - Related Party Transactions
--------------------------
<P>
Issuance of Common Shares
<P>
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.
<P>
Note 7 - Income Taxes
<P>
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 December 31, 1999, 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.
<P>
The Company has net operating loss carry forwards for
income tax purposes of $(4,828,817) at December 31, 1999,
and $(3,853,690) at December 31, 1998, respectively.
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.
<P>
<TABLE>
<S> <C> <C>
Deferred
tax asset: Dec 31, 1999 Dec 31, 1998
----------------------------------------------------------------------------
Net Operating loss
carry forward $1,641,798 $1,310,255
Valuation allowance (1,641,798) (1,310,255)Net deferred
tax assets $0 $0
</TABLE>
<P>
The Company recognized no income tax benefit for the loss
generated for the periods through December 31, 1999.
<P>
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.
<P>
Note 8 - Business and Credit Concentrations
----------------------------------
<P>
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.
<P>
Financial instruments that potentially subject the
company to credit risk consist principally of trade
receivables. Collateral is generally not required.
<P>
Note 9 - Commitments and Contingencies
-----------------------------
<P>
Lease agreement for office space
<P>
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:
<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>
<P>
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.
<P>
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.
<P>
Lease Agreement for Industrial Facility
<P>
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:
<P>
<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>
<P>
The Company assumed the lease agreement with a non
affiliated party entered into by Mr. Ernest DeSaye, Jr.
beginning March 1, 1999 and expiring on February 28,
2000, at 22B Lasinski Road, Franklin, NJ. The option to
renew for an additional two years was invoked extending
the expiration of the lease to February 28, 2002.
<P>
<TABLE>
<S> <C> <C>
Period Annual Rent Monthly Rent
--------- ----------- ------------
March 1, 1999 to February 28, 2000 $8,700.00 $725.00
March 1, 2000 to February 28, 2001 $9,000.00 $750.00
March 1, 2001 to February 28, 2002 $9,300.00 $775.00
</TABLE>
<P>
Purchase of Filter Marketing Rights
<P>
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.
<P>
The term of the agreement was October 1, 1995 until
September 30, 1999, when it expired. The agreement was
not renewed.
<P>
Note 10 - Development Stage Company
-------------------------
<P>
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. Subsequent to December 31, 1997, the
Company's primary attention turned to routine, on-going
activities and ceased to be a development stage
enterprise.
<P>
Note 11 - Segment Information
-------------------
Management Policy in Identifying Reportable Segments
-----------------------------------------------------
The Company reportable business segments are strategic
business units that offer distinctive products and
services that are marketed through different channels.
They are managed separately because of their unique
technology, marketing, and distribution requirements.
<P>
Types of Products and Services
<P>
The Company is an investment holding company that is
comprised of four subsidiaries: The Harvey Westbury
Corp., Hardyston Distributors Inc., CT Industries, and
Universal Filtration Industries, Inc. Harvey Westbury is
a manufacturer and wholesaler of various automotive,
marine and aviation products. Hardyston Distributors is
a Northern New Jersey based automotive parts
distributor. CT Industries distributor of various
automotive products. Universal Filtration has in the
past manufactured and distributed filters used by the dry
cleaning industry and is currently inactive.
<P>
Segment Profit or Loss
<P>
The Company's accounting policies for segments are the
same as those described in the summary of significant
accounting policies. Management evaluates segment
performance based on segment profit or loss before income
taxes and nonrecurring gains and losses. Transfers
between segments are accounted for at market value.
<P>
The Company's consolidated balance sheet consists of the
following subsidiary components as of December 31, 1999:
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
CT Universal Hardyston Harvey Auxer
Auxer Industries Filtration Distributors, Westbury Group, Inc.
Group, Inc. Inc. Industries, Inc. Corp. Consolidated
Inc.
---------------------------------------------------------------------
Balance Sheet
Current Assets $4,089 $19,695 $0 $140,082 $250,912 $414,778
Fixed Assets 9,171 0 2,912 7,877 12,798 32,758
Other Assets 2,022,686 200 0 629 6,004 24,299
----------------------------------------------------------------------
Total Assets $2,035,946 $19,895 $2,912 $148,588 $269,714 $471,835
=========================================================================
<P>
Liabilities and Stockholders' Equity
<P>
Current
Liabilities $134,288 $40,318 $54,451 $ 39,293 $ 30,818 $299,168
Long Term
liabilities 0 324,550 327,622 15,755 1,338,448 1,155
Stockholders'
Equity 1,901,658 (344,973)(379,161) 93,540 (1,099,552) 171,512
---------------------------------------------------------------------
Total liabilities and
stockholders'
equity $2,035,946 $19,895 $2,912 $148,588 $269,714 $471,835
==========================================================================
<P>
The Company's consolidated statement of operations for the nine month period ended
December 31, 1999
<P>
Statement of operations
Revenues $0 $3,690 0 $393,225 $474,344 $871,259
Costs of goods sold 0 3,013 0 267,413 351,784 622,210
Gross profit 0 677 0 125,812 122,560 249,049
Operating
expenses (658,794) (15,112) (17,812) (72,390) $(500,613) (1,324,662)
----------------------------------------------------------------------
Income (loss)
from operations $(658,879) $(14,435)$(17,812) $(6,519) $(378,053)$(1,075,613)
----------------------------------------------------------------------
Extraordinary item
- gain on forgiveness
of debt 99,780 99,780
Interest Income 706 706
==========================================================================
Net income
(loss) $(558,308) $(14,435)$(17,812) $(6,519) $(378,053) $(975,127)
==========================================================================
<P>
</TABLE>
The Company's consolidated balance sheet consists of the following subsidiary
components as of December 31, 1999: -CONTINUE
--------
<TABLE>
<S> <C>
Intercompany
Eliminations
-------------
Balance Sheet
Current Assets 0
Fixed Assets 0
Other Assets (2,005,220)
----------------------------------------------------------------------
Total Assets (2,005,220)
=========================================================================
<P>
Liabilities and Stockholders' Equity
<P>
Current
Liabilities 0
Long Term
liabilities (2,005,220)
Stockholders'
Equity 0
---------------------------------------------------------------------
Total liabilities and
stockholders'
equity (2,005,220)
==========================================================================
<P>
The Company's consolidated statement of operations for the nine month period ended
December 31, 1999
<P>
Statement of operations
Revenues
Costs of goods sold
Gross profit 0
Operating
expenses
----------------------------------------------------------------------
Income (loss)
from operations 0
----------------------------------------------------------------------
Extraordinary item
- gain on forgiveness
of debt
Interest Income
==========================================================================
Net income
(loss) 0
==========================================================================
</TABLE>
<P>
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 Group, Inc.
Group, Inc. Inc. Industries, Corp. Consolidated
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 1,431,938 200 0 5,770 360,852
----------------------------------------------------------------------
Total Assets $1,464,120 $(19,655) $(4,356) $(221,918) $279,993
==========================================================================
<P>
Liabilities and Stockholders' Equity
<P>
Current
Liabilities $220,863 $42,142 $37,580 $139,733 $440,318
Long Term liabilities 0 308,052 328,125 793,879 0
Stockholders'
Equity 1,243,257 (330,539) (361,349) (711,694) (160,325)
---------------------------------------------------------------------
Total liabilities and
stockholders'
equity $1,464,120 $ (19,655) $ (4,356) $ (221,918) $279,993
==========================================================================
<P>
The Company's consolidated statement of operations for the year ended December 31,1998
<P>
Statement of operations
Revenues $0 $1,168 $2,750 $283,538 $287,456
Cost of goods sold 0 38,934 400 198,618 237,952
---------------------------------------------------------------------
Gross profit 0 (37,766) 2,350 84,920 49,504
Operating
expenses (264,849) (2,729) (2,335) (482,663) (1,441,711)
---------------------------------------------------------------------
Net income (loss)$(953,984) $(40,495) $15 $(397,743) $(1,392,207)
=========================================================================
<P>
</TABLE>
The Company's consolidated balance sheet consists of the following subsidiary
components as of December 31, 1998: -CONTINUE
--------
<TABLE>
<S> <C>
Intercompany
Eliminations
Balance Sheet
Current Assets 0
Fixed Assets
Other Assets (1,430,056)
----------------------------------------------------------------------
Total Assets (1,430,056)
==========================================================================
<P>
Liabilities and Stockholders' Equity
<P>
Current
Liabilities 0
Long Term liabilities (1,430,056)
Stockholders'
Equity 0
---------------------------------------------------------------------
Total liabilities and
stockholders'
equity (1,430,056)
==========================================================================
<P>
The Company's consolidated statement of operations for the year ended December 31,1998
<P>
Statement of operations
Revenues
Cost of goods sold
---------------------------------------------------------------------
Gross profit 0
Operating
expenses
---------------------------------------------------------------------
Net income (loss) 0
=========================================================================
<P>
</TABLE>
<P>
Note 12 - Restatement
------------
<P>
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 increase in
stockholders' equity of $102,000.
<P>
In addition, the Company in error accrued as salary for
the President for the years ended December 31, 1995, 1996
and 1997 at $100,000 per year for a total of $300,000.
On July 6, 1999, the parties agreed that the accrued
compensation would not be paid. There was no accrual
made for year ended December 31, 1998. 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 increase in
stockholders equity of $300,000.
<P>
In conjunction with the Company filing Form 10SB for
Registration of Securities of small business issuers, the
effect of a one time change in accounting principles is
accounted for by retroactively restating financial
statements for the years ended December 31, 1998 and
1997.
<P>
As a result, certain costs that were capitalized and
amortized were restated and charged to operations as
incurred. The financial statements were restated to
reflect the effect of expensing these costs in the
periods incurred, increasing net loss by $540,967, and
decreasing net loss by $136,603 for the years ended
December 31, 1997 and 1998, respectively. The net change
in stockholders' equity as a result of the restatement
was a increase of $136,603 and a decrease of $540,967 at
December 31, 1998 and December 31, 1997 respectively.
<P>
Also in conjunction with the Company filing a Form 10SB
for Registration of Security of small business issuers,
the effects of a change in the value of services paid for
through the issuance of the Company's common stock and
the recognition as a loss of the Company's investment in
Auxer UK were accounted for by retroactively restating
the financial statements for the years ended December 31,
1998 and 1997.
<P>
As a result, the value of services received were changed
to reflect the fair value of the Company's common share
issued, increasing net losses by $336,135 and $515,791 or
the years ended December 31, 1998 and 1997. The company
also increased net losses by recognizing a loss on the
investment Auxer UK of $353,000 for the year ended
December 31, 1998. The net change in stockholders'
equity as a result of these changes was $353,000 for the
year ended December 31, 1998.
<P>
The net effect of the above changes covered by the
restatement on stockholders' equity was a decrease of
$216,397 and $158,967 at December 31, 1998 and 1997
respectively. The effect of the restatement on the
related per share data was to increase the loss by $.02
and $.08 per common share and per common share assuming
dilution for the year ended December 31, 1998 and 1997.
<P>
Note 13 - Subsequent Events
-----------------
<P>
The Company entered into a five year lease agreement with
a nonaffiliated party beginning on February 1, 2000 and
expiring January 31, 2005, at 12 Andrews Drive, West
Paterson, NJ, for their Wayne, NJ and Farmingdale, NY
operations. A $15,583 security deposit was required with
minimum monthly payments to be paid as follows:
<TABLE>
<S> <C> <C>
Period Annual Rent Monthly Rent
Feb. 1, 2000 - Jan. 31, 2001 $85,000 $7,083,34
Feb. 1, 2001 - Jan. 31, 2002 $89,250 $7,437.50
Feb. 1, 2002 - Jan. 31, 2003 $93,500 $7,791.67
Feb. 1, 2003 - Jan. 31, 2004 $97,750 $8,145.84
Feb. 1, 2004 - Jan 31, 2005 $102,000 $8,500.00
</TABLE>
<P>
In addition to the minimum monthly rental payments, the
Company must pay real estate taxes, insurance, and
utilities.
<P>
Note 14 Stockholders' Equity
--------------------
<P>
On January 2, 1999, the Company issued 1,500,000 shares and
1,250,000 shares of the Company's preferred stock valued at
$.15 per share to Eugene Chiaramonte, Jr. and Ronald Shaver
respectively as repayment of loans in the amount of $15,000,
reimbursement of expenses of $12,500, and deferred
compensation of $208,500 and $173,750 respectively.
<P>
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.
<P>
EDELMAN & KALOSIEH, CPAS PA.
CERTIFIED PUBLIC ACCOUNTANTS
15-01 BROADWAY
FAIR LAWN, NEW JERSEY 07410
-----------------
TEL (201) 797-4490
FAX (201) 797-0881
<P>
GEORGE A. KALOSIEH, CPA
JOSEPH F. SHACKIL, CPA MEMBERS
PAUL MEOLA, CPA AMERICAN INSTITUTE OF CERTIFIED
PUBLIC ACCOUNTANTS
N.J. SOCIETY OF CERTIFIED
PUBLIC ACCOUNTANTS
<P>
DONALD L. EDELMAN, CPA (RETIRED)
<P>
Independent Auditor's Report
----------------------------
Mr. Ernest De Saye, Jr., Owner
DB/A Hardyston Distributors
12 Andrews Drive
West Paterson, NJ 07424
<P>
We have audited the accompanying balance sheet of Ernest De
Saye, Jr., DB/A Hardyston Distributors (a sole
proprietorship) as of December 31, 1998, and the related
statements of income and proprietor's capital, and cash
flows for the nine months 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.
<P>
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 used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
<P>
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial
position of Ernest De Saye, Jr., DB/A Hardyston Distributors
(a sole proprietorship) as at December 31, 1998, and the
results of its operations and its cash flows for the nine
months then ended in conformity with generally accepted
accounting principles.
<P>
EDELMAN & KALOSIEH, CPAS PA
<P>
March 23, 2000
<P>
ERNEST DE SAYE, JR.
D/B/A HARDYSTON AUTOMOTIVE DISTRIBUTORS
(A SOLE PROPRIETORSHIP)
BALANCE SHEET
DECEMBER 31, 1998
<P>
Assets
<TABLE>
<S> <C>
Current Assets
Cash $ 13,508
Accounts Receivable 8,608
Inventory 17,019
-------------
Total Current Assets 39,135
<P>
Property and Equipment
Machinery & Equipment 4,050
Office Equipment 2,000
-------------
Total Cost 6,050
Less Accumulated Depreciation (865)
-------------
Property and Equipment (Net) 5,185
-------------
Total Assets $ 44,320
=============
<P>
See accountants' report and accompanying notes to financial statements.
</TABLE>
ERNEST DE SAYE, JR.
D/B/A HARDYSTON AUTOMOTIVE DISTRIBUTORS
(A SOLE PROPRIETORSHIP)
BALANCE SHEET
DECEMBER 31, 1998
<P>
Liabilities & Proprietor's Capital
<TABLE>
<S> <C>
Current Liabilities
Accounts Payable $298
Payroll Taxes Payable 499
------------
Total Current Liabilities 797
------------
Total Liabilities 797
------------
<P>
Proprietor's Capital 43,523
------------
Total Liabilities 8 Proprietor's Capital $ 44,320
============
<P>
See accountants' report and accompanying notes to financial statements.
</TABLE>
ERNEST DE SAYE, JR.
D/B/A HARDYSTON AUTOMOTIVE DISTRIBUTORS
(A SOLE PROPRIETORSHIP)
STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED DECEMBER 31, 1998
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 28,137
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation 865
(Increase) decrease in account receivable (8,608)
(Increase) decrease in inventory (17,019)
Increase in accounts payable 298
Increase (decrease) in payroll taxes payable 499
------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 4,172
------------
<P>
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (6,050)
<P>
-------------
NET CASH USED BY INVESTING ACTIVITIES (6,050)
-------------
CASH FLOWS FROM FINANCING ACTIVITIES
Contributions by owner 36,618
Withdrawals by proprietor (21,232)
-------------
NET CASH USED BY FINANCING ACTIVITIES 15,386
-------------
NET INCREASE (DECREASE) IN CASH 13,508
CASH AT BEGINNING OF PERIOD -
-------------
CASH AT END OF PERIOD $ 13,508
=============
<P>
See accountants' report and accompanying notes to financial statements.
</TABLE>
ERNEST DE SAYE, JR.
D/B/A HARDYSTON AUTOMOTIVE DISTRIBUTORS
(A SOLE PROPRIETORSHIP)
STATEMENT OF INCOME AND PROPRIETOR'S CAPITAL
FROM APRIL 1, 1998 TO DECEMBER 31, 1998
<TABLE>
<S> <C>
From Apr. 1, 1998
to Dec. 31, 1998
-----------------
Income
Income $ 302,222
----------
Total Income 302,222
----------
<P>
Cost of Sales
Purchases 266,925
Direct Labor 2,363
----------
Total Available Inventory 269,288
Less: Ending Inventory (17,019)
----------
Total Cost of Sales 252,269
----------
Gross Profit 49,953
<P>
Operating Expenses
Advertising 159
Bank Service Charges 249
Bookkeeping Expense 300
Utilities 1,090
Insurance Expense 2,822
Miscellaneous Expenses 964
Office Supplies and Expenses 1,015
Rent Expense 6,450
Repairs and Maintenance 782
Payroll Taxes 243
Telephone 1,825
Travel 16
Truck Expense 5,036
Depreciation Expense 865
-----------
Total Operating Expenses 21,816
-----------
Income from Operations 28,137
Proprietor's Capital at Beginning of Year -
Contributions 36,618
Withdrawals (21,232)
-----------
Proprietor's Capital at End of Year
$ 43,523
===========
<P>
See accountants' report and accompanying notes to financial statements.
</TABLE>
ERNEST DE SAYE, JR.
D/B/A HARDYSTON DISTRIBUTORS
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
<P>
NOTE A - SAY OF SIGNIFICANT ACCOUNTING POLICIES
<P>
Nature of Operations and Basis of Accounting
- ---------------------------------------------
<P>
Hardyston Distributors, a sole proprietorship, is engaged in
the auto parts distribution business with one warehouse
located in Franklin, New Jersey. The Company's financial
statements are presented in accordance with generally
accepted accounting principles. The accompanying financial
statements have been prepared solely from the accounts of
Ernest De Saye, Jr., D/B/A Hardyston Distributors, and the
owner, Ernest De Saye, Jr., represents that they do not
include his personal accounts or those of any other
operation in which he is engaged.
<P>
Property and Equipment
- ---------------------
<P>
Depreciation of property and equipment is provided on both
the straight-line and declining-balance methods.
Expenditures for maintenance and repairs are charged against
operations. Renewals and betterments that materially extend
the life of the asset are capitalized.
<P>
Income Taxes
- ------------
<P>
The proprietorship itself is not a taxpaying entity for
purposes of federal and state income taxes. Federal and
state income taxes of the proprietor are computed on his
total income from all sources; accordingly, no provision for
income taxes is made in these statements. The proprietor
customarily makes estimated tax payments toward his personal
income tax liability from the proprietorship bank account.
These payments are treated as withdrawals of capital.
<P>
Use of Estimates
- ----------------
<P>
The preparation of financial statements in conformity with
generally accepted accounting principles requires the
proprietor to make estimates and assumptions that affect
certain reported amounts and disclosures. Accordingly,
actual results could differ from those estimates.
<P>
Inventory
- ---------
Inventory is valued at the lower of cost determined on the
first-in, first-out method or market.
<P>
ERNEST DE SAYE, JR.
D/B/A HARDYSTON DISTRIBUTORS
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
<P>
NOTE B- COMMITMENTS
<P>
The Company entered into a lease agreement with a
non-affiliated party 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. Minimum monthly rental payments are to be
paid as follows:
<P>
<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>
<P>
NOTE C- SUBSEQUENT EVENTS
<P>
On April 22, 1999, the owner of the Company, Ernest De Saye, Jr., sold the
inventory and equipment to the Auxer Group Inc.
<P>
The Auxer Group, Inc.
Proforma Financial Information - Income Statement
For The Twelve Months Ended December 31, 1999
<TABLE>
<S> <C> <C> <C>
Hardyston Distributors The Auxer Group, Combined Income
Inc. Statement
<P>
(A Sole Proprietorship)
1/1/99 - 4/21/99 1/1/99 - 12/31/99 1/1/99 - 12/31/99
Revenues $116,865 $871,259 $988,124
Cost of Goods Sold $95,278 $622,210 $717,488
---------------------------------------------------------------
Gross Profit $21,587 $249,049 $270,636
===============================================================
Operations:
<P>
General & Administrative $10,471 $1,302,418 $1,312,889
Depreciation $0 $11,626 $11,626
Interest Expense $0 $10,618 $10,618
Total Expenses $10,471 $1,324,662 $1,335,133
---------------------------------------------------------------
Income (loss) from
operations $11,116 $(1,075,613) $(1,064,497)
===============================================================
Other Income (Expenses)
<P>
Interest Income $0 $706 $706
Extraordinary Item, gain on
forgiveness of debt $0 $99,780 $99,780
---------------------------------------------------------------
Net Income (loss) $11,116 $(975,127) $(964,011)
===============================================================
</TABLE>
Unaudited - See Accountant's Report
<P>
Signatures
<P>
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.
<P>
/S/EUGENE CHIARAMONTE, JR.
--------------------------
BY: EUGENE CHIARAMONTE, JR.
Title: President, Chief
Executive Officer and
Director
Date: January 10, 2000
<P>
Item 15.(b) Exhibits
<P>
<TABLE>
<S> <C>
Exhibit No. Description
- ----------------------------
<P>
2.0 Plan of Reincorporation
<P>
3.1 Articles of Incorporation of The Auxer Group, Inc. and Articles of
Amendment
<P>
3.2 By-laws of The Auxer Group, Inc.
<P>
4.1 Certificate of Designations of Preferred Stock of The Auxer Group, Inc.
<P>
4.2 Non-Statutory Stock Option Plan
<P>
10.1 Acquisition Agreement and Plan of Reorganization between the Auxer Gold
Mines and CT Industries Inc.
<P>
10.2 Acquisition Agreement of Harvey-Westbury Corp.
<P>
10.3 Carquest Products, Inc. License Agreement
<P>
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.
<P>
10.5 Agreement and Plan of Acquisition between Auxer Industries, Inc. and
Universal Filtration Industries, Inc.
10.6 Finova Capital Corporation Agreement and Amendment.
<P>
10.7 PMR and Associates Investor Relation Agreement dated January 4, 1999
<P>
10.8 PMR and Associates Investor Relations Services Agreement dated
April 6, 1999
<P>
10.9 PMR and Associates Management Consulting Services Agreement dated
July 1, 1999
<P>
10.10 Employment Agreement between A Subsidiary Corporation To Be Formed By The
Auxer Group, Inc. and Ernest R. Desaye, Jr.
<P>
21 Subsidiaries
27.1 Financial Data Schedule for The Auxer Group, Inc.
</TABLE>
EXHIBIT 2.0 - AUXER REINCORPORATION
- -----------------------------------
<P>
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.
<P>
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.
<P>
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.
<P>
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.
<P>
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.
<P>
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.
<P>
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.
<P>
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.
<P>
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.
<P>
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.
<P>
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.
<P>
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.
<P>
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.
<P>
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.
<P>
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.
- ---------------------------------------------
<P>
BY-LAWS OF THE AUXER GROUP, INC.
ARTICLE I - OFFICES
<P>
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.
<P>
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.
<P>
ARTICLE II - SEAL
<P>
1. The corporate seal shall have inscribed thereon
the name of the corporation, the year of its organization
and the words "Corporate Seal, Delaware".
<P>
ARTICLE III - SHAREHOLDERS' MEETING
<P>
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.
<P>
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.
<P>
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.
<P>
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.
<P>
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.
<P>
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.
<P>
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.
<P>
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.
<P>
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.
<P>
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.
<P>
ARTICLE IV - DIRECTORS
<P>
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. 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.
<P>
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.
<P>
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.
<P>
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.
<P>
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.
<P>
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.
<P>
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.
<P>
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.
<P>
ARTICLE V - OFFICERS
<P>
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.
<P>
2. The salaries of all officers and agents of the
corporation shall be fixed by the Board of Directors.
<P>
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.
<P>
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.
<P>
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.
<P>
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.
<P>
ARTICLE VI VACANCIES
<P>
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.
<P>
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.
<P>
ARTICLE VII CORPORATE RECORDS
<P>
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.
<P>
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.
<P>
ARTICLE VIII - SHARE CERTIFICATES, DIVIDENDS, ETC.
<P>
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.
<P>
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.
<P>
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.
<P>
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.
<P>
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.
<P>
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.
<P>
ARTICLE IX MISCELLANEOUS PROVISIONS
<P>
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.
<P>
2. The fiscal year shall begin in the first day of
January each year.
<P>
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.
<P>
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.
<P>
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.
<P>
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.
<P>
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.
<P>
ARTICLE X ANNUAL STATEMENT
<P>
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.
<P>
ARTICLE XI AMENDMENTS
<P>
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.
<P>
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.
<P>
ARTICLE X ANNUAL STATEMENT
<P>
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.
<P>
ARTICLE XI AMENDMENTS
<P>
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.
<P>
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.
<P>
(s)Eugene Chiaramonte, Jr.
--------------------------
Eugene Chiaramonte, Jr.
Corporate Secretary
CERTIFICATE OF DESIGNATION
OF
PREFERRED STOCK
OF
THE AUXER GROUP, INC.
<P>
The Auxer Group, Inc., a corporation organized and
exisiting under the General Corporation Law of the State of
Delaware (the "Corporation").
<P>
DOES HEREBY CERTIFY:
<P>
THAT, pursuant to the authority conferred upon the
board of directors by the Certificate of Incorporation of
this Corporation and section 151 ot Title 8 of the Delaware
Code, the board of directors has duly adopted the following
resolution:
<P>
RESOLVED, that pursuant to the authority expressly
granted to and vested in the board of directors of this
Corporation by the provisions of ots Certificate of
Incorporation, the board of directors hereby creates a
series of Preferred Stock to consist of 25,000,000 of the
Preferred Shares which this Corporation now has authority to
issue, and the board of directors bereby fixes the
designation, powers, preferences and relative,
participating, optional andother special rights, and the
qualifications, limitations or restrictions thereof, of the
shares of such series as follows:
<P>
1. Designation. The distinctive designation of such
stock shall be the Preferred Stock.
<P>
2. Number of Shares. The number of shares which
shall constitute such series shall be 25,000,000 shares,
which number may be increased or decreased from time to time
by theboard of directors.
3. 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 avaliable therefore. Hodlers 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.
<P>
4. Conversion Rights. The Preferred Stock is
convertible, at the holders 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.
<P>
5. Redemption. The Preferred Stock is not redeemable.
<P>
6. 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 avaliable 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 part of the
Company's assets for cash, securities or otherproperty will
be considered a liquidation, dissolution or winding up of
the Company.
<P>
7. 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.
<P>
8. 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.
<P>
9. 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.
<P>
IN WITNESS WHEREOF, the Corporation has caused this
Certificate of Designation to be executed this 1 st day of
January, by an officer thereunto duly authorized.
<P>
THE AUXER GROUP, INC.
<P>
By: /s/ Eugene Chiaramonte, Jr.
-------------------------------
EUGENE CHIARAMONTE, JR.
AUXER INDUSTRIES, INC.
<P>
NONSTATUTORY STOCK OPTION PLAN
<P>
1. Purpose
-------
<P>
The purpose of this Nonstatutory Stock Option Plan
(hereinafter referred to as the "Plan"), is to provide a
special incentive to selected individuals who have made
significant contributions to the business and success of
AUXER INDUSTRIES, INC., (hereinafter referred to as the
"Company"). The Plan is designed to accomplish this purpose
by offering such individuals options ("Options") to purchase
shares of the common stock of the Company ("Shares") so that
they will share in the Company's success.
<P>
2. Administration
--------------
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. If an option
committee administers the Plan, it shall consists of three
or more members, at least one of whom shall be neither an
officer nor an employee of the Company. (The board of
directors or an option committee shall be referred to the
"Board" herein).
<P>
The Board shall have authority, consistent with the Plan,
(a) to determine which individuals shall be granted
Options;
(b) to determine the time or times when Options shall
be granted and the number of Shares to be subject
to each Option;
(c) to determine the exercise price of the Shares
subject to each Option and the method of payment
of such price;
(d) to determine the time or times when each Option
becomes exercisable and the duration of the
exercise period, subject to the limitations
contained in Paragraph 6(b);
(e) to prescribe the form or forms of the instruments
evidencing any options granted under the Plan and
of any other instruments required under the Plan
and to change such forms from time to time;
(f) to adopt, amend and rescind rules and regulations
for the administration of the Plan and the Options
and for its own acts and proceedings; and
(g) to decide all questions and settle all
controversies and disputes which may arise in
connection with the Plan. All decisions,
determinations and interpretations of the Board
shall be binding on all parties concerned.
<P>
8. Participants
------------
<P>
The 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. In any grant of Options
after the initial grants, Participants who were previously
granted Options or sold Shares under the Plan may be
included or excluded.
<P>
9. Limitations
-----------
<P>
No Option shall be granted under the Plan after March 31,
2001, but Options theretofore granted may extend beyond that
date. Subject to adjustments as provided in Section 8 of
the Plan, the number of Shares which may be issued under the
Plan shall not exceed two (2,000,000) million in the
aggregate. To the extend 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, within the limit specified above.
<P>
10. Shares to be Issued
-------------------
<P>
Shares to be issued under the Plan may constitute an
original issue of authorized Shares or may consist of
previously issued Shares acquired by the Company, as shall
be determined by the Board. The Board and the proper
officers of the Company shall take any appropriated action
required for such issuance. The maximum number of Shares
which may be issued under the Plan is two millions
(2,000,000) Shares.
<P>
11. Terms and Conditions of Options
-------------------------------
<P>
All Options granted under the Plan shall be subject to the
following terms and conditions (except as provided in
Section 7) and to such other terms and conditions as the
Board shall determine to be appropriate to accomplish the
purposes of the Plan:
<P>
(A) Exercise price. 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: provided,
however, that in the event an option committee shall
determine to grant an Option at less than 85% of the then
current market price of the Shares, such Option shall not be
granted by the option committee without the prior approval
of the board of directors.
<P>
(B) Period of Options. The period of an Option shall
not exceed five years from the date of grant.
<P>
(C) Exercise of Options
<P>
(i) 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.
<P>
(ii) A person electing to exercise an Option shall
give written notice to the Company, as specified by the
Board, of his/her election and of the number of Shares
he/she has elected to purchase, such notice to be
accompanied by such instruments or documents as may be
required by the Board, and shall at the time of such
exercise tender the purchase price of the Shares he/she has
elected to purchase.
<P>
(C) Payment for Issuance of Shares. 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.
<P>
The Company shall not be obligated to issue any Shares
unless and until, in the opinion of the Company's counsel,
all applicable laws and regulations have been complied with,
nor, in the event the Shares at the time are not listed upon
any stock exchange, unless and until the Shares to be issued
have been listed or authorized to be added to the list upon
official notice of issuance upon such exchange, nor unless
or until all other legal matters in connection with the
issuance and delivery of Shares have been approved by the
Company's counsel. Without limiting the generality of the
foregoing, the Company may require from the Participant such
investment representation or such agreement, if any, as
counsel for the Company may consider necessary in order to
comply with the Securities Act of 1933 as then in effect,
and may require that the Participant agree that any sale of
the Shares will be made only in such manner as is permitted
by the Board and that a participant will notify the Company
when he/she intends to make any disposition of the Shares
whether by sale, gift or otherwise. The Participant shall
take any action reasonably requested by the Company in such
connection. A Participant shall have the rights of a
stockholder only as to Shares actually acquired by him/her
under the Plan.
<P>
(D) Transferability of Options. No Option 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.
(E) Termination of Employment. 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 as
provided below, but only to the extent the Participant was
entitled to exercise the Option on the date when his/her
employment terminated. If such termination of employment is
voluntary on the part of the Participant, he/she may
exercise his/her Option only within ten days after the date
of termination of employment (unless a longer period not in
excess of three months is allowed by the Board). If such
termination of employment is involuntary on the part of the
Participant, he/she may exercise his/her Option only within
three months after the date of termination of employment. In
no event, however, may such Participant exercise his/her
Option at a time when the Option would not be exercisable
had the Participant remained an employee or when the
termination was for cause. For purposes of this subsection
(f), a Participant's employment shall not considered
terminated in the case of sick leave or other bona fide
leave of absence approved by the Company or a subsidiary, or
in the case of a transfer to the employment of a subsidiary
or the employment of the Company. Anything herein to the
contrary notwithstanding, an Option may be exercised only to
the extent exercisable on the date of termination of
employment by death or otherwise.
<P>
(F) Retirement or Resignation. If prior to the
expiration date of a Participant's 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; provided, however, the
Board may terminate, at any time prior to exercise, all
unexercised Options if it shall determine that the retired
or resigning optionee has engaged in any activity
detrimental to the Company's interest.
(G) Death. 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 or any of the Shares which the
Participant was entitled to purchase immediately prior to
his/her death, by his/her executor or administrator or the
person or persons to whom the Option is transferred by will
or the applicable laws of descent and distribution, and
except as so exercised such Option shall expire at the end
of such period. In no event, however, may an Option be
exercised after the expiration of the Option period.
<P>
8. Replacement Options
-------------------
<P>
The Company may grant Options under the Plan on terms
differing from those provided for in Section 6 where such
Options are granted in substitution for Options held by
employees of other corporations who concurrently become
employees of the Company or a subsidiary as the result of a
merger, consolidation or other regoranization of the
employing corporation with the Company of subsidiary, or the
acquisition by the Company or a subsidiary of the business,
property or stock of the employing corporation. The Board
may direct that the substitute Options be granted on such
terms and conditions as the Board considers appropriate in
the circumstances.
<P>
9. Changes in Stock
----------------
<P>
In the event of a stock dividends, 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.
<P>
10. Employment Rights
-----------------
<P>
The adoption of the plan or the granting of an Option does
not confer upon any individual any right to employment or
continued employment with the Company or a subsidiary, as
the case may be, nor does it interfere in any way with the
right of the Company or a subsidiary to terminate the
employment of any of its employees at any time.
<P>
11. Amendment
---------
<P>
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
under Section 8, no such amendment shall void or diminish
Options previously granted without the consent of the
Participant, nor shall any amendment increase or accelerate
the conditions and actions required for the exercise of an
Option unless the Participant shall have been discharged
from the Company's employment for cause.
<P>
Adopted by the Board of Directors
EXHIBIT 10.1 - ACQUISTION AGREEMENT AND PLAN OF
REORGANIZATION BETWEEN THE AUXER GOLD MINES AND CT
INDUSTRIES
- ---------------------------------------------------
<P>
ACQUISITION AGREEMENT AND PLAN OF REORGANIZATION
<P>
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").
<P>
RECITALS
<P>
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;
<P>
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
<P>
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.
<P>
NOW, THEREFORE, in consideration of the premises and
mutual representations, warranties and covenants herein
contained, the parties hereby agree as follows:
<P>
ARTICLE I
<P>
ACQUISITION AND EXCHANGE OF SHARES
<P>
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.
<P>
SECTION 1.2 Issuance of Shares.
<P>
(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.
<P>
(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.
<P>
(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.
<P>
(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:
<P>
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.
<P>
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;
<P>
(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;
<P>
(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
<P>
(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;
<P>
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:
<P>
(a) To ratify this Agreement and all transactions
contemplated hereby;
<P>
(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;
<P>
(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;
<P>
(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
<P>
(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.
<P>
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.
<P>
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF AUXER
<P>
Auxer hereby represents, warrants and agrees that:
<P>
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.
<P>
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.
<P>
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.
<P>
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.
<P>
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.
<P>
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.
<P>
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.
<P>
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.
<P>
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.
<P>
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.
<P>
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.
<P>
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.
<P>
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.
<P>
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.
<P>
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.
<P>
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.
<P>
ARTICLE III
COVENANTS OF AUXER
<P>
SECTION 3.1 Conduct Prior to the Closing. Between the
date hereof and the Closing:
<P>
(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;
<P>
(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;
<P>
(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;
<P>
(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;
<P>
(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;
<P>
(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
<P>
(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.
<P>
SECTION 3.2 Affirmative Covenants. Prior to Closing,
Auxer will do the following.
<P>
(a) Use its best efforts to accomplish all actions
necessary to consummate this Agreement, including
satisfaction of all the conditions contained in this
Agreement;
<P>
(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;
<P>
(c) Obtain approval of this Agreement from its
shareholders;
<P>
(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;
<P>
(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;
<P>
(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
<P>
(g) Take all other necessary corporate actions to
accomplish those items set forth in Section 1.4 hereof.
<P>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF CTI AND SHAREHOLDERS
<P>
CTI and Shareholders hereby represent, warrant and
agree that:
<P>
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.
<P>
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.
<P>
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.
<P>
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.
<P>
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.
<P>
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.
<P>
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.
<P>
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.
<P>
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.
<P>
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.
<P>
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.
<P>
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.
<P>
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.
<P>
ARTICLE V
COVENANTS OF CTI
<P>
SECTION 5.1 Conduct Prior to the Closing. Between
the date hereof and the Closing:
<P>
(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;
<P>
(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;
<P>
(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;
<P>
(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
<P>
(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.
<P>
SECTION 5.2 Affirmative Covenants. Prior to
Closing, CTI will do the following.
<P>
(a) Obtain the approval of its Board of Directors
and Shareholders to proceed with this Agreement;
<P>
(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
<P>
(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.
<P>
ARTICLE VI
ADDITIONAL AGREEMENTS
<P>
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.
<P>
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.
<P>
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.
<P>
SECTION 6.4 Indemnification.
<P>
(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.
<P>
(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.
<P>
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.
<P>
ARTICLE VII
CONDITIONS TO OBLIGATIONS OF TIE PARTIES
<P>
The obligations of the parties under this Agreement are
subject to the fulfillment and satisfaction of each of the
following conditions:
<P>
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.
<P>
SECTION 7.2 Absence of Termination. The obligations
to consummate the transactions contemplated hereby shall not
have been canceled pursuant to Article X hereof.
<P>
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.
<P>
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.
<P>
ARTICLE VIII
CONDITIONS PRECEDENT TO OBLIGATIONS OF AUXER
<P>
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.
<P>
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.
<P>
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.
<P>
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.
<P>
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.
<P>
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.
<P>
ARTICLE IX
CONDITIONS PRECEDENT TO OBLIGATIONS OF CTI
<P>
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.
<P>
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.
<P>
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.
<P>
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.
<P>
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.
<P>
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.
<P>
ARTICLE X
TERMINATION
<P>
SECTION 10.1 Termination. Notwithstanding anything
herein or elsewhere to the contrary, this Agreement may be
terminated:
<P>
(a) By mutual agreement of all the parties hereto at
any time;
<P>
(b) By the board of directors of Auxer at any time
prior to the Closing if
<P>
(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
<P>
(ii) a material default or breach of this
Agreement shall be made by CTI; or
<P>
(iii) if the Closing shall not have taken place
on or prior to May 31, 1995.
<P>
(c) By the board of directors of CTI at any time
prior to the Closing if
<P>
(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;
<P>
(ii) a material default or breach of this
Agreement shall be made by Auger; or
<P>
(iii) if the Closing shall not have taken place
on or prior to May 31, 1995.
<P>
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.
<P>
ARTICLE XI
MISCELLANEOUS
<P>
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.
<P>
SECTION 11.2 Extension of Time: Waivers. At any time
prior to the Closing date:
<P>
(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;
<P>
(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.
<P>
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:
<P>
The Auger Gold Mines
c/o Leonard E. Neilson
Attorney at Law
1121 East 3900 South, Suite 200
Salt Lake City, Utah 84124
<P>
CT Industries, Inc.
P.O. Box 22895
Newark, New Jersey 07101-9998
<P>
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.
<P>
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.
<P>
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.
<P>
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.
<P>
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.
<P>
SECTION 11.8 Governing Law. This Agreement shall be
governed by the laws of the State of Utah.
<P>
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.
<P>
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.
<P>
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.
<P>
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.
<P>
"Auxer"
THE AUXER GOLD MINES Attest:
<P>
By:
Its: President Secretary
<P>
"CTI"
CT INDUSTRIES, INC.
<P>
By: (s) Eugene Chiaramonte (s) Howard Tapen
----------------------- -----------------
President Secretary
<P>
"Shareholders"
<P>
(s) Eugene Chiaramonte
------------------------
EUGENE CHIARAMONTE, JR.
<P>
(s) Howard Tapen
-----------------
HOWARD TAPEN
EXHIBIT 10.2 - ACQUISITION AGREEMENT OF HARVEY-WESTBURY
CORP.
- -------------------------------------------------------
<P>
ACQUISITION AGREEMENT OF
HARVEY-WESTBURY CORP.
BY
INDUSTRIES, INC.
<P>
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"].
<P>
I. ACQUIRING CORPORATION; CERTIFICATE OF INCORPORATION AND
BY-LAWS; BOARD OF DIRECTORS; OFFICERS.
<P>
1.01 Acquiring Corporation.
<P>
The corporation which shall be the acquiring
corporation is Auxer.
<P>
1.02 Certificate of Incorporation and By-laws.
<P>
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.
<P>
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.
<P>
II. STATUS AND CONVERSION OF SECURITIES AND PROVISION FOR
ADDITIONAL CONSIDERATION
2.01 Shares of H/W
<P>
(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.
<P>
(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.
<P>
(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.
<P>
(d) "Value Per Share" of one share of Auxer
Common Stock shall be one-half the Current Market Price Per
Share.
<P>
(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.
<P>
(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.
<P>
It is understood by the Parties that the closing of the
transactions contemplated herein shall take place
simultaneously with the execution of the Agreement.
<P>
2.02 Additional Consideration
<P>
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.
<P>
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.
<P>
III. COVENANTS
3.01 Covenants of Auxer
Auxer covenants, that:
<P>
(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.
<P>
(b) Securities. There are 8,079,929 Shares
outstanding.
<P>
(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.
<P>
(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.
<P>
(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.
<P>
(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).
<P>
(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.
<P>
(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.
<P>
(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.
<P>
3.02 Covenants of H/W From the Date of the Agreement
<P>
(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".
<P>
(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.
<P>
(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.
<P>
(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.
<P>
(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.
<P>
(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.
<P>
(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.
<P>
(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.
<P>
(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.
<P>
(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.
<P>
(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.
<P>
IV. REPRESENTATIONS AND WARRANTIES
<P>
4.01 Certain Representations and Warranties of Auxer
<P>
Auxer represents and warrants to H/W as follows:
<P>
(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.
<P>
(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.
<P>
(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:
<P>
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.
<P>
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.
<P>
(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.
<P>
(f) Properties. Auxer has title to or has leased
the real and personal property as set forth in the financial
statements.
<P>
(g) Patent,. Trademarks, Etc. Auxer's ownership or
patents. trademarks or any other intellectual property is as
listed on its financial statements.
<P>
(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.
<P>
(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.
<P>
4.02 Certain Representations and Warranties of H/VI/
H/W represents and warrants to Auxer as follows:
<P>
(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.
<P>
(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."
<P>
(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:
<P>
i. There has at no time been a material adverse
change in the financial condition of H/W.
<P>
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.
<P>
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.
<P>
(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:
<P>
i. Liabilities for which full provision has
been made on the financial statements of H/W
<P>
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.
<P>
(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.
<P>
(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.
<P>
(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.
<P>
(h) Patents, Trademarks, Etc. H/W's ownership of
patents, trademarks or any other intellectual property (if
any) is listed on its financial statements.
<P>
(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.
<P>
V. ABANDONMENT AND TERMINATION
<P>
5.01 Right of H/W to Abandon.
<P>
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.
<P>
(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,
<P>
(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:
<P>
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;
<P>
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;
<P>
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;
<P>
iv. All necessary corporate proceedings of
Auxer have been duly taken to authorize the execution,
delivery and performance of the Agreement by Auxer;
<P>
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;
<P>
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;
<P>
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.
<P>
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.
<P>
5.02 Right of Auxer to Abandon.
<P>
Auxer's Board of Directors shall have the right to
abandon or terminate the Acquisition if any of the following
shall not be true.
<P>
(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.
<P>
(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:
<P>
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.
<P>
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.
<P>
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;
<P>
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;
<P>
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;
<P>
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;
<P>
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.
<P>
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.
<P>
VI. MISCELLANEOUS.
<P>
6.01 Further Actions
<P>
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.
<P>
6.02 Availability of Equitable Remedies
<P>
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.
<P>
6.03 Modification
<P>
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.
<P>
6.04 Notices
<P>
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
- --------------------------------------------------------
<P>
AGREEMENT
<P>
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").
<P>
BACKGROUND
<P>
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.
<P>
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:
<P>
SECTION 1
License
<P>
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.
<P>
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.
<P>
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
<P>
"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.
<P>
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.
<P>
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".
<P>
1.5 Assignment and Use. The Supplier may not sell,
transfer, assign or sublicense its license and right to use
"CARQUEST".
<P>
SECTION 2
Additional Obligations of Supplier
<P>
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.
<P>
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.
<P>
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.
<P>
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.
<P>
(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.
<P>
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.
<P>
SECTION 3
Termination
<P>
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.
<P>
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.
<P>
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.
<P>
SECTION 4
Miscellaneous
<P>
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.
<P>
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.
<P>
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.
<P>
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.
<P>
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.
<P>
4.6 Governing Law. This Agreement shall be governed by
and construed and enforced in accordance with the laws of the
State of Indiana.
<P>
IN WITNESS WHEREOF, the parties hereto have duly
executed this Agreement as of the day and year first above
written.
<P>
CARQUEST Products, Inc.
<P>
By (s) MikeLowe
----------------
Title: Product manager
<P>
299 E. County Road 300 S.
New Castle, IN 47362
<P>
SUPPLIER
Harvey Westbury Corp.
<P>
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
- ------------------------------------------------------------
<P>
AGREEMENT OF BUSINESS COMBINATION
BY EXCHANGE OF ASSETS FOR
STOCK
<P>
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").
<P>
W I T N E S S E T H
<P>
WHEREAS, The COMPANY is desirous of exchanging all or
substantially all of its assets; and
<P>
WHEREAS, PURCHASER is desirous of acquiring all of the
assets of the Company; and,
<P>
WHEREAS, the PURCHASER wishes to employ Mr. Ernest R.
DeSaye,
Jr. ("Employee"); and,
<P>
WHEREAS, Employee wishes to be employed by the PURCHASER;
and,
<P>
WHEREAS, PURCHASER is a holding company which is publicly
held and which owns automotive related products; and,
<P>
WHEREAS, the COMPANY is an automotive distributor in
Northwest New Jersey;
<P>
IT IS NOW THEREFORE AGREED that in consideration of the
mutual covenants and agreements hereinafter set forth, the
parties hereto agree as follows:
<P>
1.Exchange of Assets.
<P>
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.
<P>
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.
<P>
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.
<P>
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.
<P>
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").
<P>
4.Exchange Terms; Allocation.
<P>
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.
<P>
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:
<P>
Fifty Five Million (55,000,000).
<P>
5.Representations and Warranties of Company. Company
hereby represents and warrants as follows:
<P>
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.
<P>
5.2 Company has no subsidiaries.
<P>
5.3 Company is solely owned by the Employee.
<P>
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.
<P>
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.
<P>
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.
<P>
5.6 Company has not leased or effected any transfer of
any of the Assets;
<P>
6. Representations and Warranties of PURCHASER.
PURCHASER hereby represents and warrants that on the closing
date all of the following will be true:
<P>
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.
<P>
6.2 PURCHASER has subsidiaries.
<P>
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.
<P>
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.
<P>
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.
<P>
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.
<P>
6.7 PURCHASER has not during the last 30 days, except
as may be required to satisfy the terms of this Agreement:
<P>
6.7.1 authorized, issued, sold or converted any
securities, or entered into any agreement with respect
thereto;
<P>
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;
<P>
6.7.3 incurred any damage, destruction or similar loss,
whether or not covered by insurance, materially affecting
their businesses or. properties;
<P>
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;
<P>
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;
<P>
6.7.6 waived any rights of material value or canceled,
discharged, satisfied or paid any material debts or claims;
<P>
6.7:7 incurred any obligation or liability (absolute or
contingent, liquidated or unliquidated, choate or inchoate);
<P>
6.7.8 leased or effected any transfer of any of their
assets or properties;
<P>
6.7.9 entered into, made any amendment of or terminated
any lease, material contract or license;
<P>
6.7.10 amended its Certificate of Incorporation or
By-Laws;
<P>
6.7.11 effected any change in their accounting
practices, procedures or methods;
<P>
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;
<P>
6.7.13 increased the compensation payable to any of
their directors, officers or employees or became obligated
to increase any such compensation;
<P>
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.
<P>
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).
<P>
6.9. PURCHASER has no liabilities except as shown on
its financial statements, no contracts or other obligations
whatsoever including any contingent liabilities.
<P>
7. Financial Statements and Form 10.
<P>
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.
<P>
8.Miscellaneous.
<P>
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.
<P>
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.
<P>
c) This Agreement shall inure to the benefit of the
parties and their successors in interest, if any, but shall
not otherwise be assignable.
<P>
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.
<P>
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.
<P>
9. Indemnification.
<P>
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.
<P>
10.Covenant Not to Disclose.
<P>
(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.
<P>
(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.
<P>
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.
<P>
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.
<P>
THE AUXER GROUP, INC.
<P>
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.
- -----------------------------------------------------------
<P>
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"].
<P>
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
<P>
WHEREAS, the Parties entered into an agreement dated August
7, 1996 embodying the oral understandings; and
<P>
WHEREAS, the Parties have agreed to modify the agreement
because certain representations of Universal relating to
revenue and profitability projections have not been met;
<P>
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.
<P>
NOW THEREFORE, IN CONSIDERATION OF THE PREMISES AND THE
UNDERTAKINGS HEREINAFTER STATED, THE PARTIES AGREE AS
FOLLOWS:
<P>
I. ACQUIRING CORPORATION; CERTIFICATE OF INCORPORATION AND
BY-LAWS; BOARD OF DIRECTORS; OFFICERS.
<P>
1.01 Acquiring Corporation.
The corporation which shall be the acquiring corporation is
Auxer.
<P>
1.02 Certificate of Incorporation and By-laws.
<P>
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.
<P>
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.
<P>
II. STATUS AND CONVERSION OF SECURITIES
<P>
2.01 Shares of Universal Filtration
<P>
(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.
<P>
(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.
<P>
(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.
<P>
(d) "Value Per Share" of one share of Auxer Common Stock
shall be S.05 per share.
<P>
(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.
<P>
III. COVENANTS
<P>
3.01 Covenants of Auxer
<P>
Auxer covenants, that:
<P>
(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.
<P>
(b) Securities. There are 7,192,929 Shares outstanding.
<P>
(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.
<P>
(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.
<P>
(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.
<P>
(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).
<P>
(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.
<P>
(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.
<P>
(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.
<P>
3.02 Covenants of Universal Filtration From the Date of the
Agreement
<P>
(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".
<P>
(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.
<P>
(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.
<P>
(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.
<P>
(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.
<P>
(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.
<P>
(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.
<P>
(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.
<P>
(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.
<P>
(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.
<P>
(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.
<P>
V. REPRESENTATIONS AND WARRANTIES
<P>
4.01 CERTAIN REPRESENTATIONS AND WARRANTIES OF AUXER
<P>
Auxer represents and warrants to Universal Filtration as
follows:
<P>
(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.
<P>
(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.
<P>
(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:
<P>
i. There has at no time been a material undisclosed
adverse change in the financial condition of Auxer.
<P>
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.
<P>
iii. The operations and business of Auxer have been
conducted in all respects only in the ordinary course.
<P>
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.
<P>
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.
<P>
(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.
<P>
(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.
<P>
(f) Properties. Auxer has title to or has leased the
real and personal property as set forth in the financial
statements.
<P>
(g) Patents, Trademarks, Etc. Auxer's ownership or
patents, trademarks or any other intellectual property is as
listed on its financial statements.
<P>
(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.
<P>
4.02 Certain Representations and Warranties of Universal
Filtration
<P>
Universal Filtration represents and warrants to Auxer as
follows:
<P>
(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.
<P>
(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."
<P>
(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:
<P>
i. -There has at no time been a material adverse
change in the financial condition of Universal Filtration.
<P>
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.
<P>
iii. Universal Filtration has not suffered an
extraordinary loss (whether or not covered by insurance) or
waived any right of substantial value.
<P>
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.
<P>
(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:
<P>
i. Liabilities for which full provision has been
made on the financial statements of Universal Filtration
<P>
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.
<P>
(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.
<P>
(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.
<P>
(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.
<P>
(h) Patents, Trademarks, Etc. Universal Filtration's
ownership of patents, trademarks or any other intellectual
property (if any) is listed on its financial statements.
<P>
(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.
<P>
V. ABANDONMENT AND TERMINATION
<P>
5.01 Right of Universal Filtration to Abandon.
<P>
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.
<P>
(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.
<P>
(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:
<P>
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;
<P>
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;
<P>
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;
<P>
iv. All necessary corporate proceedings of Auxer
have been duly taken to authorize the execution, delivery
and performance of the Agreement by Auxer;
<P>
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;
<P>
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;
<P>
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.
<P>
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.
<P>
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.
<P>
5.02 Right of Auxer to Abandon.
<P>
Auxer's Board of Directors shall have the right to abandon
or terminate the Acquisition if any of the following shall
not be true.
<P>
(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.
<P>
(b) Certificate of the President of Universal
Filtration.
<P>
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:
<P>
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.
<P>
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.
<P>
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;
<P>
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
<P>
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;
<P>
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;
<P>
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.
<P>
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.
<P>
VI. MISCELLANEOUS.
<P>
6.01 Further Actions
<P>
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.
<P>
6.02 Availability of Equitable Remedies
<P>
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.
<P>
6.03 Modification
<P>
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.
<P>
6.04 Notices
<P>
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.
<P>
6.05 Waiver
<P>
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.
<P>
6.06 Binding Effect
<P>
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.
<P>
6.07 No Third Party Beneficiaries
<P>
The Agreement does not create, and shall not be construed as
creating, any rights enforceable
<P>
6.08 Separability
<P>
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.
<P>
6.09 Headings
<P>
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.
<P>
6.10 Counterparts; Governing Law
<P>
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.
<P>
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.
<P>
UNIVERSAL FILTRATION INDUSTRIES, INC.
<P>
By: (s) Ronald M. Shaver
--------------------
Ronald M. Shaver,
President
<P>
AUXER INDUSTRIES, INC.
<P>
By: (s) Eugene Chiaramonte
-----------------------
Eugene J. Chiaramonte, Jr.
EXHIBIT 6.0 - FINOVA CAPITAL CORPORATION AGREEMENT AND
AMENDMENT
- --------------------------------------------------------
<P>
SECURITY AGREEMENT dated January, 1997 between
HARVEY WESTBURY CORP. a corporation organized and existing
under the laws of the State of New York having its principal
place of business at 15 Heisser Court, Farmingdale, New York
11735 (hereinafter called the "Borrower'), and UNITED CREDIT
CORPORATION, a corporation organized and existing under the
laws of the State of New York, having Its principal place of
business at 15 West 44th Street, New York, New York 10036-6611
(hereinafter called "United").
<P>
W I T N E S S E T H:
<P>
FIRST: Subject to the further terms hereof:
<P>
(a) Insofar as the Borrower may request, United
shall make loans or extend credit to or for the Borrower;
but United shall not be obligated to make loans, or extend
credit beyond the borrowing base or the permissible line,
whichever in less;
<P>
(b) The "borrowing base', shall mean an amount equal
to 75 of the not 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 152,000. $25,000.00
<P>
(c) The Borrower shall pay United basic interest on
the daily unpaid cash balances outstanding during each month
at a rate equal to the highest Now York City prime rate in
effect during such month as generally reported, plus 8% per
annum, but the basic rate hereunder shall not he less than
16 1/2%per annum nor more than the maximum permitted by
applicable law; *
<P>
(d) In any event, the Borrower shall pay United, as a
commitment fee for United's agreements hereunder,*$1.000.OQ
per month (pro rated for periods less than a full calendar
month) each month that this agreement is to remain in
effect, as stated below or an 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;
<P>
(e) This agreement shall remain in effect until the
last day of the month in which the second - anniversary
hereof falls.
<P>
SECOND: A. As security for the payment and performance
of all liabilities of the Borrower to United, the Borrower
hereby grants, and United shall have, a continuing security
interest in such of the following as may be checked, and all
proceeds, products and accessions, if any, and all books and
records now existing and hereafter arising relating to
properties checked; and all goods, instruments, documents of
title, policies and certificates of insurance, securities,
chattel paper, deposits, instruments, cash or other property
now or hereafter owned by the Borrower or in which it now or
hereafter has an interest which may now or hereafter be in
the lawful possession of United or as to which United may
now or hereafter control possession by documents of title or
otherwise (hereinafter called the "collateral"):
<P>
X (1) All of the Borrower's accounts, general
-- intangibles, contract rights and chattel paper,
now existing or hereafter arising, the goods, the
sale and delivery of which gave or shall give rise
to the creation of an account, and all security
the Borrower at any time obtains for the payment
of any account, general intangible, contract right
or chattel paper;
<P>
X (2) All inventory (raw, finished and in process) and
- all supplies of the Borrower, now owned or
hereafter acquired by it or as to which it may now
or hereafter control possession by documents of
title or otherwise, wherever located, and all
trade names, trademarks, patents and applications
for letters patent applicable thereto;
<P>
X (3) All equipment of the Borrower, now owned or
-- hereafter acquired by it or as to which it may now
or hereafter control possession by documents of
title or otherwise, wherever located; and
<P>
The Borrower's failure to furnish United with any formal
pledge, assignment or other designation with respect to any
property of the type included in the collateral shall not operate
to exclude such property from the collateral.
United shall pay the Borrower its equity from collections on
accounts after United's receipt of collections In excess of
the Borrower's liabilities to it.
<P>
*See separate letter containing additional Material
<P>
The Borrower's equity from collections on accounts means the
amount by which the borrowing base exceeds the Borrower's
liabilities to United which are then due. Pending the full
payment and performance of such liabilities, United may hold
any excess collateral, including cash in United's possession
and credit balances, as additional security for the payment
and performance of the Borrower's liabilities or apply the
excess to the Borrower's liabilities.
<P>
B. If property of the type is not then already Included
in the collateral, then from the date United honors much a
request, a request by the Borrower for United to guarantee
the purchase price of any inventory for the Borrower or to
purchase any inventory on behalf of the Borrower, or that
any loan made to it be repayable in installments shall have
the effect of including within the collateral all property
of the type referred to in subparagraph "SECOND A (2)" and
'(3), hereof and the proceeds, products and accessions, if
any, of, and the Borrower's books and records then existing
and thereafter arising related to, the properties so
included in the collateral.
<P>
THIRD: The Borrower represents and covenants as follows.
<P>
(a) The Borrower is a corporation duly organized and
in good standing under the laws of the state appearing at
the beginning of this agreement as the state of its
organization; it is and shall be duly qualified and in good
standing in every other state in which, if accounts are
collateral hereunder, It enters into contracts giving rise
to accounts, and, If goods of any nature are collateral
hereunder, it maintains such goods; it keeps and shall keep
its books of account and goods of any nature which are
purported to be collateral at its address appearing at the
beginning of this agreement, the execution, delivery and
performance hereof are within the Borrower's corporate
powers, have been duly authorized and are not in
contravention of law or the terms of the Borrower's charter
or by-laws or of any undertaking by which it is bound;
except for the security interest granted hereby, the Borrower
is and shall be the owner of all property located
on its premises (except as noted on a separate list signed
and delivered to United on behalf of the Borrower
concurrently herewith); it owns all property purported to be
included in the collateral free from any lien, security
interest or encumbrance; it does have and shall have the
absolute right to subject the same to a security interest In
United; after the security interest of United shall have
attached to any such property, the Borrower's properties of
any type shall not be further subject to any security
interest, lien or encumbrance of any other person, except
pursuant to United's written consent, which shall not be
unreasonably withheld to permit the Borrower to obtain
further purchase money financing from others on terms which,
in United's discretion, shall not adversely affect the
interests of United; subject to any limitations stated
therein or in connection therewith, all balance sheets,
earnings statements and other financial data which have been
or may hereafter be furnished to United, do or shall fairly
present the financial condition of the person reported upon
as of the dates and the results of his, her or its
operations for the periods for which the same are furnished;
all other information heretofore furnished to United is, and
all information hereafter furnished to United shall be
accurate and correct in all material respects and not fall
to disclose any fact necessary to make the information
furnished not misleading; and the Borrower shall as soon as
practicable after the close of each of its fiscal years and
midfiscal years furnish United with a copy of a financial
statement, prepared in accordance with generally accepted
accounting principles, showing its financial condition as
of, and the results of its operations for the period then
ended.
<P>
(b) The Borrower shall at all reasonable times give
United access to all places where any part of the collateral
or records pertaining thereto may be maintained, and shall
from time to time allow United by or through any of its
officers, agents, attorneys or accountants, to make extracts
from such recorder and it shall at all times keep United
informed of the name and location of each of Its bank
accounts.
<P>
(c) Any loan at any time received by the Borrower
from United shall not be used directly or Indirectly other
than in the Borrower's business; it shall not, directly or
indirectly, pay any dividend on its stock other than a dividend
payable in shares of Its own stock; it shall not,
directly or indirectly, make any loan to, or pay any claim
other than for current remuneration or current reimbursable
expense payable to any person controlling, controlled by or
under common control with the Borrower, and it shall, on
demand, obtain and deliver to .United subordinations in form
and substance satisfactory to United of all claims of
controlling and controlled persons consistent with the
foregoing.
<P>
(d) The Borrower shall keep all its properties,
whether included in the collateral or not, in good order and
repair, and shall not waste or destroy them or any part
thereof or Use them or any part thereof in violation of any
applicable law; it shall not dispose of any of its
properties except in the ordinary course of business and It
shall not dispose of any equipment included in the
collateral without the prior written consent of United; it
shall pay promptly, when due, any justly owing account
payable of its in which United holds a security interest,
all rents or similar charges payable with respect to any
premises where any part of the collateral may at any time be
located and all taxes payable by it, including withholding
taxes; It shall procure and maintain theft, burglary and
fire insurance containing so-called extended coverage
insurance, covering all goods included in the collateral,
and life insurance on the lives of such of the guarantors of
its obligations and its officers an United shall direct, all
of which insurance shall be in such reasonable amounts as
United shall direct, and shall be, If adjustable, adjustable
by United, and payable to and for the benefit of the
Borrower and United as their interests may appear; and the
Borrower shall, upon United's request, furnish United with
evidence satisfactory to United of its payment of such rent
or similar charges and taxes and with policies or
certificates evidencing Its compliance with such insurance
requirements.
<P>
(e) Upon its receipt or creation of any property of
the type in which United has a security interest, the
Borrower shall furnish United with information adequate to
identify such property, which information shall be in such
form as United may request (a "schedule"), accompanying such
schedule with specific pledges, assignments and designations
In form and substance satisfactory to United and copies of
relevant invoices and vouchers and if accounts are included
in the collateral, promptly after the end of each month It shall
furnish United with an ageing of its receivables as of
the last day of such month, showing for each of its account
debtors the amount owed by such debtor with respect to
invoices of the Borrower generated within the then past
month, each of the prior three months and at any time prior
to the fourth preceding month; and if so requested by
United, It shall furnish United with statements for each
account debtor for mailing to them, reflecting the
indebtedness of such account debtor and the derivation by
invoice of such indebtedness.
<P>
(f) At the time the Borrower notifies United of the
existence of any account, much account shall be good and
valid, representing an undisputed bona fide indebtedness
Incurred by the debtor named therein for merchandise
theretofore delivered pursuant to a contract of sale or
leave or for services theretofore performed by the Borrower
for said debtor pursuant to a contract therefor; no
agreement under which any deduction or discount may be
acquired shall have been made with such debtor except as
Indicated in the written "schedule" and invoice furnished to
United concurrently with the Borrower's notifying United of
the existence of the account; and the net amount so derived
of each account shall be paid in full at its maturity as
expressed in the invoice evidencing such account and the
schedule pertaining thereto; and much payment shall be
delivered to United as provided in subparagraph "THIRD (h),
hereof.
<P>
(g) The Borrower shall immediately notify United, if
accounts are Included in the collateral, of all cases
involving the return, rejection, repossession, loss of or
damage to merchandise covered by an account and of any
dispute arising or credit or adjustment granted or discount
or offset taken with respect to an account, and if goods
are; included in the collateral, of any event causing lose
or depreciation in the value of such goods and the amount of
such lose or depreciation; and the Borrower shall forthwith
pay United the invoice amount of the merchandise involved or
the amount of the dispute, credit, adjustment, discount,
offset, lose, damage or depreciation, as the case may be.
<P>
(h) The Borrower shall do all things necessary and
usual in the ordinary course of business, to sell in the
ordinary course of business inventory Included in the
collateral to responsible purchasers and to collect on
accounts included In the collateral, and shall receive IN
TRUST for United, without commingling with its other funds
and assets, all cash, checks, notes, chattel paper and other
proceeds received by it with respect to any of the
collateral, and shall deliver the same, other than
merchandise returns, to United In the form received,
promptly upon the receipt thereof.
<P>
(i) If certificates of title are or shall be Issued
with respect to any equipment Included in the collateral,
the Borrower shall, on demand, cause the interest of United
to be properly noted thereon; if any equipment Included in
the collateral is or shall be deemed a fixture under
applicable law, the Borrower shall, on demand, furnish
United with disclaimers signed by all persons having an
Interest in the affected real estate, insofar &a the
security interest of United in concerned, and United is
authorized to destroy from time to time papers theretofore
delivered to it in connection with Invoices which have
become paid.
<P>
(j) The Borrower shall, at its own expense, do all
acts and execute and deliver all writings United may at any
time require to protect or enforce United's interests,
rights and remedies created by, provided in or emanating
from this agreement.
<P>
FOURTH: For the purpose of protecting United's
interests, and only for such purpose, the Borrower hereby
appoints United, with full power of substitution, as the
Borrower's agent:
<P>
(a) to collect the Borrower's invoices and endorse the
name of the Borrower upon any instruments that may come into
United's possession in accordance with this agreement;
<P>
(b) to sign on behalf of the Borrower such financing
statements as United shall deem necessary, describing the
types or items of collateral covered hereby;
<P>
(c) to request and receive from the Borrower's agents,
employees, attorneys and accountants all information
pertaining to the Borrower which United May
<P>
B. United's compensation shall be payable with respect
to the daily cash balance owing United so long as any such
balance exists, even after the maturity of the Borrower's
indebtedness to United. United intends to make no charge for
compensation which, under the circumstances existing at
the time the charge therefore might be made shall constitute
a violation of the maximum permissible charge to a
corporation for the loan or forbearance of money under
applicable law. Provided any such law would not thereby be
violated, the compensation payable for any prior or
subsequent month hereunder may be increased to absorb, in
whole or In part, the difference between the charges
computed hereunder without reference to such law and charges
computed with reference to such law; It being understood
that the entire period of United's financing and the total
of interest charges for such entire period shall be utilized
in determining compliance with such law. In the event the
rate of interest an determined hereunder is in excess of the
maximum permissible rate, then the amount paid in excess of
such maximum shall be deemed io have been payments toward
the reduction of principal and not to the interest due
hereunder and appropriate calculation shall be made to
produce such a result. The bona fide tender of a refund of
any interest erroneously collected in violation of
applicable law shall be a full acquittance of United.
Except as otherwise required by law, interest shall be
computed on the basis of a 360 day year applied to the
actual number of days money Is deemed outstanding.
<P>
C. The rates of compensation hereunder are and will be
fixed on the basis of the Borrower's borrowing funds and
performing its obligations hereunder in due course. In the
event collection of the Borrower's accounts or the
liquidation of the Borrower's equipment or inventory falls
upon United consequent to the occurrence of an event of
default, the Borrower shall pay United 15% of the amount
collected by United. For United's services in wiring,
certifying or transferring funds, the Borrower shall pay
United 1/2 of 1% of the amount wired, certified or
transferred, or $50.00, whichever Is greater. service
charges of $50-00 each shall be made for the issuance of
checks to third parties, processing bank returned items,
each Issuance of a check in excess of two per week, advances
or "equity" payments of less than $5,000.00 and, per page,
for lists of "Past due' or Ineligible accounts. services
arising from the notification of the Borrower's account
debtors to make payments directly to United or to an address
specified by United after an occurrence of an event of
default shall be charged for at #l% of the face amount of
the invoices underlying the notification. For services in
connection with supervision of records related to accounts
included in the collateral, the Borrower shall pay United a
collateral management fee equal to 1% of its sales,
provided, however, such charge shall not be made for any
month that the notification charge referred to above is
made.
<P>
D. The Borrower shall pay United all disbursements
United may incur with respect to loans hereunder or with
respect to the collateral or In protecting or enforcing its
rights under this agreement. Such disbursements shall,
without limiting the generality of the foregoing, include
expenses of audits, dunning letters, telephone
investigations, appraisals, credit reports, bank charges for
letters of credit, verifications, filing or recording deny
documents hereunder which United determines shall be filed
or recorded in any public office, retaking, holding or
preparing for gale any goods purported to be included in the
collateral, finishing; otherwise unfinished inventory which
may be purported to be included In the collateral, selling,
leasing, settling or otherwise realizing upon all or any
part of the collateral, postage, telephone, any charges in
the nature of use and occupancy or rental United may incur
for any premises where all or any part of the collateral may
be, and attorneys' fees incurred in the preparation of this
agreement, In connection with transactions hereunder and in
enforcing or protecting United's rights hereunder. Such
attorneys' fees In any court proceedings looking to the
collection of the Borrower's liabilities shall be 25% of
such liabilities as of the commencement of such proceedings.
The foregoing expenses may include reasonable charges for
time expended and disbursements incurred by persons in
United's employ, and may be promised on estimates of the
actual expenditure when determination of the actual
expenditure in difficult.
<P>
SEVENTH: A. All interest, fees and expense for which
United in entitled to be reimbursed hereunder shall be paid
by the Borrower to United an of the last day of each
calendar month pursuant to United's statements therefor,
except as compensation may be otherwise payable with respect
to any note or other agreement. Such amounts shall be
deemed paid to the extent sums are subsequently credited to
the Borrower's loan balance from the first sums so credited.
United's statements shall be considered correct and accepted
by the Borrower, and conclusively binding upon the Borrower,
unless the Borrower notifies United of its exceptions
thereto within 20 days of the sending of the relevant statement to the Borrower.
<P>
B. Except as herein otherwise provided or am provided in
a note or other agreement made by the Borrower to United
hereunder, all loans made to or for the Borrower, including
for these purposes Interest, fees and reimbursable expenses
which have not otherwise been paid, shall be repayable on
demand. However, United agrees, except as to an over-advance,
it will not demand repayment, and will permit the
loans (and compensation and reimbursable expense) to be
repaid from the payment of accounts prior to the occurrence
of an event of default or the termination of this agreement.
Unless otherwise provided in an agreement signed by United,
an over-advance shall be repayable on demand. All the
liabilities of the Borrower to United shall, at the option
of United, and notwithstanding any time otherwise allowed,
be immediately due and payable upon the first to happen of
the termination of this agreement or the occurrence of an
event of default. The following constitute events of
defaults
<p>
(1) The breach by the Borrower of any representation
or covenant made by it, which, provided it shall not
constitute any other event of default, shall remain uncured
for more than 10 days after notice thereof to the Borrower;
or
<P>
(2) The failure of the Borrower to pay any liability
to United calling for the payment of money pursuant to this
or any other agreement, an and when the same should be paid,
including failure to pay such liabilities on a date set by
the Borrower for such payment; the Borrower's becoming
insolvent; its suspending its business; its petitioning for
or a petition against it being filed for a receivership of
its business or -property or a bankruptcy or arrangement or
any other legal proceeding or action relating to the relief
of debtors or the readjustment of debtor its making an
assignment for the benefit of creditors, seeking a
composition of creditors or suffering a lien against or the
attachment of any of its property its disposing of any
property included in the collateral otherwise than in
accordance with this agreement; its committing or suffering,
by any of its agents or employees, a fraudulent conversion
of any part of the collateral; any guarantor of its
liabilities terminating such guarantee or becoming
insolvent; or, Insofar an property of the type included in
the collateral is involved, its breaching a representation or
covenant contained in subparagraphs "THIRD (f),' "(g)" or
"(h)" hereof.
<P>
EIGHTH: A. Until the Borrower furnishes United with
satisfactory evidence to the contrary, United shall be
entitled to rely absolutely on any oral or written' advice
given to it or its designee by or on behalf of an account
debtor or any agent, attorney or employee of the Borrower in
deeming an event of default to have occurred or in
determining the not security value of accounts.
<P>
B. Upon the occurrence of any of the above events of
default or any such event being deemed to have occurred, and
at any time thereafter, such default not having previously
been cured or waived by United in writing, United shall have
the right (1) to fix the borrowing base for all purposes
under this agreement at such percentage of the borrowing
base as set forth above, including zero, as it may elect
(and no such action shall be deemed a termination of this
agreement by United); (2) to exercise all the rights and
remedies of a secured party under the Uniform Commercial
Code including, without limitation, the right to notify
account debtors of the Borrower to make payment directly to
United; (3) to require the Borrower to assemble and make any
goods included In the collateral ready for sale at a place
designated by United; (4) to transfer any property
constituting collateral into Its own name or that of its
nominee and to receive the income and proceeds thereon; (5)
to notify post office authorities to change the address for
delivery of mail addressed to the Borrower, and to receive,
open and dispose of such mail; (6) to draw and present
drafts on any bank account for sums up to the amount of the
Borrower's liabilities to United; and (7) to accelerate the
due date of the commitment fee provided for in subparagraph
"FIRST (d)' hereof for each month between the date of such
default or deemed default and the date this agreement would
otherwise have expired. insofar as collateral shall consist
of accounts, Insurance policies, instruments, chattel paper,
chosen in action or the like, United may in addition to its
other rights, realize upon such collateral by way of
adjustment or compromise, whether or not payment under such
collateral is then due. Whenever reasonable notice is
required an a matter of law to the exercise of any right by
United with respect to the collateral, S days' prior notice
shall suffice. United shall assume no credit risk In
connection with any disposition of the collateral; and only
the net cash proceeds, an and when received, after subtracting
expenses Incurred by United In realizing upon
any collateral, shall be applied to the Borrower's
Indebtedness. In the event such net cash proceeds are
insufficient to pay fully such indebtedness, the Borrower
shall remain liable to United for the deficiency regardless
of any notes or other obligations United may receive in
connection with any disposition of the collateral and
notwithstanding that it may continue to hold other
collateral. Any surplus shall be rendered to the Borrower.
<P>
C. Any delay on the part of United in exercising any
power or right hereunder shall not operate as a waiver
thereof, nor shall any single or partial exercise of any
power or right hereunder preclude any other or further
exercise thereof or the exercise of any other power or
right. No waiver by United of any default shall operate as
a waiver of any other default or of the same default on any
future occasion. The rights, remedies and benefits heroin
expressly specified are cumulative and not exclusive of any
rights, remedies or benefits which United may otherwise
have. In no event shall United be required to liquidate any
collateral before proceeding against the Borrower to collect
the Borrower's indebtedness after the occurrence of an event
of default or to proceed In any order in the liquidation of
collateral.
<P>
NINTH: The Borrower WAIVES presentment, notice of
dishonor and protest of all instruments included in or
evidencing liabilities or the collateral, any and all other
notices and demands, except as herein specifically provided
or as may not be waived by law, and the right to a trial by'
jury in any matter touching upon this agreement.
<P>
TENTH: A. This agreement shall be deemed renewed from
year to year after the initial period set forth in Paragraph
"FIRST" hereof, unless either party hereto shall give the
other notice of its intention to terminate this agreement an
of the end of such initial period or any renewal year, as
the case may be, at least 30 days prior to its expiration.
Notwithstanding the foregoing, if at any time that this
agreement is in effect the Borrower shall have any liability
to United under any note or other agreement which, in the
normal course of business, would expire later than the
termination of this agreement, then this agreement shall
remain in effect for at least the duration of such other
agreement, and this agreement shall be deemed renewed from
year to year after the maturity of such note or expiration of
such other agreement, unless either party hereto shall
give the other at least 30 days' prior notice of its
intention to cancel this agreement as of the maturity date
of such note or the expiration of such other agreement, or
such renewal year, as the case may be. 'This agreement may
be terminated by United at any time because of the
occurrence of an event of default or an event of default
being deemed to have occurred. The Borrower may terminate
this agreement at any time upon 30 days, prior notice to
United and paying United, in addition to its liabilities
other than the commitment fee provided for in subparagraph
"FIRST (dll hereof, the greater of (a) such commitment fee
or (b) 75% of the average monthly compensation earned
hereunder by United during the shorter of the period this
agreement has then been in effect or the then preceding 12
calendar months, multiplied, In each of the cases covered by
the foregoing clauses -(a)- and "(b),- by the number of
months between such termination and the date this agreement
would have otherwise expired by its terms. Any termination
shall In no way affect any transactions entered into or
rights created or liabilities incurred prior to ouch
termination; and as to such transactions, all rights and
obligations under this agreement shall be fully operative
until the same are fully liquidated.
<P>
D. Upon payment in full of the Borrower's liabilities to
United, United shall deliver to the Borrower appropriate
termination statements with respect to United's security
interests for filing under the Uniform Connercial Code, and
United and the Borrower shall exchange general relean6o.
<P>
C. *
<P>
ELEVENTH: All notices hereunder shall be In writing and
shall be delivered personally or be sent to the parties
hereto at their respective addresses set forth above,
marked, 'Attention: President," or to such other addresses
an of which notice shall be duly given. Notices under
Paragraph "TENTH" hereof shall be so addressed, but shall be
given only by registered or certified mail, return receipt
requested.
<P>
TWELFTH: The Invalidity of any portion of this agreement
shall not affect the balance of this agreement, nor shall
the invalidity of any portion hereof an applied to any
particular circumstance affect the validity of this
agreement when applied to any other circumstances.
<p>
THIRTEENTH: As used herein any words or phrases given a
meaning by the Uniform Commercial Code shall have such
meaning and the following words and phrases shall have the
respectively indicated meanings:
<P>
(a) "Liabilities" shall mean any and all liabilities of
the Borrower to United of every kind and description,
direct or indirect, absolute or contingent, due or to become
due, now existing or hereafter arising, regardless of how
they arise or by what agreement or instrument they may be
evidenced or whether evidenced by any Instrument, alone or
with others, and Include obligations to Perform acts and
refrain from taking action as well an obligations to pay
money;
<P>
(b) "Net security value of accounts" shall mean the
amount of such of the Borrower's accounts receivable
outstanding at any time net security value of accounts Is
determined hereunder as to which the Borrower has furnished
United with (i) a formal pledge or designation on a form
supplied by United, (ii) a duplicate Invoice, (iii) the
original shipping receipt or bill of lading applicable
thereto and (iv) such other documents as United may request;
minus the amount of: (x) past due accounts under the terms
hereof, (y) such accounts an represent a greater than
prudent concentration of the Borrower's business owing from
one account debtor; (z) all payments, adjustments and
credits applicable thereto and all amounts considered
uncollectible by United by reason of merchandise or other
disputes, insolvency of the account debtor, or otherwise,
including, without limitation, United's experience generally
with the Borrower's account debtors, all as determined by
United In its sole discretion.
<P>
(C) "Installment loan" means any part of the
liabilities of the Borrower
to United which United and the Borrower have agreed shall be
payable to United in two or more installments.
<P>
FOURTEENTH: This agreement cannot be modified or terminated
orally.
<P>
FIFTEENTH: This agreement shall be binding on the parties
hereto and their respective successors and assigns.
<P>
IN WXTNESS WHEREOF, the parties hereto have caused this
agreement to be executed by their officers thereunto duly
authorized.
<P>
HARVEY WESTBURT CORP.
<P>
By:
<P>
UNITED CREDIT CORPORATION
<P>
By:
<P>
THIS IS AN IMPORTANT DOCUMENT. THE BORROWER SHOULD CONSULT
ITS LEGAL AND FINANCIAL ADVISORS BEFORE SIGNING.
<P>
AMENDMENT
- ---------
F I N 07A
FINANCIAL INNOVATORS
<P>
FINOVA CAPITAL CORPORATION
GROWTH FINANCE
15 W. 44TH STREET
STM FLOOR
NEW YORK, NY 10036
<P>
TEL 212 843 0808
FAX 212 843 0817
<P>
March 2, 1999
<P>
Harvey Westbury Corporation
15 Heisser Court
Farmingdale, NY 11735
<P>
Gentlemen:
<P>
The security agreement between you and our predecessor,
United Credit Corporation, is hereby modified in the
following respects:
<P>
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.
<P>
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.
<P>
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.
<P>
4. Paragraph FIRST (e) is changed to read as follows:
This agreement shall remain in effect until January 31,
2001.
<P>
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.
<P>
If the foregoing correctly sets forth our understanding
please sign below and return a copy of this letter so
endorsed.
<P>
Please call if you have any questions.
<P>
Sincerely,
<P>
FINOVA CAPITAL CORPORATION
DBA UNITED CREDIT
<P>
AGREED:
<P>
HARVEY WESTBURY CORPORATION
BY
<P>
EXHIBIT 10.7 - PMR AND ASSOCIATES INVESTOR RELATION
AGREEMENT DATED JANUARY 4, 1999.
- ------------------------------------------------------------
<P>
PMR and ASSOCIATES
1042 North El Camino Real, Suite B-266
Encinitas, California, 92024
760-612-3643 Phone
<P>
Mr. Gene Chiramonte Chairman
Auxer Group
<P>
RE: Investor Relations Proposal--Auxer Group
(OTC-BB "AUXER")
<P>
Dear Mr. Chiramonte;
<P>
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.
<P>
PROPOSAL OUTLINE
<P>
PMR and Associates will provide full investor relations
services for Auxer Group, Inc. pursuant to the terms and
conditions in the attached agreement,
<P>
COMPENSATION
-------------
<P>
A. Retainer: $3,500 per month- three month minimum
contract payable, in free trading common stock
<P>
B. Arrange for financing or investment capital according
to a separate finder's foe agreement.
<P>
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.
<P>
SERVICES PROVIDED
-----------------
<P>
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
website.
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.
<P>
Thank you for your time and I look forward to a
successful future between our two companies.
<P>
AGREED Upon By /s/Patrick M. Rost, PMR & Associates
1-4-99 DATE
<P>
AGREED Upon By: /s/ Gene Chiaramonte, Chairman Auxer
1-4-99 DATE
<P>
Sincerely;
Patrick N1. Rust
PMR and Associates
EXHIBIT 10.8 - PMR AND ASSOCIATES INVESTOR RELATIONS
SERVICES AGREEMENT DATED APRIL 6, 1999.
- ------------------------------------------------------------
<P>
AGREEMENT OF INVESTOR RELATIONS SERVICES
<P>
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.
<P>
WHEREAS, The Company desires acquire the services of PMR and
Associates, LLC; and
<P>
WHEREAS, PMR and Associates is a consultant with special
knowledge, skills and experience within the investment and
business community;
<P>
THEREFORE, it NOW agreed that in consideration of the mutual
convenants and agreements hereinafter set forth, the parties
hereto agree as follows:
<P>
1. Services
<P>
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
<P>
2. Compensation & Terms
<P>
1.1 Retainer equal to $2000 per month for a minimum of
three (3) months from the date of this agreement.
<P>
1.2 Finder's Fees of 10% of any funding arrangements
originating through introductions through the Consultant
<P>
3. Other Covenants
<P>
2.1 The Company shall indemnify and hold harmless the
Consultant for any acts conducted by the Company relating to
this agreement;
<P>
2.2 The Consultant shall indemnify and hold harmless the
Company for any acts conducted by the Consultant relating to
this agreement;
<P>
2.3 The Consultant shall abide by all federal and state
laws and regulations concerning investor relations, stock
promotions and public disclosure requirements
<P>
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
<P>
Agreed Upon By: Patrick M. Rost, PMR & Assoc
Dated:
<P>
Agreed Upon By: Eugene Chiaramonte, Auxer
Group
Dated:
EXHIBIT 10.9 - PMR AND ASSOCIATES MANAGEMENT CONSULTING
SERVICES AGREMEENT DATED JULY 1, 1999.
- ------------------------------------------------------------
<P>
AGREEMENT OF MANAGEMENT CONSULTING SERVICES
<P>
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.
<P>
WHEREAS, The Company desires acquire the services of PMR and
Associates, LLC; and
<P>
WHEREAS, PMR and Associates is a consultant with special
knowledge, skills and experience related to finance and
marketing;
<P>
THEREFORE, it NOW agreed that in consideration of the mutual
convenants and agreements hereinafter set forth, the parties
hereto agree as follows:
<P>
1. Services
<P>
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
<P>
2. Compensation & Terms
<P>
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.
<P>
3. Other Convenants
<P>
2.1 The Company shall indemnify and hold harmless the
Consultant for any acts conducted by the Company relating to
this agreement;
<P>
2.2 The Consultant shall indemnify and hold harmless
the Company for any acts conducted by the Consultant
relating to this agreement;
<P>
2.3 The Consultant shall abide by all federal and
state laws and regulations concerning investor relations,
stock promotions and public disclosure requirements
<P>
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
<P>
Agreed Upon By: Patrick M. Rost, PMR & Assoc
Dated:
<P>
Agreed Upon By: Eugene Chiaramonte, Auxer Group
Dated:
EXHIBIT 10.10 - EMPLOYMENT AGREEMENT FOR ERNEST DESAYE
JR.
-------------------------------------------------------
<P>
EMPLOYMENT AGREEMENT
BETWEEN
A SUBSIDIARY CORPORATION TO BE FORMED BY
THE AUXER GROUP, INC.
AND
ERNEST R. DESAYE, JR.
<P>
AGREEMENT dated this 22 day of April, 1999, between a
subsidiary corporation to be formed by THE AUXER GROUP,
INC., a New Jersey corporation to be formed (hereinafter
the "Company") which will have its principal place of
business at 30 Galesi Drive, Wayne, NJ 07470, and Ernest
R. DeSaye, Jr. (hereinafter the "Employee").
<P>
WHEREAS, the Company desires to acquire the services of
Employee because of his special knowledge and skills;
and,
<P>
NOW, THEREFORE, in consideration of the foregoing, ten
dollars paid in hand, and other good and valuable
consideration, receipt and sufficiency of which is hereby
acknowledged, the following is agreed:
<P>
1. DUTIES
------
<P>
The Company hereby employs Employee as a manager of the
business which has been conveyed this day to the Company,
having powers and duties in that capacity as set for the
from time to time by the President of the Company.
Employee shall devote his full time and best efforts to
the Business of the Company.
<P>
2. COMPENSATION
------------
<P>
As compensation for his services to the Company, in
whatever capacity rendered, the Company shall pay to
Employee once every two weeks the sum of $1,731 as gross
salary. This salary shall be paid over the term of this
Agreement which is five years, with a 5% increase being
made on each anniversary date of this Agreement. This
Agreement shall be renewed for one additional five year
term provided that all material terms of this Agreement
are performed by Employee provided that both mutually
agree.
<P>
In addition, Employee shall be entitled to incentive
payments as follows: 1) cash equal to one percent (1%)
of the gross profit (gross sales less discounts less
costs of goods sold) derived from house accounts defined
as all current accounts of Hardyston Distributor
purchased today by the Company; 2) cash equal to two
percent (2%) of the gross profit on all new clients
obtained during the term of this agreement only on orders
placed by each of said new clients for twelve months
following said each new client's first order where after
said account will become a house account; 3) stock or
stock options equal in cash value based upon the average
of the bid and asked price on the day preceding the date
of issuance equal to one percent (1%) of gross profit on
all supervised accounts upon achieving in excess of one
million dollars ($1,000,000) in total revenue for a
fiscal year; and, 4) stock or stock options equal in cash
value based upon the average of the bid and asked price
on the day preceding the date of issuance equal to one-half
percent (0.5%) of the gross profit in excess of two
million dollars ($2,000,000) in total revenue for a
fiscal year, so that the total stock and stock option
compensation under items 3) and 4) of this paragraph 2
shall equal 1.5% of the gross profit on total revenue
above said two million dollars. ($2,000,000).
<P>
3. EXPENSES
--------
<P>
The Employee may incur reasonable expenses for promoting
the business of the Company, including expense for
travel, entertainment and similar items. The Company
will reimburse the Employee for all such expenses upon
the presentation by the Employee, from time to time, of
an itemized account justifying such expenditures. Such
reimbursement shall be provided within 30 working days of
such presentation by Employee. If the Company
determines, in its sole discretion, that this method
allowing expenses is not in the best interest of the
Company, the Company may impose such other method, if
any, for allowing such expense, including elimination of
the same.
<P>
4. NOTICE
-------
<P>
Any notice required to be given pursuant to the
provisions of this Agreement shall be in writing and by
registered mail, and mailed to the parties at the
following addresses:
<P>
COMPANY: 30 Galesi Drive
Suite 304
Wayne, NJ 07470
<P>
EMPLOYEE: 22-B Lasinski Road
Franklin, NJ 07416
<P>
5. TERMINATION
-----------
<P>
This Agreement may be terminated in any one of the
following manners:
<P>
1. The death of Employee
2. The failure of the company, as evidenced by
filing under the Bankruptcy Act for liquidation,
or the making of an assignment for the benefit
of creditors; or,
3. A material breach of the Assignment and Non-
Disclosure Agreement executed between the
Company and the Employee.
<P>
6. APPLICABLE LAW
--------------
<P>
This Agreement shall be governed by the laws of the State
of New Jersey and shall be enforceable only in the
Superior Court of New Jersey for Bergen County. If any
provision of this Agreement is declared void, such
provision shall be deemed severed from this Agreement,
which shall otherwise remain in full force and effect.
<P>
7. BINDING EFFECT
--------------
<P>
This Agreement shall have binding effect upon the parties
hereto, when approved by the Board, and upon their
respective personal representatives, legal
representatives, successors and assigns. Any waiver of
any breach of this Agreement shall be made in writing and
shall be applicable only to such breach and shall not be
construed to waive any subsequent or prior breach other
than the specific breach so waived.
<P>
8. SUPERSEDES EARLIER AGREEMENTS
-----------------------------
<P>
This Agreement supersedes all earlier agreements between
the Employee and the Company with respect to Employee's
employment by the Company.
<P>
IN WITNESS WHEREOF, the parties have executed this
Agreement the date first written above.
<P>
THE AUXER GROUP, INC.
<P>
Ernest R. DeSaye, Jr. Eugene Chiaramonte, Jr.
President
<P>
EXHIBIT 21 - SUBSIDIARIES OF THE ISSUER
- ---------------------------------------
<P>
. CT Industries, Inc. - State of New York
. Universal Filtration Industries, Inc. - State of
New York
. Harvey-Westbury Corp. - State of New York
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 8,400
<SECURITIES> 0
<RECEIVABLES> 115,653
<ALLOWANCES> 0
<INVENTORY> 290,725
<CURRENT-ASSETS> 414,778
<PP&E> 66,820
<DEPRECIATION> 34,062
<TOTAL-ASSETS> 471,835
<CURRENT-LIABILITIES> 299,168
<BONDS> 0
0
2,750
<COMMON> 56,747
<OTHER-SE> 171,512
<TOTAL-LIABILITY-AND-EQUITY> 471,835
<SALES> 871,259
<TOTAL-REVENUES> 871,259
<CGS> 622,210
<TOTAL-COSTS> 622,210
<OTHER-EXPENSES> 1,302,418
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,618
<INCOME-PRETAX> <1,075,613>
<INCOME-TAX> 0
<INCOME-CONTINUING> <1,075,613>
<DISCONTINUED> 0
<EXTRAORDINARY> <99,780>
<CHANGES> 0
<NET-INCOME> <975,127>
<EPS-BASIC> <.02>
<EPS-DILUTED> <.02>
</TEXT
