UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION
OF SECURITIES OF SMALL BUSINESS ISSUERS
Under Section 12(b) or (g) of The Securities Exchange Act of 1934
Nu Electric Corp.
(Name of Small Business Issuer in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
23-2426437
(I. R. S. Employer Identification No. )
624 East Tarpon Avenue, Tarpon Springs, FL 34689
(Address of principal executive offices) (Zip Code)
(727)942-8938
(Issuer's telephone number)
Securities to be registered pursuant to Section 12(b) of the Act: None
Securities to be registered pursuant to Section 12(g) of the Act: Common Stock
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TABLE OF CONTENTS
Part I
Item 1. Description of Business..............................................3
Item 2. Plan of Operation....................................................7
Item 3. Description of Property..............................................7
Item 4. Security Ownership of Certain Beneficial
Owners and Management................................................8
Item 5. Directors, Executive Officers, Promoters
and Control Persons..................................................9
Item 6. Executive Compensation..............................................10
Item 7. Certain Relationships and Related Transactions......................10
Item 8. Description of Securities...........................................10
Part II
Item 1. Market Price of and Dividends on the Registrant's
Common Equity and Other Shareholder Matters.........................12
Item 2. Legal Proceedings...................................................13
Item 3. Changes in and Disagreements with Accountants.......................13
Item 4. Recent Sales of Unregistered Securities.............................13
Item 5. Indemnification of Directors and Officers...........................14
Part F/S
Financial Statements.........................................................15
Part III
Item 1. Index to Exhibits...................................................
Item 2. Description of Exhibits.............................................
Signatures...................................................................
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THIS REGISTRATION STATEMENT CONTAINS CERTAIN FORWARD LOOKING STATEMENTS WITHIN
THE MEANING OF THE PRIVATE SECURITIES REFORM ACT OF 1995. THE REGISTRANT INTENDS
THAT SUCH FORWARD LOOKING STATEMENTS BE SUBJECT TO THE SAFE HARBORS CREATED
THEREBY. THESE FORWARD LOOKING STATEMENTS INCLUDE STATEMENTS REGARDING (I) THE
REGISTRANT'S RESEARCH AND DEVELOPMENT PLANS, MARKETING PLANS, CAPITAL AND
OPERATIONS EXPENDITURES, AND RESULTS OF OPERATIONS; (II) POTENTIAL FINANCING
ARRANGEMENTS; (III) POTENTIAL UTILITY AND ACCEPTANCE OF THE REGISTRANT'S
EXISTING AND PROPOSED PRODUCTS; AND (IV) THE NEED FOR, AND AVAILABILITY OF,
ADDITIONAL FINANCING.
THE FORWARD LOOKING STATEMENTS INCLUDED HEREIN ARE BASED ON CURRENT EXPECTATIONS
AND INVOLVE A NUMBER OF RISKS AND UNCERTAINTIES. THESE FORWARD LOOKING
STATEMENTS ARE BASED ON ASSUMPTIONS REGARDING THE REGISTRANT'S BUSINESS AND
TECHNOLOGY WHICH INVOLVE JUDGMENTS WITH RESPECT TO, AMONG OTHER THINGS, FUTURE
SCIENTIFIC, ECONOMIC, REGULATORY AND COMPETITIVE CONDITIONS, AND FUTURE BUSINESS
DECISIONS, ALL OF WHICH ARE DIFFICULT OR IMPOSSIBLE TO PREDICT ACCURATELY AND
MANY OF WHICH ARE BEYOND THE CONTROL OF THE REGISTRANT. ALTHOUGH THE REGISTRANT
BELIEVES THAT THE ASSUMPTIONS UNDERLYING THE FORWARD LOOKING STATEMENTS ARE
REASONABLE, ANY OF THE ASSUMPTIONS COULD PROVE INACCURATE AND, THEREFORE, ACTUAL
RESULTS MAY DIFFER MATERIALLY FROM THOSE SET FORTH IN THE FORWARD LOOKING
STATEMENTS. IN LIGHT OF THE SIGNIFICANT UNCERTAINTIES INHERENT IN THE FORWARD
LOOKING INFORMATION CONTAINED HEREIN, THE INCLUSION OF SUCH INFORMATION SHOULD
NOT BE REGARDED AS ANY REPRESENTATION BY THE REGISTRANT OR ANY OTHER PERSON THAT
THE OBJECTIVES OR PLANS OF THE REGISTRANT WILL BE ACHIEVED.
References in this registration statement to "We," "Us," or the "Company" refer
to Nu Electric Corporation, as well as their subsidiaries and predecessors.
PART I
Item 1. Description of Business.
(a) Business Development.
We were incorporated as Escalator, Inc. under the General Corporation
Laws of the State of Delaware on April 17, 1986. On June 3, 1986, Lone
Pine Resources, Inc. was merged with our Company through a reverse
merger whereby the shareholders of Lone Pine Resources, Inc. received
an equal number of shares in Escalator, Inc. Lone Pine Resources, Inc.
was incorporated under the laws of Utah on June 23, 1983.
We conducted operations through our two wholly-owned subsidiaries
Escalator Securities, Inc. and Escalator Investments, Inc., both
Pennsylvania corporations. Escalator Investments, Inc. was incorporated
in the State of Pennsylvania on August 15, 1984
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and conducted financial planning activities through approximately 1992
as a Registered Investment Advisor under the Investment Advisors Act of
1940. Since 1992, Escalator Investments, Inc. has had no operations.
Escalator Securities, Inc. was incorporated in the State of
Pennsylvania on August 22, 1985, and conducted business as a registered
broker-dealer under the Securities Exchange Act of 1934 and the
Pennsylvania Securities Act of 1972 until 1997. On December 31, 1997,
Escalator Securities, Inc. was closed by the National Association of
Securities Dealers. Since this date, Escalator Securities, Inc. has had
no operations.
On July of 1990, we acquired Frank Communications Corp., a Pennsylvania
corporation incorporated on May 30, 1989, which was in the business of
financial public relations. In consideration of this acquisition, we
paid $1,000.
On June 30, 1997, we transferred our holdings in Escalator Securities,
Inc. to Escalator Investments, Inc. pursuant to the terms of an
Agreement and Plan of Spinoff. On December 31, 1997, Escalator
Securities, Inc. was closed by the National Association of Securities
Dealers.
On April 22, 1998, we changed our name to Nu Electric Corporation. On
June 30, 1999, we acquired Clean Water Technologies, Inc. (hereinafter
"Clean Water"), a Florida limited liability company, through an
agreement and plan of merger whereby all of the outstanding and issued
shares of Clean Water were exchanged for shares of Nu Electric.
Pursuant to this agreement, we acquired all of the assets of the
business of Clean Water.
We have not been a party to any bankruptcy, receivership or similar
proceeding. We have not been involved in any material reclassification,
merger, consolidation, or purchase or sale of a significant amount of
assets not in the ordinary course of business.
(b) Business of Issuer.
(1) Principal products or services and their markets.
We currently have no products, services or revenues. We plan
to focus our efforts on sub-licensing environmentally friendly
technology developed by third parties. We have developed no
criteria for identifying such technology or for the
identification of sub-licensees of such technology. There can
be no guarantee that we will be able to locate and obtain
licenses to such technology or such sub-licensees.
If we are able to obtain licenses for the use of technologies,
we plan to sub-license such technology to third parties. If we
are able to locate sub-licensees, and such sub-licensees are
subsequently able to locate applications for the technology,
we plan to obtain royalty fees on the use of the licensed
technology. There can be no assurance that, if we obtain
licenses to environmentally friendly technologies, we will be
able to locate entities with the requisite knowledge and
experience to arrange application of such technology. Further,
there is no guarantee that if located, we will be able to
enter into licensing agreements with favorable terms, if
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at all. If we are unable to acquire rights to technology or
sub-license such technology to qualified entities, if
obtained, it may have a materially adverse effect on our
business and operations.
In our acquisition of Clean Water, we acquired a license to
technology related to the removal of arsenic from water. We
plan to sub-license this technology to parties with the
requisite experience and knowledge to arrange for its
technological application. We are currently awaiting patent
approval of this technology, but there can be no assurance
that a patent will be granted. Even if a patent is granted,
there is no guarantee that we will be able to sub-license this
technology to a third party. If patent approval is not
granted, it may make it difficult, if not impossible, for us
to sub-license our current licensed technology.
(2) Distribution methods of the products or services.
We have no products or services to be distributed. As of the
date of this registration statement, we have no plans for
distribution of any products or services that we may develop
in the future.
(3) Status of any publicly announced new product or service.
We currently have no new products or services that have been
publicly announced.
(4) Competitive business conditions and the small business
issuer's competitive position in the industry and methods of
competition.
In our search for technology and qualified parties to apply
such technology, we will compete with entities having
significantly greater financial and other resources than that
of the company. There can be no assurance that we will be able
to compete effectively with such entities. Further, we will
compete with our own potential sub-licensees for the location
and acquisition of environmentally friendly technologies. Our
failure to effectively compete with such entities could have a
materially adverse effect on our business and operations.
(5) Sources and availability of raw materials and the names of
principal suppliers.
We have no arrangements for raw materials or suppliers.
(6) Dependence on one or a few major customers.
We have no customers.
(7) Intellectual Property.
Through our acquisition of Clean Water, we acquired an
exclusive license for a process to remove arsenic from
drinking water. More specifically, the technology is a method
of removing arsenic species from an aqueous liquid using
modified zeolite materials. This agreement is for a period of
the longer of twenty years or the patent expiration. Although
we are the exclusive licensee of this technology, the owners
of the technology are permitted by the agreement to infringe
upon our
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exclusive rights in the case of our insolvency, bankruptcy,
dissolution, breach or similar occurrence. In addition, we are
required to carry product liability insurance coverage in an
amount sufficient to cover claims arising from the use of the
Clean Water technology.
In consideration for this exclusive license, Clean Water paid
seven-hundred thousand (700,000) shares of their common stock
as the initial license fee for this technology. Further, we
must pay two percent (2%) of revenues earned from the use of
this technology. This percentage is subject to the following
minimum royalty schedule:
First 24 months $0
End of year three $5,000
End of year four $6,000
End of year five $7,200
End of year six $8,640
End of year seven and each year thereafter $10,368
Two patent applications (Numbers 60/036,704 and 90/016,126)
for this technology have been filed with the United States
Patent and Trademark Office, by inventor Dr. Dagmar Bonnin.
These are both pending applications, and there is no guarantee
that patents for these applications will be granted.
As of the date of this registration statement, we currently
have no patents, trademarks, franchises, concessions, royalty
agreements or labor contracts.
(8) Need for any government approval of principal products or
services. We are not in need of governmental approval, as we
have no products or services.
(9) Effect of existing or probable governmental regulations on the
business. Although we have no operations which are currently
affected by governmental regulation, we feel that the
following may be of importance, if we attempt to utilize our
license for the technology to remove arsenic from water.
Environmental Protection Agency ("EPA") established the
current maximum contaminant level (MCL) for arsenic, 50
micrograms per liter (ug/L) or parts per billion (ppb), in
1975. This drinking water standard is based on the standard
set by the Public Health Service in 1943.
In 1996, Congress established certain requirements the EPA
must meet in designating a new standard for arsenic. These
requirements have shaped the agency's strategic approach. The
EPA will use peer-reviewed health effects research to meet the
statutory deadlines, along with studies of treatment,
analytical methods, occurrence, and cost-benefits, and will
identify affordable small system technologies. Results of
focused long-term arsenic research efforts
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will be considered in future reviews of the MCL, which will be
evaluated at least every 6 years, as appropriate, as required
by the 1996 amendments.
Proposed new standards on arsenic are to be publicly released
on January 1, 2000 and finalized by January 1, 2001. These
standards will dictate the parameters within which our company
may be able to proceed in developing an area of operations.
Further, if we are able to acquire other environmentally
friendly technologies in the future, of which there can be no
assurance, we will likely be affected by regulations similar
to those discussed above. Our failure to develop awareness on
all regulations relating to technologies, which we may seek to
acquire, could result in obsolescence of licenses obtained by
us. Such obsolescence could have a materially adverse effect
on our business and operations.
(10) Research and Development in the last two fiscal years. As of
the date of this registration statement, no amount has been
spent on research and development.
(11) Costs and effects of compliance with environmental laws. We
anticipate that the nature of our business will surround
compliance with environmental laws. We plan to acquire
technology based on compliance with the environmental law
standards. Since these standards will likely change regularly
in the future, we will incur expenses in seeking technology
which compliments such standards. Our failure to acquire
technologies, which comply with environmental law regulations,
could have a materially adverse effect on our operations.
(12) Number of total employees and number of full time employees.
We currently have two total and full-time employees. There are
no employment or collective bargaining agreements in place.
Item 2. Plan of Operation.
We are currently unable to satisfy our cash requirements without the financial
support of our management. We anticipate that we will meet our cash requirements
for the foreseeable future through financial support of our management.
Eventually, we may seek to raise additional funds. We have not yet determined if
or how we plan to obtain these additional funds.
We plan to acquire existing technology, which has already been fully developed.
Consequently, we do not anticipate significant research and development expenses
over the next twelve months. We do not expect to purchase or sell any plant and
significant equipment or make any significant changes in the number of employees
over the next twelve months.
Item 3. Description of Property.
Our offices are located at 624 East Tarpon Avenue, Tarpon Springs, Florida. The
space is approximately 1500 square feet and is leased by Wall Street
Communications, Inc., a sub-chapter
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S corporation controlled by the Scalas, at a monthly rent of $1100.00. We do not
own any significant real or personal property.
Item 4. Security Ownership of Certain Beneficial Owners and Management.
(a) Security Ownership of Certain Beneficial Owners
<TABLE>
<CAPTION>
Title of Name & Address of Amount & Nature Percent
Class Beneficial Owner.. of Ownership of Class
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Common Howard & Laurie Scala 1,596,340 Joint Tenancy 41.8%
624 East Tarpon Avenue
Tarpon Springs, FL 34689
Common Howard & Laurie Scala 79,500 Indirect 2.1%
Wall Street Communications
624 East Tarpon Avenue
Tarpon Springs, FL 34689
Common Howard Scala / IRA 202,480 Direct 5.3%
624 East Tarpon Avenue
Tarpon Springs, FL 34689
Common Laurie Scala /IRA 45,970 Direct 1.2%
624 East Tarpon Avenue
Tarpon Springs, FL 34689
Common Laurie Scala C/F 33,230 Direct 0.9%
Matthew & Jeffrey Scala
624 East Tarpon Avenue
Tarpon Springs, FL 34689
Common Clifford Gross 753,424 Direct 19.7%
Utek, LLC
202 South Wheeler Street
Plant City, Florida 33566
</TABLE>
<TABLE>
<CAPTION>
(b) Security Ownership of Management
Title of Name & Address of Amount & Nature Percent
Class Beneficial Owner of Ownership of Class
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Common Howard & Laurie Scala 1,596,340 Joint Tenancy 41.8%
624 East Tarpon Avenue
Tarpon Springs, FL 34689
Common Howard & Laurie Scala 79,500 Indirect 2.1%
Wall Street Commmunications
624 East Tarpon Avenue
Tarpon Springs, FL 34689
Common Howard Scala / IRA 202,480 Direct 5.3%
624 East Tarpon Avenue
Tarpon Springs, FL 34689
Common Laurie Scala /IRA 45,970 Direct 1.2%
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624 East Tarpon Avenue
Tarpon Springs, FL 34689
Common Laurie Scala C/F 33,230 Direct 0.9%
Matthew & Jeffrey Scala
624 East Tarpon Avenue
Tarpon Springs, FL 34689
- ----------------------------------------------------------------------------------------------------------
TOTAL Howard & Laurie Scala 1,957,520 shares 51.3%
</TABLE>
(c) Changes in Control.
There are currently no arrangements which may result in a change of
control of the Company.
Item 5. Directors and Executive Officers, Promoters and Control Persons.
(a) Officers and Directors.
The following chart sets forth information on our officers and
directors:
<TABLE>
<CAPTION>
Name Age Title(s) Term of Office
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Laurie C. Scala 47 President, Secretary/Treasurer, & Director July 1, 1998 to present
Howard A.Scala 45 Vice President & Director July 1, 1998 to present
</TABLE>
Our Bylaws require that we have a minimum of one director. Directors
are elected at our annual meeting to be held on the second Monday of
each September or at a time as soon thereafter as is convenient, at a
time to be fixed by the Board of Directors. Directors shall serve until
their successors are duly elected or appointed. A vacancy on the Board
of Directors may be filled by a majority vote of the remaining
directors.
Our Bylaws provide for a minimum of the following officers: President,
Treasurer and Secretary. These officers are to be elected by the Board
of Directors at the first Board meeting following the annual meeting.
Other officers may be appointed by the Board at any time, and the Board
may fill any vacancies.
Laurie C. Scala is a graduate of Douglas College in Communications
(B.A. 1975). She began her brokerage career as a registered
representative of Merrill Lynch, Pierce, Fenner & Smith, Inc. in 1976.
In 1980, she became a Vice President of Herzfeld & Stern, Inc. In 1982,
Mrs. Scala assumed a position as Vice President of Thomson McKinnon
Securities, Inc. In 1984, she left her former position to work at a
partnership formed with her husband, Howard Scala, providing financial
planning and brokerage services. Since its formation in 1986, Mrs.
Scala has worked for the Company. She holds no other directorships in
any reporting companies.
Howard A. Scala is a graduate of Syracuse University School of
Management in Marketing (B.S. 1973). He began his brokerage career as a
registered representative of Merrill Lynch, Pierce, Fenner & Smith,
Inc. in 1976. In 1980, he became a Vice President of Herzfeld & Stern,
Inc. In 1982, Mr. Scala assumed a position as Vice President of Thomson
McKinnon Securities, Inc. In 1984, he left his former position to work
at a partnership formed with his wife, Laurie Scala, providing
financial planning and brokerage services. Since its formation
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in 1986, Mr. Scala has worked for the Company. He holds no other
directorships in any reporting companies.
(b) Identify Significant Employees.
We have no persons, not mentioned above, who are expected to make a
significant contribution to our business.
(c) Family relationships.
Laurie and Howard Scala are husband and wife.
(d) Involvement in certain legal proceedings. As of December 31, 1997,
Escalator Securities, Inc. was expelled as a broker-dealer from the
National Association of Securities Dealers, and Howard Scala was barred
as a broker.
Other than the aforementioned, we have had no events that occurred
during the past five years, including bankruptcies, criminal
convictions or proceedings, court orders or judgments, that are
material to an evaluation of the ability or integrity of any director,
person nominated to become a director, executive officer, promoter or
control person of our Company.
Item 6. Executive Compensation.
<TABLE>
<CAPTION>
- --------------------- -------- ---------- ---------- ------------------- ------------------ ----------------- ----------- ---------
Name and Principle Year Salary Bonus ($) Other Annual Restricted Securities LTIP Other
Position ($) Compensation ($) Stock Award(s) Underlying Payouts ($)
($) Options (#) ($)
- --------------------- -------- ---------- ---------- ------------------- ------------------ ----------------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Laurie & Howard
Scala, 1996 0 0 0 0 0 0 0
President & Vice 1997 0 0 0 0 0 0 0
President 1998 0 0 0 $187,500 0 0 0
respectively
- --------------------- -------- ---------- ---------- ------------------- ------------------ ----------------- ----------- ---------
</TABLE>
Item 7. Certain Relationships and Related Transactions.
There have been no transactions during the last two years, or proposed
transactions, to which we were or are a party, in which any of our directors,
executive officers, nominees for such positions, security holders or the
families of such people had a material interest. We are not a subsidiary of any
other company. We have not entered into any transactions with promoters.
Item 8. Description of Securities.
Common Stock.
In General. We are authorized to issue 50,000,000 shares of common stock with a
par value of $0.002 each, of which have 3,814,572 common shares were outstanding
as of September 30, 1999. All of the issued and outstanding common stock is
fully paid and non-assessable.
Voting. Each share of our common stock entitles the holder thereof to one vote
per share in the election of directors and in all other matters upon which
stockholders are entitled to vote. The holders of shares of common stock do not
have cumulative voting rights, which means that the
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holders of more than 50% of the outstanding shares voting for the election of
directors can elect all of the directors to be elected, if they so choose. In
such event, the holders of the remaining shares will not be able to elect any of
our directors. As of the date of this registration statement, Howard and Laurie
Scala are the beneficial owners of 1,957,520 voting shares or approximately 51%
of our outstanding voting stock. As the majority shareholders of the Company,
the Scalas would be able to elect all of the Directors of the Company.
Dividends. Each share of common stock entitles the holder thereof to receive
cash dividends as the Board of Directors may declare from funds legally
available therefor. However, we have not declared any dividends to date and do
not intend to declare any dividend on our common stock in the foreseeable
future.
Rights. There are no preemptive rights with respect to the common stock. Upon
liquidation, dissolution or winding up of the affairs of the Company, and after
payment of creditors, the assets legally available for distribution will be
divided ratably on a share-for-share basis among the holders of the outstanding
shares of common stock.
Preferred Stock.
We are not authorized to issue any preferred stock at this time.
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PART II
Item 1. Market Price of and Dividends on the Registrant's Common Equity and
Related Stockholder Matters.
(a) Market information.
Our common stock is traded on the NASDAQ Over the Counter Bulletin
Board ("OTCBB") under the symbol NRGE. The following bid quotations
have been reported for the period beginning January 1, 1997 and ended
September 30, 1999:
Bid Quotations
--------------
Period High Low
------ ---- ----
Quarter Ended:
March 31, 1997 $5/8 $5/16
June 30, 1997 $1 3/8 $19/32
September 30, 1997 $1 1/8 $1/2
December 31, 1997 $11/16 $1/2
Quarter Ended:
March 31, 1998 $3/8 $1/4
June 30, 1998 $1/2 $3/8
September 30, 1998 $17/32 $3/8
December 31, 1998 $23/32 $5/32
Quarter Ended:
March 31, 1999 $11/16 $13/32
June 30, 1999 $1 7/8 $3/8
September 30, 1999 $1 1/16 $1/2
Such quotations reflect inter-dealer prices, without retail mark-up,
mark-down or commission. Such quotes are not necessarily representative
of actual transactions or of the value of our securities, and are in
all likelihood not based upon any recognized criteria of securities
valuation as used in the investment banking community.
The Company has been advised that approximately seven member firms of
the NASD are currently acting as market makers for the common stock.
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 warrants.
(b) Holders.
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As of September 30, 1999, there were approximately 113 holders of
record of our 3,814,572 shares of common stock outstanding. Of these
shares, 2,873,198 are restricted securities within the meaning of Rule
144(a)(3) promulgated under the Securities Act of 1933, as amended,
because such shares were issued and sold by the Company in private
transactions not involving a public offering. Certain of the shares of
common stock are held in "street" name and may, therefore, be held by
several beneficial owners. Our transfer agent is Fidelity Transfer
Company located at 1800 South West Temple, Suite 301, Box 53, Salt Lake
City, UT 84115.
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.
(c) Dividends.
We have not paid a cash dividend on our common stock in the past two
years. The payment of dividends may be made at the discretion of our
Board of Directors and will depend upon, among other things, our
operations, our capital requirements and our overall financial
condition. As of the date of this registration statement, we have no
intention to declare dividends.
Item 2. Legal Proceedings.
We are currently unaware of any pending legal proceeding or any proceeding
contemplated by a governmental authority in which we may be involved.
Item 3. Changes in and Disagreements with Accountants.
In August 1998, we retained our current accountants, Acquavella, Chiarelli,
Shuster & Co. We dismissed our previous accountant, Robert DiMarco, because the
firm was understaffed. The dismissal was not due to any unfavorable report or
disagreement. Further, the dismissal was not related to any advice or
recommendations of the accountant. The change was made solely based on the fact
that the Board of Directors felt that a larger firm may better meet the needs of
our Company.
Item 4. Recent Sales of Unregistered Securities.
On January 13, 1997 we issued 3,000 shares of our common stock as an employee
bonus. This transaction was made in reliance on the exemption from the
registration requirements provided in section 4(2) of the Securities Act of
1933.
On June 30, 1997, we issued 306,000 shares of our common stock in the conversion
of outstanding 10% convertible bonds. This transaction was made in reliance on
the exemption from the registration requirements provided in section 4(2) of the
Securities Act of 1933.
On March 2, 1998, we issued 3,000 shares of our common stock as an employee
bonus. In addition, we issued 500,000 shares to Howard and Laurie Scala as
compensation for services
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rendered on the same date. These transactions were made in reliance on the
exemption from the registration requirements provided in section 4(2) of the
Securities Act of 1933.
On February 17, 1999, we issued 2,000 shares of our common stock as an employee
bonus. This transaction was made in reliance on the exemption from the
registration requirements provided in section 4(2) of the Securities Act of
1933.
On June 17, 1999 we issued 1,000,000 shares of our common stock as compensation
for services rendered. This transaction was made in reliance on the exemption
from the registration requirements provided in section 4(2) of the Securities
Act of 1933.
On June 30, 1999, we issued 893,000 shares of our common stock pursuant to the
Agreement and Plan of Merger with Clean Water.
Item 5. Indemnification of Directors and Officers.
Our Amended and Restated Certificate of Incorporation eliminates the liability
of our directors, officers, and trustees to the fullest extent permitted by
Section 145 of the Delaware General Corporation Law ("DCGL"), as the same may be
amended from time to time.
Section 145(a) of the DGCL provides that a Delaware 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.
Section 145(b) of the DGCL provides that a Delaware 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 suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that such
person acted in any of the capacities set forth above, 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 was brought
shall determine upon application that, despite the adjudication of liability but
in view of all the circumstances of the case, such person is fairly and
reasonably entitled to be indemnified for such expenses which the court shall
deem proper.
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Section 145 of the DGCL further provides that to the extent a director or
officer of a corporation has been successful on the merits or otherwise in the
defense of any action, suit or proceeding referred to in subsections (a) and (b)
of Section 145, or in the 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; that indemnification and
advancement of expenses provided by, or granted pursuant to 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 his official capacity and as to action in another capacity while holding such
office; that 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 or officer and
shall inure to the benefit of the heirs, executors and administrators of such a
person; and that the corporation shall have the power to purchase and maintain
insurance on behalf of any person who is or was a director or officer of the
corporation 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
such Section 145.
15
<PAGE>
NU ELECTTRIC CORPORATION & SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
JUNE 27, 1999
<PAGE>
NU ELECTRIC, CORPORATION & SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
JUNE 27, 1999
TABLE OF CONTENTS
Page
----
Independent Auditor's Report F-1
Consolidated Financial Statements:
Balance Sheet F-2
Statement of Operations F-3
Statement of Stockholder's Equity (Deficiency) F-4
Statement of Cash Flows F-5
Notes to Financial Statements F-6-9
Consolidating Supplementary Information:
Independent Auditor's Report on
Supplementary Information F-10
Schedule of Selling, General and
Administrative Expenses F-11
<PAGE>
To The Stockholders And Directors
Nu Electric, Corporation & Subsidiaries
Tarpon Springs, Florida 34689
INDEPENDENT AUDITOR'S REPORT
We have audited the accompanying consolidated balance sheet of NU ELECTRIC,
CORPORATION & SUBSIDIARIES, as of June 28, 1998 and June 27, 1999 and the
related consolidated statements of operations, retained earnings, stockholder's
equity (deficiency) and cash flows for the fifty two weeks then ended. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
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. A audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. A audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of NU ELECTRIC, CORPORATION &
SUBSIDIARIES, as of June 28, 1998 and June 27, 1999, and the results of its
operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.
Iselin, New Jersey
July 21, 1999
F-1
<PAGE>
<TABLE>
<CAPTION>
NU ELECTRIC, CORPORATION & SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
JUNE
ASSETS
June 28, June 27,
1998 1999
---- ----
<S> <C> <C>
Cash $ 8,582 $ 16,483
Deposits 925 925
Property and equipment (net) (note 2) 15,798 12,638
----------- -----------
$25,305 $30,046
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Due to officer $ 25,000 $ 15,000
10% convertible note payable (note 3) 5,000 -
----------- -----------
Total liabilities 30,000 15,000
----------- -----------
Stockholders' equity and deficiency
Common stock - par value $.001
Authorized 50,000,000 shares
Issued and outstanding 2,917,855 shares 21,543 61,543
Additional paid in capital 761,158 763,158
Accumulated deficit ( 787,396) ( 809,655)
----------- -----------
Total stockholders' equity (deficit) ( 4,695) ( 15,046)
----------- -----------
$ 25,305 $ 30,046
=========== ===========
</TABLE>
See accountants' report an notes to financial statements
F-2
<PAGE>
<TABLE>
<CAPTION>
NU ELECTRIC CORPORATION & SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
Fifty-two Fifty-two
Weeks Ended Weeks Ended
June 28, 1998 June 27, 1999
------------- -------------
<S> <C> <C>
Revenues:
Commissions $ 73,813
Interest and dividends 411 18
Other income 23,379 21,303
------------ ------------
Total revenues 97,603 21,321
------------ ------------
Operating Expenses:
Salaries and related expenses 20,293 -
Clearing expenses and commissions 32,612 -
Depreciation/amortization 41 3,160
Rent 10,834 6,102
Selling, general and administration 58,621 34,318
------------ ------------
Total operating expenses 122,401 43,580
------------ ------------
Net Income (loss) ($ 24,798) ($22,259)
============ ============
Net income per common share ($ .012939) ($.00584)
============ ============
</TABLE>
See accountants' report and notes to financial statements.
F-3
<PAGE>
<TABLE>
<CAPTION>
NU ELECTRIC CORPORATION & SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY (DEFICIT)
FIFTY-TWO WEEKS ENDED JUNE 28, 1998 AND FIFTY-TWO WEEKS ENDED JUNE 27, 1999
C o m m o n S t o c k
----------------------
Additional
Number of Par Paid-In
Shares Value Capital
------ ----- -------
Deficit
<S> <C> <C> <C> <C>
Balance - June 27, 1997 1,107,397 $21,543 $758,736 ($762,598)
Net income (loss) 799,000 - 2,422 ( 24,798)
------------ ----------- ----------- -----------
Balance - June 28, 1998 1,906,397 21,543 761,158 ( 787,396)
Net income (loss) 1,011,458 40,000 2,000 ( 22,259)
------------ ----------- ----------- -----------
Balance - June 27, 1999 2,917,855 $61,543 $763,158 ($809,655)
============ =========== =========== ===========
</TABLE>
See accountants' report and financial statements.
F-4
<PAGE>
<TABLE>
<CAPTION>
NU ELECTRIC, CORPORATION & SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
Fifty-two Fifty-two
Weeks Ended Weeks Ended
June 28, 1998 June 27, 1999
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net income/(loss) ( 24,798) ( 22,259)
Adjustment to reconcile net loss to
net cash used in operations:
Depreciation and amortization 41 3,160
(Increase) decrease in due from brokers and dealers 13,227 -
(Increase) decrease in deposits,
prepaid expenses and other assets 8,943 -
Increase (decrease) in accounts payable and
accrued expenses ( 39,702) -
------------ -------------
Net cash provided (used) by operating activities ( 42,289) ( 19,099)
------------ -------------
Cash flows from investing activities:
Increase in additional paid in capital 2,422
------------
Net cash provided (used) by investing activities 2,422
------------
Cash flows from financing activities:
Proceeds from the issuance of 1,000,000
shares of common stock - 40,000
Decrease in 10% convertible notes payable ( 40,000) ( 3,000)
(Increase) decrease in due from officers 32,880 ( 10,000)
------------ -------------
Net cash provided (used) by financing activities ( 7,120) 27,000
------------ -------------
Net increase (decrease) in cash ( 46,987) 7,901
Cash - beginning 55,569 8,582
------------ -------------
Cash - ending $ 8,582 $16,483
============ =============
Supplementary information:
- -------------------------
Increase in additional paid in capital $2,000.
</TABLE>
See accountants' report and notes to financial statements.
F-5
<PAGE>
NU ELECTRIC, CORPORATION & SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
JUNE 27, 1999
1. Organization and Nature of Business:
Escalator, Inc. was incorporated under the General Corporation laws
of the state of Delaware on April 17, 1986. On April 22, 1998, a
certificate of amendment was filed to change the name of the
Corporation to Nu-Electric Corporation. The Company is a publicly
traded Company which trades under the symbol NRGE. The Company owns
100% of Frank Communications Corp. and Escalator, Inc.
(Pennsylvania). Escalator, Inc. (Pennsylvania) owns 100% of
Escalator, Investments Inc. and Escalator Securities Inc.
Escalator Securities Inc. a licensed broker dealer and market maker
in securities. The Company is licensed by the Securities and Exchange
Commission, various State security agencies and the National
Association of Securities Dealers. On December 31, 1997 the Company
surrendered its license. Frank Communications Corp. provides
Financial Public Relations Services. The Company ceased operations in
July of 1997. As of June 28, 1998 all subsidiaries have ceased doing
business and are in the process of being dissolved. All significant
intercompany transactions and balances have been eliminated.
2. Summary of Significant Accounting Policies
a. Principals of Consolidation:
---------------------------
The consolidated financial statements include the accounts of
Nu-Electric Corporation (Delaware), its wholly-owned subsidiaries
of Frank Communications Corp. and Escalator, Inc. (Pennsylvania).
Also Escalator Investments, Inc. and Escalator Securities, Inc.
both Pennsylvania corporations wholly owned by Escalator, Inc.
(Pennsylvania). All significant intercompany transactions and
balances have been eliminated.
b. Securities not Readily Marketable:
---------------------------------
Securities not readily marketable represent securities which
cannot be sold or offered due to arrangements, restrictions or
other conditions applicable to the Company. The securities are
listed at fair value as determined by Board of Directors and is
unchanged for the period covered by the accompanying financial
statements.
c. Property, Equipment, Depreciation and Amortization:
--------------------------------------------------
Property and equipment are stated at cost. Depreciation and
amortization are provided using the straight-line and declining
balance method over the estimated useful lives of the assets.
F-6
<PAGE>
NU ELECTRIC, CORPORATION & SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
JUNE 27, 1999
2. Summary of Significant Accounting Policies (Continued)
d. Amortization of Debt Issuance Costs:
------------------------------------
The company and its subsidiaries file a consolidated Federal
income tax return. Investment tax credits, when applicable, are
recorded as a reduction of Federal income tax in the year in
which the credits are utilized.
e. Income Taxes:
------------
Debt issue costs associated with the 10% convertible notes
payable are being amortized over the term of the notes using the
straight line method which expired in 1997.
f. Income/(Loss) Per Common Share:
------------------------------
The income or loss per common share is based on the weighted
average number of shares outstanding (2,917,855). Fully diluted
income/loss per share amounts are not presented because the
exercise of the stock option and the conversion of the 10%
convertible notes payable are anti-dilutive.
g. Statement of cash flows:
-----------------------
For purposes of the statement of cash flows, the Company
considers all highly liquid accounts with a maturity of three
months or less as cash equivalents.
h. Concentrations of Credit Risk:
-----------------------------
Financial instruments which potentially subject the Company to
concentrations of credit risk consist of cash and cash
equivalents. The company places its temporary cash investments
with a quality, high credit financial institution. At times, such
investments, along with the Company's cash balances with this
institution, exceeded the current insured amount under the
Federal Deposit Insurance Corporation.
i. Use of Estimates in Preparation of Financial Statements:
-------------------------------------------------------
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make certain estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from
those estimates.
F-7
<PAGE>
NU ELECTRIC, CORPORATION & SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
JUNE 27, 1999
3. 10% Convertible Notes Payable
The Company issued $351,000 unsecured 10% convertible notes in June
1987. The notes matured on June 1, 1997. Holders of $306,000 worth
converted their bonds to common stock at $1 per share, which was a
discount from their previous conversion rate of $10 per share. Two
bondholders holding $40,000 worth took a cash settlement. The
remaining holder of $5,000 was repaid $3,000 in full settlement of
the obligation prior to June 27, 1999.
4. Income Taxes
For income tax reporting, the Company and its subsidiaries have net
operating loss carry forwards, and investment tax credit carry
forwards available to reduce future Federal income taxes. If not
used, the carry forwards will expire as follows:
Year Ending Federal Net Investment
In June Operating Loss Tax Credits
------- -------------- -----------
2000 $700
2001 $32,835
2002 54,000
2003 71,000
2004 183,000
2005 160,000
2008 33,713
2010 13,569
2011 121,290
2012 24,259
2013 22,259
-------- ------
$716,464 $700
======== ======
F-8
<PAGE>
NU ELECTRIC, CORPORATION & SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
JUNE 27, 1999
5. Capital Stock
As of June 27, 1999, the Company issued an additional 750,000 shares
of stock in connection with $30,000 expenses paid on behalf of Nu
Electric, Corporation & Subsidiaries by an entity owned by one of the
majority shareholders. In addition, in lieu of cash repayment of a
$10,000 officer loan payable was converted to 250,000 shares of
common stock.
6. Subsequent Event - Business Combination
On June 30, 1999, Nu Electric, Corporation & Subsidiaries, a Delaware
Corporation entered into a merger agreement with Clean Water
Technologies, Inc. , (CWT) a florida Corporation. The merger was
accounted for by the pooling of interests method, where the
10,000,000 shares of outstanding common stock of CWT was converted to
893,000 shares of common stock of Nu Electric, Corporation &
Subsidiaries. CWT had no assets, liabilities or income of any kind,
character or description at the time of the merger, and accordingly
there was no effect on the revenues and earnings reported. CWT holds
a license for a technology developed at USF (University of South
Florida) to remove arsenic from drinking water.
F-9
<PAGE>
Stockholders and Directors
Nu Electric, Corporation & Subsidiaries
Tarpon Springs, Florida 34689
INDEPENDENT AUDITOR'S REPORT ON
CONSOLIDATING SUPPLEMENTARY INFORMATION
Our audits of the consolidated financial statements included in the preceding
section of this report were directed to the consolidating supplementary
information as of June 27, 1999 and the June 28, 1998, and for the fifty-two
weeks then ended, presented in the following section of this report has been
subjected to the auditing procedures applied in the audit of the basic
consolidated financial statements. This information, while not considered
necessary for fair presentation of the consolidated financial position, results
of operations and cash flows of the Company and its subsidiaries, is in our
opinion, fairly stated in all material respects in relation tot he consolidated
financial statements taken as a whole.
F-10
<PAGE>
NU ELECTRIC, CORPORATION & SUBSIDIARIES
SCHEDULE OF SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
<TABLE>
<CAPTION>
Fifty-two Fifty-two
weeks ended weeks ended
June 28, 1998 June 27, 1999
------------- -------------
<S> <C> <C>
Dues and subscriptions $12,264 $1,945
Fines litigation and assessments 1,939 -
Insurance 2,603 -
Legal and accounting 22,106 4,274
Office expense and supplies 4,818 8,642
Sales, promo, auto and travel 8,748 12,320
Taxes, licenses and filing fees 3,702 1,854
Telephone and utilities and maintenance 2,441 5,283
-------- --------
$58,621 $34,318
======== ========
</TABLE>
See accountants' report and notes to financial statements.
F-11
<PAGE>
EXHIBIT INDEX
EXHBIT # ITEM Page
2.1 Acquisition of Escalator, Inc.
2.2 Lone Pine Resources, Inc. Merger
2.3 Agreement and Plan of Spinoff
2.4 Acquisition of Clean Water Technologies, Inc.
3.1 Articles of Incorporation
3.2 Bylaws
4 Share Certificate
21 Subsidiaries of the Registrant
27 Financial Data Schedule
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act of
1934, the registrant has duly caused this registration statement to be signed on
its behalf by the undersigned, thereunto duly authorized.
NU ELECTRIC CORP.
/s/ Laurie Scala
---------------------------
By: Laurie Scala, President
Date: 10/13/99
18
AGREEMENT AND PLAN OF REORGANIZATION
May 27, 1986
LONE PINE RESOURCES, INC., a Utah Corporation
ACQUISITION OF
ESCALATOR, INC., a Pennsylvania Corporation
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
Recitals ...................................................................................... 3
Agreement ..................................................................................... 3
1. Plan of Reorganization ....................................................... 3
2. Exchange of Shares ........................................................... 3
3. Delivery of Shares ........................................................... 3
4. Termination .................................................................. 4
5. Representations of Stockholders and Acquiree ................................. 5
6. Representations of Acquiring Corporation .....................................11
7. Closing Date .................................................................16
8. Conditions Precedent to the Obligations of Acquiree and the Stockholders .....16
9. Conditions Precedent to the Obligations of Acquiror ..........................19
10. Indemnification ..............................................................19
11. Nature and Survival of Representations .......................................19
12. Documents at Closing .........................................................19
13. Additional Covenants .........................................................20
14. Miscellaneous ................................................................21
Signature Page ................................................................................22
Exhibit "A" ...................................................................................23
Exhibit "B" ...................................................................................24
Acquiree Schedules
Acquiror Schedules
</TABLE>
2
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
------------------------------------
This agreement and Plan of Reorganization is entered into this 27th day
of May, 1986, by and between Lone Pine Resources, Inc., a Utah corporation,
(hereinafter "Acquiror"); Escalator, Inc., a Pennsylvania corporation,
(hereinafter "Acquiree") and the persons listed in Exhibit "A" attached hereto
and by this reference made a part hereof, the Stockholders of Acquiree,
(hereinafter "Stockholders").
RECITALS:
Stockholders of Acquiree own all of the issued and outstanding, common
stock of Acquiree. Acquiror desires to acquire all of the issued and outstanding
stock of Acquiree, making Acquiree a wholly-owned subsidiary of Acquiror, and
Stockholders desire to make a tax-free exchange solely of their shares in
Acquiree for shares of Acquiror's common stock, par value $.00l prior to the
recapitalization described herein, to be exchanged as set out herein with said
Stockholders.
NOW, THEREFORE, for the mutual consideration set out herein, the
parties agree as follows:
AGREEMENT
---------
1. Plan of Reorganization Stockholders of Acquiree are the owners of
all the issued and outstanding common stock of said Acquiree. It is the
intention of the parties hereto that all of the issued and outstanding capital
stock of Acquiree shall be acquired by Acquiror in exchange solely for Acquiror
voting stock. It is the intention of the parties hereto that this transaction
qualify as a tax-free reorganization under Section 368(a)(l)(B) of the Internal
Revenue Code of 1954, as amended, and related sections thereunder.
2. Exchange of Shares. Acquiror and Stockholders agree that all of the
issued and outstanding shares of capital stock of Acquiree, consisting of
8,365,716 shares of common stock, shall be exchanged with Acquiror for an
aggregate of 16,731,432 shares of restricted common stock of Acquiror. The
Acquiror shares will, on the Closing Date, as hereafter defined, be delivered
to the Stockholders in exchange for their shares in Acquiree. Stockholders
represent and warrant that they will hold such shares of common stock of
Acquiror for investment purposes and not for further public distribution and
agree that the shares shall be appropriately restricted. No fractional shares of
Acquiror stock shall be issued In connection with the transaction, and any
fractional shares will be rounded up or down as is appropriate.
3
<PAGE>
3. Delivery of Shares. On or before the Closing Date, Stockholders will
deliver certificates representing all of the shares of Acquiree duly endorsed so
as to make Acquiror the sole holder thereof, free and clear of all claims and
encumbrances; and on such Closing Date, delivery of the Acquiror shares, which
will be appropriately restricted as to transfer, will be made to the
Stockholders as set forth herein. The transaction contemplated herein shall not
close unless 100% of the outstanding shares of Acquiree are delivered at Closing
and Stockholders of Acquiree owning such shares execute this Agreement. A list
of the shares of Acquiree, the owner thereof, and shares of Acquiror to be
received by said Stockholders is attached hereto as Exhibit "A" and by this
reference is incorporated herein.
4. Termination.
A. This agreement may be terminated by action of the Board of Directors
of Acquiror or by the Stockholders of Acquiree at any time prior to the Closing
Date if,
1. There shall be any actual or threatened action or
proceeding by or before any court or any other governmental body which
shall seek to restrain, prohibit or invalidate the transactions
contemplated by this Agreement and which, in the judgment of such Board
of Directors made in good faith and based upon the advice of legal
counsel, makes it inadvisable to proceed with the transactions
contemplated by this Agreement; or
2. The Closing shall not have occurred prior to May 31, 1986
or such later date as shall have been approved by parties hereto, other
than for reasons set forth in paragraph B or C below.
In the event of termination pursuant to this Section 4(h), no
obligation, right or liability shall arise hereunder and each party shall bear
all of the expenses incurred by them in connection with the negotiation,
drafting and execution of this Agreement and the consummation of the
transactions herein contemplated.
B. This agreement may be terminated at any time prior to the Closing
Date by action of Acquiror if:
1. Acquiree or the Stockholders shall fail to comply in any
material respect with any of its or their covenants or agreements
contained in or shall fail to satisfy any condition precedent
identified in Section 9 of this Agreement or if any of the
representations or warranties of Acquiree or the Stockholders contained
herein shall be inaccurate in any material respect; or
2. There shall have been any material change after January 31,
1986 in the assets, properties, business or financial condition of
Acquiree taken as a whole which could
4
<PAGE>
have a materially adverse effect on the value of the business of
Acquiree taken as a whole except any changes disclosed In any exhibits attached.
If this agreement is terminated pursuant to this Section 4(B), this
Agreement shall be of no further force or effect, no obligation, right or
liability shall arise hereunder, and Acquiree shall bear its own costs as well
as the legal, accounting, printing and other costs incurred by Acquiror in
connection with the negotiation, preparation and execution of this Agreement and
the transactions herein contemplated.
C. This Agreement may be terminated at any time prior to the Closing
Date by action of the Stockholders of Acquiree if:
1. Acquiror shall fail to comply in any material respect with
any of their covenants or agreements contained in or shall fail to
satisfy any condition precedent identified in Section 8 of this
Agreement or if any of the representations or warranties of Acquiror
contained herein shall be inaccurate in any material respect; or
2. There shall have been any material change after January 31,
1986 in the assets, properties, business or financial condition of
Acquiror as a whole which could have a materially adverse effect on the
value of the business of Acquiror taken as a whole, except any changes
disclosed in any Exhibit hereto.
If this Agreement is terminated pursuant to this Section 4(C), this
Agreement shall be of no further force or effect, no obligation, right or
liability shall arise hereunder, and Acquiror shall bear their own costs as well
as the legal, accounting, printing and other costs incurred by Acquiree and the
Stockholders in connection with negotiation, preparation and execution of this
Agreement and the transactions herein contemplated.
5. Representations and Warranties of Stockholders and Acquiree. The
Stockholders to the best of their information and belief, and Acquiree, hereby
represent and warrant that, with respect to their shares and as to the Acquiree,
and its subsidiaries, effective this date and the Closing Date, the
representations listed below are true and correct.
A. Shareholders of Acquiree. The listed Stockholders on Exhibit "A" are
the sole owners of all of the issued and outstanding share of the capital stock
of Acquiree; such shares are free from claims, liens, or other encumbrances; and
Stockholders have the unqualified right to transfer and dispose of such shares
subject to the laws of bankruptcy, insolvency and general creditors' rights.
B. Financial Statements. The pro forma combined financial statements of
Acquiree, subsidiaries of Acquiree and affiliated partnerships, as of and for
the eleven months ended January 3i,
5
<PAGE>
1986, which have been delivered to Acquiror ("Acquiree Financial Statements")
are complete, accurate and fairly present the financial condition of Acquiree
and its subsidiaries as of the date thereof and the results of its operations
for the periods covered, subject to the assumptions and pro forma adjustments
reflected in such statements. There are no liabilities, either fixed or
contingent, not reflected in such financial statements other than contracts or
obligations in .the ordinary and usual course of business, constituting liens or
other liabilities which, if disclosed, would alter substantially the financial
condition of Acquiree and subsidiaries as reflected in such Financial
Statements.
1. Included in the Acquiree Schedules are true and correct
copies of any federal income tax return of Acquiree and subsidiaries
filed for the most recent fiscal year. No such federal income tax
return has been examined by the Internal Revenue Service. Any such
income tax return accurately reflects the taxes due for the period
covered thereby, except for amounts which, in the aggregate, are
immaterial.
2. The books and records, financial and others, of Acquiree
and its subsidiaries are in all material respects complete and correct
and have been maintained in accordance with good business and
accounting practices.
C. Absence of Certain Changes or Events. Except as set forth in this
Agreement or the Acquiree Schedules, since January 31, 1986:
1. There has not been (a) any material adverse change in the
business, operations, properties, level of inventory, assets, or
condition of Acquiree or its subsidiaries; or (b) any damage,
description, or loss to Acquiree or its subsidiaries (whether or not
covered by insurance) materially and adversely affecting the business,
operations, properties, assets, or conditions of Acquiree or its
subsidiaries;
2. Neither Acquiree nor any of its subsidiaries has (a)
amended its articles of incorporation or bylaws; (b) declared or made,
or agreed to declare or make, any payment of dividends or distributions
of any assets of any kind whatsoever to stockholders or purchased or
redeemed, or agreed to purchase or redeem, any of its capital stock;
(c) waived any rights of value which in the aggregate are extraordinary
or material considering the business of Acquiree or its subsidiaries;
(d) made any material change in its method of management, operation, or
accounting; (e) entered into any other material transactions not in the
ordinary course of business, except as otherwise contemplated by this
Agreement; (f) made any accrual or arrangement for or payment of
bonuses or special compensation of any kind or any severance or
termination pay to any present or former officer or employee; (g)
increased the rate of compensation payable or to become
6
<PAGE>
payable by it to any of its officers or directors or any of its
employees whose monthly compensation exceeds $1,000; or (h) made any
increase in any profit sharing, bonus, deferred compensation,
insurance, pension, retirement, or other employee benefit plan,
payment, or arrangement made to, for, or with its officers, directors,
or employees;
3. Neither Acquiree nor any its subsidiaries has (a) granted
or agreed to grant any options, warrants, or other rights for its
stocks, bonds, or other corporate securities calling for the issuance
thereof; (b) borrowed or agreed to borrow any funds or incurred, or
become subject to, any material obligation or liability (absolute or
contingent) except liabilities incurred in the ordinary course of
business; (c) paid any material obligation or liability (absolute or
contingent) other than current liabilities reflected in or shown on the
balance sheet included in the Acquiree Financial Statements and current
liabilities incurred since that date in the ordinary course of
business; (d) sold or transferred, or agreed to sell or transfer, any
of its assets, property, or rights (except assets, property, or rights
not used or useful in its business which, in the aggregate have a value
of less than $5,000), or cancelled, or agreed to cancel, any debts or
claims (except debts or claims which in the aggregate are of a value of
less than $5,000); (e) made or permitted any amendment or termination
of any contract, agreement, or license to which it is a party if such
amendment or termination is material, considering the business of
Acquiree; or (f) issued, delivered, or agreed to issue or deliver any
stock, bonds, or other corporate securities including debentures
(whether authorized and unissued or held as treasury stock); and
4. To the best knowledge of Acquiree, it has not become
subject to any law or regulation which materially and adversely
affects, or in the future may adversely affect, the business,
operations, properties, assets, or condition of Acquiree or its
subsidiaries, except to the extent that rules and regulations of
general application adopted by the Securities and Exchange Commission
and the National Association of Securities Dealers, Inc., may be deemed
to be within the scope of this Section.
D. Litigation and Proceedings. Neither Acquiree nor its subsidiaries
are not involved in any pending litigation or governmental investigation or
proceeding not reflected in such financial statements, or otherwise disclosed in
the Acquiree Schedules and, to the best knowledge of Acquiree and Stockholders,
no litigation, claims assessments, or governmental investigation or proceeding
is threatened against Acquiree or its subsidiaries, its Stockholders or
properties except as disclosed in the Acquiree Schedules attached hereto and by
this reference made a part hereof.
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E. Organization.
1. As of the Closing Date, Acquiree and its subsidiaries will
be in good standing in its state of incorporation, and will be in good
standing and duly qualified to do business in each state and
jurisdiction where required to be so qualified.
2. Acquiree and its subsidiaries have complied with all state,
federal and local laws in connection with their formation, issuance of
securities, organization, capitalization and operations, and no
contingent liabilities have been threatened or claims made, and no
basis for the same exists with respect to said operations, formation or
capitalization, including claims for violation of any state or federal
securities laws except where any non-compliance would not materially
affect the business or property of the Acquiree or its subsidiaries.
F. Tax Returns. Acquiree and its subsidiaries have filed all
governmental, tax or related returns and reports due or required to be filed and
has paid, or made adequate provisions for, all taxes or assessments listed on
such returns and reports, and that to date, Acquiree has no notice of any claims
for unpaid taxes.
G. Subsidiaries. Acquiree has two wholly-owned subsidiary
corporations, that being Escalator Securities, Inc., and Escalator Investments,
Inc.
H. No Conflict With Other Instruments. The execution of this Agreement
will not violate or breach any agreement, contract, or commitment to which
Acquiree, its subsidiaries, or Stockholders are a party and has been duly
authorized by all appropriate and necessary action.
I. Capitalization. The authorized capitalization of Acquiree is as set
forth in the January 31, 1986, financial statements of Acquiree. The authorized
capital stock of Acquiree consists of 30,000,000 shares of Common Stock having
$.OOl par value, of which 8,365,716 shares have been validly issued and are now
outstanding. There are no outstanding convertible securities, warrants, options
or commitments of any nature which may cause authorized but unissued shares to
be issued to any person, except as disclosed in the Acquiree Schedules. All
issued and outstanding shares are legally issued, fully paid and non-assessable
and are not issued in violation of the pre-emptive or other right of any
person.
J. Restricted Shares to be Issued. The Stockholders understand and are
aware that the issuance of Acquiror's shares hereunder is being made without
registration under the Securities Act of 1933, as amended (the "Act") or any
state Securities laws and that the shares so issued may not be sold or
transferred without registration under the Act or unless an exemption from such
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registration is available. The Stockholders understand that the investment in
the Shares of Acquiror is speculative and may remain so for an indefinite period
and acknowledge that the Stockholders are able to bear the economic risk of
their investment in the shares of Acquiror.
K. Title and Related Matters. Acquiree and its subsidiaries have good
and marketable title to all of their properties, inventory, interests in
properties, and other assets, real and personal, which are reflected in the
Acquiree balance sheets as of January 31, 1986, or acquired after that date
(except properties, interests in properties, and assets sold or otherwise
disposed of since such date in the ordinary course of business), free and clear
of all mortgages, liens, pledges, charges, or encumbrances except (i) statutory
liens or claims not yet delinquent; (ii) such imperfections of title and
easements as do not and will not materially detract from or interfere with the
present or proposed use of the properties subject thereto or affected thereby or
otherwise materially impair present business operations on such properties; and
(iii) as described in the Acquiree Schedules. Acquiree owns, free and clear of
any liens, claims, encumbrances, or other restrictions or limitations of any
nature whatsoever or has the unrestricted right to use, any and all procedures,
techniques, business plans, methods of management, or other information
utilized in the conduct of Acquiree's business or operations, whether or not the
value thereof is reflected in the most recent balance sheet included in the
Acquiree Schedules. The plants, structures, and equipment of Acquiree that are
necessary or used in the operations of the business of Acquiree are in good
operating condition and repair.
L. Contracts.
1. Except as included or described in the Acquiree Schedules,
there are no material contracts, agreements, franchises, license
agreements, or other commitments to which Acquiree or its subsidiaries
are a part or by which they or any of their assets are bound;
2. All contracts, agreements, franchises, license agreements,
and other commitments to which Acquiree or its subsidiaries are a party
or by which their assets are bound and which are material to the
operations of Acquiree or subsidiaries taken as a whole are valid and
enforceable by Acquiree or subsidiaries in all respects;
3. Neither Acquiree nor any of its subsidiaries is a party to
or bound by, and the assets of Acquiree or its subsidiaries are not
subject to, any contract, agreement, other commitment or instrument;
any charter or other corporate restriction; or any judgment, order,
writ, injunction, decree, or award which materially and adversely
affects, or in the future may (as far as Acquiree can now foresee),
materially
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<PAGE>
and adversely affect, the business, operations, properties, assets, or
condition of Acquiree or its subsidiaries; and
4. Except as included or described in the Acquiree Schedules
or reflected in the Acquiree Financial Statements, neither Acquiree nor
any of its subsidiaries is a party to any oral or written (a) contract
for the employment of any officer or employee which is not terminable
on 30 days (or less) notice; (b) profit sharing, bonus, deferred
compensation, stock option, severance pay, pension benefit or
retirement plan, agreement, or arrangement covered by Title IV of the
Employee Retirement Income Security Act, as amended; (c) agreement,
contract, or indenture relating to the borrowing of money; (d) guaranty
of any obligation, other than one on which Acquiree or any subsidiary
of Acquiree is a primary obligor, for the borrowing of money or
otherwise, excluding endorsements made for collection and other
guaranties of obligations, which, in the aggregate do not exceed
$1,000; (e) consulting or other similar contract with an unexpired term
of more than one year or providing for payments in excess of $1,000 in
the aggregate; (f) collective bargaining agreement, (g) agreement with
any present or former officer or director of Acquiree; or (h) contract,
agreement, or other commitment involving payments by it of more than
$1,000 in the aggregate.
M. Material Contract Defaults. Except as set forth in the Acquiree
Schedules, neither Acquiree not its subsidiaries are in default in any material
respect under the terms of any outstanding contract, agreement, lease, or other
commitment which is material to the business, operations, properties, assets, or
condition of Acquiree, and there is no event of default or other event which,
with notice or lapse of time or both, would constitute a default in any material
respect under any such contract, agreement, lease, or other commitment in
respect of which Acquiree has not taken adequate steps to prevent such a default
from occurring.
N. Compliance with Laws and Regulations. Acquiree and its subsidiaries
have complied with all applicable statutes and regulations of any federal,
state, or other governmental entity or agency thereof, and with all applicable
rules of the National Association of Securities Dealers, Inc., except to the
extent that noncompliance would not materially and adversely affect the
business, operations, properties, assets, or condition of Acquiree or its
subsidiaries or except to the extent that noncompliance would not result in the
incurrence of any material liability for Acquiree or its subsidiaries.
0. Acquiree Schedules. Acquiree has delivered to Acquiror the following
schedules, which are collectively referred to as the "Acquiree Schedules" and
which consist of separate schedules dated as of the date of execution of this
Agreement and instruments and data as of such date, all certified by the chief
executive officer
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of Acquiree and by Howard A. Scala, Laurie C. Scala, and Lillian F. Chafetz,
as complete, true, and correct:
1. a schedule containing complete and correct copies of the
articles of incorporation and bylaws of Acquiree and its subsidiaries
in effect as of the date of this Agreement;
2. a schedule including the financial statements of Acquiree
identified in paragraph 5(B);
3. a schedule containing a description of all real property
owned or leased by Acquiree or its subsidiaries, together with a
description of every mortgage, deed of trust, pledge, lien, agreement,
encumbrance, claim, or equity interest of any nature whatsoever in such
real property;
4. a schedule describing all contracts, agreements, including
oral agreements, to which Acquiree or its subsidiaries are parties or
by which they or their assets are bound, but excluding (a) any
contract, agreement or instrument identified in any other Acquiree
Schedule, and (b) any contract or agreement entered into in the
ordinary course of business.
5. a schedule describing all licenses, permits, and other
governmental authorizations (or requests or applications therefor)
pursuant to which Acquiree or its subsidiaries carry on or propose to
carry on their business (except those which, in the aggregate, are
immaterial to the present or proposed business of Acquiree or its
subsidiaries);
6. a schedule setting forth a description of any material
adverse change in the business, operations, property, inventory,
assets, or condition of Acquiree since January 31, 1986;
7. a schedule containing copies of all federal, state, and
local income and other tax returns filed by Acquiree for the last
three full fiscal years; and
8. a schedule containing a list of all litigation or pending
or threatened litigation or proceeding.
9. a schedule containing any other information required or
permitted to be set forth in the Acquiree Schedules pursuant to any
other section of this Agreement.
P. Information. The information concerning Acquiree and
its subsidiaries set forth in this Agreement and in the Acquiree Schedules is
complete and accurate in all material respects and does not contain any untrue
statement of a material fact or omit to state a material fact required to make
the statements made in light of the circumstances under which they were made not
misleading.
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6. Representations and Warranties of Acquiror. Acquiror hereby
represent and warrants that effective this date and the Closing Date,
the following representations are true and correct:
A. Issuance of Shares. As of the Closing Date, the Acquiror
shares to be delivered to the Stockholders will constitute valid and
legally issued shares of Acquiror, fully-paid and nonassessable, and
will be legally equivalent in all respects to the common stock of
Acquiror issued and outstanding as of the date thereof.
B. Authorization. The officers of Acquiror are duly authorized
to execute this Agreement and have taken all action required by law and
agreements, charters, bylaws, etc., to properly and legally execute
this Agreement.
C. Financial Statements. Acquiror has delivered to Acquiree a
current audited financial statement dated as of January 31, 1986 and at
closing shall deliver all of its financial records, which shall be
true, complete and accurate; there are and shall be no substantial
liabilities, either fixed or contingent, not reflected in such
financial statements and records. Said financial statement does fairly
and accurately reflect the financial condition of the Acquiror as of
the date hereof and the results of operations for the period reflected
therein. Such statements have been prepared in accordance with
generally accepted accounting principles, consistently applied, except
as otherwise stated herein.
D. Absence of Certain Changes or Events. Except as set forth
in this Agreement or the Acquiror Schedules, since January 31, 1986:
1. there has not been (a) any material adverse change
in the business, operations, properties, assets, or condition
of Acquiror (whether or not covered by insurance) materially
and adversely affecting the business, operations, properties,
assets, or conditions of Acquiror, or (b) any damage,
destruction or loss to Acquiror, in either case;
2. Acquiror has not (a) amended its articles of
incorporation or bylaws; (b) declared or made, or agreed to
declare or make, any payment of dividends or distributions of
any assets of any kind whatsoever to stockholders or purchased
or redeemed, or agreed to purchase or redeem, any of its
capital stock; (c) waived any rights or value which in the
aggregate are extraordinary or material considering the
business of Acquiror; (d) made any material change in its
method of management, operation, or accounting; (e) entered
into any other material transactions, except as otherwise
contemplated by this Agreement; (f) made any accrual or
arrangement for or payment of bonuses or special compensation
of any kind or any severance or termination pay to any present
or former officer or employee; (g) paid or become obligated to
pay any officer director, employeeS, agent or independent
contractor, exclu4ing attorney fees incurred in connection
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<PAGE>
with this Agreement and proposed acquisition not exceeding $2,500, any
compensation which, in the aggregate for all such persons, exceed
$1,000; or (h) made any increase in any profit sharing, bonus, deferred
compensation, insurance, pension, retirement, or other employee
benefit plan, payment, or arrangement made to, for, or with its
officers, directors, or employees;
3. Acquiror has not (a) granted or agreed to grant any
options, warrants, or other rights for its stocks, bonds, or other
corporate securities calling for the issuance thereof; (b) borrowed or
agreed to borrow any funds or incurred, or become subject to, any
material obligation or liability (absolute or contingent) except
liabilities incurred in the ordinary course of business; (c) paid any
material obligation or liability (absolute or contingent) other than
current liabilities reflected in or shown on the Acquiror balance sheet
as of December 31, 1985, and current liabilities incurred since that
date in the ordinary course of business; (d) sold or transferred, or
agreed to sell or transfer, any of its assets, property, or rights, or
cancelled, or agreed to cancel, any debts or claims; (e) made or
permitted any amendment or termination of any contract, agreement, or
license to which it is a party if such amendment or termination is
material, considering the business of Acquiror; or (f) issued,
delivered, or agreed to issue or deliver any stock, bonds, or other
corporate securities including debentures (whether authorized and
unissued or held as treasury stock); and
4. To the best knowledge of Acquiror, it has not become
subject to any law or regulation which materially and adversely
affects, or in the future may adversely affect, the business,
operations, properties, assets, or condition of Acquiror.
E. Litigation and Proceedings. Acquiror is not involved in any pending
litigation, claims or governmental investigation or proceeding not reflected in
such financial statements or otherwise disclosed in the Acquiror Schedules and
there are no lawsuits, claims, assessments, investigations, or similar matters,
to the best knowledge of management, threatened or contemplated against
Acquiror, its management or properties.
F. Organization. As of the closing Date and the date hereof Acquiror
is duly organized, validly existing and in good standing under the laws of the
State of Utah; it has the corporate power to own its property and to carry on
its business as now being conducted and is duly qualified to do business in any
jurisdiction where so required.
G. Tax Returns. Acquiror has filed all federal, state, county and local
income, excise, property, and other tax returns, forms, or reports, which are
due or required to be filed by it prior to the date hereof and has paid or made
adequate provisions for the payment of all taxes, fees, or assessments which
have or may
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become due pursuant to such returns or pursuant to any assessments received.
H. Contracts.
1. Except as included or referred to in the Acquiror
Schedules, there are no contracts, agreements, franchises, license
agreements, or other commitments to which Acquiror is a party or by
which it or any of its properties are bound;
2. All contracts, agreements, franchises, license agreements,
and other commitments to which Acquiror is a party or by which it or
its properties are bound, and which are material to the operations of
Acquiror, are valid and enforceable by Acquiror in all respects;
3. Acquiror is not a party to any contract, agreement,
commitment, or instrument or subject to any charter or other corporate
restriction or any judgment, order, writ, injunction, decree, or award
which materially and adversely affects, or in the future may (as far as
Acquiror can now foresee) materially and adversely affect, the
business, operations, properties, assets, or condition of Acquiror; and
4. Acquiror has no profit sharing, bonus, deferred
compensation, stock option, severance pay, pension, benefit, or
retirement plan, agreement, or arrangement covered by Title IV of the
Employee Retirement Income Security Act, as amended.
I. Material Contract Defaults. Acquiror has not materially breached,
nor has it any knowledge of any pending or threatened claims or any legal basis
for a claim that Acquiror has materially breached, any of the terms of
conditions of any agreements, contracts or commitments to which it is a party or
is bound and the execution and performance hereof will not violate any
provisions of applicable law of any agreement to which Acquiror is subject.
J. Capitalization. The capitalization of Acquiror as of the date
hereof, comprises authorized common stock of 50,000,000 shares, $.001 par value,
of which 3,665,000 shares are presently Issued and outstanding. Prior to
Closing, Acquiror shall seek shareholder approval to effectuate a 1 for 2
reverse stock split, and an increase in the par value of its common stock to
$.002 per share. The 1 for 2 reverse stock split and change of par value of
Acquiror's common stock will be effected in connection with a merger of Acquiror
into Escalator, Inc., a Delaware corporation, and the wholly-owned subsidiary
of Acquiror. All outstanding shares have been duly authorized, validly issued,
and fully-paid and there are no outstanding or presently authorized securities,
warrants, options or related commitments of any nature not reflected in the
current financial statements of Acquiror. All of the outstanding shares are non
assessable and free of cumulative voting or pre-emptive rights. There are no
outstanding convertible
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securities, warrants, options or commitments of any nature which may cause
authorized but unissued shares to be issued to any person.
K. Subsidiaries. Acquiror has no subsidiary corporation.
L. Corporate Records. The corporate financial records, minute books,
and other documents and records of Acquiror are to be available to present
management of Acquiree prior to the Closing Date and turned over to new
management in their entirety at closing or as soon thereafter as practicable.
M. Independent Accountant. The Acquiror's Certified Public Accountant
whose report is referred to herein, is an independent accounting firm.
N. Securities Laws. Acquiror is a public company and represents that it
has no existing or threatened liabilities, claims lawsuits, or basis for the
same with respect to its original stock issuance to its founders, its public
offering or any dealings with its Stockholders, the public, brokers, the
Securities and Exchange Commission, state agencies or other persons.
0. Title and Related Matters. Acquiror has good and marketable title to
all of its properties, interests in properties, and other assets, real and
personal, which are reflected in the latest balance sheet or which were acquired
after that date (except for properties ,interests in properties, and assets sold
or otherwise disposed of since such date in the ordinary course of business),
free and clear of all mortgages, liens, pledges, charges, or encumbrances except
(1) statutory liens or claims not yet delinquent; (ii) such imperfections of
title and easements as do not and will not materially detract from or interfere
with the present or proposed use of the properties subject thereto or affected
thereby or otherwise materially impair present business operations on such
properties; and (iii) as described in the Acquiror Schedules.
P. Compliance With Laws and Regulations. Acquiror has complied with all
applicable statutes and regulations of any federal, state, or other applicable
governmental entity or agency thereof, except to the extent that noncompliance
would not materially and adversely affect the business, operations, properties,
assets, or condition of Acquiror or except to the extent that noncompliance
would not result in the incurrence of any material liability.
Q. Acguiror Schedules. Acquiror has delivered to Acquiree the following
schedules, which are collectively referred to as the "Acquiror Schedules", which
are dated the date of this Agreement, all certified by an officer of Acquiror
and the Officers of Acquiror to be complete, true, and accurate:
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<PAGE>
1. a schedule containing complete and accurate copies of the
articles of incorporation and bylaws of Acquiror as in effect as of the
date of this Agreement;
2. a schedule containing copies of all financial statements;
3. a schedule containing copies of the Acquiror income tax
returns referred to above;
4. a schedule setting forth a description, location, and
amount of all cash, certificates of deposit, money market certificates,
similar cash items of Acquiror as of the date hereof, and any other
assets;
5. a schedule containing the Acquiror's prospectus dated
November 28, 1983;
6. a schedule containing a copy of the Acquiror current
corporate information package filed with the Securities Division
pursuant to Rule 14.2m, dated April 10, 1986;
R. Information. The information concerning Acquiror set forth in this
Agreement and the Acquiror Schedules is complete and accurate in all material
respects and does not contain any untrue statement of a material fact or omit to
state a material fact required to make the statements made, in light of the
circumstances under which they were made, not misleading.
7. Closing Date. The Closing Date herein referred to shall be upon such
date as the parties hereto may mutually agree upon but is expected to be on or
about May 9, 1986, but not later than May 31, 1986. At the Closing the
Stockholders will be deeme6 to have accepted delivery of the certificate of
stock to be issued in their name, and in connection therewith will make delivery
of its stock in Acquiree to Acquiror. Certain opinions, exhibits, etc. may be
delivered subsequent to the closing date upon the mutual agreement of the
parties hereto.
8. Conditions Precedent to the Obligations of Acquiree and the
Stockholders. All obligations of Acquiree and Stockholders under this Agreement
are subject to the fulfillment by Acquiror, prior to or as of the Closing Date,
of each of the following conditions:
A. The representations and warranties by or on behalf of Acquiror
contained in this Agreement or in any certificate or documents delivered to
Acquiree pursuant to the provisions hereof shall be true in all material
respects at and as of the time of Closing as though such representations and
warranties were made at and as of such time.
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<PAGE>
B. Acquiror shall have performed and complied with all covenants,
agreements, and conditions required by this Agreement to be performed or
complied with by it prior to or at the Closing on the Closing Date.
C. The election or appointment of Howard A. Scala, Laurie
C. Scala, and Lillian F. Chafetz to the Board of Directors of Acquiror and the
resignation of the existing officers and directors of Acquiror and the transfer
of the office of Registered Agent to such party as is designated by Acquiree.
D. Shareholders of Acquiror approving at a lawfully convened
stockholders' meeting: (1) this Agreement and Acquiror's performance hereof;
(2) the change of Acquiror's name to Escalator, Inc.; (3) the merger of Acquiror
into Escalator, Inc., a Delaware corporation that is a wholly-owned subsidiary
of Acquiror, solely for the purpose of effecting a change of domicile of
Acquiror to the State of Delaware; and (4) a recapitalization of Acquiror
effecting a one for two reverse split of Acquiror's outstanding shares of common
stock and an increase in the par value of Acquiror's common stock from $.00l to
$.002 per share.
B. All instruments and documents delivered to Stockholders pursuant to
the provisions hereof shall be reasonably satisfactory to legal counsel for
Stockholders.
F. Acquiror shall have delivered to Stockholders and Acquiree an
opinion of its counsel dated the Closing Date to the effect that:
1. Acquiror is a corporation duly organized, validly existing
and in good standing under the laws of the State of Utah;
2. Acquiror has the corporate power to carry on its business
as now being conducted, and is duly qualified to do business in any
jurisdiction where so required where the non-qualification to do
business in any jurisdiction would not materially adversely affect the
business and properties of Acquiror;
3. This Agreement has been duly authorized, executed and
delivered by Acquiror and is a valid and binding obligation of Acquiror
enforceable in accordance with its terms subject to the laws of
bankruptcy, insolvency, general creditors rights and equitable
principles.
4. The shares to be issued to Stockholders hereunder will,
when issued, be duly and validly issued, fully-paid and non
assessable.
5. Except as referred to herein such counsel knows of (a) no
actions suit or other legal proceedin9s or investigations pending or
threatened against or relating to
17
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or materially adversely affecting Acquiror; and (b) no unsatisfied
judgments against Acquiror.
6. Counsel has no reason to doubt the accuracy or completeness
of any representation or warranty made by the Acquiror herein, however,
Counsel has made no independent verification of such representations
and warranties.
7. Escalator, Inc., a Delaware corporation, has been duly
organized and is validly existing in good standing under the laws of
the State of Delaware, and all of the issued and outstanding capital
stock of such corporation is owned by Acquiror, free and clear of all
claims, liens and encumbrances.
9. Conditions Precedent to the Obligations of Ac9uiror. All obligations
of Acquiror under this Agreement are subject to the fulfillment, by Acquiree and
Stockholders, prior to or at the Closing on the Closing Date, of each of the
following conditions:
A. The representations and warranties by Acquiree and Stockholders
contained in this Agreement or in any certificate or document delivered to
Acquiror pursuant to the provisions hereof shall be true at and as of the time
of Closing as though such representations and warranties were made at and as of
such time.
B. Acquiree and Stockholders shall have performed and complied with all
covenants, agreements, and conditions required by this Agreement to be performed
or complied with by it prior to or at the Closing; including the delivery of all
of the outstanding stock of Acquiree.
C. Stockholders shall deliver to Acquiror a letter commonly known as an
"investment letter" in the form attached as Exhibit "B" hereto, agreeing that
the shares of stock in Acquiror are being acquired for investment purposes, and
not with a view to public resale.
D. Stockholders hereby state that the materials, including current
financial statements, prepared and delivered by Acquiror to Stockholders, has
been read and understood by Stockholders, that they are familiar with the
business of Acquiror, that they are acquiring the Acquiror shares under Section
4(2), commonly known as the private offering exemption of the Securities Act of
1933, that the shares are restricted and may not be resold, except in reliance
of an exemption under the Act.
E. Acquiree shall have delivered to Acquiror an opinion of counsel
dated the Closing Date to the effect that:
1. Acquiree and its subsidiaries are corporations duly
organized, validly existing and in good standing under the laws of the
State of Pennsylvania and are duly qualified to do business in any
jurisdiction where so required.
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2. Acquiree and its subsidiaries have the corporate power to
carry on their business as now being conducted and are duly qualified
to do business in any jurisdiction where so required where the
non-qualification to do business in any jurisdiction would not
materially adversely affect their business.
3. This Agreement has been duly authorized, executed and
delivered by Acquiree and Stockholders, is a valid and binding
obligation of Acquiree and Stockholders and is enforceable in
accordance with its terms subject to the laws of bankruptcy,
insolvency, general creditors rights and equitable principals.
4. Except as referred to herein such counsel knows of
(a) no actions, suit or other legal proceedings or investigations
pending or threatened against or relating to or materially adversely
affecting Acquiree; and (b) no unsatisfied judgments against Acquiree.
5. Counsel has no reason to doubt the accuracy or completeness
of any representation or warranty made by Acquiree or Stockholders
herein, however, Counsel has made no independent investigation in
connection with such representations or warranties.
10. Indemnification. Within the period provided in paragraph 11 herein
and in accordance with the terms of that paragraph, each party to this
Agreement, shall indemnify and hold harmless each other party at all times after
the date of this Agreement 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 form any misrepresentations, breach of covenant or warranty or
nonfulfillment 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 payment made by said parties at any time after the Closing, in
respect of any liability of 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.
11. Nature and Survival of Representations. All representations,
warranties and covenants made by any party in this Agreement shall survive the
Closing hereunder and the consummation of the transactions contemplated hereby
for two years from the date hereof. All of the parties hereto are executing and
carrying out the provisions of this Agreement in reliance solely on the
representations, warranties and covenants and agreements contained in this
Agreement or at the closing of the transactions herein provided for and not upon
any investigation upon which it
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<PAGE>
might have made or any representations, warranty, agreement, promise or
information, written or oral, made by the other party or any other person other
than as specifically set forth herein.
12. Documents at Closing. At the Closing, the following transactions
shall occur, all of such transactions being deemed to occur simultaneously:
A. Stockholders and Acquiree will deliver, or cause to be delivered,
the following, to Acquiror:
1. stock certificates for the stock of Acquiree being tendered
hereunder, duly endorsed and guaranteed in blank;
2. all corporate records of Acquiree, including without
limitation corporate minute books (which shall contain copies of the
Articles of Incorporation and Bylaws, as amended to the Closing), stock
books, stock transfer books, corporate seals, and other such corporate
books and records as may reasonably be requested for review by Acquiror
and its counsel;
3. the opinion of counsel for Acquiree as set forth herein;
4. a certificate executed by Howard A. Scala, Laurie
C. Scala and Lillian F. Chafetz, individually, and as officers and
directors of Acquiree, to the effect that all representations and
warranties made by Acquiree under this Agreement are true and correct
as of the Closing, the same as though originally given to Acquiror on
said date;
5. a certificate from the Secretary of State of its
incorporation dated at or about the date of the Closing to the effect
that Acquiree is in good standing under the laws of said State;
6. an investment letter in the form attached as Exhibit "B"
hereto, from each of the Stockholders representing that such
Stockholder are acquiring shares of Acquiror for investment purposes
only and not with a view to further distribution;
7. such other instruments, documents and certificates, if
any, as are required to be delivered pursuant to the provision of this
Agreement or which may be reasonably requested in furtherance of the
provision of this Agreement;
B. Acquiror will deliver or cause to be delivered, the following, to
Stockholders and Acquiree:
1. stock certificates for Common Stock to be issued as a part
of the exchange as listed on Exhibit "A";
20
<PAGE>
2. a certificate of the President and Secretary of Acquiror to
the effect that all representations and warranties of Acquiror made
under this Agreement are reaffirmed on the Closing Date, the same as
though originally given to Stockholders on said date;
3. the opinion of Acquiror's counsel set forth herein;
4. certified copies of resolutions by Acquiror's Board of
Directors and Stockholders authorizing this transaction and the
transactions described in Section 8(D) hereof;
5. a certificate from the Secretary of State of Utah dated at
or about the date of Closing that Acquiror is in good standing under
the laws of said State:
6. such other instruments and documents as are required to be
delivered pursuant to the provisions of this Agreement.
13. Additional Covenants. Between the date hereof and the Closing Date,
except with the prior written consent of the other party:
A. Acquiror and Acquiree shall conduct their business only in the usual
and ordinary course and the character of such business shall not be changed nor
any different business be undertaken.
B. No change shall be made in the Articles of Incorporation or Bylaws
of Acquiror or Acquiree.
C. No change shall be made in the authorized or issued shares of
Acquiror or Acquiree.
D. Neither Acquiror. nor Acquiree shall discharge or satisfy any lien
or encumbrance or obligation or liability, other than current liabilities shown
on the financial statements heretofore delivered and current liabilities
incurred since that date in the ordinary course of business.
E. Neither Acquiror nor Acquiree shall make any payment or distribution
to its shareholders or purchase or redeem any shares or capital stock.
F. Neither Acquiror nor Acquiree shall mortgage, pledge or subject to
lien or encumbrance any of its assets, tangible or intangible.
G. Neither Acquiror nor Acquiree shall cancel any debts or claims or
waive any rights.
H. Present management of Acquiror agree that after the closing, they
will continue to furnish the Company and its new management with such additional
documentation and information regarding Acquiror as is reasonably requested.
21
<PAGE>
14.Miscellaneous
A. Further Assurances. At any time and from time to time, after the
effective date, each party will execute such additional instruments and take
such action as may be reasonably requested by the other party to confirm or
perfect title to any property transferred hereunder or otherwise to carry out
the intent and purposes of this Agreement.
B. Waiver. Any failure on the part of any party hereto to comply with
any of its obligations, agreements or conditions hereunder may be waived in
writing by the party to whom such compliance is owed.
C. Brokers. Neither party has employed any brokers or finders with
regard to this Agreement unless otherwise described in writing to aL1 parties
hereto.
D. Notices. All notices and other communications hereunder shall be in
writing and shall be deemed to have given if delivered in person or sent by
prepaid first class registered or certified mail, return receipt requested.
E. Headings. The section and subsection heading in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
F. Counterparts. This Agreement may be executed simultaneously in two
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
G. Governing Law. This Agreement was negotiated and is being contracted
for in the State of Utah, and shall be governed by the laws of the State of
Utah, and the securities being issued herein are being issued and delivered in
the State of Utah in accordance with isolated transaction and nonpublic offering
exemption.
U. Binding Effect. This Agreement shall be binding upon the parties
hereto and inure to the benefit of the parties, their respective heirs,
administrators, executors, successors and assigns.
I. Entire Agreement. This Agreement contains the entire agreement
between the parties hereto and supersedes any and all prior agreements,
arrangements or understandings between the parties relating to the subject
matter hereof. No oral understandings, statements, promises or inducements
contrary to the terms of this Agreement exist. No representations, warranties,
covenants or conditions, express or implied, other than as set forth herein,
have been made by any party.
22
<PAGE>
J. Time. Time is of the essence.
K. Severability. If any part of this Agreement is deemed to be
unenforceable the balance of the Agreement shall remain in full force and
effect.
L. Attorney's Fees and Costs. In the event any party hereto has to
resort to legal action to enforce any of the terms hereof, such party shall be
entitled to collect attorneys fees and other costs from the party in default.
IN WITNESS WHEREOF, the parties have executed this Agreement the day
and year first above written.
ATTEST: LONE PINE RESOURCES, INC.
a Utah corporation
By: /s/ illegible By: /s/ illegible
------------------------ ----------------------------
Secretary President
ATTEST: ESCALATOR, INC.
a Pennsylvania Corporation
By: /s/ Lillian F. Chafetz By: /s/ Laurie C. Scala
------------------------ ----------------------------
Secretary President
STOCKHOLDERS: (Exhibit "B")
23
<PAGE>
SECOND PAGE OF SIGNATURES - STOCKHOLDERS
- ----------------------------------------
/s/ Howard A. Scala
- -------------------------------
Howard A. Scala
/s/ Laurie C. Scala
- -------------------------------
Laurie C. Scala
/s/ Luther V. Rhodes III *
- -------------------------------
Luther V. Rhodes III
/s/ Fay Elfand *
- -------------------------------
Fay Elfand
/s/ Charles A. Porrini, DDS *
- -------------------------------
Charles A. Porrini, DDS
/s/ Joanne F. Mardorno *
- -------------------------------
Joanne F. Mardorno
/s/ Sinclaire M. Scala *
- -------------------------------
Sinclaire M. Scala
/s/ Edward L. White *
- -------------------------------
Edward L. White
/s/ E. David Hochberg *
- -------------------------------
E. David Hochberg
/s/ William D. Diem, Jr *
- -------------------------------
William D. Diem, Jr.
/s/ Hangley Connolly Epstein
Chicco Foxman & Ewing *
- -------------------------------
Hangley Connolly Epstein
Chicco Foxman & Ewing
/s/ Howard A. Scala
- -------------------------------
* By Howard A. Scala, agent and attorney-in-fact for the shareholder named.
24
<PAGE>
EXHIBIT "A"
TO THE AGREEMENT AND PLAN OF REORGANIZATION
Dated May 27, 1986
<TABLE>
<CAPTION>
Lone Pine
Escalator Resources
Name Shares Shares
---- ------ ------
<S> <C> <C>
Howard A. Scala 3,541,700 7,083,400
Laurie C. Scala 3,541,700 7,083,400
Luther V. Rhodes, III. 750,000 1,500,000
Fay Elfand 150,000 300,000
Charles A. Porrini 50,000 100,000
Joanne F. Madorno 50,000 100,000
Sinclaire M. Scala 50,000 100,000
Edward L. White 50,000 100,000
E. David Hochberg 100,000 200,000
William D. Diem, Jr. 50,000 100,000
Hangley, Connolly, Epstein Chicco, Foxman & Ewing
Escalator 32,316 64,632
--------- -----------
TOTAL 8,365,716 16,731,432
</TABLE>
ARTICLES OF MERGER OF LONE PINE RESOURCES
INC., a Utah Corporation
INTO ESCALATOR, INC.,
a Delaware Corporation
Pursuant to the provisions of Section 16-10-72 of the Utah Business
Corporation Act, Lone Pine Resources, Inc., a Utah corporation, (hereafter "Lone
Pine"), and Escalator, Inc., a Delaware Corporation, (hereafter "Surviving
Corporation" or "Escalator"), adopt the following Articles of Merger for the
purpose of merging Lone Pine, Inc., into Escalator, Inc.
W I T N E S S E T H:
I
PLAN OF MERGER
--------------
Pursuant to these Articles of Merger, it is intended and agreed that
Lone Pine will be merged into Escalator and Escalator shall be the Surviving
Corporation. The name of the Surviving Corporation shall be Escalator, Inc. The
terms, conditions, and understandings of the merger are set forth in the Plan
and agreement of Merger between Escalator and Lone Pine, dated as of May 29,
1986, a copy of which is attached hereto as Exhibit "A" and incorporated herein
by this reference.
II
ARTICLES OF INCORPORATION AND BYLAWS
------------------------------------
On the consummation of the merger, the Articles of Incorporation and
Bylaws of the Surviving Corporation shall be the Articles of Incorporation and
Bylaws of Escalator, Inc., a copy of which are attached as Exhibits "A" and "B"
to the Plan and Agreement of Merger attached hereto and by this reference made a
part hereof.
III
AUTHORIZED AND OUTSTANDING SHARES OF LONE PINE
----------------------------------------------
Lone Pine has 50,000,000 shares of common voting stock, par value
$.001, authorized, of which 20,396,432 are presently issued and outstanding.
Each of the shares is entitled to one vote.
<PAGE>
IV
AUTHORIZED AND OUTSTANDING SHARES OF ESCALATOR
----------------------------------------------
Escalator has 50,000,000 shares of common stock, $.002 par value,
authorized, of which 187,500 shares are issued and outstanding. Each share is
entitled to one vote.
V
APPROVAL BY SHAREHOLDERS OF LONE PINE
-------------------------------------
Of the 20,396,432 issued and outstanding shares of Lone Pine 3,665,000
of such shares were issued and outstanding at the time the Plan and Agreement of
Merger was voted upon by the Lone Pine Shareholders. A total of 2,002,800
shares of Lone Pine common stock were voted in favor of the Plan and Agreement
of Merger and a total of 0 shares of Lone Pine common stock voted against the
Plan and Agreement of Merger. Such shares were voted individually and not as a
class.
VI
APPROVAL BY SHAREHOLDER OF ESCALATOR
------------------------------------
All 187,500 shares of common stock of Escalator were voted in favor of
entering into the Plan and Plan of Merger with no shares of common stock of
Escalator dissenting. Such shares were voted individually and not as a class.
VII
UNDERTAKINGS OF ESCALATOR
-------------------------
A. Escalator hereby agrees that it may be served with process in the
State of Utah in any proceeding for the enforcement of any obligation of Lone
Pine and in any proceeding for the enforcement of the rights of any dissenting
shareholder of Lone Pine against Escalator.
B. Escalator hereby irrevocably appoints the Secretary of State of the
State of Utah its agent to accept service of process in any proceeding referred
to in paragraph A above.
C. Escalator hereby agrees to promptly pay to any dissenting
shareholders of Lone Pine the amount, if any, to which they shall be entitled
under the provisions of the Utah Business Corporation Act with regard to the
rights of dissenting shareholders.
2
<PAGE>
IN WITNESS WHEREOF, the undersigned corporations, acting by their
respective presidents and secretaries, have executed these Articles of Merger on
the 29th day of May, 1986.
Attest: LONE PINE RESOURCES, INC.
/s/ Lillian F. Chafetz By Laurie C. Scala
- ---------------------- ------------------
Secretary President
Attest: ESCALATOR, INC.
/s/ Lillian F. Chafetz By: /s/ Laurie C. Scala
- ----------------------- -----------------------
Secretary President
State of Pennsylvania )
)ss
County of Montgomery )
On the 29th day of May, 1986, personally appeared before me, a Notary
Public, Laurie C. Scala, the President of Lone Pine Resources, Inc., and
Escalator, Inc., who duly acknowledged to me that he executed these Articles
of Merger.
/s/ Irene Wallace
------------------------------
Notary Public
My Commission Expires: Residing: IRENE WALLACE, Notary Public
5/6/89 Cheltenham Twp., Montgomery Co.
My Commission Expires May 6, 1989
1846 Carriage way
Warrington, PA 18976
State of Pennsylvania)
)ss
County of Montgomery )
On the 29th day of May, 1986, personally appeared before me, a Notary
Public, Lillian F. Chafetz the Secretary of Lone Pine Resources, Inc., and
Escalator, Inc., who duly acknowledged to me that he executed these Articles of
Merger.
/s/ Irene Wallace
------------------------------
Notary Public
My Commission Expires: Residing: IRENE WALLACE, Notary Public
5/6/89 Cheltenham Twp., Montgomery Co.
My Commission Expires May 6, 1989
1846 Carriage way
Warrington, PA 18976
3
<PAGE>
PLAN AND AGREEMENT OF MERGER
BETWEEN
ESCALATOR, INC.
(a Delaware corporation)
and
LONE PINE RESOURCES, INC.
(a Utah corporation)
This plan and agreement of merger made and entered into as of this
29th day of May, 1986, by and between Escalator, Inc., a Delaware corporation
(herein sometimes referred to as the "Delaware Corporation" or "Surviving
Corporation"), and Lone Pine Resources, Inc., a Utah corporation (herein
sometimes referred to as the "Utah Corporation"), said corporations hereinafter
sometimes referred to jointly as the "Constituent Corporations".
Witnesseth:
Whereas, the Delaware corporation is a corporation organized and
existing under the laws of the State of Delaware, its Certificate of
Incorporation having been filed in the office of the Secretary of State of the
State of Delaware on April 17, 1986 and recorded in the office of the recorder
of deeds for the County of New Castle in the said state, in April, 1986, and the
registered office of the Delaware corporation being located at Corporate Trust
Center, 1209 Orange, in the City of Wilmington, County of New Castle, and the
name of its registered agent in charge thereof being The Corporate Trust
Company; and
Whereas, the total number of shares of stock which the Delaware
corporation has authority to issue is 50,000,000 of which 187,500 shares are now
issued and outstanding, all of which are owned by the Utah Corporation; and
Whereas, the sole purpose of the merger agreed to herein is to change
the domicile of the Utah Corporation to Delaware; and
Whereas, the Utah Corporation is a corporation organized and existing
under the laws of the State of Utah, its Articles of Incorporation having been
filed in the office of the Secretary of State of the State of Utah on the 23rd
day of June, 1983, and a Certificate of Incorporation having been issued by said
Secretary of State on that date; and
Whereas, the aggregate number of shares which the Utah corporation has
authority to issue is 50,000,000 of which 20,396,432 shares are presently issued
and outstanding and of which 3,665,000 were issued and outstanding and entitled
to vote on the Plan and Agreement of Merger; and
Whereas, the Board of Directors of each of the constituent Corporations
deems it advisable that the Utah Corporation be
1
<PAGE>
merged into the Delaware Corporation on the terms and conditions hereinafter set
forth, in accordance with the applicable provisions of the statutes of the
States of Delaware and Utah respectively, which permit such merger;
Now therefore, in consideration of the premises and of the agreements,
covenants and provisions hereinafter contained, the Delaware Corporation and the
Utah Corporation, by their respective Boards of Directors, have agreed and do
hereby agree, each with the other as follows:
ARTICLE I
The Utah Corporation and the Delaware Corporation shall be merged into a
single corporation, in accordance with applicable provisions of the laws of the
State of Utah and of the State of Delaware, by the Utah Corporation merging into
the Delaware Corporation, which shall be the Surviving Corporation. Such merger
shall be effective upon the recording of a Certificate of Ownership and Merger
with the Secretary of State of Delaware.
ARTICLE II
Upon the merger becoming effective as provided by the applicable laws of
the State of Utah and of the State of Delaware (the time when the merger shall
so become effective being sometimes herein referred to as the "effective date of
the merger"):
1. The two Constituent Corporations shall be a single corporation, which
shall be the Delaware Corporation as the Surviving Corporation, and the separate
existence of the Utah Corporation shall cease except to the extent provided by
the laws of the State of Utah applicable to a corporation after its merger into
another corporation.
2. The Delaware Corporation shall thereupon and thereafter possess all
the rights, privileges, immunities and franchises, of a public or a private
nature, of each of the Constituent Corporations. All property, real or personal,
and all debts due on whatever account, including subscriptions to shares, and
all other choses in action, and all and every other interest of, or belonging
to, or due to each of the Constituent Corporations, shall be taken and deemed to
be vested in the Surviving Corporation without further act or deed; and the
title to all real estate, or any interest therein, vested in either of the
Constituent Corporations shall not revert or be in any way impaired by reason of
the merger.
3. The Delaware Corporation shall thenceforth be responsible and liable
for all of the liabilities and obligations of each of the Constituent
Corporations. Any claim existing or action or proceeding pending by or against
either of the Constituent Corporations may be prosecuted to judgment as if the
2
<PAGE>
merger had not taken place, or the Surviving Corporation may be substituted in
its place, and neither the rights of creditors nor any liens upon the property
of either of the Constituent Corporations shall be impaired by the merger.
4. The aggregate amount of the net assets of the Constituent
Corporations which was available for the payment of dividends immediately prior
to the merger, to the extent that the value thereof is not transferred to stated
capital by the issuance of shares or otherwise, shall continue to be available
for the payment of dividends by the Surviving Corporation.
5. The Bylaws of the Delaware Corporation as existing and constituted
immediately prior to the effective date of merger shall be and constitute the
bylaws of the Surviving Corporation. Such Bylaws are attached hereto as Exhibit
A and by this reference made a part heerof.
6. The Board of Directors, and the members thereof, and the officers,
of the Delaware Corporation or the Surviving Corporation shall be as follows:
Howard A. Scala C.E.O./Director
Laurie C. Scala President/Director
Lillian F. Chafetz Secretary/Treasurer/Director
ARTICLE III
The Certificate of Incorporation of the Delaware Corporation shall not
be amended in any respect, by reason of this Plan and Agreement of Merger, and
said Certificate of Incorporation, as filed in the office of the Secretary of
State of the State of Delaware on April 17, 1986, as amended, shall constitute
the Certificate of Incorporation of the Surviving Corporation, until further
amended in the manner provided by law, and is set forth in Exhibit B certified
separately as the Certificate of Incorporation of the Surviving Corporation
ARTICLE IV
The manner and basis of converting the shares of each of the Constituent
Corporations into shares of the Surviving Corporation is as follows:
1. The 187,500 shares of stock of the Delaware Corporation now owned and
held by the Utah Corporation shall be canceled and no shares of stock of the
Delaware Corporation shall be issued in respect there, and the capital of the
Delaware Corporation shall be deemed to be reduced by the amount of Three
Hundred Seventy Five Dollars ($375) the amount represented by said 187,500
shares of stock.
2. Each two shares of the Utah Corporation shall be
3
<PAGE>
converted into one fully paid and nonassessable share of capital stock of the
Delaware Corporation. Any partial shares will be rounded up to the next whole
number.
After the effective date of the merger, each owner of an outstanding
certificate or certificates theretofore representing shares of the Utah
Corporation shall be entitled, upon surrendering such certificate or
certificates to the Surviving Corporation, to receive in exchange therefor a
certificate or certificates representing the number of shares of stock of the
Surviving Corporation into which the shares of the Utah Corporation theretofore
represented by the surrendered certificate or certificates shall have been
converted as hereinbefore provided. Until so surrendered, each outstanding
certificate which, prior to the effective date of the merger, represented shares
of the Utah Corporation shall be deemed, for all corporate purposes, to
represent the ownership of the common stock of the Surviving Corporation on the
basis hereinbefore provided.
ARTICLE V
The Utah Corporation shall pay all expenses of carrying this agreement
of merger into effect and accomplishing the merger herein provided for.
ARTICLE VI
If at any time the Surviving Corporation shall consider or be advised
that any further assignment or assurance in law is necessary or desirable to
vest in the Surviving Corporation the title to any property or rights of the
Utah Corporation, the proper officers and directors of the Utah Corporation
shall, and will execute and make all such proper assignments and assurances in
law and do all things necessary or proper to thus vest such property or rights
in the Surviving Corporation, and otherwise to carry out the purposes of this
Plan and Agreement of Merger.
ARTICLE VII
This Plan and Agreement of Merger has, been: submitted to and approved
by the shareholders of each of the Constituent Corporations, as provided by law,
and shall take effect upon the filing of the Certificate of Ownership and Merger
with the Secretary of State of the State of Delaware. The Utah Corporation, as
owner of all of the issued and outstanding shares of the Delaware Corporation,
has voted in favor of the Plan and Agreement of Merger. On May 9, 1986, a total
of 3,665,000 shares of the Utah Corporation were issued and outstanding and
entitled to vote upon the Plan and Agreement of Merger. On that date, a
shareholders' meeting was held at which a total of 2,002,800 shares were voted
in favor of the Plan and Agreement of Merger with 0 shares dissenting. Anything
herein or elsewhere to the contrary, this Plan and Agreement of Merger may be
abandoned by either of the Constituent Corporations by an appropriate
4
<PAGE>
resolution of its board of directors at any time prior to its approval or
adoption by the shareholders and stockholders thereof, or by the mutual consent
of the Constituent Corporations evidenced by appropriate resolutions of their
respective, boards of directors, at any time prior to the effective date of the
merger.
In Witness Whereof, the Delaware Corporation and the Utah Corporation,
pursuant to the approval and authority duly given by resolutions adopted by
their respective boards of directors have caused this Plan of Agreement of
Merger to be executed by the President and Attested by the secretary of each
party hereto, and the corporate seal affixed.
LONE PINE RESOURCES, INC. ESCALATOR, INC.
a Utah corporation a Delaware corporation
By /s/ Laurie C. Scala By /s/ Laurie C. Scala
- ------------------------------ ----------------------------
Laurie C. Scala Laurie C. Scala
President President
By /s/ Lillian F. Chafetz By Lillian F. Chafetz
- ------------------------- ---------------------
Lillian F. Chafetz Lillian F. Chafetz
Secretary Secretary
State of Pennsylvania )
)ss
County of Montgomery )
On the 29th day of May, 1986, personally appeared before me, a Notary
Public, Laurie C. Scala, the President of Lone Pine Resources, Inc., a Utah
corporation, and Escalator, Inc., a Delaware corporation, who duly acknowledged
to me that he executed this Agreement pursuant to a Resolution of the Board of
Directors of said Corporations and shareholder approval thereof.
/s/ Irene Wallace
---------------------------
Notary Public
My Commission Expires: Residing: IRENE WALLACE, Notary Public
5/6/89 Cheltenham Twp., Montgomery Co.
My Commission Expires May 6, 1989
1846 Carriage way
Warrington, PA 18976
5
<PAGE>
State of Pennsylvania )
)ss
County of Montgomery )
On the 29th day of May, 1986, personally appeared before me, a Notary
Public, Lillian F. Chafetz, the secretary of Lone Pine Resources, Inc., a Utah
corporation, and Escalator, Inc., a Delaware corporation, who duly acknowledged
to me that he executed this agreement pursuant to a Resolution of the Board of
Directors of said Corporations and shareholder approval theretof
/s/ Irene Wallace
-----------------
Notary Public
My Commission Expires: Residing: IRENE WALLACE, Notary Public
5/6/89 Cheltenham Twp., Montgomery Co.
My Commission Expires May 6, 1989
1846 Carriage way
Warrington, PA 18976
6
AGREEMENT AND PLAN OF SPINOFF
-----------------------------
THIS AGREEMENT AND PLAN OF SPINOFF ("the Agreement") is made and
entered into as of the 30th day of June, 1997, by and between ESCALATOR, INC., a
Delaware corporation ("Escalator"), and ESCALATOR INVESTMENTS, INC., a
Pennsylvania corporation ("Investments")
RECITALS
WHEREAS, Escalator owns all of the issued and outstanding shares of the
capital stock of Escalator Securities, Inc., a Pennsylvania corporation
("Securities"), which firm is registered as a securities broker-dealer and
conducts a securities brokerage business.
WHEREAS, in the judgment of the Board of Directors of Escalator it is
in the best interests of Escalator to transfer its holdings in Securities to
Investments for the following reasons among others:
a. If it desires to do so in the future, the Corporation can more
easily accomplish a merger or consolidation with another business, and, in
connection therewith, the value of the shares of common stock of the Company,
which shares are publicly traded, will be enhanced through such merger or
consolidation.
2. Securities can be more efficiently managed if its operations are run
independently from the operations of the Corporation.
<PAGE>
NOW THEREFORE, in consideration of the premises, and for other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties agree as follows:
ARTICLE I
TRANSFER OF SECURITIES STOCK
IN EXCHANGE FOR INVESTMENTS STOCK
1.01 Transfer of Stock. Upon the execution of this Agreement and
subject to the terms and conditions contained herein, Escalator shall sell,
transfer, assign and convey to Investments all of the issued and outstanding
shares of all classes of capital stock of Securities and in exchange therefor
Investments shall issue to Escalator all of the authorized shares of capital
stock of Investments.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF ESCALATOR
Escalator represents and warrants to Investments as follows:
2.01 Organization and Authority. Escalator and Securities is each duly
organized, validly existing and in good standing under the laws of the
jurisdiction in which it is organized, with full power and authority to own its
property and to carry on its business as now being conducted, and each is
qualified in each other jurisdiction in which qualification is required for it
to hold the property or to conduct the business it holds or conducts
2
<PAGE>
therein, except to the extent that all failures of all such entities so to
qualify, in the aggregate, do not have a material adverse effect on the
financial condition, business or operations of Escalator and Securities taken as
a whole.
2.02 Capitalization of Escalator and Securities. The authorized capital
stock of Escalator consists of 50,000,000 shares of common stock, $.001 par
value, of which, as of June 30, 1997, 1,418,397 shares were issued and
outstanding. The authorized capital stock of Securities consists of 10,000
shares of common stock, $1.00 par value, of which, as of June 30, 1997, 1,000
shares were issued and outstanding. All of such shares of Escalator and
Securities are validly issued, fully paid and nonassessable. Escalator owns all
of the issued and outstanding shares of capital stock of Securities. There are
no other shares of capital stock or other equity securities of Escalator or
Securities outstanding and there are no outstanding options, warrants, scrip,
rights to subscribe to, calls, or commitments of any character whatsoever
relating to, or securities or rights convertible into, any shares of capital
stock of Escalator or Securities, and there are no contracts, commitments,
understandings or arrangements by which Escalator or Securities is or may become
bound to issue any additional shares of their capital stock or options,
warrants, or rights to purchase or acquire any additional share of their capital
stock.
3
<PAGE>
2.03 Authorization. Escalator has all requisite corporate power and
authority to enter into this Agreement and to carry out its obligations
hereunder. The execution and delivery of this Agreement has been duly authorized
by Escalator's Board of Directors and no other corporate proceedings on the part
of Escalator are necessary to authorize this Agreement and the transactions
contemplated hereby. This Agreement is a valid and binding obligation of
Escalator, fully enforceable against Escalator in accordance with its terms.
Neither the execution and delivery of this Agreement by Escalator, nor
the consummation of the transactions contemplated hereby, nor compliance by
Escalator with any of the provisions hereof will (i) violate, 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 termination of, or accelerate the performance required by, or
result in a right of termination or acceleration, or result in the creation of
any lien, security interest, charge or encumbrance upon any of the properties or
assets of Escalator or Securities, under any of the terms, conditions or
provisions of (x) their respective charters or Bylaws, or (y) any note, bond,
mortgage, indenture, deed of trust, license, lease, agreement or other
instrument or obligation to which Escalator or Securities is a party, or by
which any part of the properties or assets of
4
<PAGE>
Escalator or Securities may be subject, or (ii) subject to compliance with the
statute referred to in the next paragraph, violate any judgment, ruling, order,
writ, injunction, decree, statute, rule or regulation applicable to Escalator or
Securities or any part of the properties or assets of Escalator or Securities;
except for such violations, conflicts, breaches, or defaults, which would not,
in the aggregate, have a material adverse effect on the value of the Escalator
and Securities taken as a whole.
Other than in connection with or in compliance with the provisions of
the General Corporation Law of the State of Delaware, and other than such as
shall have been obtained prior to the completion of the transactions
contemplated hereby, no notice to, filing with, or authorization, consent or
approval of, any public body or authority is necessary for the consummation by
Escalator of the transactions contemplated by this Agreement where the failure
to provide such notices or filings, or to receive such authorizations, consents
or approvals could, in the aggregate, impair or prevent Investments from owning
and operating a material portion of the property or business of Securities after
the transfer of its stock to Investments pursuant to Section 1.01 hereof.
2.04 Litigation and Other Proceedings. Except for those matters set
forth in Exhibit A hereto, as of the date hereof, neither Escalator nor
Securities is a party to any pending or
5
<PAGE>
threatened claim, action, suit, investigation or proceeding, or subject to any
order, judgment or decree except for matters which, in the aggregate, will not
have a material adverse effect on the business, condition (financial or other),
prospects, income or operations of Escalator and Securities taken as a whole.
2.05 Compliance With Law. As of the date hereof, Escalator and
Securities are each in compliance in all material respects with all laws and
regulations applicable to its operations or with respect to which compliance is
a condition of engaging in the business thereof, except for failures to comply,
which, in the aggregate, do not have a material adverse effect on the conduct
of, or the ability to conduct operations of, or the financial or other condition
of, the business of Escalator and Securities, taken as a whole.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF INVESTMENTS
Investments represents and warrants to Escalator as follows:
3.01 Organization and Authority. Investments is duly organized, validly
existing and in good standing under the laws of the State of Pennsylvania, with
power to own its property and to carry on its business as now being conducted.
3.02 Capitalization of Investments. The authorized capital stock of
Investments consists of 50,000,000 shares of common stock, $.001 par value, of
which, as of June 30, 1997, 2 shares were
6
<PAGE>
issued and outstanding. Such shares are issued to and are held by Escalator.
Such other shares of Investments to be issued hereunder, when issued, will be
validly issued, fully paid and non-assessable and free from preemptive rights.
There are no other shares of capital stock or other equity securities of
Investments outstanding and there are no outstanding options, warrants, scrip,
rights to subscribe to, calls, commitments of any character whatsoever relating
to or, securities or rights convertible into any shares of capital stock or
Investments and there are no contracts, commitments, understandings, or
arrangements by which Investments is or may become bound to issue any additional
shares of its capital stock or options, warrants, or rights to purchase or
acquire any additional shares of its capital stock.
3.03 Authorization. Investments has all requisite corporate power and
authority to enter into this Agreement and to carry out its obligations
hereunder. The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby have been duly authorized by Investment's
Board of Directors and no other corporate proceedings on the part of Investments
are necessary to authorize this Agreement and the transactions contemplated
hereby. This Agreement is a valid and binding obligation of Investments fully
enforceable against Investments in accordance with its terms. Other than in
connection with or in compliance with the General Corporation Law of the State
of
7
<PAGE>
Pennsylvania, no notice to, filing with, or authorization, consent or approval
of, any public body or authority is necessary for the consummation by
Investments of the transactions contemplated by this Agreement.
3.04 Litigation and Other Proceedings. As of the date hereof,
Investments is not a party to any pending or threatened claim, action, suit,
investigation or proceeding, or subject to any order, judgment, or decree except
for matters which, in the aggregate, would not have a material adverse effect on
the business, conditions (financial or otherwise), prospects, income or
operations of Investments.
3.05 Compliance with Law. As of the date hereof, Investments is in
compliance in all material respects with all laws and regulations applicable to
its operations or with respect to which compliance is a condition of engaging in
the business thereof except for failures to comply, which, in the aggregate,
would not have a material adverse effect on the conduct, operations of or the
financial or other condition of the business of Investments.
ARTICLE IV
MISCELLANEOUS AGREEMENTS AND CONSENTS
Subject to the terms and conditions herein provided, each of the
parties hereto agrees to use all reasonable efforts to take, or cause to be
taken, all actions, and to do, or cause to be done, all things necessary, proper
or advisable under applicable laws and
8
<PAGE>
regulations to consummate and make effective the transactions contemplated by
this Agreement. Escalator will, and will cause Securities to, use their best
efforts to obtain consents of all third parties and governmental bodies
necessary to the consummation of the transactions contemplated by this
Agreement. In case at any time after the transfer of shares pursuant to Section
1.01 hereof, any further action is necessary or desirable to carry out the
purposes of this Agreement, the proper officers and/or directors of Escalator or
Investments, as the case may be, shall take all such necessary action.
ARTICLE V
GENERAL
5.01 Survival of Representations, Warranties, and Agreements. All
representations and warranties contained in this Agreement and all agreements in
this Agreement or in any instrument delivered pursuant to this Agreement shall
survive the transfer and issuance of the stock pursuant to Section 1.01 hereof.
5.02 Miscellaneous. This Agreement: (a) constitutes the entire
agreement of the parties hereto and supersedes all other prior agreements and
understandings, both written and oral, among the parties, or any of them, with
respect to the subject matter hereof; (b) is not intended to confer upon any
person other than the parties hereto any rights or remedies hereunder; (c) shall
not be assigned by operation of law or otherwise; and (d) shall be
9
<PAGE>
governed in all respects by the laws of the State of Delaware.
IN WITNESS WHEREOF, Escalator and Investments have caused this
Agreement to be executed by their respective officers thereunto duly authorized
all as of the date first written above.
WITNESSES: ESCALATOR, INC.,
a Delaware corporation
/s/ Mary Therese Lahey By: Howard A. Scala
____________________________ Its: Chairman
MARY THERESE LAHEY
MY COMMISSION # CC 499681
EXPIRES:October 5, 1999
Bonded Thru Notary Public Underwriters
ESCALATOR INVESTMENTS, INC.,
a Pennsylvania corporation
/s/ Mary Therese Lahey By: Howard A. Scala
____________________________ Its: Chairman
10
<PAGE>
EXHIBIT A
---------
1. DBCC for District No. 7 v. Escalator Securities, Inc. (Complaint No.
C07950049) --- The NASD's District Business Conduct Committee for
District No. 7, in a Decision issued on October 31, 1996, imposed the
following sanctions on Escalator Securities, Inc.: (1) a fine of
$80,000, (2) restitution in the aggregate amount of %67,223, plus
interest from October 11, 1994 until paid, and (3) the expulsion of
Escalator Securities as a member of the NASD. The case is currently on
appeal before the National Business Conduct Committee of the NASD,
which appeal operates as a stay of the sanctions imposed by the DBCC on
Escalator Securities.
2. DBCC No. 7 v. Escalator Securities, Inc. (Complaint No. C07930034) ---
The NASD's District Business Conduct Committee for District No. 7, in a
Decision on Remand issued on May 12, 1997, ordered Escalator Securities
to pay restitution to certain of its customers in the total amount of
$106,359.16. Escalator Securities was further ordered to pay interest
on said amount commencing on July 16, 1992 and continuing until paid.
The case is currently on appeal before the National Business Conduct
Committee of the NASD, which appeal operates as a stay of the order of
restitution imposed by the DBCC on Escalator Securities.
3. Escalator Inc. has defaulted on certain convertible notes it issued
which matured on June 1, 1997. Escalator owes approximately $42,000.00
in principal and accrued interest under the notes. The two holders of
these notes have rejected the Company's offer to convert their debt to
common stock of Escalator and have requested payment. Litigation has
been threatened against Escalator by one noteholder who is owed the
aggregate principal amount of $30,000.00.
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger ("Agreement") is entered into by and
among NUELECTRIC Corp., a Delaware corporation ("NUELECTRIC"), Clean Water,
Technologies, Inc., a Florida corporation ("CWT"), and UTEK, LLC, a Florida
limited liability company ("UTEK").
WHEREAS, UTEK is the majority shareholder of CWT; and
WHEREAS, CWT has the rights to acquire and own the exclusive worldwide
right, title and interest to manufacture and market a proprietary products using
the arsenic removal processes for reducing arsenic in water ("Invention')
invented by Dr. Dagmar Bonin and covered by Vie patent application pending
("Patent Application") listed in Exhibit C; and
WHEREAS, the parties desire to provide for the terms and conditions
upon which Owl will merge into NUELECTRIC in a statutory merger ("Merger") in
accordance with Section 607.1107 of the Corporation Law of Florida ("Florida
Act"), upon consummation of which the assets and business of CWT will be owned
by NUELECTRIC, and all issued and outstanding shares of capita! stock of CWT
will be exchanged for common stock of NUELECTRIC; and
WHEREAS, for federal income tax purposes, it is intended that the
Merger qualify as a tax-free reorganization within the meaning or Section 368
(a)(1)(A) of the Internal Revenue Code of 1986, as amended ("Code").
NOW, THEREFORE, in consideration of the premises rind for other good
and valuable consideration, the receipt, adequacy and sufficiency or which are
hereby acknowledged, the parties agree as follows:
ARTICLE 1
THE MERGER
1.01 The Merger
(a) Agreement to Merge. Subject to the terms and conditions of this
Agreement, at the Effective Time, as defined below, CWT shall be merged with and
into NUELECTRIC in accordance with the provisions or this Agreement and the
Oklahoma Act; (he separate corporate existence or CWT shall cease; and
NUELECTRIC shall continue as the surviving corporation ("Surviving
Corporation"). The constituent corporations ("Constituent Corporations") to the
Merger are NUELECTRIC and CWT. The name or the Surviving Corporation, NUELECTRIC
Coporation shall not be changed by reason of the Merger.
(b) Effective Time. The Merger shall become effective ("Effective
Time")
__________________________________________________Agreement and Plan of Merger 1
<PAGE>
upon filing of a Certificate of Merger substantially in the form attached
Exhibit A (`Certificate of Merger") with the Secretary of State of the State of
Florida In accordance with the applicable provisions of the Florida Act.
(c) Appointment of Service Agent. NUELECTRIC hereby irrevocably
appoints the Secretary of State of the State of Florida as its agent to accept
process in Florida in any proceeding for the enforcement of any obligation of
any Constituent Corporation in Florida as well as for the enforcement of any
obligation of the Surviving Corporation arising from or by reason of the Merger,
including any suit or other proceeding to enforce appraisal rights of any
shareholder of CWT. NUELECTRIC designates that all such process received by the
Secretary of State of Florida shall be sent to NUELECTRIC at 624 East Tarpon
Avenue, Tarpon Springs, Florida 34689.
(d) Effect of the Merger. At the Effective Time, all rights, powers,
privileges, franchises, licenses and permits of the Constituent Corporations and
all property, real, personal and mixed, shall be vested in the Surviving
Corporation; and all debts, duties, liabilities and claims of every kind,
character and description of the Constituent Corporations shall be debts,
duties, liabilities and claims of the Surviving Corporation and may be enforced
against the Surviving Corporation to the same extent as if such debts, duties,
liabilities and claims had been incurred by it originally. All rights of
creditors of the Constituent Corporations and all liens upon property of any
Constituent Corporation shall be preserved unimpaired and shall not be altered
in any way by reason of the Merger.
1.02 Conversion of Stock. At the Effective Time, by virtue of the
Merger and without any action on the part of the shareholders of the Constituent
Corporations:
(i) The 10,000,000 Shares of CWT that are issued and outstanding at the
Effective Time shall be converted into 893,000 shares of common stock of the
Surviving Corporation issued which by agreement of the shareholders of CWT shall
be issued to UTEK, University of South Florida Research Foundation (USFRF),
Bruce Clark and to Dr.Clifford Gross as they mutually agree; and
(ii) Each share of common stock of NUELECTRIC issued and outstanding at
the Effective Time shall remain issued and outstanding as one share of common
stock of the Surviving Corporation,
1.03 Effect of Merqer.
-----------------
(a) Rights in CWT Cease. At and after the Effective Time, the holder of
each certificate of common stock of CWT shall cease to have any rights as a
shareholder of CWT. All dividends or other distributions with respect to CWT
common stock prior to the Effective Time shall be payable to the shareholders of
CWT without interest upon surrender of certificates representing CWT common
stock.
(b) Closure of CWT Stock Records. From and after the Effective Time,
the stock transfer books of CWT shall be closed, and there shall be no further
registration of stock transfers on the records of CWT.
1.04 Certificate of Incorporation of the Surviving Corporation The
certificate of Incorporation of the Surviving Corporation shall not be changed
by reason of the Merger,
__________________________________________________Agreement and Plan of Merger 2
<PAGE>
except that the name of the Surviving Corporation is being changed to
NUELECTRIC, Inc.
1.O5 Bylaws of Surviving Corporation. The Bylaws of the Surviving
Corporation shall not be changed by reason of the Merger.
1.06 Directors of theSurviving Corporation. The directors of the
Surviving Corporation immediately after the Effective Time shall be the persons
named in Exhibit B until each of their respective successors is duly elected and
qualified.
1.07 Officers of the Surviving Corporation. The officers ol~ the
Surviving Corporation immediately after the Effective Time shall be the persons
set forth in Exhibit B until each of their respective successors is duly epected
and qualified.
1.08 ~ The Closing of the Merger shall take place at the office of
NuElectric Corporation, 624 East Tarpon Avenue, Tarpon Springs, Florida, 34689.
ARTICLE 11
REPRESENTATIONS AND WARRANTIES
2.01 General Representations and Warranties of UTEK represents a
warrants to NUELECTRIC that the facts set forth below are true and correct:
(a) Organization. CWT is a corporation duly organized, validly existing
and in good standing under the laws of the State of FIorida, and that CVVT has
the requisite power and authority to conduct its business.
(b) Authorization. The execution of this Agreement and the consummation
of the Merger and the other transactions contemplated hereby have been duly
authorized by the Board of Directors and shareholders of CWT; no other corporate
action on its part is necessary in order to execute, denver, consummate and
perform it obliglations hereunder; and CWT has all requisite corporate and other
authority to execute and deliver this Agreement and consummate the transactions
contemplated hereby.
(c) Capitalization. The authorized capital of CWT consists of
10,000,000 shares of common stock, par value $.001 per share; at the date hereo~
8,370,000 shares of common stock were issued and outstanding and owned by UTEK,
700,000 shares are owned by USFRF, 465,000 shares are owned by Bruce Clark and
465,000 shares are owned by Dr. Gross and no shares were held in its treasury.
All Issued and outstanding shares of common stock of CWT have been duly and
validly issued and are filly paid and non~ assessable shares and have not been
issued in violation of any preemptive or other rights of ~ny other person or any
applicable laws. There are no outstanding options, warrants, commitments, call
or other rights or agreements requiring it to issue any shares of CWT common
stock and securities convectib~e into shares of CWT's common stock of anyone for
any reason whatsoever.
__________________________________________________Agreement and Plan of Merger 3
<PAGE>
(d) Binding Effect. The execution, delivery, performance and
consummation of the Merger and the transactions contemplated hereby will not
violate any obligation to which CWT is a party and will not create a default
hereunder; and this Agreement constitutes a legal, valid and binding obligation
of CWT, enforceable in accordance with its terms, except as the enforcement may
be limited by bankruptcy, insolvency, moratorium, or similar laws affecting
creditor's rights generally and by the availability of injunctive relief,
specific performance or other equitable remedies.
(e) Litigation Relating to this Agreement. There are no suits, actions
or proceedings pending or to the knowledge of CWT or UTEK threatened which seek
to enjoin the Merger or the transactions contemplated by this Agreement or
which, if adversely decided, wouid have a materially adverse effect on the
business, results of operations, assets, prospects, the Patent Appplicat
License, or the results of the operations of CWT,
(f) No Conflicting Agreements. Neither the execution and delivery of
this Agreement nor the fulfillment of or compliance by CWT with the terms or
provisions hereof will result in a breach of the terms, conditions or provisions
of, or constitute a default under, or result in a violation of, CWT's corporate
charter or bylaws, the Patent Applications, the License (as defined below) or
any agreement, contract, instrument, order, judgment or decree to which CVVT is
a party or by which CWT or any of its assets is bound, or violate any provision
of any applicable law, rule or regulation or any order, decree, writ or
injunction of any court or government entity which materially affects its assets
or business.
(g) Consents. No consent from or approval of any court, governmental
entity or any other person is necessary in connection with execution and
delivery of this Agreement by CWT or performance of the obligations of CVVT
hereunder or under any other agreement to which CWT is a party; and the
consummation of the transactions contemplated by this Agreement will not require
the approval of any entity or person in order to prevent the termination of the
Patent Applications, the License, or any other material right, privilege,
license or agreement relating to CWT or its assets or business.
(h) Title to Assets. CWT has or will by Closing have good and
marketable title to its assets (tangible and intangible), free and clear of all
liens, claims, charges, mortgages, options, restrictions, secuilty agreements
and other encumbrances of every kind or nature whatsoever.
(i) The Patent Applications and the License.
---------------------------------------
(1) To the knowledge of UTEK and CWT; the Patent Application which
is pending is being prosecuted in good faith with diligence.
(2) The Invention is owned by USF Research Foundation Inc., a
Florida educational corporation ("USFRF"). The Foundation has all
right, power, authority and ownership and entitlement to file,
prosecute and maintain in effect the Patents and Patent Applications
with respect to the Invention listed in Exhibit C hereto; and
__________________________________________________Agreement and Plan of Merger 4
<PAGE>
(3) Dr. Dagmar Bonin is the only Inventor of the Invention; and she has
assigned all her rights in the Invention of USF; and
(4) The Exclusive License Agreement ("License") dated September, 1998,
by and between CWT and the USFRF, covering the Invention when executed will be
legal, valid, binding and enforceable in accordance with its terms (a final copy
has been provided to NUELECTRIC); and
(5) NUELECTRIC understands that CWT makes no representation and
provides no assurances that Commercial Exploitation of Licensed Products under
this Agreement does not, and will not in the future, infringe or otherwise
violate the rights of others.
(6) Except as otherwise expressly set fort in this Agreement, CWT makes
no representation and extend no warranties of any kind, either express or
implied, including but not limited to warranties of merchantability, fitness for
a particular purpose, noninfringement, and validity of USF Patent rights.
(j) Liabilities of CWT. CWT has no assets, no liabilities of any kind,
character or description except those created by the License Agreement with USF,
final copies of which have been provided to NUELECTRIC (Exhibit D).
(k) Financial Statements. The unaudited financial statements of CWT
attached as (Exhibit E) present fairly its financial position and the results of
its operations on the dates for the periods shown therein; provided, however,
that interim fmancial statements are subject to customary year-end adjustments
and accruals that, in the aggregate, will not have a material adverse effect on
the overall financial condition or results of its operations. CWT has not
engaged in any business not reflected in its financial statements. There have
been no material adverse changes in the nature of its business, prospects, the
value of assets or the financial condition since the date of its financial
statements. There are no outstanding obflgations or liabilities of CWT except as
specifically set forth in the CWT financial statements and Licensing Agreement
with USF.
(1) Taxes. All returns, reports, statements and other similar filings
required to be filed by CWT with respect to any federal, state, local or foreign
taxes, assessments, interests, penalties, deficiencies, fees and other
governmental charges or impositions have been timely filed with the appropriate
governmental agencies in all jurisdictions in which such tax returns are
required to be filed; all such tax returns properly reflect all liabilities of
CWT for taxes for the periods, property or events covered thereby; and all
taxes, whether or not reflected on those tax returns, and all taxes claims to be
due from CWT by any taxing authority, have been properly paid, except to the
extent reflected on Schedule 2.01(m) where CWT has contested in good faith by
appropriate proceedings and reserves have been established on its financial
statements to the fill extent if the contest is adversely decided against it.
CWT has not received any notice of assessment or proposed assessment in
connection with any returns, CWT has not extended or waived the application of
any statute of limitations of any jurisdiction regarding the assessment or
collection of any taxes. There are no tax liens (other than any lien which
arises by operation of Jaw for current taxes not yet due and payable) on any of
its assets. There is no basis for any additional assessment of taxes, interest
or penalties. CWT has made all deposits required by law to be made with respect
to
__________________________________________________Agreement and Plan of Merger 5
<PAGE>
employees' withholding and other employment taxes, including without limitation
the portion of such deposits relating to taxes imposed upon CWT.
(m) Absence of Certain Changes or Events. CWT has not, and without the
written consent of NUELECTRIC, it will not have:
(i) Sold, encumbered, assigned or transferred any of its
material assets or its interest in the Patent Applications,
the License or any other material asset; or
(ii) Amended or terminated the License; or
(iii) Suffered any material damage, destruction or loss; or
(iv) Made any commitments or agreements for capital
expenditures or otherwise; or
(v) Entered into any transaction or made any commitment not
disclosed to NUELECTRIC; or
(n) Material Contracts. A complete and accurate copy of all material
agreements, contracts and commitments of the following types, whether written or
oral to which it is a party or is bound, has been provided to NUELECTRIC and
such agreements are in full force and effect without amendment. In addition:
(i) There are no outstanding unpaid promissory notes,
mortgages, indentures, deed of trust, security agreements and
other agreements and instruments relating to the borrowing of
money by or any extension of credit to CWT; and
(ii) There are no outstanding operating agreements, lease
agreements or similar agreements by which CWT is bound; and
(iii) The complete final drafts of the License Agreement, and
the Patent Applications with all schedules, exhibits and
amendments relating thereto have been provided to NUELECTRIC;
and
(iv) There are no outstanding licenses to or from others of
any intellectual property and trade names; and
(v) There are not outstanding contracts or commitments to
sell, lease or otherwise dispose of any of CWT's property; and
(o) Compliance with Laws. CWT is in compliance with all applicable
laws, rules, regulations and orders promulgated by any federal, state or local
government body or agency relating to its business and operations. CWT owns all
franchises, licenses, permits, easements, rights, applications, filings,
registration and other authorizations which are necessary for it to conduct
business, all of which are valid and in full force and effect and CWT is in
full compliance therewith,
__________________________________________________Agreement and Plan of Merger 6
<PAGE>
(p) Litigation. There is no suit, action or any arbitration,
administrative, legal or other proceeding of any kind or character, or any
governmental investigation pending or threatened against CWT or the Patents, the
Patent Applications, the License or the Research Agreement affecting its assets
or business, and there is no factual basis the therefor. There are no pending or
threatened actions or proceedings before any court, arbitrator or administrative
agency which would, if adversely determined, individually or in the aggregate,
materially and adversely affect its assets or business.
(q) Employees. CWT has no employees. CWT is not a party to or bound by
any employment agreement or any collective bargaining agreement with respect to
any of the employees.
(r) Employee Benefit Plans. There are no employee benefit plans in
effect, and there are no outstanding or unfunded liabilities to employees of
CWT.
(s) Books and Records. The books and records of CWT are complete and
accurate in all material respects, fairly present its business and operations,
have beern maintained in accordance with good business practices, and accurately
reflect in all material respects its business, financial condition and
liabilities.
(t) No_Broker's Fees, Neither UTEK nor CWT has incurred any finder's,
broker's, investment banking, financial, advisory or other similar fees or
obligations.
(u) Full Disclosure. All representations or warranties of UTEK and CWT
are true, correct and complete in all material respects to the best of our
knowledge on the date hereof and shall be true, correct and complete in all
material respects as of the Closing as if they were made on such date.
2.02 General Representations and Warranties of NUELECTRIC. NUELECTRIC
represents and warrants to UTEK and CWT that the facts set forth are true and
correct.
(a) Organization. NUELECTRIC is a corporation duly organized, validly
existing and in good standing under the Laws of the State of Delaware, is
qualified to do business as a foreign corporation in each other jurisdiction in
which the conduct of its business or the ownership of its properties require
such qualification, and has all requisite power and authority to conduct is
business and operate properties.
(b) Authorization. The execution of this Agreement and the consummation
of the Merger and the other transactions contemplated hereby have been duly
authorized by the Board of Directors and shareholders of NUELECT1C; no other
corporate action on its part is necessary in order to execute, deliver,
consummate and perform its obligations hereunder; and it has all requisite
corporate and other authority to execute and deliver this Agreement and
consummate the transactions contemplated hereby.
(c) Capitalization. The authorized capital of NUELECTRIC consists of
50,000,000 shares of common stock, par value $.001 per share; and at the
Effective Time of the Merger, up to 4,000,000 shares of its common stock will be
issued and outstanding immediately alter the Effective Time. All issued and
outstanding shares of common stock of NUELECTRIC have been duly and validly
issued and are fully paid and non-assessable shares and have not been issued in
violation of any preemptive or
__________________________________________________Agreement and Plan of Merger 7
<PAGE>
other rights of any other person or any applicable laws. There will be no
outstanding options, warrants, commitments, calls or other rights or agreements
requiring it to issue any shares of NUELECTRIC common stock or securities
convertible into shares of its common stock to anyone for any reason whatsoever
immediately after the Effective Time.
(d) Binding Effect. The execution, delivery, performance and
consummation of the Merger and the transactions contemplated hereby will not
violate any obligation to which NUELECTRIC is a party and will not create a
default hereunder, and this Agreement constitutes a legal, valid and binding
obligation of NUELECTRIC, enforceable in accordance with its terms, except as
the enforcement may be limited by bankruptcy, insolvency, moratorium, or similar
Laws affecting creditor's rights generally and by the availability of injunctive
relief, specific performance or other equitable remedies.
(e) Litigation Relating to this Aqreement. There are no suits, actions
or proceedings pending or to its knowledge threatened which seek to enjoin the
Merger or the transactions contemplated by this Agreement or which, If adversely
decided, would have a materially adverse effect on its business, results of
operations, assets, prospects or the results of its operations of NUELECTRIC.
(f) No Conflicting Agreements. Neither the execution and delivery of
this Agreement nor the fulfillment of or compliance by NUELECTRIC with the terms
or provisions thereof will result in a breach of the terms, conditions or
provisions of, or constitute a default under, or result in a violation of, its
corporate charter or bylaws, or any agreement, contract, instrument, order,
judgment or decree to which it is a party or by which it or any of the assets is
bound, or violate any provision of any applicable law, rule or regulation or any
order, decree, writ or injunction of any court or governmental entity which
materially affects its assets or business.
(g) Consents. No consent from or approval of any court, governmental
entity or any other person Is necessary in connection with its execution and
delivery of this Agreement and performance of the obligations of NUELECTRIC
hereunder or under any other agreement to which NUELECTRIC is a party; and the
consummation of the transactions contemplated by this Agreement will not require
the approval of any entity or person in order to prevent the termination of any
material right, privilege, license or agreement relating to NUELECTRIC or its
assets or business.
(h) Title to Its Assets. NUELECTRIC has good and marketable title to
its assess (tangible and intangible), free and clear of all charges, claims,
liens, mortgages, options, restrictions, security agreements and other
encumbrances of every kind or nature whatsoever.
(i) Condition of Tangible Assets. AU of its tangible assets have been
operated in accordance with customary operating practices generally acceptable
in its industry to which and have been maintained and are in good working order
and repair in the ordinary course of business, subject only to reasonable and
ordinary wear and tear.
(j) Financial Statements. The unaudited financial statements of
__________________________________________________Agreement and Plan of Merger 8
<PAGE>
NUELECTRIC attached as Exhibit F present fairly its flnancial position and the
results of its operations on the dates and for the periods shown therein;
provided, however, that interim financial statements are subject to customary
year-end adjustments and accruals that, in the aggregate, will not have a
material adverse effect on the overall financial condition or results of its
operations. NUELECTRIC has not engaged in any business not reflected in its
financial statements. There have been no material adverse changes in the nature
of its business, prospects, the value of assets or the financiaV condition since
the date of its financial statements. There are no outstanding obligations or
liabilities of NUELECTRIC except as specifically set forth in the NUELECTRIC
financial statements.
(k) Taxes. All returns, reports, statements and other similar filings
required to be filed by NUELECTRIC with respect to any federal, state, local or
foreign taxes, assessments, interests, penalties, deficiencies, fees and other
governmental charges or impositions have been timely filed with the appropriate
governmental agencies in all jurisdictions in which such tax returns are
required to be filed: all such tax returns properly reflect all liabilities of
NUELECTRIC for taxes for the periods, property or events covered thereby; and
all taxes, whether or not reflected on those tax returns, and all taxes claimed
to be due from NUELECTRIC by any taxing authority, have been properly paid,
except to the extent reflected in Exhibit E where NUELECTRIC has contested in
good faith by appropriate proceedings and reserves have been established on its
financial statements to the full extent if the contest is adversely decided
against it. NUELECTRIC has not received any notice of assessment or proposed
assessment in connection with any tax returns, NUELECTRIC has not extended or
waived the application of any statute of limitations of any jurisdiction
regarding the assessment or collection of any taxes. There are no tax liens
(other than any lien which arises by operation of law for current taxes not yet
due and payable) on any of its assets. There is no basis for any additional
assessment of taxes, interest or penalties. NUELECTRIC has made all deposits
required by law to be made with respect to employees' withholding and other
employment taxes, including without limitation the portion of such deposits
relating to taxes imposed upon NUELECTRIC.
(l) Absence of Certain Changes or Events. NUELECTRIC has not and,
without the written consent of CWT, it will not have:
(i) Sold, encumbered, assigned or transferred any of its
material assets for less than fair consideration; or
(ii) Amended or terminated any material agreement; or
(iii) Suffered any material damage, destruction or loss; or
(iv) Received notice or had knowledge of any material adverse
effect on Its material assets; or
(v) Made any commitments or agreements for capital
expenditures; or
__________________________________________________Agreement and Plan of Merger 9
<PAGE>
(vi) Entered into any transaction other than in the ordinary
course of business consistent with past practice: or
(vii) Agreed to take any of the actions set forth in this
paragraph.
(m) Material Contracts. A complete and accurate copy of all material
agreements, contracts and commitments of the following types, whether written or
oral to which it is a party or is bound, has been provided to CWT:
(1) All material promissory notes, mortgages, indentures, deed
of trust security agreements and other agreements and
instruments relating to the borrowing of money by or any
extension of credit to it; and
(ii) All material operating agreements and lease agreements;
and
(iii) All material licenses to or from others of any
intellectual property and trade names.
(n) Compliance with Laws. NUELECTRIC is in compliance with all
applicable laws, rules, regulations and orders promulgated by any federal, state
or local governmental body or agency relating to its business and operations.
NUELECTRIC owns all franchises, licenses, permits, easements, rights,
applications, filings, registration and other authorizations which are necessary
for it to conduct business, all of which are valid and in full force and effect,
and it is in full compliance therewith.
(o) Litigation. There is no suit, action or any arbitration,
administrative, legal or other proceeding of any kind or character, or any
governmental investigation pending or threatened against it affecting its assets
or business, and there is no factual basis therefor. There are no pending or
threatened actions or proceedings before any court, arbitrator or administrative
agency which would, if adversely determined, individually or in the aggregate,
materially and adversely affect its assets or business.
(p) Employees. NUELECTRIC has three employees. NUELECTRIC has no
written agreements with its employees.
(q) Employee Benefit Plans and Arrangements. There are no employee
benefit plans in effect, and there are no unfunded liabilities to employees.
(r) Books and Records. The books and records of NUELECTRIC are complete
and accurate in all material respects, fairly present its bUsiness and
operations, have been maintained in accordance with good business practices, and
accurately reflect in all material respects its business and financial
condition.
(s) No Broker's Fees. NUELECTRIC has incurred no finder's, broker's,
investment banking, financial, advisory or other similar fee.
(t) Full Disclosure. All representations or warranties of NUELECTRIC
are
_________________________________________________Agreement and Plan of Merger 10
<PAGE>
true, correct and complete in all material respects on the date hereof and shall
be true, correct and complete in all material respects as of the Closing as if
they were made on such date. No statement made by it herein or in the exhibits
hereto or any document delivered by it or on its behalf pursuant to this
Agreement contains an untrue statement of material fact or omits to state all
material facts necessary to make the statements therein not misleading in any
material respect.
2.03. Investment Representations of UTEK. UTEK represents and warrants
to NuElectric that:
(a) GeneraL It has such knowledge and experience in financial and
business matters as to be capable of evaluating the risks and merits of an
investment in the shares ("Shares") of common stock of NUELECTRIC pursuant to
the Merger. It is able to bear the economic risk of the investment of the
Shares, including the risk of a total loss of the investment in the Shares. The
acquisitions of the Shares is for its own account and is for investment. Except
a permitted by law, it has no present intention of selling, transferring or
otherwise disposing in any way of all or any portion of the shares. All
information that it has supplied to NUELECTRIC is true and correct. It has
conducted all investigations and due diligence concerning NUELECTRIC which it
deems appropriate and it has found all such information obtained fully
acceptable. It has had an opportunity to ask questions of the officer and
directors of NUELECTRIC concerning the Shares and the business and financial
condition of and prospects for NIJELECTRIC, and the officers and directors
NUELECTRIC have adequately answered all questions asked and made all relevant
information available to them.
(b) Stock Transfer Restrictions, None of the shares being issued to
CWT are free-trading. The following restrictions will apply-50% of the stock
issued will have a one-year legend under Rule 144; the other 50% will have a
two-year restricted legend under rule 144.
ARTICLE HI
TRANSACTIONS PRIOR TO CLOSING
3.01 Corporate Approvals. Prior to Closing, each of the parties shall
submit this Agreement to its Board of Directors and shareholders and obtain
approval thereof. Copies of corporate actions taken shall be provided to each
party.
3.02 Access to Information. Each party agrees to permit upon reasonable
notice the attorneys, accountants, and other representatives of the other
parties reasonable access (luring normal business hours to its properties and
its books and records to make reasonable investigations with respect to its
affairs, and to make its officers and employees available to answer questions
and provide additional information as reasonably requested.
3.03 Expenses. Each party agrees to beat its own expenses in connection
with the negotiation and consummation of the Merger and the transactions
contemplated hereby. 3.04 Covenants. Except as permitted in writing, each party
agrees that it will:
(i) Use its good faith efforts to obtain all requisite
licenses, permits.
_________________________________________________Agreement and Plan of Merger 11
<PAGE>
consents, approvals and authorizations necessary in order to
consummate the Merger; and
(11) Notify the other parties upon the occurrence of any event
which would have a materially adverse effect upon the Merger
or the transactions contemplated hereby or upon the business,
assets or results of operations; and
(iii) Not modify its corporate structure, except as necessary
or advisable in order to consummate the Merger and the
transactions contemplated hereby.
ARTICLE IV
CONDITIONS PRECEDENT
The obligation of the parties to consummate the Merger and the
transactions contemplated hereby are subject to the following conditions which
may be waived to the extent permitted by saw:
(a) Each party must obtain the approval of its Board of Directors and
shareholders in accordance with applicable law, and such approval shall not have
been rescinded or restricted; and
(b) Each party shall obtain all requisite licenses, permits, consents,
authorizations and approvals required to complete the Merger and the
transactions contemplated hereby; and
(c) There shall be no effective injunction, writ or preliminary
restraining order or other order of a similar nature issued by any court or
governmental agency having jurisdiction directing that the Merger or the
transactions contemplated hereby shall not be consummated; and
(d) The representations and warranties of the parties shall be true and
correct in all material respects at the Effective Time; and
(e) The Patent Applications have been prosecuted in good faith with
reasonable diligence.
(f) The License Agreement is valid and in full force and effect without
any default therein.
ARTICLE V
INDEMNIFICATION
(a) By UTEK. UTEK agrees to indemnify, defend and hold harmless
NUELECTRIC and its shareholders, directors, officers, employees, agents and
representatives and their respective successors and assigns against and in
respect of
_________________________________________________Agreement and Plan of Merger 12
<PAGE>
any cost, damage, expense (including reasonable legal lees and actual expenses),
liability or loss incurred or suffered by any of them resulting from or arising
out of the (~) breach, inaccuracy, misrepresentation or untruth of any
representation or warranty, or the nonfulfillment of any agreement or covenant
of UTEK contained in this Agreement or in any document delivered by UTEK or CWT
to NUELECTRIC pursuant hereto; and (ii) any action, assessment, claim, demand,
proceeding or suit incident to any of the foregoing. The liability of UTEK
hereunder may be satisfied by the return to NUELECTRIC of shares of NUELECTRIC
common stock issued pursuant hereto.
(b) By NUELECTRIC. NUELECTRIC agrees 10 indemnify, defend and hold
harmless UTEK and its shareholders, officers, directors, employees, agents and
representatives and their respective successors and assigns against and in
respect of any cost, damage, expense (including reasonable legal fees and actual
expenses), liability or loss incurred or suffered by any of them resulting from
or arising out of: (I) the breach, inaccuracy, misrepresentation or untruth of
any representation, warranty, or the nonfulfillment of any agreement or covenant
of NUELECTRIC contained in this Agreement or in any document delivered by it to
UTEK pursuant hereto; and (ii) any action, assessment, claim, demand, proceeding
or suit incident to any of the foregoing.
(c) Costs. The indemnification rights and obligations of a party hereto
shall include the right to receive and the duty to pay and reimburse the
indemnified party all its reasonable costs and expenses incurred in the
enforcement of its rights hereunder.
(d) Survival of Representations and Warranties.
-------------------------------------------
(1) The representations and warranties made by UTEK shall
survive for a period of 1 year after Closing, and thereafter and such
representation and warranties shall be extinguished, except with
respect to claims then pending for which specific notice has been given
during such 1 year period. UTEK shall have liability and responsibility
for the surviving representations and warranties made by it herein,
notwithstanding any due diligence investigation or examination by
NUELECTRIC.
(2) The representations and warranties made by NUELECTRIC
shall survive for a period of 1 year after Closing, and thereafter all
such representations and warranties shall be extinguished, except with
respect to claims then pending for which specific notice has been given
during such 1 year period. NUELECTRIC shall have liability and
responsibility for the surviving representations and warranties made to
NUELECTRIC, notwithstanding any due diligence investigation or
examination by UTEK.
(e) Limitations on Liability. Notwithstanding any, other provision
herein to the contrary, neither party hereto shall be liable to the other party
for any cost, damage, expense, liability or loss under this indemnification
provision until after the sum of all amounts individually when added to all
other such amounts in the aggregate exceeds $500, and then such liability shall
apply only to matters in excess of $500.
(f) Rights of Indemnitors. The indemnified party shall notify the
indemnifying party of the assertion of commencement of such action, claim or
proceeding within a reasonable period of time or, if citation or service of
process has been made, within 15
_________________________________________________Agreement and Plan of Merger 13
<PAGE>
days thereafter. The indemnified party may, at its option and at its sole
expense, participate in the defense of and contest any such action, claim or
proceeding; provided, however, the indemnified party shall at all times also
have the right to participate fully therein. If the indemnifying party, within a
reasonable time after receiving such notice, fails to participate, the
indemnified party shall have the right, but shall not be obligated, to undertake
the defense of the action, claim or proceeding for the account of and at the
risk of the indemnifying party; provided, however, in the event that the
indemnified party shall determine to compromise or settle (exercising its
judgment in good faith) any such action, claim or proceeding, the indemnified
party shall be required to give the indemnifying party 15 days' notice of such
determination after it receipt of actual notice of the claim. The indemnified
party shall then be entitled to compromise or settle the action, claim, or
proceeding for the account of and at the risk of the indemnifying party;
provided, however, the settlement shall be effective without the consent of both
the indemnifying and indemnified parties, which consent shall not be reasonably
withheld. The parties agree that any indemnified party may join any indemnifying
party in any action, claim or proceeding brought by a third part, as to which
any right of indemnity created by this Agreement would or might apply, for the
purpose of enforcing any right of the indemnity granted to such indemnified,
party pursuant to this Agreement.
(g) Additional Rights. Any right of indemnity of any party pursuant to
this Agreement shall be in addition to and shall not operate as a limitation on
any other right to indemnity of such party pursuant to this Agreement, any
document or instrument executed in connection with the consummation of the
transaction contemplated hereby or otherwise.
ARTICLE VI
ARBITRATION
In the event a dispute arises with respect to the interpretation or
effect of this Agreement or concerning the rights or obligations of the parties
hereto, the parties agree to negotiate in good faith with reasonable diligence
in an effort to resolve the dispute in a mutually acceptable manner. Failing to
reach a resolution thereof, either party shall have the right to submit the
dispute to be settled by arbitration under the Commercial Rules of Arbitration
of the American Arbitration Association. The parties agree that all arbitration
shall be conducted in Tampa, Florida, unless the parties mutually agree to the
contrary. The cost of arbitration shall be borne by the party against whom the
award is rendered or, if in the interest of fairness, as allocated in accordance
with the judgment of the arbitrators. All awards in arbitration made in good
faith and not infected with fraud or other misconduct shall be final and
binding.
ARTICLE VII
MISCELLANEOUS
No party may assign this Agreement or any right or obligation of it
hereunder without the prior written consent of the other parties hereto. No
permitted assignment shall relieve a party of its obligations under this
Agreement without the separate written
_________________________________________________Agreement and Plan of Merger 14
<PAGE>
consent of the other parties. This Agreement shall be binding upon and enure to
the benefit of the parties and their respective permitted successors and
assigns. Each party agrees that it will comply with all applicable laws, rules
and regulations in the execution and performance of its obligations under this
Agreement. This Agreement shall be governed by and construct in accordance with
the laws of the State of Florida. This document constitutes a complete and
entire agreement among the parties with reference to the subject matters set
forth herein. No statement or agreement, oral or written, made prior to or at
the execution hereof and no prior course of dealing or practice by either party
shall vary or modify the terms set forth herein without the prior consent of the
other parties hereto. This Agreement may be amended only by a written document
signed by the parties. Notices or other communications required to be made in
connection with this Agreement shall be delivered to the parties at the address
set forth below or at such other address as may be changed from time to time by
giving written notice to the other parties. This Agreement may be executed in
multiple counterparts, each of which shall constitute one and a single
Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed by a duly authorized officer this 30th day of June 1999.
NUELECTRIC CORPORATION CLEAN WATER
TECHNOLOGIES, INC.
By: /s/ Laurie C. Scala By: /s/ Clifford M. Gross
----------------------------- ----------------------------
Laurie C. Scala, President Dr. Clifford M. Gross, President
UTEK, LLC
By: /s/ Clifford M. Gross
----------------------------
Dr. Clifford M. Gross
Chief Executive Officer
_________________________________________________Agreement and Plan of Merger 15
<PAGE>
EXHIBIT A
CERTIFICATE OF MERGER
TO THE SECRETARY OF STATE OF THE STATE OF Florida, Capital Bldg., 401 South
Monroe Street, Tallahassee, Florida 32399.
This Certificate of Merger is being filed pursuant to Section 607.1107
of the Florida General Corporation Act. In lieu of filing an executed Agreement
and Plan of Merger, the Surviving Corporation hereby states and certifies as
follows:
1. The names and states of incorporation of each of the Constituent
Corporations are:
NAME OF CORPORATION STATE OF INCORPORATION
------------------- ----------------------
NuElectric Corporation Delaware
Clean Water Technologies, Inc. Florida
2. An Agreement and Plan of Merger has been approved, adopted, certified,
executed and acknowledged by each Constituent Corporation, in
accordance with the provisions of Section 601.1107 of the Corporation
Laws of Florida.
3. The name of the Surviving Corporation is NUELECTRIC CORPORATION.
4. The Certificate of Incorporation of the Surviving Corporation is not
being changed by reason of the Merger.
5. The executed Agreement and Plan of Merger is on file at the principal
place of business of the Surviving Corporation at 624 East Tarpon
Avenue, Tarpon Springs, Florida 34689.
6. A copy of the Agreement and Plan of Merger will be furnished on request
and without cost to any shareholder of any Constituent corporation.
7. The authorized capital of Clean Water Technologies, Inc. Is 10,000,000
shares of common stock, par value $.001 per share, and all shares
issued and outstanding voted for the Merger.
The authorized capital of NUELECTRIC CORPORATION, is 50,000,000 shares
of common stock, of which 2,917,855 are issued and outstanding, a
majority of which voted for approval of the Merger.
_________________________________________________Agreement and Plan of Merger 16
<PAGE>
IN WITNESS WHEREOF, the Surviving Corporation has caused this
Certificate of Merger to be executed by its President and attested by its
Secretary, this 3Oth day of June, 1999
NUELECTRTC CORPORATION
By: /s/ Laurie C. Scala, Secretary
------------------------------
Laurie C. Scala, President
ATTEST:
By: /s/ Laurie C. Scala, Secretary
------------------------------
Laurie C. Scala, Secretary
_________________________________________________Agreement and Plan of Merger 17
CERTIFICATE OF INCORPORATION
OF
ESCALATOR, INC.
The Undersigned, a natural person over the age of eighteen (18) years
acting as an incorporator of the Corporation under the Delaware Corporation Law,
adopt the following certificate and Articles of Incorporation for such
corporation:
ARTICLE I
The name of the corporation is ESCALATOR, INC. ARTICLE II
The registered office of the Corporation in the state of Delaware is
Corporation Trust Center, 1209 Orange Street, Wilmington, Delaware, county of
New Castle. The registered agent in charge thereof at such address is The
Corporation Trust Company.
ARTICLE III
The nature of the business, and the objects and purposes proposed to be
transacted, promoted and carried on, are to do any or all things herein
mentioned, as fully and to the same extent as natural persons might or could do,
and in any part of the world, viz.:
"The purpose of the Corporation is to engage in any Lawful act or
activity for which corporations may be organized under the General
Corporation Law of Delaware."
ARTICLE IV
The amount of the total authorized capital stock of this Corporation is
Fifty Thousand Dollars ($100,000) divided into 50,000,000 shares of $.002 par
value each. All shares shall be designated as common stock. Shareholders shall
not have pre-emptive rights or be entitled to cumulative voting in connection
with the shares of the Company's common stock.
<PAGE>
ARTICLE V
The name and mailing address of the incorporator of the Company is:
A.O. Headman, Jr. 420 East South Temple, Suite 334
Salt Lake City, UT 84111
ARTICLE VI
The powers of the incorporator(s) shall terminate upon the filing of
this certificate of incorporation, and the names and mailing addresses of the
persons to serve as directors until the first annual meeting of stockholders of
until successors are elected and qualify are:
Name of Director Mailing Address
---------------- ---------------
Laura Lee Sorenson 9025 Oakwood Place
West Jordan, Utah 84084
Lewis B. Sorenson 9025 Oakwood Place
West Jordan, Utah 84084
John F. Nemelka 125 South 10th East
Mapleton, Utah 84663
The number of members of the Board of Directors shall be fixed from
time to time by the Board of Directors. If any vacancy occurs, the remaining
directors by an affirmative vote of a majority thereof, may elect a director to
fill the vacancy until the next annual meeting of stockholders.
ARTICLE VII
No contract or transaction between the corporation and one or more of
its directors or officers, or between the Corporation and any other corporation,
partnership, association, or other organization in which one or more of its
directors or officers are directors or officers, or have a financial interest,
shall be void or voidable solely for this reason, or solely because the director
or officer is present at or participates in the meeting of the board of
committee thereof which authorizes the contract or transaction, or solely
because his or their votes are counted for such purpose, if:
2
<PAGE>
1. The material facts as to his interest and as to the contract or
transaction are disclosed or are known to the Board of Directors or the
committee, and the Board or committee in good faith authorizes the contract or
transaction by a vote sufficient for such purpose without counting the vote of
the interested director or directors; or
2. The material facts as to his interest and as to the contract or
transaction are disclosed or are known to the stockholders entitled to vote
thereon, and the contract or transaction is specifically approved in good faith
by vote of the stockholders; or
3. The contract or transaction is fair as to the Corporation as of the
time it is authorized, approved or ratified, by the Board of Directors, a
committee thereof, or the stockholders.
Interested directors may be counted in determining the presence of a
quorum at a meeting of the Board of Directors or of a committee which authorizes
the contract or transaction.
The undersigned, for the purpose of forming a corporation under the
laws of the state of Delaware, does make, file and record this certificate, and
does certify that the facts stated herein are true; and has executed this
Certificate of Incorporation.
Dated: April 15, 1986
/s/ A. O. Headman
--------------------------------
Incorporator
3
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
Escalator, Inc., a corporation organized and existing under and by virtue of the
General Corporation Law of the State of Delaware (the "Corporation"),
DOES HEREBY CERTIFY:
FIRST: The Board of Directors of Escalator, Inc. by unanimous consent in writing
duly adopted resolutions setting forth proposed amendments of the Certificate
of Incorporation of said Corporation, declaring said amendments to be advisable
and calling ear the proposed amendments to be submitted to the sole stockholder
of said Corporation for consideration thereof. The resolutions setting forth the
proposed amendments are as follows:
RESOLVED, that the Certificate of Incorporation of this
Corporation be amended by changing the Article thereof numbered
"IV" so that, as amended said Article shall be and read as
follows:
The total number of shares of stock which the
Corporation shall have authority to issue is Fifty
Million (50,000,000) shares of Common Stock, $.002 par
value per share."
FURTHER RESOLVED, that the Certificate of Incorporation of this
Corporation be amended by changing the Article thereof numbered
"VII" so that, as amended said Article shall be and read as
follows:
"The Board of Directors is expressly authorized to
adopt, amend or repeal the By-Laws of the
Corporation."
SECOND: That thereafter, pursuant to resolution of its Board of Directors, the
sole stockholder of said Corporation in accordance with Section 228 of the
General Corporation Law of the State of Delaware voted by consent in writing in
favor of the amendments.
THIRD: That said amendments were duly adopted in accordance with the provisions
of Section 242 of the General Corporation Law of the State of Delaware.
FOURTH: That the capital of said Corporation shall not be reduced under or by
reason of said amendments.
<PAGE>
IN WITNESS WHEREOF, said Escalator, Inc. has caused this certificate
be signed by Laura Lee Sorenson, its President, and Lewis B. Sorenson, its
Secretary, this ________ day of May, 1986.
BY: /s/ Laura Lee Sorenson
---------------------------------
President
ATTEST: /s/ Lewis B. Sorenson
-----------------------------
Secretary
STATE OF Utah )
)ss.
COUNTY OF Salt Lake)
On the 9th day of May, 1986, personally appeared before me Laura Lee
Sorensen, President, and Lewis B Sorenson, Secretary, who being by me first duly
sworn, severally declared that they are the persons who signed the foregoing
document as President and Secretary, and that the statements therein contained
are true.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this 9th day
of May, 1986
/s/ A. O. Headman
-------------------------------
NOTARY PUBLIC
Residing at Salt Lake
My Commission expires:
3/21/87
- --------------------------
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
ESCALATOR, INC.
ESCALATOR, INC. (the "Corporation"), a corporation organized and
existing under and by virtue of the General Corporation Law of the State of
Delaware for the purpose of amending its Certificate of Incorporation,
DOES HEREBY CERTIFY:
FIRST: That the Board of Directors of the Corporation by the unanimous
written consent of its members, filed with the minutes of the Board, adopted a
resolution proposing and declaring advisable the following amendment to the
Certificate of Incorporation of the Corporation:
RESOLVED, that the Certificate of Incorporation of the Corporation
be amended by changing Article I thereof so that, as amended, said
Article shall be and read as follows:
The name of the Corporation is Mu Electric Corporation.
SECOND That in lieu of a meeting and vote of stockholders, the
stockholders have given written consent to said amendment in accordance with the
provisions of Section 228 of the General Corporation Law of the State of
Delaware, and written notice of the adoption of the amendment has been given as
provided in Section 228 of the General Corporation Law of the State of Delaware
to every stockholder entitled to such notice.
THIRD: That the aforesaid amendment was duly adopted in accordance with
the applicable provisions of Sections 242 and 228 of the General Corporation Law
of the State of Delaware.
IN WITNESS WHEREOF, this Certificate of Amendment has been duly
executed by Howard A. Scala, Chairman of the Corporation, this ~ day of April,
1998.
ESCALATOR, INC.
By: /s/ Howard A. Scala
------------------------------
Howard A. Scala, Chairman
BY-LAWS
OF
ESCALATOR, INC.
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
-----------------
Page
----
<S> <C> <C> <C>
ARTICLE 1 - Stockholders...................................................................... 1
1.1 Place of Meetings............................................................. 1
1.2 Annua1 Meeting................................................................ 1
1.3 Special Meetings.............................................................. 1
1.4 Notice of Meetings............................................................ 1
1.5 Voting List................................................................... 2
1.6 Quorum........................................................................ 2
1.7 Adjournments.................................................................. 2
1.8 Voting and Proxies............................................................ 2
1.9 Action at Meeting............................................................. 3
1.10 Action Without Meeting........................................................ 3
ARTICLE 2 - Directors.......................................................................... 3
2.1 General Powers................................................................ 3
2.2 Number; Election and Qualification............................................ 4
2.3 Enlargement of the Board...................................................... 4
2.4 Tenure........................................................................ 4
2.5 Vacancies..................................................................... 4
2.6 Resignation................................................................... 4
2.7 Regular Meetings.............................................................. 4
2.8 Special Meetings.............................................................. 5
2.9 Notice of Special Meetings.................................................... 5
2.10 Meetings by Telephone Conference Calls........................................ 5
2.11 Quorum........................................................................ 5
2.12 Action at Meeting............................................................. 5
2.13 Action by Consent............................................................. 6
2.14 Removal....................................................................... 6
2.15 Committees.................................................................... 6
2.16 Compensation of Directors..................................................... 7
ARTICLE 3 - Officers........................................................................... 7
3.1 Enumeration................................................................... 7
3.2 Election...................................................................... 8
3.3 Qualification................................................................. 8
3.4 Tenure........................................................................ 8
3.5 Resignation and Removal....................................................... 8
3.6 Vacancies..................................................................... 8
3.7 Chairman of the Board and Vice Chairman
of the Board................................................................ 9
3.8 President..................................................................... 9
3.9 Vice Presidents............................................................... 9
3.10 Secretary and Assistant Secretaries........................................... 9
3.11 Treasurer and Assistant Treasurers............................................ 10
3.12 Salaries...................................................................... 10
i
<PAGE>
ARTICLE 4 - Capital Stock...................................................................... 11
4.1 Issuance of Stock............................................................. 11
4.2 Certificates of Stock......................................................... 11
4.3 Transfers..................................................................... 11
4.4 Lost, Stolen or Destroyed Certificates........................................ 12
4.5 Record Date................................................................... 12
ARTICLE 5 - Indemnification.................................................................... 13
ARTICLE 6 - General Provisions................................................................. 13
6.1 Fiscal Year................................................................... 13
6.2 Corporate Seal................................................................ 13
6.3 Written Notice of Meetings.................................................... 13
6.4 Waiver of Notice.............................................................. 14
6.5 Voting of Securities.......................................................... 14
6.6 Evidence of Authority......................................................... 14
6.7 Certificate of Incorporation.................................................. 14
6.8 Transactions with Interested Parties.......................................... 14
6.9 Severability.................................................................. 15
6.10 Pronouns...................................................................... 15
ARTICLE 7 - Amendments......................................................................... 15
7.1 By the Board of Directors...................................................... 15
7.2 By the Stockholders............................................................ 16
</TABLE>
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<PAGE>
BY-LAWS
OF
ESCALATOR, INC.
ARTICLE 1 -- Stockholders
-------------------------
1.1 Place of Meetings. All meetings of stockholders shall be
held at such place within or without the State of Delaware as may be designated
from time to time by the Board of Directors or the President or, if not so
designated, at the registered office of the corporation.
1.2 Annual Meeting. The annual meeting of stockholders for the
election of directors and for the transaction of such other business as may
properly be brought before the meeting shall be held on the second Monday in
September in each year, at a time fixed by the Board of Directors or the
President. If this date shall fall upon a legal holiday, then such meeting shall
be held on the next succeeding business day at the same hour. If no annual
meeting is held in accordance with the foregoing provisions, the Board of
Directors shall cause the meeting to be held as soon thereafter as convenient or
a special meeting may be held in lieu of the annual meeting, and any action
taken at that special meeting shall have the same effect as if it had been taken
at the annual meeting, and in such case all references in these By-Laws to the
annual meeting of the stockholders shall be deemed to refer to such special
meeting.
1.3 Special Meetings. Special meetings of stockholders may be
called at any time by the President or by the Board of Directors. Business
transacted at any special meeting of stockholders shall be limited to matters
relating to the purpose or purposes stated in the notice of meeting.
1.4 Notice of Meetings. Except as otherwise provided by law,
written notice of each meeting of stockholders, whether annual or special, shall
be given not less than 10 nor more than 60 days before the date of the meeting
to each stockholder entitled to vote at such meeting. The notices of all
meetings shall state the place, date and hour of the meeting. The notice
<PAGE>
of a special meeting shall state, in addition, the purpose or purposes for which
the meeting is called.
1.5 Voting List. The officer who has charge of the stock ledger
of the corporation shall prepare, at least 10 days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at lease
10 days prior to the meeting, at a place within the city where the meeting is to
be held. The list shall also be produced and kept at the time and place of the
meeting during the whole time of the meeting, and may be inspected by any
stockholder who is present.
1.6 Quorum. Except as otherwise provided by law, the Certificate
of Incorporation or these By-Laws, the holders of a majority of the shares of
the capital stock of the corporation issued and outstanding and entitled to vote
at the meeting, present in person or represented by proxy, shall constitute a
quorum for the transaction of business.
1.7 Adjournments. Any meeting of stockholders may be adjourned
to any other time and to any other place at which a meeting of stockholders may
be held under these By-Laws by the stockholders present or represented at the
meeting and entitled to vote, although less than a quorum, or, if no stockholder
is present, by any officer entitled to preside at or to act as Secretary of such
meeting. If the adjournment is for more than 30 days, or if after the
adjournment, a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each stockholder of record entitled to
vote at the meeting. At the adjourned meeting, the corporation may transact any
business which might have been transacted at the original meeting.
1.8 Voting and Proxies. Each stockholder shall have one vote for
each share of stock entitled to vote held of record by such stockholder and a
proportionate vote for each fractional share so held, unless otherwise provided
in the Certificate of Incorporation. Each stockholder of record entitled to vote
at a meeting of stockholders, or to express consent or dissent to corporate
action in writing without a meeting, may vote or express such consent or dissent
in person or may authorize
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another person or persons to vote or act for him by written proxy executed by
the stockholder or his authorized agent and delivered to the Secretary of the
corporation. A duly executed proxy shall be irrevocable if it states that it is
irrevocable and if, and only as long as, it is coupled with an interest
sufficient in law to support an irrevocable power. No proxy shall be voted or
acted upon after three years from the date of its execution, unless the proxy
expressly provides for a longer period.
1.9 Action at Meeting. When a quorum is present at any meeting,
the holders of a majority of the stock present: or represented and voting on a
matter (or if there are two or more classes of stock entitled to vote as
separate classes, then in the case of each such class, the holders of a majority
of the stock of that class present or represented and voting on a matter) shall
decide any matter to be voted upon by the stockholders at such meeting, except:
when a different role is required by express provision of law, the Certificate
of Incorporation or these By-Laws. Any election by stockholders shall be
determined by a plurality of the votes cast by the stockholders entitled to vote
at the election.
1.10 Action Without Meeting. Any action required or permitted to
be taken at any annual or special meeting of stockholders of the corporation may
be taken without a meeting, without prior notice and without a vote, if a
consent in writing, setting forth the action so taken, is signed by the holders
of outstanding stock having not less than the minimum number of votes that would
be necessary to authorize or take such action at a meeting at which all shares
entitled to vote on such action were present and voted. Prompt notice of the
taking of corporate action without a meeting by less than unanimous written
consent shall be given to those stockholders who have not consented in writing.
ARTICLE 2 - Directors
---------------------
2.1 General Powers. The business and affairs of the corporation
shall be managed by or under the direction of a Board of Directors, who may
exercise all of the powers of the corporation except as otherwise provided by
law, the Certificate of Incorporation or these By-Laws. In the event: of a
vacancy on the Board of Directors, the remaining directors, except as otherwise
provided by law, may exercise the powers of the full Board of Directors until
the vacancy is filled.
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2.2 Number; Election and Qualification. The number of directors
which shall constitute the whole Board of Directors shall be determined by
resolution of the stockholders or the Board of Directors, but in no event shall
be less than one. The number of directors may be decreased at any time and from
time to time either by the stockholders or by a majority of the directors then
in office, but only to eliminate vacancies existing by reason of the death,
resignation, removal or expiration of the term of one or more directors. The
directors shall be elected at the annual meeting of stockholders by such
stockholders as have the right to vote in such election. Directors need not be
stockholders of the corporation.
2.3 Enlargement of the Board. The number of directors may be
increased at any time and from time to time by the stockholders or by a majority
of the directors then in office.
2.4 Tenure. Each director shall hold office until the next
annual meeting and until such time as his successor is elected and qualified, or
until his earlier death, resignation or removal.
2.5 Vacancies. Unless and until filled by the stockholders, any
vacancy in the Board of Directors, however occurring, including a vacancy
resulting from an increase in the number of directors, may be filled by vote of
a majority of the directors then in office, although less than a quorum, or by a
sole remaining director. A director elected to fill a vacancy shall be elected
for the unexpired term of his predecessor in office, and a director chosen to
fill a position resulting from an increase in the number of directors shall hold
office until the next annual meeting of stockholders and until his successor is
elected and qualified, or until his earlier death, resignation or removal.
2.6 Resignation. Any director may resign by delivering his
written resignation to the corporation at its principal office or to the
Secretary. Such resignation shall be effective upon receipt unless it is
specified to be effective at some other time or upon the happening of some other
event.
2.7 Regular Meetings. Regular meetings of the Board of Directors
may be held without notice at such time and place, either within or without the
State of Delaware, as shall be determined from time to time by the Board of
Directors; provided
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that any director who is absent when such a determination is made shall be given
notice of the determination. A regular meeting of the Board of Directors may be
held without notice immediately after and at the same place as the annual
meeting of stockholders.
2.8 Special Meetings. Special meetings of the Board of Directors
may be held at any time and place, within or without the State of Delaware,
designated in a call by the Chairman of the Board, President or two or more
directors, or by one director in the event that there is only a single director
in office.
2.9 Notice of Special Meeting. Notice of any special meeting of
directors shall be given to each director by the Secretary or one of the
directors calling the meeting. Notice shall be duly given to each director (1)
by giving notice to such director in person or by telephone at least 48 hours
in advance of the meeting, (ii) by sending a telegram or telex, or delivering
written notice by hand, to his last known business or home address at least 48
hours in advance of the meeting, or (iii) by mailing written notice to his last
known business or home address at least 72 hours in advance of the meeting. A
notice or waiver of notice of a meeting of the Board of Directors need not
specify the purposes of the meeting.
2.10 Meetings by Telephone Conference Calls. Directors or any
members of any committee designated by the directors may participate in a
meeting of the Board of Directors or such committee by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and participation by such
means shall constitute presence in person at such meeting.
2.11 Quorum. A majority of The whole Board of Directors shall
constitute a quorum at all meetings of the Board of Directors. In the event one
or more of the directors shall be disqualified to vote at any meeting, then the
required quorum shall be reduced by one for each such director so disqualified;
provided, however, that in no case shall less than one-third (1/3) of the whole
Board of Directors constitute a quorum. In the absence of a quorum at any such
meeting, a majority of the directors present may adjourn the meeting from time
to time without further notice other than announcement at the meeting, until a
quorum shall be present.
2.12 Action at Meeting. At any meeting of the Board
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<PAGE>
of Directors at which a quorum is present, the vote of a majority of those
present shall be sufficient to take any action, unless a different vote is
specified by law, the Certificate of Incorporation or these By-Laws.
2.13 Action by Consent. Any action required or permitted to be
taken at any meeting of the Board of Directors or of any committee of the Board
of Directors may be taken without a meeting, if all members of the Board of
Directors or committee, as the case may be, consent to the action in writing,
and the written consents are filed with the minutes of proceedings of the Board
of Directors or committee.
2.14 Removal. Any one or more or all of the directors may be
removed, with or without cause, by the holders of a majority of the shares then
entitled to vote at an election of directors, except that (i) the directors
elected by the holders of a particular class or series of stock may be removed
without cause only by vote of the holders of a majority of the outstanding
shares of such class or series and (ii) in the case of a corporation having
cumulative young, if less than the entire board is to be removed, no director
may be removed without cause if the votes cast against his removal would be
sufficient to elect him if then cumulatively voted at an election of the entire
board of directors.
2.15 Committees. The Board of Directors may, by resolution
passed by a majority of the whole Board of Directors, designate one or more
committees, each committee to consist of one or more of the directors of the
corporation. The Board may designate one or more directors as alternate members
of any committee, who may replace any absent or disqualified member at any
meeting of the committee. In the absence or disqualification of a member of a
committee, the member or members of the committee present at any meeting and not
disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any such absent or disqualified member. Any such
committee, to the extent provided in the resolution of the Board of Directors
and subject to the provisions of the General Corporation Law of the State of
Delaware, shall have and may exercise all the powers and authority of the Board
of Directors in the management of the business and affairs of the corporation
and may authorize the seal of the corporation to be affixed to all papers which
may require it; but no such committee shall have the power or
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<PAGE>
authority in reference to amending the Certificate of Incorporation (except that
a committee may, to the extent authorized in the resolution or resolutions
providing for the issuance of shares of stock adopted by the Board of Directors
as provided in subsection (a) of section 151 of the General Corporation Law of
the State of Delaware, fix the designations and any of the preferences or rights
of such shares relating to dividends, redemption, dissolution, any distribution
of assets of the corporation or the conversion into, or the exchange of such
shares for, shares of any other class or classes or any other series of the same
or any other class or classes of stock of the corporation or fix the number of
shares of any series of stock or authorize the increase or decrease of the
shares of any series), adopting an agreement of merger or consolidation,
recommending to the stockholders the sale, lease or exchange of all or
substantially all of the corporation's property and assets, recommending to the
stockholders a dissolution of the corporation or a revocation of a dissolution,
or amending the By-laws of the corporation; and, unless the resolution,
By-Laws, or Certificate of Incorporation expressly so provides, no such
committee shall have the power or authority to declare a dividend, to authorize
the issuance of stock or to adopt a certificate of ownership and merger. Each
such committee shall keep minutes and make such reports as the Board of
Directors may from time to time request. Except as the Board of Directors may
otherwise determine, any committee may make rules for the conduct: of its
business, but unless otherwise provided by the directors or in such rules, its
business shall be conducted as nearly as possible in the same manner as is
provided in these By-Laws for the Board of Directors.
2.16 Compensation of Directors. Directors may be paid such
compensation for their services and such reimbursement for expenses of
attendance at meetings as the Board of Directors may from time to time
determine. No such payment shall preclude any director from serving the
corporation or any of its parent or subsidiary corporations in any other
capacity and receiving compensation for such service.
ARTICLE 3 - Officers
--------------------
3.1 General. The officers of the corporation shall consist of a
Chairman of the Board, a President, a Secretary, a Treasurer and such other
officers with such other titles as the Board of Directors may determine,
including a Vice Chairman of the Board, and one or more Vice Presidents,
Assistant Treasurers, and Assistant Secretaries. The Board of Directors may
appoint
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<PAGE>
such other officers with such other powers and duties as it may deem
appropriate.
3.2 Election. The Chairman of the Board, President, Treasurer
and Secretary shall be elected annually by the Board of Directors at its first
meeting following the annual meeting of stockholders. Other officers may be
appointed by the Board of Directors at such meeting or at any other meeting.
3.3 Qualification. No officer need be a stockholder. Any two or
more offices may be held by the same person.
3.4 Tenure. Except as otherwise provided by law, by the
Certificate of Incorporation or by these By-Laws, each officer shall hold
office until his successor is elected and qualified, unless a different term is
specified in the vote choosing or appointing him, or until his earlier death,
resignation or removal.
3.5 Resignation and Removal. Any officer may resign by
delivering his written resignation to the corporation at its principal office or
to the President or Secretary. Such resignation shall be effective upon receipt
unless it is specified to be effective at some other time or upon the happening
of some other event.
Any officer may be removed at any time, with or without cause,
by vote of a majority of the entire number of directors then in office.
Except as the Board of Directors may otherwise determine, no
officer who resigns or is removed shall have any right to any compensation as an
officer for any period following his resignation or removal, or any right to
damages on account of such removal, whether his compensation be by the month or
by the year or otherwise, unless such compensation is expressly provided in a
duly authorized written agreement with the corporation.
3.6 Vacancies. The Board of Directors may fill any vacancy
occurring in any office for any reason and may, in its discretion, leave
unfilled for such period as it may determine any offices other than those of
President, Treasurer and Secretary. Each such successor shall hold office for
the unexpired term of his predecessor and until his successor is elected and
qualified, or until his earlier death, resignation or removal.
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<PAGE>
3.7 Chairman of the Board and Vice Chairman of the Board. The
Chairman of the Board of Directors shall be the Chief Executive Officer of the
corporation. Subject to the direction of the Board of Directors, the Chairman of
the Board of Directors shall have general charge and supervision of the business
of the Corporation, and shall have full authority to take all lawful actions
necessary to implement corporate and business policy established by the Board of
Directors. In addition, the Chairman of the Board of Directors shall perform
such duties and possess such other powers as are assigned to him by the Board of
Directors. Unless otherwise provided by the Board of Directors, the Chairman of
the Board of Directors shall preside at all meetings of the stockholders and the
Board of Directors. The Board of Directors may appoint a Vice Chairman of the
Board of Directors, who may, in the absence or disability of the Chairman,
perform the duties and exercise the powers of the Chairman and perform such
other duties and possess such other powers as from time to time authorized by
the Board of Directors.
3.8 President. The President shall be the Chief Operating
Officer of the corporation and shall have charge and supervision of the day to
day business operations of the corporation, subject to the authority of the
Chairman of the Board of Directors and of the Board of Directors. Unless the
Board of Directors or Chairman of the Board of Directors shall otherwise direct,
all executive officers of the corporation shall report, directly or through
their immediate superior officers, to the President. The President shall perform
such other duties and shall have such other powers as the Board of Directors may
from time to time prescribe.
3.9 Vice Presidents. Any Vice President shall perform such
duties and possess such powers as the Board of Directors, Chairman of the Board
of Directors or the President may from time to time prescribe. The Board of
Directors may assign to any Vice President the title of Executive Vice
President, Senior Vice President or any other title selected by the Board of
Directors.
3.10 Secretary and Assistant Secretaries. The Secretary shall
perform such duties and shall have such powers as the Board of Directors,
Chairman of the Board of Directors or the President may from time to time
prescribe. In addition, the Secretary shall perform such duties and have such
powers as are incident to the office of the secretary, including without
limitation the duty and power to give notices of all meetings of
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<PAGE>
stockholders and special meetings of the Board of Directors, to attend all
meetings of stockholders and the Board of Directors and keep a record of the
proceedings, to maintain a stock ledger and prepare lists of stockholders and
their addresses as required, to be custodian of corporate records and the
corporate seal and to affix and attest to the same on documents.
Any Assistant Secretary shall perform such duties and possess
such powers as the Board of Directors, the Chairman of the Board of Directors,
the President or the Secretary may from time to time prescribe. In the event of
the absence, inability or refusal to act of the Secretary, the assistant
Secretary (or if there shall be more than one, the Assistant Secretaries in the
order determined by the Board of Directors) shall perform the duties and
exercise the powers of the Secretary.
In the absence of the Secretary or any assistant Secretary at
any meeting of stockholders or directors, the person presiding at the meeting
shall designate a temporary secretary to keep a record of the meeting.
3.11 Treasurer and Assistant Treasurers. The Treasurer shall
perform such duties and shall have such powers as may from time to time be
assigned to him by the Board of Directors, the Chairman of the Board of
Directors, or the President. In addition, the Treasurer shall perform such
duties and have such powers as are incident to the office of treasurer,
including without limitation the duty and power to keep and be responsible for
all funds and securities of the corporation, to deposit funds of the corporation
in depositories selected in accordance with these By-Laws, to disburse such
funds as ordered by the Board of Directors, the Chairman of the Board of
Directors, the President or any Vice President of the Corporation so authorized
to act by specific authorization of the Board of Directors or Chairman of the
Board of Directors, to make proper accounts of such funds, and to render, as
required by the Board of Directors, Chairman of the Board of Directors or
President, statements of all such transactions and of the financial condition of
the corporation.
The Assistant Treasurers shall perform such duties and possess
such powers as the Board of Directors, the Chairman of the Board of Directors,
the President or the Treasurer may from time to time prescribe. In the event of
the absence, inability or refusal to act of the Treasurer, the Assistant
Treasurer (or if there shall be more than one, the Assistant Treasurers in the
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order determined by the Board of Directors) shall perform the duties and
exercise the powers of the Treasurer.
3.12 Salaries. Officers of the corporation shall be entitled to
such salaries, compensation or reimbursement as shall be fixed or allowed from
time to time by the Board of Directors.
ARTICLE 4 - Capital Stock
-------------------------
4.1 Issuance of Stock. Unless otherwise voted by the
stockholders and subject to the provisions of the Certificate of Incorporation,
the whole or any part of any unissued balance of the authorized capital stock of
the corporation or the whole or any part of any unissued balance of the
authorized capital stock of the corporation held in its treasury may be issued,
sold, transferred or otherwise disposed of by vote of the Board of Directors in
such manner, for such consideration and on such terms as the Board of Directors
may determine.
4.2 Certificates of Stock. Every holder of stock of the
corporation shall be entitled to have a certificate, in such form as may be
prescribed by law and by the Board of Directors, certifying the number and class
of shares owned by him in the corporation. Each such certificate shall be signed
by, or in the name of the corporation by, the Chairman or Vice Chairman, if any,
of the Board of Directors, or the President or a Vice President, and the
Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary
of the corporation. Any or all of the signatures on the certificate may be a
facsimile.
Each certificate for shares of stock which are subject to any
restriction on transfer pursuant to the Certificate of Incorporation, the
By-Laws, applicable securities laws or any agreement among any number of
shareholders or among such holders and the corporation shall have conspicuously
noted on the face or back of the certificate either the full text of the
restriction or a statement of the existence of such restriction.
4.3 Transfers. Except as Otherwise established by rules and
regulations adopted by the Board of Directors, and subject to applicable law,
shares of stock may be transferred on the books of the corporation by the
surrender to the corporation or its transfer agent of the certificate
representing such shares properly endorsed or accompanied by a written
assignment or power of attorney properly executed, and with such proof of
authority
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or the authenticity of signature as the corporation or its transfer agent may
reasonably require. Except as may be otherwise required by law, by the
Certificate of Incorporation or by these By-Laws, the corporation shall be
entitled to treat the record holder of stock as shown on its books as other
owner of such stock for all purposes, including the payment of dividends and the
right to vote with respect to such stock, regardless of any transfer, pledge or
other disposition of such stock until the shares have been transferred on the
books of the corporation in accordance with the requirements of these By-Laws.
4.4 Lost, Stolen or Destroyed Certificates. The corporation may
issue a new certificate of stock in place of any previously issued certificate
alleged to have been lost, stolen, or destroyed, upon such terms and conditions
as the Board of Directors may prescribe, including the presentation of
reasonable evidence of such loss, theft or destruction and the giving of such
indemnity as the Board of Directors may require for the protection of the
corporation or any transfer agent or registrar.
4.5 Record Date. The Board of Directors may fix in advance a
date as a record date for the determination of the stockholders entitled to
notice of or to vote at any meeting of stockholders or to express consent (or
dissent) to corporate action in writing without a meeting, or entitled to
receive payment of any dividend or other distribution or allotment of any rights
in respect of any charge, conversion or exchange of stock, or for the purpose
of any other lawful action. Such record date shall not be more than 60 nor less
than 10 days before the date of such meeting, nor more than 60 days prior to any
other action to which such record date relates.
If no record date is fixed, the record date for determining
stockholders entitled to notice of or to vote at a meeting of stockholders shall
be at the close of business on the day before the day on which notice is given,
or, if notice is waived, at the close of business on the day before the day on
which the meeting is held. The record date for determining stockholders entitled
to express consent to corporate action in writing without a meeting, when no,
prior action by the Board of Directors is necessary, shall be the day on which
the first written consent is expressed. The record date for determining
stockholders for any other purpose shall be at the close of business on the day
on which the Board of Directors adopts the resolution relating to such purpose.
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A determination of stockholders of record entitled to notice of
or to vote at a meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the Board of Directors may fix a new record
date for the adjourned meeting.
ARTICLE 5 - Indemnification
---------------------------
The corporation shall, to the fullest extent permitted by
Section 145 of the General Corporation Law of the State of Delaware, as that
Section may be amended and supplemented from time to time, indemnify any
director, officer Or trustee which it shall have power to indemnify under that
`Section against any expenses, liabilities or other matters referred to in or
covered by that Section. The indemnification provided for in this Article (i)
shall not be deemed exclusive of any other rights to which those indemnified may
be entitled under any by--law, agreement or vote of stockholders or
disinterested directors or otherwise, both as to action in their official
capacities and as to action in another capacity while holding such office, (ii)
shall continue as to a person who has ceased to be a director, officer or
trustee and (iii) shall inure to the benefit of the heirs, executors and
administrators of such a person. The corporation's obligation to provide
indemnification under this Article shall be offset to the extent of any other
source of indemnification or any otherwise applicable insurance coverage under a
policy maintained by the corporation or any other person.
ARTICLE 6 - General Provisions
------------------------------
6.1 Fiscal Year. Except as from time to time otherwise
designated by the Board of Directors, the fiscal year of the corporation shall
begin on the first day of March in each year and end on the last day of February
in each year.
6.2 Corporate Seal. The corporate seal shall be in such form as
shall be approved by the Board of Directors.
6.3 Written Notice of Meetings. Whenever written notice is
required to be given to any person pursuant to law, the Certificate of
Incorporation or these By-Laws, it may be given to such person, either
personally or by sending a copy thereof by first class mail, or by telegram,
charges prepaid, to his address appearing on the books of the corporation, or to
his business or
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other address supplied by him to the corporation for the purpose of notice. If
the notice is sent by first class 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 case of a
special meeting of the shareholders, the general nature of the business to be
transacted.
6.4 Waiver of Notice. Whenever any notice whatsoever is required
to be given by law, by the Certificate o Incorporation or by these By-Laws, a
waiver of such notice either in writing signed by the person entitled to such
notice or such person's duly authorized attorney, or by telegraph, cable or any
other available method, whether before, at or after the time stated in such
waiver, or the appearance of such person or persons at such meeting in person or
by proxy, shall be deemed equivalent to such notice.
6.5 Voting of Securities. Except as the directors may otherwise
designate, the President or Treasurer may waive notice of, and act as, or
appoint any person or persons to act as, proxy or attorney-in--fact for this
corporation (with or without power of substitution) at, any meeting of
stockholders or shareholders of any other corporation or organization, the
securities of which may be held by this corporation.
6.6 Evidence of Authority. A certificate by the Secretary, or an
Assistant Secretary, or a temporary Secretary, as to any action taken by the
stockholders, directors, a committee or any officer or representative of the
corporation shall as to all persons who rely on the certificate in good faith be
conclusive evidence of such action.
6.7 Certificate of Incorporation. All references in these
By-Laws to the Certificate of Incorporation shall be deemed to refer to the
Certificate of Incorporation of the corporation, as amended and in effect from
time to time.
6.8 Transactions with Interested Parties. No contract or
transaction between the corporation and one or more of the directors or
officers, or between the corporation and any other corporation, partnership,
association, or other organization in which one or more of the directors or
officers are directors or officers, or have a financial interest, shall be void
or voidable solely for this reason, or solely because the
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director or officer is present at or participates in the meeting of the Board
of Directors or a committee of the Board of Directors which authorizes the
contract or transaction or solely because his or their votes are counted for
such purpose, if:
(1) The material facts as to his relationship or interest and as
to the contract or transaction are disclosed or are known to the Board
of Directors or the committee, and the Board of Directors or committee
in good faith authorizes the contract or transaction by the affirmative
votes of a majority of the disinterested directors, even though the
disinterested directors be less than a quorum;
(2) The material facts as to his relationship or interest and as
to the contract or transaction are disclosed or are known to the
stockholders entitled to vote thereon, and the contract or transaction is
specifically approved in good faith by vote of the stockholders; or
(3) The contract or transaction is fair as to the corporation as
of the time it is authorized, approved or ratified, by the Board of
Directors, a committee of the Board of Directors, or the stockholders.
Common or interested directors may be counted in determining the
presence of a quorum at a meeting of the Board of Directors or of a committee
which authorizes the contract or transaction.
6.9 Severability. Any determination that any provision of these
By-laws is for any reason inapplicable, illegal or ineffective shall not affect
or invalidate any other provision of these By-Laws.
6.10 Pronouns. All pronouns used in these By-laws shall be
deemed to refer to the masculine, feminine or neuter, singular or plural, as the
identity of the person or persons may require.
ARTICLE 7 - Amendments
----------------------
7.1 By the Board of Directors, These By-Laws may be altered,
amended or repealed or new By-Laws may be adopted by the affirmative vote of a
majority of the directors present at any regular or special meeting of the Board
of Directors at which a quorum is present.
-15-
<PAGE>
7.2 By the Stockholders. These By-laws may be altered, amended
or repealed or new By-Laws may be adopted by the affirmative vote of the
holders of a majority of the shares of the capital stock of the corporation
issued and outstanding and entitled to vote at any regular meeting of
stockholders, or at any special meeting of stockholders, provided notice of such
alteration, amendment, repeal or adoption of new by-laws shall have been stated
in the notice of such special meeting.
ADOPTED this 20th day of April, 1986.
/s/ Laurie B. Sorenson
----------------------------
President
ATTEST:
/s/ [ILLEGIBLE]
- --------------------------
Secretary
-16-
<PAGE>
CERTIFICATE OF SECRETARY
KNOW ALL MEN BY THESE PRESENTS: That the undersigned does
hereby certify that the undersigned is the Secretary of the aforesaid
Corporation, duly organized and existing under and by virtue of the laws of the
State of Delaware; that the above and foregoing Bylaws of said Corporation were
duly and regularly adopted as such by the Board of Directors of said Corporation
by unanimous consent.
DATED this 20th day of April , 1986.
/s/ Lewis B. Sorenson
-----------------------
SECRETARY
-17-
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
[GRAPHIC OMITTED]
[GRAPHIC OMITTED] [GRAPHIC OMITTED]
[GRAPHIC OMITTED]
NuElectric Corporation
50,000,000 AUTHORIZED SHARES $0.001 PAR VALUE NON-ASSESSABLE
This Certifies that
is the record holder of
Shares of NuElectric Corporation Common Stock transferable on the books
of the Corporation by the holder hereof in person or by duly authorized attorney
upon surrender of this Certificate properly endorsed. This Certificate is not
valid until countersigned by the Transfer Agent and registered by the Registrar.
Witness the facsimile seal of the Corporation and the facsimile
signatures of its duly authorized officers.
Dated: [GRAPHIC OMITTED]
/s/ Laurie C. Scala
- -----------------------
PRESIDENT/SECRETARY
Escalator Investments, Inc., a Pennsylvania corporation
with subsidiary Escalator Securities, Inc., a Pennsylvania corporation
Frank Communications Corp., a Pennsylvania corporation
Clean Water Technologies, Inc., a Florida limited liability company
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