UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
[X] Annual report under Section 13 or 15(d) of the Securities Exchange Act
of 1934 for the fiscal year ended May 31, 1992.
[ ] Transition report under Section 13 or 15(d) of the Securities Exchange
Act of 1934 (no fee required) for the transition period from
____________________ to _______________________.
Commission file number: 0-17371
HYTK INDUSTRIES, INC.
(Name of Small Business Issuer in Its Charter)
Nevada 88-0182808
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
2133 East 9400 South, Suite 151 - Sandy, Utah 84093
(Address of Principal Executive Offices)
(801) 944-0701
(Issuer's Telephone Number, Including Area Code)
Securities Registered Under Section 12(g) of the Exchange Act:
Title of Class: Common Stock, $0.001 Par Value
Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes __ No XX
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B not contained in this form, and no disclosure will be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [ ]
The issuer had no revenues for the year ended May 31, 1992.
The aggregate market value of the voting stock held by non-affiliates computed
by reference to the average bid and asked prices of such stock, as of August 31,
1997 was $0.00, because the Company's Common Stock was not traded on a stock
market or quotation system.
The number of shares outstanding of the issuer's common stock as of August 31,
1997 was 52,266.
Total of Sequentially Numbered Pages: 40
Exhibit Index on Page: 18
<PAGE>
TABLE OF CONTENTS
PART I
ITEM 1. DESCRIPTION OF BUSINESS ........................................... 3
ITEM 2. DESCRIPTION OF PROPERTY ........................................... 6
ITEM 3. LEGAL PROCEEDINGS ....................................................7
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS ............... 7
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS ......... 8
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION ........ 8
ITEM 7. FINANCIAL STATEMENTS ............................................. 10
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS .................... 11
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT ....... 11
ITEM 10. EXECUTIVE COMPENSATION ........................................... 12
ITEM 11. SECURITY OWNERSHIP OF BENEFICIAL OWNERS .......................... 13
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS ................... 14
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K ................................. 16
SIGNATURES ....................................................... 17
INDEX TO EXHIBITS ................................................ 18
<PAGE>
PART I
ITEM 1. DESCRIPTION OF BUSINESS
Business Development
Unless the context indicates otherwise, the term "Company" shall
hereinafter refer to HYTK Industries, Inc., a Nevada corporation, and any of its
predecessors or former subsidiaries. The Company was originally incorporated on
July 12, 1982 under the name Digitel of Las Vegas, Inc. The Company was formed
as a telephone equipment servicing and maintenance business, but as the Company
grew, its operations evolved to include the sale and installation of
telephone-related equipment. The Company eventually focused its business
primarily on Interconnect operations. As used herein, "Interconnect" refers to
the attachment of customer-owned telephone equipment to the networks of
regulated telephone companies.
The Company's Interconnect operations consisted of consulting with
prospective customers to determine their specific communications needs and
future business plan. The Company would then design a telephone system to meet
those needs. The Company, which was an authorized representative of several
major telephone manufacturers, would sell and install telephone systems ranging
from very simple two-line telephones to complex computerized systems designed
for as many as 5,000 lines. After the sale and installation, the Company would
continue to maintain and service the telephone systems for its clients.
The Company conducted its Interconnect business primarily in Las Vegas,
Nevada and surrounding areas. Between 1982 and 1991, the Company installed an
estimated 10,000 to 12,000 telephone systems for its customers.
On May 15, 1987, the Company changed its name to HYTK Industries Inc. On
June 1, 1987, the Company transferred its Interconnect operations to Digitel,
Inc., a Colorado corporation and former wholly-owned subsidiary of the Company
("Digitel"). Under the name HYTK, the Company became a holding entity which
conducted all of its operations through Digitel, its only subsidiary at the
time. Subsequently, the Company made efforts to expand its operations into other
business sectors.
On January 12, 1989, the Company formed U.S. Voice Corporation ("U.S.
Voice"), another former wholly-owned subsidiary, under the laws of the State of
Nevada. U.S. Voice was incorporated in order to market voice mail equipment and
lease voice mailboxes. U.S. Voice began operating in Denver, Colorado in April
1989, and its operations were expanded to Las Vegas, Nevada in June 1989. It
incurred considerable losses during the start-up phase of its operations and
generated revenues significantly below the Company's estimates. The Company
discontinued U.S. Voice's operations on October 1, 1989 when it transferred all
equipment and other assets of U.S. Voice to the manager of U.S. Voice's Denver
operations, Terry Kelly, in exchange for Mr. Kelly's assumption of all
indebtedness related to those assets and his agreement to surrender to the
Company any proceeds realized from the sale of such equipment exceeding the
amounts owed. The Company recorded a net loss of $50,511 as a result of
discontinuing U.S. Voice's operations.
On February 1, 1989, the Workman Family Partnership ("WFP"), a general
partnership controlled by William Workman, then a director of the Company,
acquired an office and warehouse complex. The office complex was located at 3990
West Russell Road and had been leased by Digitel since October 1986. The
property was purchased from Century Manufacturing, Inc. ("Century") through what
was intended to be a sale-leaseback arrangement. Pursuant to this arrangement,
WFP assumed obligation under a first mortgage on the property and agreed to
lease the property to Century for a period of five years. Century, in turn,
subleased the property to commercial tenants. On May 26, 1989, WFP assigned all
of its interest in, and delegated all of its obligations under, this arrangement
to the Company in exchange for the Company's issuance of 2,679 restricted shares
of common stock, par value $0.001 ("Common Stock").1 The Company continued to
lease this property to Century until 1995. For more information on the property,
see "Item 2 - Description of Property."
<PAGE>
On July 9, 1990, the Company executed a Stock Exchange Agreement (the
"Agreement") with Cactus Club USA, Inc., a Colorado corporation ("Cactus Club"),
and the shareholders of Cactus Club. Pursuant to the Agreement, the Company was
to acquire all of the issued and outstanding capital stock of Cactus Club in
exchange for 32,142 restricted shares of Common Stock and warrants to purchase
up to 71,428 additional shares of Common Stock. Prior to the Agreement, Cactus
Club was a closely-held corporation which manufactured men's sportswear,
including shirts, sweaters, and caps. The merchandise produced by Cactus Club
was distributed throughout the United States, Europe, Japan and Australia.
In order to help capitalize this acquisition, the Company had previously
filed a registration statement on Form S-2 which registered 17,454 Common Stock
Purchase Warrants (the "Warrants") and a corresponding number of shares of
Common Stock underlying the Warrants. The Company issued, as a dividend to its
shareholders of record as of December 1, 1989, one Warrant for every share of
Common Stock outstanding on the record date. The Company intended to use the
cash generated through the exercise of warrants to raise $500,000, an amount
Cactus Club needed to meet its September 30, 1990 production deadline.
As of mid-September 1990, however, the Company had raised only $103,830 in
gross proceeds through the exercise of the Warrants. By that time, the NASDAQ
Small Cap Market had delisted the Company's Common Stock, an event which
effectively halted the exercise of warrants, and the Company had no alternative
means of raising additional capital. Accordingly, the Company terminated the
Agreement with Cactus Club. In furtherance of the Agreement, the Company had
previously advanced $84,000 on behalf of Cactus Club and guaranteed additional
amounts borrowed by Cactus Club.
In an attempt to minimize losses stemming from the Agreement, the Company
transferred any and all of its rights, title and interest in the capital stock
of Cactus Club to Dudley Investment Company, an unrelated third party. In
exchange, the Company obtained 84,000 shares of Series A Preferred Stock of
Cactus Club and indemnification from guarantees the Company had previously made
to lenders of Cactus Club. The Company does not believe that this preferred
stock has any current value and the Company therefore recorded an $84,000 loss
for the fiscal year ended May 31, 1991 to reflect its investment in Cactus Club.
For more information on the Cactus Club acquisition see "Item 12 - Certain
Relationships and Related Transactions."
Pursuant to a May 20, 1992 Asset Purchase Agreement, the Company
transferred nearly all of the assets then owned by Digitel to Southwestern
Communications, Inc., a Nevada corporation f/k/a Western Communications, Inc.
("Southwestern"). By means of this Agreement, the Company sold all of Digitel's
machinery, equipment, tangible personal property, inventory, and accounts
receivable to Southwestern. The only asset not transferred to Southwestern was a
Honda automobile encumbered by a lease contract with Honda Leasing. As
consideration for the transfer, Southwestern assumed approximately $675,000
worth of Digitel's debts. No additional consideration was paid because the debts
to be assumed were equal to or exceeded the value of the assets transferred.
Southwestern provided notice of this bulk sale pursuant to the provisions of
Article 6 of the Uniform Commercial Code. The decision to sell Digitel was based
on the fact that Digitel had experienced net losses in the prior two years and
Digitel's liabilities exceeded its assets at the time of the transfer. Gordon
Beckstead, then the Company's president and director, was a 40% owner of
Southwestern at the time of this transaction. For more information on Mr.
Beckstead and the transfer of Digitel, see "Item 12 - Certain Relationships and
Related Transactions." During fiscal year 1994, Digitel's articles of
incorporation were suspended by the State of Colorado for failure to file its
1993 annual report. The Company has no current intentions to revive Digitel's
charter and will likely seek to voluntarily dissolve Digitel in the near future.
Accordingly, the Company has not included Digitel as a consolidated subsidiary
on the attached financial statements.
- --------
1 WFP transferred its interest in the Russell Road property for 15,000,000
shares of Common Stock. The number appearing above has been adjusted to reflect
the 1-for-140 reverse stock split effected by the Company on September 1, 1991
and the 1-for-40 reverse split effected by the Company and November 1, 1995.
Unless otherwise indicated, all further references to quantities of Common Stock
have been adjusted to reflect both the 1991 and 1995 reverse stock splits.
<PAGE>
After the respective transfers of U.S. Voice, Cactus Club and Digitel, the
Company's only remaining asset was its interest in the sale-leaseback of the
Russell Road property. The Company retained this interest until April 22, 1995.
On that date, the Company transferred its interest in the property to BeckWork
LLC, a Nevada limited liability company ("BeckWork") whose 50% owner, Gordon
Beckstead, was then president and a director of the Company. In exchange for
this transfer, BeckWork assumed the first and second mortgages on the property
and agreed to share any and all profits derived from the eventual sale of the
property by BeckWork. This obligation to share profits was evidenced by a
promissory note executed by BeckWork and secured by a deed of trust.
According to the promissory note executed by BeckWork, the Company was
entitled to receive 50% of the first $100,000 in net proceeds realized from the
sale of the Russell Road property and 10% of any amounts realized in excess of
that initial $100,000. The net proceeds of the promissory note were determined
by subtracting from the gross sales proceeds any and all amounts due on the
first and second mortgages, all sales commissions paid, and all related closing
costs.
On July 23, 1996, BeckWork sold the Russell Road property for a total of
$1,810,000. The mortgage indebtedness on the property and closing costs related
to the sale totaled $1,373,940, meaning that $436,060 in net proceeds were
realized from the sale. Based on the profit sharing formula specified in the
promissory note, the Company received $83,606 from the sale. Of this $83,606 due
the Company, $70,845 was used to pay promissory notes that had been executed by
the Company in favor of former directors and to pay legal fee obligations that
had been accrued by the Company. Accordingly, $12,761 was ultimately received by
the Company. For more information on the sale of the Russel Road property, see
"Item 12 - Certain Relationships and Related Transactions."
On September 1, 1995, the Company executed a Consulting Agreement with
Canton Financial Services Corporation, a Nevada corporation that provides
professional business consulting services ("Canton"). Pursuant to the consulting
agreement, Canton assisted the Company in restructuring its capitalization and
provided related business and accounting services. As consideration, the Company
issued 2,565 restricted shares of Common Stock to Park Street Investments, Inc.,
a Utah corporation ("Park Street"), and 23,078 restricted shares of Common Stock
to A-Z Professional Consultants, Inc., a Utah corporation ("A-Z"). In the
aggregate, the Common Stock issued to Park Street and A-Z constituted 51% of the
Company's then-outstanding Common Stock. Both Park Street and A-Z were designees
of Canton who received their shares of Common Stock as a finder's fee for
introducing the Company to Canton.
A change of control in the Company occurred pursuant to the change of
ownership in the Company's Common Stock. On September 5, 1995, the board of
directors appointed Ken Kurtz, Richard Surber and Steven Christensen as
additional directors of the Company. Gordon Beckstead then resigned as the
Company's president, vice president and secretary. The board then appointed Ken
Kurtz as the Company's president, Richard Surber as the Company's vice
president, and Steven Christensen as the Company's secretary and treasurer. Ken
Kurtz is also the president, director and sole shareholder of Park Street.
Richard Surber is also the president and sole director of A-Z and the president
and a director of Canton. Neither Mr. Kurtz nor Mr. Surber was a director of the
Company at the time the Consulting Agreement became effective and therefore
neither voted on the propriety of the Consulting Agreement or the issuance of
Common Stock pursuant to it.
Once these appointments were effective, Gordon Beckstead, James Blyth, and
F. Rex Graham all resigned as directors. The change in control in the Company
reflected the change in ownership of the Company's capital stock resulting from
the execution of the Consulting Agreement. None of the resigning officers or
directors had any disagreements with the Company or its management.
The Company has since terminated the Consulting Agreement with Canton and
Mr. Christensen and Mr. Surber have since resigned from their positions with the
Company.
<PAGE>
Business of Issuer
Since April 22, 1995, the Company has been a dormant public company without
any operations or significant assets. The only revenue realized by the Company
since that time was generated from Beckwork's sale of the Russell Road property.
The Company's current business plan involves finding a suitable merger or
acquisition candidate who can provide the Company with a basis for successful
operations. The Company's management is in the process of prospecting for,
interviewing and performing the necessary due diligence to structure a
successful merger or acquisition. However, there can be no assurances that the
Company will be able to negotiate a corporate merger or acquisition or if such a
combination is achieved, that it will be profitable, worthwhile or sustainable.
The Company does not currently produce any goods or provide any services. Nor
does the Company have any full or part time employees, aside from its officers
and directors.
ITEM 2. DESCRIPTION OF PROPERTY
From May 1989 to April 1995, the Company owned an interest in an office
complex located at 3990 West Russell Road. The property consisted of
approximately 36,040 square feet of office and warehouse space which was leased
to commercial tenants. The Company acquired this interest from the Workman
Family Partnership ("WFP"), a general partnership controlled by William Workman,
then the Company's officer and director, in exchange for 2,679 shares of
restricted Common Stock. WFP had previously acquired its right to the property
through what was intended to be a sale-leaseback arrangement it entered with
Century Manufacturing, Inc., the prior owner of the property ("Century").
According to this arrangement, WFP assumed the obligations under a mortgage loan
of approximately $926,000, forgave a $273,500 debt owed by Century to William
Workman that was secured by the Russell Road property, and executed a long-term
note of $180,500 in favor of WFP. On May 26, 1989, the Company assumed from WFP
all benefits and obligations attendant to the agreement with Century.
Under the leaseback provisions of the agreement, Century was to continue
leasing the property from the Company for an amount equal to the debt service on
the first mortgage note, taxes, insurance, and normal maintenance of the
property. Century, in turn, would sublease the property to commercial tenants.
Century also retained certain ownership rights including the exclusive right to
manage, market, sell, or repurchase the property for a period of five years
(ending February 1, 1994). Century retained all rents from the property that
exceeded the lease payments it paid to the Company and was responsible for
shortfalls between revenue generated from the property and expenses on the
property.
On February 23, 1994, the Securities and Exchange Commission initiated a
public administrative proceeding against the Company asserting that the Company
had improperly recorded this transaction as a purchase and leaseback when, in
fact, it was a financing arrangement. This proceeding was settled pursuant to a
consent decree entered on February 23, 1994. For more information on this
administrative proceeding, see "Item 3 - Legal Proceedings."
On April 22, 1995, the Company transferred, conveyed and assigned all of
its interest in the Russell Road property to BeckWork, LLC, a limited liability
company ("BeckWork") whose 50% owner, Gordon Beckstead, was then the president
and a director of the Company. The Company sold the property in exchange for
BeckWork's assumption of two mortgages on the property and for Beckwork's
agreement to share the proceeds of the subsequent sale of the property with the
Company. The profit sharing agreement was evidenced by a promissory note and
secured by a deed of trust on the property. On July 23, 1996, BeckWork sold the
property and the Company received an $83,606 return on the sale.
The Company does not currently own any real property and has not owned any
since it sold its interest in the Russell Road property on April 22, 1995. The
Company does not anticipate the acquisition of any real property in the near
future.
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
On February 23, 1994, the Securities and Exchange Commission (the "SEC")
initiated a public administrative proceeding against the Company based on the
Company's accounting treatment of the Russell Road property for the fiscal years
ended May 31, 1989, 1990, 1991, and 1992. The Company had recorded the
transaction as a purchase and leaseback in its annual reports for the
aforementioned fiscal years. The SEC asserted that this acquisition did not
qualify for sale-leaseback treatment according to Financial Accounting Standards
Board ("FASB") Statement of Standards Numbers 66 and 98 because the
seller-lessee maintained significant continuing involvement with the property,
including the right to manage and sell the property for a period of five years.
The SEC further contested the accounting treatment of the property because the
first mortgage on the property was not assumable by the buyer-lessor. The SEC
dismissed its proceeding by accepting an offer of settlement proposed by the
Company.
According to the consent order which was entered, the Company agreed to
file unaudited financial statements in a Form 8-K which accounted for the
property as a financing transaction and not a sale-leaseback arrangement. The
Company filed the required Form 8-K on February 23, 1994 and this document is
incorporated herein by this reference. The Company was also required to refile
audited financial statements for the years 1989-92, which properly account for
the property, within 90 days of commencing operations. The Company has also
filed this information. Accordingly, the Company believes that it has fully
complied with the conditions of the consent order. For more information on the
structure of the transaction that led to the consent decree, see "Item 2
Description of Property."
As described in "Item 1 - Description of Business," the Company acquired
all of the capital stock of Cactus Club USA, Inc. pursuant to a July 9, 1990
Stock Exchange Agreement. In connection with this acquisition, the Company
guaranteed the debts which Cactus Club owed to two of its creditors, BNY
Financial Corporation ("BNY") and Barclays Commercial Corporation ("Barclays").
Dudley Investment Company ("Dudley") later indemnified the Company against
claims made pursuant to these guarantees in connection with the Company's
transfer of Cactus Club to Dudley.
In March 1991, BNY instituted a civil suit against the Company in the
Municipal Court of the State of California, County of Los Angeles. In April
1991, the Company stipulated to the entry of a judgment for $7,974. In May 1991,
Revenue Service Co., Inc., the assignee of Barclays, filed a civil action
against the Company in the District Court for the City and County of Denver,
Colorado seeking to recover $18,254 plus interest and attorney fees.
As of December 1996, both of these civil actions have either been settled
or dismissed. Accordingly, there are no legal proceedings currently pending
against the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of shareholders between the fourth
quarter of the 1992 fiscal year and October 26, 1995.
On October 27, 1995, the Company's shareholders approved a 40-for-1 reverse
stock split of the Company's Common Stock. Of the 2,031,127 shares of Common
Stock issued and outstanding on that date, 1,025,675 (50.4%) voted to approve
the reverse stock split. The shareholders approved this corporate action by
means of a written consent in lieu of a shareholders' meeting. No matters have
been submitted to a vote of shareholders since October 27, 1995 and prior to the
filing date of this Form 10-KSB.
<PAGE>
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Market Information
The Company's Common Stock traded over-the-counter from February 1986 until
September 1990 when it was delisted from the NASDAQ Small Cap Market for failure
to maintain registered market makers. The Company's Common Stock has not traded
or been quoted over-the-counter or on any exchange since that time. The Company
seeks to establish a public market for its Common Stock and is currently
attempting to obtain a quotation of its Common Stock pursuant to Rule 15c2-11 of
the Securities Exchange Act of 1934.
On September 1, 1991, holders of a majority of the Company's Common Stock
approved a 1-for-140 reverse split of the Company's issued and outstanding
Common Stock. Prior to the 1991 reverse split, there were 141,268,323 issued and
outstanding shares of Common Stock. After the split there were 1,009,000 shares
issued and outstanding.
On November 1, 1995, the Company effected a 1-for-40 reverse stock split of
its issued and outstanding Common Stock. The 1995 reverse split was approved by
the holders of a majority of the Company's Common Stock pursuant to a written
consent in lieu of a shareholders' meeting. Of the 2,031,127 shares of Common
Stock issued and outstanding on the date of the consent, holders of 1,025,675
shares voted to approve the reverse split.
Record Holders
There are 950,000,000 shares of Common Stock authorized for issuance. As of
August 31, 1997, there were 52,266 shares of Common Stock issued and
outstanding, held by 2,013 record holders.
Dividends
The Company has not declared any cash dividends for the last three
years and does not anticipate paying any dividends in the foreseeable future.
The payment of dividends is within the discretion of the board of directors and
will depend on the Company's earnings, capital requirements, financial condition
and other relevant factors.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The Company was incorporated in 1982 under the name Digitel of Las Vegas,
Inc. From 1982 until May 1992, the Company's primary operations involved the
sale, installation, and servicing of commercial telephone systems In 1986, the
Company transferred all assets related to its Interconnect operations to a newly
formed subsidiary, Digitel, Inc., a Colorado corporation ("Digitel"). Beginning
in 1989, the Company made attempts to expand its operations into other business
sectors.
From January 1989 to October 1989, the Company sold and leased voice
mailbox equipment through its wholly-owned subsidiary, U.S. Voice. These
operations were unsuccessful largely as a result of unforeseen initial start-up
costs and revenues that did not meet the Company's expectations. In October
1989, the Company transferred all of the assets of U.S. Voice to an affiliate.
The Company realized a net loss from discontinued operations of $48,108. For
more information on U.S. Voice see "Item 1 - Description of Business."
<PAGE>
In July 1990, the Company acquired 100% of the outstanding capital stock of
Cactus Club, a manufacturer of mens sportswear. The Company acquired Cactus Club
with the intention of diversifying its business holdings and moving away from
telecommunications-related operations. Cactus Club required an immediate cash
infusion of $500,000 which the Company had intended to provide through the
proceeds of a warrant offering which the Company was then conducting. In
September 1990, the Company's Common Stock was delisted from the NASDAQ Small
Cap Market. After the Common Stock was delisted, the Company ceased receiving
cash proceeds from the exercise of the previously issued warrants. The Company
did not have an alternative method of financing the cash requirements of Cactus
Club. Accordingly, in October 1990, the Company transferred all of the assets of
Cactus Club to an unaffiliated third party. The Company recorded an $84,000 loss
as a result of its investment in Cactus Club. For more information on Cactus
Club, see "Item 1 - Description of Business."
On May 20, 1992, the Company transferred substantially all of the assets of
Digitel to Western Communications, Inc. (n/k/a Southwestern Communications,
Inc.), an affiliated entity. The Company sold the assets of Digitel in exchange
for Southwestern's assumption of an equivalent amount of Digitel's liabilities.
At the time of this transfer Digitel's liabilities exceeded its assets. Digitel
had experienced recurring losses and the Company's management did not believe
that it had the resources necessary to reverse this trend. The sale of Digitel's
assets was structured as a bulk transfer under Article 6 of the Uniform
Commercial Code, and notice of the sale was delivered to Digitel's creditors,
most of whom were suppliers. The Company believes that this transfer effectively
liquidated any and all claims that these trade creditors may have had against
the Company, and that any claims which may have survived are now barred by the
applicable statute of limitations. Accordingly, the Company has not recorded
these claims as a liability on its balance sheet. See "Item 1- Business of
Issuer" for more information on the disposition of Digitel.
After the transfers of U.S. Voice, Cactus Club, and Digitel, the Company's
only significant asset was an interest in a parcel of commercial real estate
located at 3900 West Russell Road in Las Vegas Nevada. The Company had title to
the property but leased the property back to a former owner under what was
intended to be a sale-leaseback arrangement. This interest in the property was
assigned to the Company by an affiliate in exchange for the Company's issuance
of Common Stock. For more information of the property, see "Item 1 - Business of
Issuer" and "Item 2 - Description of Property." From May 1992 to April 1995, the
lease of this property was the only source of revenues generated by the Company.
In April 1995, the Company transferred its interest in the property to
another affiliate. At the time of this transfer, the first mortgage holder on
the property was threatening foreclosure and the Company was in danger of not
realizing the full value of the property as a result of the impending forced
sale. Therefore, the Company transferred the Russell Road property in exchange
for the transferee's assumption of the debt obligations on the property and
promise to distribute to the Company 50% of the first $100,000 in net proceeds
realized from the eventual sale of the property and 10% of additional net
proceeds realized. On July 23, 1996, the Russell Road property was sold. The
Company received $83,606 as a result of the sale. The cash derived from the sale
was used to reduce the Company's liabilities. The Russell Road property was the
last substantial asset owned by the Company. For more information on these
transactions, see "Item 12 - Certain Relationships and Related Transactions."
The Company effected a 1-for-40 reverse stock split of all issued and
outstanding shares of the Company's Common Stock on November 1, 1995. The board
of directors recommended the reverse split because it believed the number of
shares of Common Stock then outstanding was disproportionately large when
compared with the Company's revenue, net income, and net worth.
The Company is currently negotiating potential mergers or acquisitions,
however, as of the date of this filing no definitive agreements have been
reached. The Company has not realized any cash inflow in the past five years,
excepting the cash realized from the April 1996 sale of the Russell Road
property. The Company hopes that it can engage in an acquisition or merger with
an entity that will provide the Company with revenue from operations. Since the
Company no longer has any significant assets, any merger or acquisition that the
Company ultimately effects will involve the issuance of the Company's Common
Stock. Such an exchange of the Company's Common Stock would substantially dilute
the existing ownership position of the Company's current shareholders. If the
Company effects a future merger or acquisition, it will need financing to
satisfy the cash requirements of its merger/acquisition partner. The nature and
extent of these requirements will depend upon the kind of business acquired by
the Company. Given the Company's limited cash flow and history of operating
losses, there is a substantial risk that the Company will not be able to raise
the capital necessary to make a subsequent merger or acquisition successful. A
merger or acquisition will also likely result in the Company's recruitment of
additional employees.
<PAGE>
ITEM 7. FINANCIAL STATEMENTS
Please see the accompanying financial statements attached as pages F-1
through F-8.
[THIS SPACE LEFT INTENTIONALLY BLANK]
<PAGE>
Sellers & Associates
CERTIFIED PUBLIC ACCOUNTANT Fax (801) 627-1639
378 Harrison Blvd. Suite 101, Ogden, Utah 84403 (801) 621-8128
INDEPENDENT PUBLIC ACCOUNTANT'S REPORT
Board of Directors
HYTK Industries, Inc. and Subsidiaries
Salt Lake City, Utah
We have audited the accompanying balance sheets of HYTK Industries, Inc. and
Subsidiaries as of May 31, 1992 and 1991 and the related statements of
operations, stockholders' equity, and cash flows for the years ended May 31,
1992, 1991, and 1990. These financial statements are the responsibilities of the
Company's Management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatements. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
As discussed in Note 6 to the financial statements, the Company transferred its
assets in a bulk sale May 20, 1992. An officer of the Company owned 40% of the
acquiring corporation. The acquiring corporation assumed the Company debts
without additional consideration as the debts were equal to or exceeded the
value of the assets transferred. The financial records of the Company were also
transferred to the acquiring corporation. Since that time, the acquiring
corporation has changed ownership and management and the financial records of
the Company through May 31, 1992 have become lost, destroyed, or otherwise made
unavailable by the corporation. Because of this, we have relied primarily on the
prior audits unaudited financial statements of the Company as previously
provided in reports filed with the Securities and Exchange Commission. Although
we have generally satisfied ourselves as to the overall reasonableness of such
financial data, we were unable to satisfy ourselves as the correctness and
accuracy of the statements of cash flows as provided in these financial
statements.
In our opinion, except as explained paragraph, the financial statements referred
to above present fairly, in all material respects, the financial position of
HYTK Industries, Inc. and Subsidiaries as of May 31, 1992 and 1991 and the
results of its operations and its cash flows for the years ended May 31, 1992
and 1991, and 1990 in conformity with generally accepted accounting principles.
The accompanying financial statements have been presented assuming the Company
will continue as a going concern. As discussed in Notes 5 and 6 to the financial
statements, the Company disposed of all its assets May 20, 1992 and has not
generated revenue since. This raises substantial doubt about its ability to
continue as a going concern. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
May 20, 1997
<PAGE>
HYTK INDUSTRIES, INC. AND SUBSIDIARIES
Consolidated Balance Sheet
May 31, 1992 and 1991
May 31, 1992 May 31, 1991
----------------- -----------------
ASSETS
Current Assets:
Cash and cash equivalents ................. $ -- 5,461
Income tax receivable ..................... 15,000 22,250
----------- -----------
15,000 27,711
----------- -----------
Other Assets:
Investments in marketable securities ...... -- 12,000
Other assets, discontinued operations,
net of associated liabilities ........... -- 198,546
----------- -----------
-- 210,546
----------- -----------
TOTAL ASSETS ................................. $ 15,000 $ 238,257
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses ..... $ 4,500 $ 6,800
Bank overdrafts ........................... 20,867 --
----------- -----------
25,367 6,800
----------- -----------
Noncurrent Liabilities:
Note payable, related party ............... 27,500 25,000
Deferred income taxes ..................... -- 14,300
Other liabilities, discontinued operations,
net of other associated assets ......... 587,682 380,347
----------- -----------
615,182 419,647
----------- -----------
Commitments and contingencies ................ -- --
Stockholders' Equity
Preferred stock, par value $.001,
50,000,000 shares authorized,
no share issued and outstanding
Common stock, par value $.001
950,000,000 shares authorized,
issued and outstanding shares
of 24,636 for 1992 and 25,226 for 1991 . 25 25
Additional paid-in-capital ................ 1,108,612 1,106,032
Retained earnings (deficit) ............... (1,629,951) (548,529)
----------- -----------
(521,314) 557,528
Less unearned compensation ................ 104,235 183,570
---------- -----------
(625,549) 373,958
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY ... $ 15,000 $ 420,058
=========== ===========
See notes to financial statements.
F-1
<PAGE>
<TABLE>
<CAPTION>
HYTK INDUSTRIES, INC. AND SUBSIDIARIES
Statements of Operations
For the Years Ended May 31, 1992, 1991 and 1990
May 31, May 31, May 31,
1992 1991 1990
------------ -------------- ---------
<S> <C> <C> <C>
Revenues .......................................................... $ -- $ -- $ --
----------- --------- -----------
Operating Expenses
Salaries and payroll taxes ................................... 14,200 66,218 73,608
Professional fees ............................................ 50,499 47,827 20,490
General and administrative ................................... 12,066 18,505 13,907
Bad debt ..................................................... -- -- 14,740
Rent and utilities ........................................... 10,156 17,124 10,800
Insurance .................................................... -- -- 930
Depreciation and amortization ................................ 4,291 --
Other ........................................................ 6,250 4,115 24,642
----------- --------- -----------
93,171 158,080 159,117
----------- --------- -----------
Non-Operating Income (Expense)
Write-off deferred registration costs ........................ -- (147,307) (109,331)
Interest income .............................................. 80 132 672
Miscellaneous ................................................ -- (500) --
Loss on disposition of investments ........................... -- (222,107) --
Loss on disposition of property and equipment ................ (12,000) --
----------- --------- -----------
(11,920) (369,782) (108,659)
----------- --------- -----------
Income (Loss) from continuing operations
before income taxes .......................................... (105,091) (527,862) (267,776)
Provision for income taxes ........................................ 29,300 -- (3,900)
Gain (loss) from discontinued operations, net of income tax benefit (1,005,631) (204,512) 266,770
Gain on diposal of discontinued operations ........................ -- -- 2,403
----------- --------- -----------
(1,005,631) (204,512) 269,173
----------- --------- -----------
Net Income (loss) ................................................. $(1,081,422) $ (732,374) $ (2,503)
=========== ========= ===========
Earnings (loss) per share:
Loss for continuing operations ............................... $ (4.24) $ (26.79) $ (15.05)
=========== ========= ===========
Income (loss) from discontinued operations ................... $ (40.57) $ (10.38) $ 15.13
=========== ========= ===========
Net income (loss) ............................................ $ (43.63) $ (37.17) $ 0.14
=========== ========= ===========
Weighted-average shares outstanding ............................... 24,785 19,702 17,796
See notes financial statements.
F-2
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
HYTK INDUSTRIES AND SUBSIDIARIES
Statements of Stockholders' Equity
Years Ended May 31, 1992, 1991 and 1990
Common Stock
----------------------
Retained
Additional Earnings Total
Number of Paid In (Deficit) Deferred Stockholders'
Shares Par Value Capital Accumulated Compensation Equity
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balances, May 31, 1989 .......................... 17,141 $ 17 $ 849,345 $ 186,348 $ -- $ 1,035,710
Issuance of common stock
under stock bonus plan ..................... 5 -- 700 -- -- 700
Issuance of common stock
to profit sharing plan ..................... 714 1 39,999 -- -- 40000
Net Loss ........................................ -- -- -- (2,503) -- (2,503)
------- ---- ----------- ----------- --------- -----------
Balances, May 31, 1990 .......................... 17,860 $ 18 $ 890,044 $ 183,845 $ -- $ 1,073,907
Exercise of common stock warrants ............... 466 -- 104,382 -- -- 104,382
Deferred offering costs ......................... -- -- (104,382) -- -- (104,382)
Issuance of common stock
under stock compensation plan .............. 6,982 7 218,416 -- (186,215) 32,208
Issuance of common stock
under stock bonus plan ..................... 7 -- 217 -- -- 217
Shares surrendered and canceled ................. (89) -- (2,645) -- 2,645 --
Net Loss ........................................ -- -- -- (732,374) -- (732,374)
------- ---- ----------- ----------- --------- -----------
Balances, May 31, 1991 .......................... 25,226 $ 25 $ 1,106,032 $ (548,529) $(183,570) $ 373,958
Deferred compensation earned .................... -- -- -- -- 80,585 80,585
Shares surrendered and canceled ................. (3,293) (3) (129) -- -- (132)
Issuance of common stock
under stock option plan .................... 23 -- 22 -- -- 22
Issuance of common stock
to director for services ................... 2679 3 2,497 -- (1,250) 1,250
Exercise of common stock warrants ............... 1 -- 190 -- -- 190
Net Loss ........................................ -- -- -- (1,081,422) -- (1,081,422)
------- ---- ----------- ----------- --------- -----------
Balance, May 31, 1992 ........................... 24,636 $ 25 $ 1,108,612 $(1,629,951) $(104,235) $ (625,549)
======= ==== =========== =========== ========= ===========
See notes to financial statements.
F-3
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
HYTK INDUSTRIES, INC.
Statements of Cash Flows
For the Years Ended May 31, 1992, 1991 and 1990
May 31, May 31, May 31,
1992 1991 1990
-------------- -------------- ---------------
Cash Flows From Operating Activities
<S> <C> <C> <C>
Net income (loss) ............................................. $(1,081,422) $ (732,374) $ (2,503)
Noncash expenses (income) included in net income (loss)
Loss on disposition of investments ......................... 12,000 222,107 --
Write-off of deferred registration cost .................... -- 147,307 --
Depreciation and amortization .............................. -- 4,291 --
Equipment provision for loss on note receivable ............ -- -- 14,740
Issuance of common stock for services ...................... 1,250 32,425 700
Issuance of stock to profit-sharing and stock bonus plan ... 22 -- 40,000
Effect of shares currendered and canceled .................. (132) -- --
Deferred compensation earned ............................... 80,585 -- --
Write off deferred income taxes ............................ (14,300) -- --
Change in assets and liabilities
(Increase) decrease in account receivable, other ........... -- 46,568 (46,063)
(Increase) decrease in income tax receivable ............... 7,250 (7,150) (15,100)
(Increase) decrease in other assets, discontinued operations 341,919 379,131 (83,730)
(Increase) decrease in other assets ........................ -- 2,500 (2,500)
Increase (decrease) in accounts payable and accrued expenses (2,300) (38,885) 26,934
Increase in bank overdrafts ................................ 20,867 -- --
Increase in current liabilities, discontinued operations ... 626,110 -- --
Increase (decrease) in income taxes payable ................ -- -- (28,500)
----------- ----------- -----------
Net cash provided by (used for) operating activities ............... (8,151) 55,920 (96,022)
----------- ----------- -----------
Cash Flows From Investing Activities
Repayment of note receivable, related party ................... -- -- 200,000
Purchase of investment in marketable securities ............... -- (115,566) --
----------- ----------- -----------
Net cash provided by (used for) investing activities ............... -- (115,566) 200,000
----------- ----------- -----------
Cash Flows From Financing Activities
Payment received on notes receivable .......................... -- 10,260
Increase in deferred registration costs ....................... -- (80,225) (100,468)
Proceeds from note payable, related party ..................... 2,500 25,000 --
Capitalization of deferred registration costs ................. -- 104,382 --
Issuance of common stock for cash ............................. 190 -- --
----------- ----------- -----------
Net cash provided by (used for) financing activities ............... 2,690 49,157 (90,208)
----------- ----------- -----------
Increase (decrease) in cash and cash equivalents ................... (5,461) (10,489) 13,770
Cash and cash equivalents, beginning of year ....................... 5,461 15,950 2,180
----------- ----------- -----------
Cash and cash equivalents, end of year ............................. $ -- $ 5,461 15,950
=========== =========== ===========
Supplement Disclosures Of Cash Flow Information
Cash payments for Interest .................................... $ -- $ 106,854 $ 104,231
Cash payment for Income Taxes ................................. $ -- $ -- $ --
See notes to financial statements.
F-4
</TABLE>
<PAGE>
HYTK INDUSTRIES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
Years ended May 31, 1992, 1991 and 1990
Note 1. Nature of Business and Significant Accounting Policies
The Company's operations were in the telecommunications industry
specializing in the sales, installations and maintenance of telephone systems.
A summary of the Company's significant accounting policies follows:
Principles of consolidation:
HYTK Industries, Inc. was formerly known as Digitel of Las
Vegas, Inc. On May 15, 1987, the Company changed its name to
HYTK Industries, Inc. On June 1, 1987, the Company's
interconnect operations were transferred to a wholly-owned
subsidiary formed by the Company, Digitel, Inc. HYTK
Industries Inc. acted only as a holding company for its
subsidiaries.
The consolidated financial statements include the accounts of
HYTK Industries Inc. and its wholly-owned subsidiaries,
Digitel, Inc. All significant intercompany accounts and
transactions have been eliminated.
Ditigel, Inc. operated in the telecommunications industry,
specializing in the sales, installation and maintenance of
telephone and voice mail systems. On June 30, 1992, operations
of Ditigel, Inc. were discontinued.
Earnings per share data:
Earnings per share have been computed on the basis of the
weighted average number of shares of common stock outstanding
during the year.
Outstanding warrants have not been included in the computation
of income per share as the effect of such would be
anti-dilutive.
Cash equivalents:
The Company considers all certificates of deposits with
maturities of three months or less as of year end to be cash
equivalents.
Note 2. Investments in Marketable Securities
During the fiscal year ended May 31, 1989, the Company advanced
$200,000 to an unrelated third party to finance the acquisition of
Above Technologies. Inc. As consideration for advancing Above
Technologies, Inc. working capital funding, and as consideration for
consulting services rendered to Above Technologies, Inc. by the
Company, the Company received a total of 480,588 shares of Above
Technologies, Inc. common stock. The market value of Above
Technologies, Inc. stock as of May 31, 1992 and 1991 was $0 and
$12,000, respectively.
Note 3. Notes Payable, Related Party
During the year ended May 31, 1991, an officer/director of the
Company advanced the Company $25,000. The advance accrued interest at
the rate of 10 percent per annum and principal and interest were due
November 30, 1992.
<PAGE>
Note 4. Lease Commitments and Related Party Transaction
The Company leased office space from a related party on a
month-to-month basis for $900 per month, which included secretarial
services through 1991.
Ditigel, a subsidiary of the Company, leased office space under two
operating leases expiring in October 1991 and March 1994 for $1,532
and $4,608 per month, respectively.
Note 5. Going Concern
The Company has ceased operations and disposed of most of its assets
and is now inactive. Consequently, it is not a going concern. Unless
additional funds and business activity come into the Company, it will
remain inactive.
Note 6. Explanation of Financial Statement Presentation
Pursuant to a May 20, 1992 Asset Purchase Agreement, the Company
transferred nearly all of the assets then owned by Digitel to
Southwestern Communications, Inc., a Nevada corporation f/k/a Western
Communications, Inc. ("Southwestern"). By means of this Agreement,
the Company sold all of Digitel's machinery, equipment, tangible
personal property, inventory, and accounts receivable to
Southwestern. The only asset not transferred to Southwestern was a
Honda automobile encumbered by a lease contract with Honda Leasing.
As consideration for the transfer, Southwestern assumed approximately
$675,000 worth of Digitel's debts. No additional consideration was
paid because the debts to be assumed were equal to or exceeded the
value of the assets transferred. Southwestern provided notice of this
bulk sale pursuant to the provisions of Article 6 of the Uniform
Commercial Code. Prior management indicated that the decision to sell
Digitel was based on the fact that Digitel had experienced net losses
in the prior two years and Digitel's liabilities exceeded its assets
at the time of the transfer. Gordon Beckstead, then the Company's
president and director, was a 40% owner of Southwestern at the time
of this transaction.
During fiscal year 1994, Digitel's articles of incorporation were
suspended by the State of Colorado for failure to file its 1993
annual report. The Company has no current intentions to revive
Digitel's charter and will likely seek to voluntarily dissolve
Digitel in the near future. Accordingly, the Company has not included
Digitel as a consolidated subsidiary on the attached financial
statements. Rather, such activity is reported as "other assets,
discontinued operations, net of associated liabilities " or "other
liabilities, discontinued operations, net of associated assets."
Since the bulk sale occurred just prior to the May 31, 1992 year end,
the response to notifications of assumption of debt of Southwestern
extended into the year ended May 31, 1993. Accordingly, the final
disposal of "Other assets, discontinued operations, net of associated
liabilities " and "other liabilities, discontinued operations, net of
associated assets" also extended into the year ended May 31, 1993.
Consequently, there are no liabilities dealing with the bulk transfer
subsequent to May 31, 1993.
Prior to the transfer of Digitel, the Company also had made transfers
of its other subsidiaries and interests in U.S. Voice and Cactus
Club. As with Digitel, these activities are also reported as
"discontinued operations" in the financial statements through May 31,
1991.
<PAGE>
Note 7: Income Taxes
The provision for income taxes included in the accompanying
consolidated statements of operations differs form the statutory
amount for the following:
Years Ended May 31,
1992 1991 1990
Income tax expense
at statutory federal tax rate $ - $ - $ 10,300
Graduated tax rates - - (6,400)
---------- ---------- -----------
$ - $ - $ 3,900
=====================================
The provision for income taxes of $3,900 at May 31, 1990 was offset
by the net tax benefit of $19,000 form the loss from discontinued
operations. A net operating loss of approximately $44,000 generated
in the current year was carried back to prior years resulting in a
net income tax receivable at May 31, 1990 of $15,100.
The credits arising from the utilization of net operating loss carry
forwards have been reflected, in the accompanying consolidated
statement of operations, as an extraordinary item.
As of May 31, 1992, the Company had a net operating loss
carryforward of approximately $540,000 potentially available to
offset future taxable income. However, the Company's ability to
utilize such losses to offset future taxable income was subject to
various limitations imposed by the rules and regulations of the
Internal Revenue Service.
Note 8. Stock Option Plan
The Company has adopted a qualified stock option plan under which
179 shares of its $0.001 par value common stock have been reserved
for options to employees. Option prices will be the fair market
value (110% of fair market value if the optionee has more than 10%
voting control) of the common stock on the date the options are
granted. The term of an option shall be for a period of no longer
than ten years from the date of the grant of the option. The Plan
expires May 20, 1995. No options have been granted to date.
Note 9. Stockholders' Equity
On September 1, 1991 the Company effected a 1-for-140 reverse stock
split of its common stock and on November 1, 1995 the Company
effected a 1-for-40 reverse stock split of its common stock. All
reference to quantities of common stock have been adjusted to
reflect both the 1991 and 1995 reverse stock splits.
During the year ended May 31, 1988 the Company approved a stock
bonus plan for its employees. The plan approved 500,000 shares to be
set aside, 20% to be issued in the current year, and 10% yearly for
eight years. During the years ended May 31, 1992, 1991 and 1990, the
Company distributed under this plan 23, 7 and 5 shares amounting to
$22, $217 and $700, respectively.
Note 10. Profit-Sharing Trust
During the year ended May 31, 1988, the Company established a
profit-sharing trust for its employees who meet eligibility
requirements set forth in the Plan. The annual contributions to the
Plan are to be determined by the board of Directors, with a maximum
amount equal to 15 percent of gross salaries. The amount of the
contribution for the years ended May 31, 1989 and 1988 are $$40,000
and $30,712, respectively.
<PAGE>
During the year ended May 31, 1989, the Plan settled the May 31,
1988 accrued profit sharing contribution of $30,711 by issuing 152
shares of the Company's $.001 par value common stock and 67 shares
of its treasury stock.
During the year ended May 31, 1990, the Plan settled the May 31,
1989 accrued profit sharing contribution of $40,000 by issuing 714
shares of the Company's $.001 par value common stock.
On February 8, 1991, Digitel adopted a 401(k) Profit Sharing Plan
and Trust, which became effective on January 1, 1991. All employees
of Digitel are eligible to participate, after having satisfied
certain eligibility requirements. A Plan participant may contribute
up to 10 percent of his salary to the Plan (subject to Internal
Revenue Code limits), with Digitel making a matching contribution
initially equal to 25 percent of the amount contributed by the
participant.
Note 11. Supplemental data to consolidated statement of cash flows
Excluded from the consolidated statement of cash flows for the years
ended May 31, 1992, 1991 and 1990 were the effects of certain
noncash investing and financing activities as follows: (1992)
Issuance of common stock for compensation for $2,500; (1991)
Issuance of common stock for compensation for $32,425, Issuance of
common stock for deferred stock compensation for $218,423; (1990)
Issuance of common stock for compensation for $700.
Note 12. Discontinued operations
During the year ended May 31, 1989, the Company commenced operations
of one of its wholly-owned subsidiaries, US Voice Corporation, which
provided voice mail equipment and leasing of voice mail boxes. US
Voice Corporation incurred a considerable loss during its start-up,
and on October 1, 1989, management decided to discontinue its
operations. The company disposed of its net assets relating to the
operations of US Voice Corporation, resulting in a gain of $2,403.
The Company incurred a loss from discontinued operations of US Voice
Corporation of $50,511 net of an income tax benefit of $22,704 for
the year ended May 31, 1990.
Note 13. Subsequent Events
The Company retained its interest in the sale-leaseback of the
Russell Road property. This asset was not recognized on the books of
the Company since it was questionable as to its value. On April 22,
1995, this interest was transferred to BeckWork LLC ("Beckwork"),
whose 50% owner was then president and director of the Company. In
exchange, the Company received a commitment to share in the profits
derived from the eventual sale of the property by BeckWork. Such
agreement was evidenced by a promissory note and a deed of trust
executed by BeckWork. On July 23, 1996, BeckWork sold the Russel
Road Property. Under the terms of the April 22, 1995 agreement, the
Company received $83,606.
On November 1, 1995 the Company effected a 1-for-40 reverse stock
split of its common stock. All reference to quantities of common
stock have been adjusted to reflect this reverse stock split.
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
During the fiscal years 1989 to 1991, Mitchell, Londer & Company served
as the Company's principal auditors. In September 1995, the Company's principal
offices moved from Denver, Colorado to Salt Lake City, Utah. In conjunction with
this move, the Company terminated its relationship with Mitchell, Londer &
Company. This decision was based on the Company's relocation and the Company had
no disagreements with its former accountant with respect to accounting
principles or practices, financial statement disclosure, or auditing scope and
procedures at the time of the dismissal.
The last report on Form 10-KSB prior to the Company's move to Salt Lake
City was filed for the fiscal year ended May 31, 1991. Mitchell Londer &
Company's report on the financial statements included therein did not contain
any adverse opinion or disclaimer of opinion, nor was it modified as to
uncertainty, audit scope or accounting principles. The auditor's unqualified
report, however, was subsequently retracted as a result of a February 23, 1994
consent order entered by the Securities and Exchange Commission which sanctioned
the Company for its accounting treatment of real property as an asset. For more
information on this consent order, see "Item 3 - Legal Proceedings." Mitchell
Londer & Company's report also contained an explanatory paragraph stating that
due to recurring losses there was "substantial doubt about [the Company's]
ability to continue as a going concern."
On June 27, 1996, the Company retained Sellers & Company as its
principal accountant. The Company did not consult with Sellers & Company
regarding the application of accounting principles, type of audit opinion, or
any other matters outlined in Item 304(a)(2) of Regulation S-B under the
Securities Exchange Act of 1934. Sellers & Company audited the Company's
financial statements for the fiscal years 1989-1996. None of the auditor's
reports prepared by Sellers & Company contained an adverse opinion or disclaimer
of opinion, nor were modified as to uncertainty, audit scope or accounting
principles. The report did, however, contain an explanatory paragraph stating
that due to recurring losses there was "substantial doubt about [the Company's]
ability to continue as a going concern."
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Directors and Executive Officers:
Ken Kurtz, age 28, was appointed as the Company's president and
director on September 5, 1995. Mr. Kurtz is currently the only officer and
director of the Company. Mr. Kurtz is, and has been since February 1992, the
president and sole director of Park Street Investments, Inc., a Utah corporation
and one of the Company's largest shareholders. From November 1990 to February
1992, Mr. Kurtz was secretary-treasurer of Boss International, Inc., a company
which published time management systems.
Compliance with Section 16(a) of the Exchange Act
Based solely upon the Company's review of Forms 3, 4 and 5 and
amendments thereto furnished to the registrant under Rule 16a-3(d) during the
fiscal year preceding the filing of this Form 10-KSB, the Company is not aware
of any person who was a director, officer, or beneficial owner of more than ten
percent of the Company's Common Stock and who failed to file reports required by
Section 16(a) of the Securities Exchange Act of 1934 in a timely manner except
those listed in this subsection.
<PAGE>
<TABLE>
<CAPTION>
On September 1, 1995, Park Street Investments, a Utah corporation
("Park Street"), acquired 2,565 shares of Common Stock pursuant to a Consulting
Agreement with the Company. At the time, this constituted greater than 10% of
the Company's then-outstanding Common Stock. Accordingly, Park Street was
required to file a Form 3 pursuant to Section 16(a) of the Securities Exchange
Act of 1934 ("Form 3") within 10 days of that acquisition. Ken Kurtz, the
Company's president and director, is also the president and sole director of
Park Street. Accordingly, Mr. Kurtz was required to file a separate Form 3 based
on his position as an officer/director of the Company and his indirect
beneficial ownership of more than 10% of the Common Stock. On November 1, 1995,
separate Forms 3 were filed for both Mr. Kurtz and Park Street. Neither was
filed in a timely manner.
On September 1, 1995, A-Z Professional Consultants, Inc., a Utah
corporation ("A-Z"), acquired 23,078 shares of Common Stock pursuant to a
Consulting Agreement with the Company. This amount constituted greater than 10%
of the Company's outstanding Common Stock. Accordingly, A-Z was required to file
a Form 3 within 10 days of the acquisition. Richard Surber was then the
Company's vice president and director and was also the president and sole
director of A-Z,. Mr. Surber, therefore, was also required to file a Form 3
based on his position as an officer/director and his indirect, beneficial
ownership of more than 10% of the Common Stock. Both Mr. Surber and A-Z filed
their respective Forms 3 on November 1, 1995. Neither was filed in a timely
manner.
On May 1, 1997, A-Z Professional Consultants transferred all of its
interest in the Company's Common Stock to two irrevocable trusts. The Alexander
W. Senkovski Irrevocable Trust acquired 11,539 shares of Common Stock pursuant
to a Stock Purchase Agreement. The David Michael Irrevocable Trust also acquired
11,539 shares of Common Stock pursuant to a Stock Purchase Agreement. The shares
acquired on May 1 made each irrevocable trust the beneficial owner of over 10%
of the Company's Common Stock. The Company is aware that neither The Alexander
W. Senkovski Irrevocable Trust nor The David Michael Irrevocable Trust has filed
a Form 3 to evidence the acquisition of these holdings, but the Company has been
informed that these entities are now preparing these documents.
ITEM 10. EXECUTIVE COMPENSATION
No compensation in excess of $100,000 was awarded to, earned by, or
paid to any executive officer of the Company between the years 1991 and 1996.
The following table provides summary information for the years 1989 to 1996
concerning cash and noncash compensation paid or accrued by the Company to or on
behalf of Gordon Beckstead, the Company's president and director from May 1985
to September 1995, and Ken Kurtz, the Company's current president and director.
SUMMARY COMPENSATION TABLE
Annual Compensation Awards Payouts
Restricted Securities Other
Name & Fiscal Other Annual Stock Underlying LTIP Compen-
Position Year Salary Bonus($) Compensation Award(s)($) Options/SARs(#) Payouts sation
-------- ---- ------ -------- ------------ ----------- --------------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Ken Kurtz 1997 -0- -0- -0- -0- -0- -0- -0-
Current 1996 -0- -0- -0- -0- -0- -0- -0-
President 1995 -0- -0- -0- -0- -0- -0- -0-
Gordon 1995 -0- -0- -0- -0- -0- -0- -0-
Beckstead 1994 -0- -0- -0- -0- -0- -0- -0-
Former 1993 -0- -0- -0- -0- -0- -0- -0-
President 1992 $36,000+ -0- -0- -0- -0- -0- -0-
1991 $36,000 -0- -0- $84, 000* -0- -0- -0-
1990 $60,000 -0- -0- -0- -0- -0- -0-
1989 $30,000 -0- -0- -0- -0- -0- -0-
</TABLE>
+ Mr. Beckstead's annual salary was discontinued on or before May 20, 1992, when
the Company transferred 100% of Digitel's assets to Southwestern Communications,
Inc. No salary has been paid to any executive officer since the fiscal year
ended May 31, 1992.
* On November 30, 1990, Mr. Beckstead was issued 107,142 shares of Common Stock
in consideration for services he had previously rendered to the Company and for
Mr. Beckstead's agreement to reduce his annual salary from $60,000 to $36,000.
These shares were issued pursuant to a November 19, 1990 Stock Escrow Agreement.
According to that Agreement, Mr. Beckstead's shares vested at a rate of 8,928
shares per month beginning February 28, 1991 or became fully vested upon the
sale of the Company. All 107,142 shares ultimately vested on or before September
1, 1995 when a controlling interest in the Company was transferred to Park
Street Investments, Inc. and A-Z Professional Consultants, Inc.
<PAGE>
<TABLE>
<CAPTION>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information concerning the
Company's stock ownership as of August 31, 1997 with respect to: (i) each person
who is known to the Company to be a beneficial owner of more than five percent
of the Company's Common Stock; (ii) all directors; (iii) each of the executive
officers; and (iv) all directors and executive officers as a group:
Amount and Nature of Percent of
Title of Class Name and Address of Beneficial Owner Beneficial Ownership Class
<S> <C> <C> <C>
Common Stock, The Alexander W. Senkovski Irrevocable Trust 11,539 22.1%
Par Value $0.001 5519 Rawls Road
Tampa, Florida 33625
Common Stock, Gordon Beckstead 5,373 10.3%
Par Value $0.001 6244 Elmira Cir
Englewood, Colorado 80111
Common Stock, The David Michael Irrevocable Trust 11,539 22.1%
Par Value $0.001 5519 Rawls Road
Tampa, Florida 33625
Common Stock, Wendell Hall & BonnieJean C. Tippets, Trustees 23,078 44.2%
Par Value $0.001 5519 Rawls Road
Tampa, Florida 33625
Common Stock, Ken Kurtz 2,565 4.9%
Par Value $0.001 2133 East 9400 South, Suite 151
Sandy, Utah 84093
Common Stock, Officers and Directors as a Group 2,565 4.9%
Par Value $0.001
</TABLE>
Wendell Hall and BonnieJean C. Tippetts are co-trustees of both the David
Michael Irrevocable Trust and the Alexander Senkovski Irrevocable Trust. Neither
Wendell Hall nor BonnieJean C. Tippetts has a beneficial interest in either
trust.
These shares are owned by Park Streeet Investments, Inc., a Utah corporation
of which Ken Kurtz is the only officer and director.
<PAGE>
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Transactions Involving Property Located at 3900 Russell Road
On February 1, 1989, William Workman, then the Company's
secretary-treasurer and chairman of the board of directors, acquired an
office/warehouse complex located at 3900 West Russell Road, Las Vegas, Nevada
from Century Manufacturing, Inc. ("Century"). Mr. Workman's purchase of the
property was structured as a sale-leaseback. As consideration for the property,
Mr. Workman agreed to assume a mortgage of approximately $926,000 and released
Century from a $273,500 debt Century owed him. Mr. Workman subsequently assigned
this interest to the Workman Family Partnership ("WFP"), an entity under his
control.
On May 26, 1989, WFP assigned all of its interest in the property to
the Company in consideration for the Company's assumption of all obligations
under the agreement with Century and the Company's issuance of 15,000,000 (not
accounting for either the September 1, 1991 1-for-140 reverse stock split or the
November 10, 1995 1-for-40 reverse stock split) restricted shares of Common
Stock. The shares issued to Mr. Workman were valued at $0.03, the closing price
of free trading stock on May 26. Accordingly, the Company recorded Mr. Workman's
interest in the transaction at $450,000. The Company entered this transaction
because it believed that ownership of industrial real estate in Las Vegas was a
prudent investment and because the agreement allowed the Company to acquire an
asset without expending cash. A majority of the Company's disinterested
directors approved of this transaction.
From 1989 to 1995, the Company leased the property to Century under the
leaseback provisions of the Agreement. On April 22, 1995, the Company
transferred its rights, interests, and obligations under the agreement with
Century to BeckWork, LLC, a Nevada limited liability company ("BeckWork").
Gordon Beckstead, who was then the Company's president and director, owned a 50%
interest in BeckWork. The remainder of BeckWork was owned by William Workman,
who was no longer an officer or director of the Company at the time of the
transaction. At the time the Russell Road property was transferred to BeckWork,
the Company had discontinued all of its operations and had no assets to secure
the mortgages on the property other than the property itself. The first mortgage
holder was preparing to foreclose on the property and the Company felt that the
property was worth more than would be realized in a foreclosure sale. BeckWork
was deemed to be an acceptable debtor by the first and second mortgage holders.
The Company therefore believed that transferring the property to BeckWork would
prevent a forced sale of the property and thereby allow the Company to realize
some of the proceeds of the sale. Accordingly, a majority of the disinterested
directors voted to approve this related party transaction.
As consideration for the transfer of all the Company's rights to the
Russell Road property, BeckWork agreed to assume the first and second mortgages
on the Russell Road property. BeckWork also promised to transfer to the Company
a specified percentage of the proceeds resulting from BeckWork's sale of the
property. This obligation was secured by a promissory note executed by BeckWork
and a deed of trust on the property. For more information on the deed of trust
and underlying obligation see "Item 2 - Description of Property."
On July 23, 1996, BeckWork sold the property to an unrelated third
party for $1,810,000 Under the promissory note executed by BeckWork, the Company
was entitled to $83,606 of the total proceeds of the sale. At the time that
BeckWork sold the property, Gordon Beckstead was no longer a director or officer
of the Company.
Of the $83,606 the Company was entitled to under the promissory note,
$40,000 was paid to Gordon Beckstead in full payment of a note Mr. Beckstead had
previously purchased from another former director of the Company. Gordon E.
Beckstead Associates, Inc., a Company controlled by Mr. Beckstead, received an
additional $17,883 as repayment for advancements made on behalf to the Company,
including the payment of legal fees accrued through the Company's defense of
1994 proceeding initiated by the Securities Exchange Commission. For more
information on this proceeding, see "Item 3 - Legal Proceedings." An additional
$12,962 was paid to the Law Offices of Fay M. Matsukage in settlement of legal
services performed on behalf of the Company. Ms. Matsukage served as the
Company's corporate counsel for over 10 years and is the wife of Gordon
Beckstead. The Company's current board of directors, none of whom were
interested parties to these transactions, ratified the Company's payment of
these debts.
<PAGE>
The Company's Sale of Digitel
On May 20, 1992, the Company transferred substantially all of the
assets owned by its wholly-owned subsidiary, Digitel, Inc., to Western
Communications, Inc. (n/k/a Southwestern Communications, Inc.), a Nevada
corporation ("Southwestern"). At the time of the transaction, Southwestern was
controlled by Gordon Beckstead, then the Company's president and director, and
Michael Curry, an unrelated party. Mr. Beckstead owned approximately 40% of the
outstanding common stock of Southwestern and therefore had a material interest
in the transaction.
Digitel had experienced recurring losses from operations and had a
negative net worth at the time that its assets were transferred to Southwestern.
At the time of the Agreement, Digitel's assets were valued at $675,000. As
consideration for Digitel's transfer of assets, Southwestern assumed an
identical amount of the liabilities of Digitel. No additional consideration was
paid because the debts assumed were equivalent to the assets transferred. The
Agreement was structured as a bulk sale under Article 6 of the Uniform
Commercial Code and a notice to creditors was promulgated by Southwestern.
The Company decided to engage in this transaction because Digitel had
experienced continuing losses from operations and had liabilities that exceeded
its assets. The Company also believed that liquidating Digitel would enable the
Company to engage in future mergers or acquisitions that would help reverse the
Company's fortunes. A majority of the Company's disinterested directors voted to
approve this transaction.
The Company's Acquisition of Cactus Club
On July 9, 1990, the Company executed a Stock Exchange Agreement with
Cactus Club USA, Inc., a Colorado corporation ("Cactus Club"), and its
shareholders. Pursuant to the terms of the Agreement, the Company was to acquire
all of the issued and outstanding common stock of Cactus Club in exchange for
32,142 restricted shares of the Company's Common Stock and warrants to purchase
up to 71,428 shares. Cactus Club was a closely-held corporation that
manufactured and marketed a proprietary line of sportswear for men. It was
expected that Cactus Club would continue to operate as the Company's
wholly-owned subsidiary.
Workman Family Partnership, a limited partnership organized in the
state of Idaho ("WFP"), owned 45% of the outstanding common stock of Cactus Club
prior to the Stock Exchange Agreement. William Workman, who at the time was the
Company's secretary-treasurer and chairman of the board of directors, was also
the general partner of WFP. Mr. Workman, therefore, had a material personal
interest in this transaction.
In September 1990, the Company terminated the Stock Exchange Agreement
with Cactus Club after determining that the Company could not provide the
$500,000 capital infusion that Cactus Club required. The Company then
transferred all of its right, title and interest in Cactus Club to Dudley
Investment Company, an unrelated third party in exchange for 84,000 shares of
preferred stock in Cactus Club. The Company does not believe that this preferred
stock has any current value and the Company has reflected a loss of $84,000 for
its investment in Cactus Club.
Although the Company recorded a significant loss as a result of the
Cactus Club Agreement, the Company believed that the transaction was in the
Company's best interest at the time it was executed because the Agreement
allowed the Company to acquire a business with impressive earnings projections
using only restricted shares of the Company's Common Stock and warrants to
purchase additional shares of Common Stock, and therefore did not adversely
affect the Company's cash flow. A majority of the Company's disinterested
directors approved the Agreement, finding that it contained terms no less
favorable than had such transaction been with an unrelated party.
<PAGE>
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Index to Exhibits. Exhibits required to be attached by Item 601 of
Regulation S-B are listed in the Index to Exhibits beginning on page
17 of this Form 10-KSB, which is incorporated herein by this
reference.
(b) Reports on Form 8-K. The Company did not make any filings on Form 8-K
during the fourth quarter of the fiscal year ending May 31, 1992. The
Company's last Form 8-K was filed on February 23, 1994 and contained
unaudited financial statements for the fiscal years 1989 through 1992.
This Form 8-K was filed pursuant to a consent order the Company entered
with the Securities and Exchange Commission. See "Item 3 - Legal
Proceedings" for more information on this consent order.
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
Registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized, this 5TH day of September 1997.
HYTK Industries, Inc.
/s/ Ken Kurtz
Ken Kurtz, President
In accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the Registrant and in the capacities and
on the dates indicated.
Signature Title Date
/s/ Ken Kurtz President and Director September 5, 1997
Ken Kurtz
<PAGE>
INDEX TO EXHIBITS
EXHIBIT PAGE
NO. NUMBER DESCRIPTION
3(i) * The Company's Articles of Incorporation (incorporated herein
by reference to the Exhibits to the Company's Registration
Statement on Form S-18, Registration No. 2-99737-LA )
3(i) * The Company's Bylaws, as amended (incorporated herein by
reference to the Exhibits to the Company's Registration
Statement on Form S-18, Registration No. 2-99737-LA).
MATERIAL CONTRACTS
10(i)(a) 20 September 1, 1995 Consulting Agreement executed by and
between the Company and Canton Financial Services
Corporation.
10(i)(b) 26 April 22, 1995 Deed of Trust executed by BeckWork, LLC. for
the benefit of the Company.
10(i)(c) 31 May 20, 1992 Asset Purchase Agreement executed by and
between the Company and Western Communications.
CONSULTING AGREEMENT
This Consulting Agreement is made effective this 1ST day of September 1995
by and between Canton Financial Services Corporation, a Nevada corporation with
offices at 268 West 400 South, Suite 310, Salt Lake City, Utah 84101
(hereinafter "Consultant") and HYTK Industries, Inc., a Nevada corporation with
offices at 4582 South Ulster Parkway, Stanford Place III, Suite 201, Denver,
Colorado, 80237 (hereinafter referred to as HYTK or "Client") with respect to
the following:
RECITALS
WHEREAS, Consultant is in the business of providing general business
consulting services to privately held and publicly held corporations; and
WHEREAS, Client desires to retain Consultant to provide advice
relative to corporate and consulting services;
NOW, THEREFORE, in consideration of the mutual promises, covenants and
agreements contained herein, and for other good and valuable consideration, the
receipt and adequacy of which is expressly acknowledged, Client and Consultant
agree as follows:
1. Engagement of Consultant.
(a) Consultant agrees to be responsible for taking all steps necessary
to prepare Client for a merger. This includes, but is not limited to,
facilitating efforts to cause Client's corporate status with the state to be in
good standing; restructuring Client's capital formation possibly through reverse
splits, reauthorization of debt and equity; negotiating the settlement of
outstanding debts and lawsuits; preparing financial statements and audits;
preparing and filing other documents with the necessary regulatory bodies as is
required by law, including, but not limited to preparing and filing Forms 10-K
and 10-Q if necessary.
(b) Consultant agrees to prospect for, interview and perform necessary
due diligence on potential merger candidates and to negotiate and structure a
merger with potential candidates.
(c) Consultant agrees to only consider merger candidates that at a
minimum meet NASDAQ listing requirements with respect to gross assets and net
worth.
(d) Consultant further agrees to aid Client in preparation of Client's
15c2-11, and to use its best efforts to recruit market makers in order to
develop a market for Client's stock. Additionally, Consultant agrees to prepare
press releases and corporate fact sheets and to perform other public and
investor relations services in an attempt to develop an active market for
Client's stock.
2. Compensation.
Client shall pay Consultant an hourly fee for the consulting services
provided during the Initial Consulting Period (as defined below) with an option
to convert any amounts due to Consultant for said consulting services into stock
of Client.
Client shall pay as a finders fee 1,025,675 shares or, 51% of the
issued and outstanding shares of the company, whichever is greater, as follows:
Park Street Investments, Inc., shall receive the sum of 102,567 shares; A-Z
Professional Consultants, Inc. shall receive 923,108 shares.
<PAGE>
3. Term of Agreement, Extensions and Renewals.
This Agreement shall have an initial term of five years (5) (the
"Initial Consulting Period") from the above date hereon although if the
Consulting Services are completed prior to the expiration of this time period
the agreement may be earlier terminated and the Consultant paid the base fee.
Thereafter, this Agreement can be extended on a month to month basis (the
"Extension Period") by mutual agreement of the parties executed in writing
specifying the compensation for the Extension Period. Such notice shall be in
writing and shall be delivered at least ten (10) days prior to the end of the
Initial Consulting Period or any subsequent extension period. In the event of
termination pursuant to this paragraph, neither party shall have any further
rights or obligations hereunder after the effective date of such termination
except that the obligation of Client to make payments as provided for in this
Agreement and to reimburse costs and expenses shall continue until paid in full
by Client.
4. Nondisclosure of Confidential Information.
In consideration for the Client entering into this Agreement,
Consultant agrees that the following items used in the Clients business are
secret, confidential, unique, and valuable, were developed by Client at great
cost and over a long period of time, and disclosure of any of the items to
anyone other than Client's officers, agents, or authorized employees will cause
Client irreparable injury.
A. Non public financial information, accounting information,
plans of operations, possible mergers or acquisitions prior to
the public announcement;
B. Customer lists, call lists, and other confidential customer
data;
C. Memoranda, notes, records concerning the technical processes
conducted by Client;
D. Sketches, plans, drawings and other confidential research and
development data or;
E. Manufacturing processes, chemical formulae, and/or the
composition of Client's products.
5. Due Diligence.
Client shall supply and deliver to Consultant all information relating
to its business as may be reasonably requested by Consultant to enable
Consultant to make such investigation of Client and its business prospects, and
Client shall make available to Consultant names, addresses and telephone numbers
as Consultant may need to verify or substantiate any such information provided.
6. Best Efforts Basis.
Consultant agrees that it will at all times faithfully and to the best
of its experience, ability and talents, perform all the duties that may be
required of and from Consultant pursuant to the terms of this Agreement.
Consultant does not guarantee that its efforts will have any impact on client's
business or that any subsequent financial improvement will result of
Consultant's efforts. Client understands and acknowledges that the success of
failure of Consultant's efforts will be predicated on Client's assets and
operating results.
7. Costs and Expenses.
Consultant agrees to front all hard costs, however Client agrees that
Consultant shall be reimbursed for these hard costs either in cash or stock,
simultaneously with paying the liabilities currently owed by HYTK. If sufficient
cash is not available to pay both amounts due, Client and Consultant agree to
share the cash on a pro-rata basis, unless otherwise agreed to by the parties.
<PAGE>
8. All Prior Agreements Terminated.
This Agreement constitutes the entire understanding of the parties with
respect to the engagement of Consultant, and all prior agreements and
understandings with respect thereto and hereby terminated and shall be of no
force or effect.
9. Consultant is not an Agent or Employee.
Consultant's obligations under this Agreement consist solely of the
Consulting Services described herein. In no event shall Consultant be considered
to act as the employee or agent of Client or otherwise represent or bind Client.
For the purposes of this Agreement, Consultant is an independent contractor. All
final decisions with respect to acts of Client or its affiliates, whether or not
made pursuant to or in reliance on information or advice furnished by Consultant
hereunder, shall be those of Client or such affiliates and Consultant shall
under no circumstances by liable for any expense incurred or loss suffered by
Client as a consequence of such action or decisions.
10. Miscellaneous.
A. Authority. The execution and performance of this Agreement
have been duly authorized by all requisite corporate action.
This Agreement constitutes a valid and binding obligation of
the parties.
B. Amendment. This Agreement may be amended or modified at any
time and in any manner only by an instrument in writing
executed by the parties hereto.
C. Waiver. All the rights and remedies of either party under this
Agreement are cumulative and not exclusive of any other rights
and remedies provided by law. No delay or failure on the part
of either party in the exercise of any right or remedy arising
from a breach of this Agreement shall operate as a waiver of
any subsequent right or remedy arising from a subsequent
breach of this Agreement. The consent of any party where
required hereunder to any act of occurrence shall not be
deemed to be a consent to any other act or occurrence.
D. Assignment:
(i) Neither this Agreement nor any right created by it
shall be assignable by either party without the prior
written consent of the other;
(ii) Nothing in this Agreement, expressed or implied, is
intended to confer upon any person, other than the
parties and their successors, any rights or remedies
under this Agreement.
E. Notices. Any notice or other communication required or
permitted by this Agreement must be in writing and shall be
deemed to be properly given when delivered in person to an
officer of the other party, when deposited in the United
States mails for transmittal by certified or registered mail,
postage prepaid, or when deposited with a public telegraph
company for transmittal or when sent by facsimile
transmission, charges prepared provided that the communication
is addressed:
(i) In the case of BRIA to:
Canton Financial Services Corporation
Attn: Steven A. Christensen
268 West 400 South, Suite 310
Salt Lake City, Utah 84101
Telephone: (801) 575-8073
Facsimile: (801) 575-8340
(ii) In the Case of Consultant to:
HYTK Industries, Inc.
4582 South Ulster Parkway,
Stanford Place III, Suite 201
Denver, Colorado 80237
or to such other person or address designated in writing to
receive notice.
<PAGE>
F. Headings and Captions. The headings of paragraphs are included
solely for convenience. If a conflict exists between any
heading and the text of this Agreement, the text shall
control.
G. Entire Agreement. This instrument and the exhibits to this
instrument contain the entire Agreement between the parties
with respect to the transaction contemplated by the Agreement.
It may be executed in any number of counterparts but the
aggregate of the counterparts together constitute only one and
the same instrument.
H. Effect of Partial Invalidity. In the event that any one or
more of the provisions contained in this Agreement shall for
any reason be held to be invalid, illegal, or unenforceable in
any respect, such invalidity, illegality or unenforceability
shall not affect any other provisions of this Agreement, but
this Agreement shall be constructed as if it never contained
any such invalid, illegal or unenforceable provisions.
I. Controlling Law and Venue. The validity, interpretation, and
performance of this Agreement shall be controlled by and
construed under the laws of the State of Utah, the state in
which this Agreement is being executed.
J. Attorney's Fees. If any action at law or in equity, including
an action for declaratory relief, is brought to enforce or
interpret the provisions of this Agreement, the prevailing
party shall be entitled to recover actual attorney's fees from
the other party. The attorney's fees may be ordered by the
court in the trial of any action described in this paragraph
or may be enforced in a separate action brought for
determining attorney's fees.
K. Time is of the Essence. Time is of the essence of this
Agreement and of each and every provision hereof.
L. Mutual Cooperation. The parties hereto shall cooperate with
each other to achieve the purpose of this Agreement, and shall
execute such other and further documents and take such other
and further actions as may be necessary or convenient to
effect the transactions described herein.
M. Further Actions. At any time and from time to time, each party
agrees, at its or their expense, to take actions and to
execute and deliver documents as may be reasonably necessary
to effectuate the purposes of this Agreement.
N. Indemnification. Client agrees to indemnify, defend and hold
Consultant harmless from and against all demands, claims,
actions, losses, damages, liabilities, costs and expenses,
including without limitation, interest, penalties and
attorneys' fees and expenses asserted against or imposed or
incurred by either party by reason of or resulting from a
breach of any representation, warranty, covenant condition or
agreement of the other party to this Agreement.
O. No Third Party Beneficiary. Nothing in this Agreement,
expressed or implied, is intended to confer upon any person,
other than the parties hereto and their successors, any rights
or remedies under or by reason of this Agreement, unless this
Agreement specifically states such intent.
P. Facsimile Counterparts. If a party signs this Agreement and
transmits an electronic facsimile of the signature page to the
other party, the party who receives the transmission may rely
upon the electronic facsimile as a signed original of this
Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement on the date herein
above written.
HYTK INDUSTRIES, INC. CANTON FINANCIAL SERVICES CORPORATION
By: /s/Gordon Beckstead By: /s/ Steven Christensen
Gordon Beckstead, President Steven Christensen, President
DEED OF TRUST
THIS DEED OF TRUST is made this 22 day of April 1995, among the
Trustor, BECKWORK, LLC, a Nevada limited liability company ("Borrower"), HYTK
INDUSTRIES INC. ("Trustee"), and the Beneficiary, HYTK INDUSTRIES INC., a
corporation organized and existing under the laws of the State of Nevada, whose
address is 4582 S. Ulster St. Parkway, Suite 201, Denver, Colorado ("Lender").
Borrower, in consideration of the indebtedness herein recited and the
trust herein created, irrevocably grants and conveys to Trustee, in trust, with
power of sale, the following described property located in the County of Clark,
State of Nevada, and more particularly described as follows, to wit:
The SE 1/4 of the SW 1/4 of the SE 1/4 of the SE 1/4 of Section 30,
Township 21 South, Range 61 East, M.D.B.&M. Excepting therefrom the
southerly 50.00 feet thereof, as conveyed to Clark County by deed
recorded October 14, 1981 in Book 1475 as Document Number 1434187. The
north 20.00 feet of the south 50.00 feet was vacated by Order of
Vacation recorded January 17, 1982 in Book 1649, as Document Number
1608332.
which has the address of 3990 West Russell Road, Las Vegas, Nevada 89118
("Property Address");
Together with all improvements now or hereafter erected on the
property, and all easements, rights, appurtenances, and rents (subject however
to the rights and authorities given herein to Lender to collect and apply such
rents), all of which shall be deemed to be and remain a part of the property
covered by this Deed of Trust; and all of the foregoing, together with said
property are hereinafter referred to as the "Property";
To secure to Lender the repayment of the indebtedness of principal and
interest evidenced by Borrower's note dated April 22, 1995 ("Note"), which Note
is in the face amount of not less than $1,000, due and payable upon the sale of
the Property; the payment of all other sums, with interest, advanced in
accordance herewith to protect the security of this Deed of Trust; and the
performance of the covenants and agreements of Borrower herein contained.
Borrower covenants that Borrower is lawfully seised of the estate
hereby conveyed and has the right to grant and convey the Property, and theat
the Property is unencumbered, except for a mortgage or deed of trust dated May
9, 1985, and recorded at Book 2111 on May 16, 1985, as Instrument No. 2070053 of
the official records of the County Recorder of Clark County, State of Nevada
(herein "Senior Mortgage") and a second deed of trust issued to Charles Englert
in the original amount of $200,000, other encumbrances of record. Borrower
covenants that Borrower will warrant and defend generally the title to the
Property against all claims and demands, subject to encumbrances of record.
Borrower and Lender covenant and agree as follows:
1. Payment of principal and interest. Borrower shall promptly pay when
due the indebtedness evidenced by the Note and late charges as provided in the
Note.
2. Funds for taxes and insurances. Borrower shall be obligated to make
such payments of yearly taxes and assessments only to the extent that Borrower
makes such payments to the holder of the Senior Mortgage.
3. Prior mortgages and deeds of trust; liens. Borrower shall perform
all of the Borrower's obligations under the Senior Mortgage or any other
security agreement with a lien which has priority over this Deed of Trust,
including Borrower's covenants to make payments when due. Borrower shall pay all
taxes, assessments and other charges, fines and impositions attributable to the
Property which may attain a priority over this Deed of Trust, and leasehold
payments or ground rents, if any.
<PAGE>
4. Hazard insurance. Borrower shall keep the improvements now existing
or hereafter erected on the Property insured against loss by fire, hazards
included within the term "extended coverage," and such other hazards as Lender
may require and in such amounts and for such periods as Lender may require.
The insurance carrier providing the insurance shall be chosen by
Borrower subject to approval by Lender; provided, that such approval shall not
be unreasonably withheld. All insurance policies and renewals shall be in form
acceptable to Lender and shall included a standard mortgage clause in favor of
and in form acceptable to Lender. If the Senior Mortgagees do not hold the
policies and renewals, the Lender shall have the right to do so.
In the event of loss, Borrower shall give prompt notice to the
insurance carrier and Lender. Lender may make proof of loss if not made promptly
by Borrower.
If the Property is abandoned by Borrower, or if Borrower fails to
respond to Lender within 30 days from the date notice is mailed by Lender to
Borrower that the insurance carrier offers to settle a claim for insurance
benefits, Lender is authorized to collect and apply the insurance proceeds at
Lender's option either to restoration or repair of the Property or to the sums
secured by this Deed of Trust.
5. Preservation and maintenance of property. Borrower shall keep the
Property in good repair and shall not commit waster or permit impairment or
deterioration of the Property.
6. Protection of lender's security. If Borrower fails to perform the
covenants and agreements contained in this Deed of Trust, or if any action or
proceeding is commenced which materially affects Lender's interest in the
Property, then Lender, at Lender's options, upon notice to Borrower, may make
such appearances, disburse such sums and take such action as is necessary to
protect Lender's interest.
Any amounts disbursed by Lender pursuant to this paragraph 6, with
interest, at the Note rate, shall become additional indebtedness of Borrower
secured by this Deed of Trust. Unless Borrower and Lender agree to other terms
of payment, such amounts shall be payable upon notice from Lender to Borrower
requesting payment thereof. Nothing contained in this paragraph 6 shall require
Lender to incur any expense or take any action.
7. Inspection. Lender may make or cause to be made reasonable entries
upon and inspections of the Property, provided that Lender shall give Borrower
notice prior to any such inspection specifying reasonable cause therefor related
to lender's interest in the Property.
8. Borrower not released; forbearance by lender not waiver. Extension
of the time for payment or modification or amortization of the sums secured by
this Deed of Trust granted by Lender to any successor in interest of Borrower
shall not operate to release, in any manner, the liability of the original
Borrower and Borrower's successors in interest. Lender shall not be required to
commence proceedings against such successor or refuse to extend time for payment
or otherwise modify amortization of the sums secured by this Deed of Trust by
reason of any demand made by the original Borrower and Borrower's successors in
interest. Any forbearance by Lender in exercising any right or remedy hereunder
or otherwise afforded by applicable law, shall not be a waiver of or preclude
the exercise of any such right or remedy.
9. Successors and assigns bound; joint and several liability;
co-signers. The covenants and agreements herein contained shall bind, and the
rights hereunder shall inure to, the respective successors and assigns of Lender
and Borrower, subject to the provisions of paragraph 13.
10. Notice. Except for any notice required under applicable law to be
given in another manner, (a) any notice to Borrower provided for in this Deed of
Trust shall be given by mailing such notice by certified mail addressed to
Borrower at the Property Address or at such other address as Borrower may
designate by notice to Lender, and (b) any notice to Lender shall be given by
certified mail, return receipt requested, to Lender's address stated herein or
to such other address as Lender may designate by notice to Borrower. Any notice
provided for in this Deed of Trust shall be deemed to have been given to
Borrower or Lender when given in the manner designated herein.
<PAGE>
11. Governing law; severability. The state and local laws applicable to
this Deed of Trust shall be the laws of the jurisdiction in which the Property
is located. The foregoing sentence shall not limit the applicability of Federal
law to this Deed of Trust. In the event that any provision of clause of this
Deed of Trust or the Note conflicts with applicable law, such conflict shall not
affect other provisions of this Deed of Trust or the Note which can be given
without the conflicting provision, and to this end the provisions of this Deed
of Trust and the Note are declared to be severable.
12. Borrower's copy. Borrower shall be furnished a conformed copy of
the Note and of this Deed of Trust at the time of execution or after
recordation.
13. Transfer of property; assumption. If all or any part of the
Property or an interest therein is sold or transferred by Borrower, excluding
(a) the creation of a lien or encumbrance subordinate to this Deed of Trust, (b)
a transfer by devise, descent or by operation of law upon the death of a joint
tenant, or (c) the grant of any leasehold interest of three years or less not
containing an option to purchase, Lender may declare all of the sums secured by
this Deed of Trust to be immediately due and payable.
If Lender exercises such option to accelerate, Lender shall mail
Borrower notice of acceleration in accordance with paragraph 10. Such notice
shall provide a period of not less than ten days from the date the notice is
mailed within which Borrower may pay the sums declared due. If Borrower fails to
pay such sums prior to the expiration of such period, Lender may, without
further notice or demand on Borrower, invoke any remedies permitted by paragraph
14.
14. Acceleration; remedies. Except as provided in paragraph 13, upon
Borrower's breach of any covenant or agreement of Borrower in this Deed of
Trust, including the covenants to pay when due any sums secured by this Deed of
Trust, Lender prior to acceleration shall mail notice to Borrower as provided in
paragraph 10 specifying: (1) the breach; (2) the action required to cure such
breach; (3) a date, not less than ten days from the date the notice is mailed to
Borrower, by which such breach must be cured; and (4) that failure to cure such
breach on or before the date specified in the notice may result in acceleration
of the sums secured by this Deed of Trust and sale of the Property. The notice
shall further inform Borrower of the right to reinstate after the acceleration
and the right to bring a court action to assert the nonexistence of a default or
any other defense of Borrower to acceleration and sale. If the breach is not
cured on or before the date specified in the notice, Lender, at Lender's option,
may declare all of the sums secured by this Deed of Trust to be immediately due
and payable without further demand and may invoke the power of sale and any
other remedies permitted by applicable law. Lender shall be entitled to collect
all reasonable costs and expenses incurred in pursuing the remedies provided in
this paragraph 14, including, but not limited to, reasonable attorney's fees.
If Lender invokes the power of sale, Lender shall execute or cause
Trustee to execute a written notice of the occurrence of an event of default and
of Lender's election to cause the Property to be sold and shall cause such
notice to be recorded in each county in which the Property or some part thereof
is located. Lender or Trustee shall mail copies of such notice in the manner
prescribed by applicable law. Trustee shall give public notice of sale to the
persons and in the manner prescribed by applicable law. After the lapse of such
time as may be required by applicable law, Trustee, without demand on Borrower,
shall sell the Property at public auction to the highest bidder at the time and
place and under the terms designated in the notice of sale in one or more
parcels and in such order as Trustee may determine. Trustee may postpone sale of
all or any parcel of the Property by public announcement at the time and place
of any previously scheduled sale. Lender or Lender's designee may purchase the
Property at any sale.
Trustee shall deliver to the purchaser a Trustee's deed conveying the
Property so sold without any covenant or warranty, expressed or implied. The
recitals in the Trustee's deed shall be prima facie evidence of the trust of the
statements made therein. Trustee shall apply the proceeds of the sale in the
following order: (a) to all reasonable costs and expenses of the sale,
including, but not limited to, reasonable Trustee's and attorney's fees and
costs of title evidence; (b) to pay Senior Mortgages and Deeds of Trust; (c) to
all sums secured by this Deed of Trust; and (d) the excess, if any, to the
person or persons legally entitled thereto.
<PAGE>
15. Borrower's right to reinstate. Notwithstanding Lender's
acceleration of the sums secured by this Deed of Trust due to Borrower's breach,
borrower shall have the right to have any proceedings begum by Lender to enforce
this Deed of Trust discontinued at any time prior to five days before sale of
the Property pursuant to the power of sale contained in this Deed of Trust or at
any time prior to entry of a judgment enforcing this Deed of Trust if: (a)
Borrower pays Lender all sums which would be then due under this Deed of Trust
and the Note had no acceleration occurred; (b) Borrowers cure all breaches of
any other covenants or agreements of Borrower contained in this Deed of Trust;
(c) Borrower pays all reasonable expenses incurred by Lender and Trustee in
enforcing the covenants and agreements of Borrower contained in this Deed of
Trust, and in enforcing Lender's and Trustee's remedies as provided in paragraph
15, including, but not limited to, reasonable attorney's fees; and (d) Borrower
takes such action as Lender may reasonably require to assure that the lien of
this Deed of Trust, Lender's interest in the Property and Borrower's obligation
to pay the sums secured by this Deed of Trust shall continue unimpaired. Upon
such payment and cure by Borrower, this Deed of Trust and the obligations
secured hereby shall remain in full force and effect as if no acceleration had
occurred.
16. Assignment of rents; appoint of receiver; lender in possession. As
additional security hereunder, Borrowers assign to Lender (subject to the senior
rights of the Senior Mortgage and Senior Deed of Trust) the rents of the
Property, provided that Borrower shall, prior to acceleration under paragraph 15
or abandonment of the Property, have the right to collect and retain such rents
as they become due and payable.
Upon acceleration under paragraph 14 or abandonment of the Property,
Lender, in person, by agent or by judicially appointed receiver shall be
entitled to enter upon, take possession of and manage the Property and to
collect the rents of the Property including those past due. All rents collected
by Lender or the receiver shall be applied first to payment of the costs of
management of the Property and collection of rents, including, but not limited
to, receiver's fees, premiums on receiver's bonds and reasonable attorney's
fees, Senior Mortgages and Senior Deeds of Trust and then to the sums secured by
this Deed of Trust. Lender and the receiver shall be liable to account only for
those rents actually received.
17. Reconveyance. Upon payment of all sums secured by this Deed of
Trust, Lender shall require Trustee to reconvey the Property and shall surrender
this Deed of Trust and all notes evidencing indebtedness secured by this Deed of
Trust to Trustee. Trustee shall reconvey the Property without warranty and
without charge to the person or persons legally entitled thereto. Such person or
persons shall pay all costs of recordation, if any.
18. Substitute trustee. Lender, at Lender's option, may from time to
time remove Trustee and appoint a successor trustee to any Trustee appointed
hereunder. Without conveyance of the Property, the successor trustee shall
succeed to all the title, power and duties conferred upon the Trustee herein and
by applicable law.
19. Requests for notices. Borrower requests that copies of the notice
of default and notice of sale be sent to Borrower's address which is 2957 S.
Highland Drive, Las Vegas, Nevada 89109. Lender requests that copies of notices
of foreclosure from the holder of the Senior Mortgage and any other lien which
has priority over this Deed of Trust be sent to Lender's address, as set forth
on page one of this Deed of Trust.
In witness whereof Borrower has executed this Deed of Trust.
BECKWORK, LLC,
a Nevada limited liability company
By: /s/ Gordon E. Beckstead By: /s/ William E. Workman
Gordon E. Beckstead, Manager William E. Workman, Manager
ASSET PURCHASE AGREEMENT
THIS AGREEMENT, made and entered into as of May 20, 1992, by and
between DIGITEL, INC., a Colorado corporation ("Seller"), and WESTERN
COMMUNICATIONS, INC., a Nevada corporation;
WHEREAS, Seller is engaged in the telephone interconnect business; and
WHEREAS, Seller desires to sell to Buyer, and Buyer desires to buy from
seller, the assets and business of Seller;
NOW, THEREFORE, in consideration of the mutual representations,
warranties, covenants, and agreements, and upon the terms and subject to the
conditions hereinafter set forth, the parties do hereby agree as follows:
ARTICLE I: TERMS OF PURCHASE AND SALE
1.01 Purchase and Sale. On the Closing Date, as hereinafter defined, on
the terms and subject to the conditions set forth in this Agreement, Seller
shall sell, convey, transfer, assign, and deliver to Buyer, and Buyer shall
purchase and acquire from Seller all of Seller's right, title, and interest in
and to the assets and business of Seller, whether now owned or hereafter
acquired by Seller prior to the Closing Date, and Whether tangible or
intangible, which are used exclusively in connection with the conduct of
Seller's telephone interconnect business (the "Assets"), including, without
limitation, the following:
(a) Substantially all of the machinery, equipment, vehicles, office
furniture, tools, and other tangible property owned by Seller and used
exclusively in connection with the conduct of Seller's telephone interconnect
business;
(b) All supplies and inventories used exclusively in connection with
the conduct of Seller's telephone interconnect business;
(c) All accounts receivable;
(d) Subject to Section 4.01 hereof, all of Seller's rights under the
Commitments (as defined in Section 2.05 hereof), pertaining exclusively to the
conduct of Seller's telephone interconnect business, including, but not limited
to, any contracts for services and supplies, permits, licenses and approvals to
operate the business;
(e) All sales and promotional literature, and all books, records, files
and data (including customer and supplier lists), or copies thereof, pertaining
exclusively to the conduct of Seller's telephone interconnect business, except
for personnel records and files, copies of which will be provided to Buyer to
the extent permitted by law (the "Books and Records");
(f) All trade names and trademarks used exclusively in connection with
the conduct of Seller's telephone interconnect business, including, without
limitation, Seller's right, title, and interest in and to the name "DIGITEL";
(g) All cash, cash deposits, other cash equivalent investments, cash
refunds, insurance policies, and security bonds or deposits; and
(h) The business of Seller as a going concern and goodwill, if any.
Specifically excluded from the Assets are the items listed on Schedule
A to this Agreement.
<PAGE>
1.02 The Closing. The closing of the transactions contemplated hereby
(the "Closing") shall take place at 3990 West Russell Road, #5, Las Vegas,
Nevada 89118. as of the close of business on June 15, 1992 (the "Closing Date").
1.03 Purchase Price and Payment. Inasmuch as the liabilities to be
assumed exceed the assets to be acquired, there shall be no cash paid to Seller.
1.04 Payment of Taxes and Other Charges. Buyer shall pay, at the
closing, or if due thereafter promptly when due, all transfer taxes, sales
taxes, stamp taxes, and any other taxes (other than income taxes payable by
Seller) payable in connection with the transactions contemplated hereby.
1.05 Instruments of Transfer. On the Closing Date, Seller shall deliver
to Buyer duly executed instruments of transfer assignment of the Assets
sufficient to vest in Buyer the interests in the Assets being conveyed in
accordance with the terms of this Agreement.
1.06 Assumption. Buyer understands and agrees that, from and after the
Closing, except for those liabilities listed on Schedule B hereto and as
specifically provided in Sections 1.04, 6.01 (a), and 9.03 (a), hereof to the
contrary, neither Seller nor any of its affiliates shall have any liability or
responsibility for any liability or obligation of or arising out of or relating
to the Assets (including any Commitments included in the Assets) or Seller's
telephone interconnect business of whatever kind or nature, whether contingent
or absolute, whether arising prior to or on or after, and whether determined or
interminable on, the Closing Date, and whether or not specifically referred to
in this Agreement (such liabilities and obligations, except set forth in
Sections 1.04, 6.01 (a), and 9.03 (a), hereof, being collectively referred to as
the "Liabilities"). Accordingly, Buyer agrees that, effective upon the Closing,
Buyer shall assume and shall thereafter pay, perform, and discharge and,
effective as of the Closing, Buyer does hereby assume the Liabilities, and
further agrees that it shall indemnify Seller and its affiliates and hold each
of them harmless against any liability, loss, damage, claim, costs, or expense
(collectively, a "Loss") incurred or suffered by any of them arising out of (i)
any of the Liabilities of (ii) any breach by Buyer of, or failure by Buyer to
comply with, any of the provisions of this Agreement.
ARTICLE II: REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer as follows:
2.01 Organization. Seller is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Colorado, and has
the requisite corporate power and authority to execute, deliver, and perform
this Agreement and to consummate the transactions contemplated hereby.
2.02 Financial Statements. Seller has delivered to Buyer balance sheet
information as of May 31, 1992 (the "Balance Sheet") and a schedule of
operations for the 12-month period ending May 31, 1992 (the "Financial
Statements"), copies of which are attached as Exhibit A to this Agreement. The
Financial Statements fairly present the net assets and results of operations of
Seller as of May 31, 1992 and for the 12-month period ending on the basis of
accounting described in the footnotes thereto.
2.03 Absence of Certain Changes or Events. Since the date of the
Balance Sheet, the Seller has not (a) suffered any damage, destruction, or
casualty loss to its physical properties materially and adversely affecting the
business or financial condition of Seller; (b) incurred or discharged any
obligation or liability except in the ordinary course of business and except
obligations or liabilities that are not individually or in the aggregate
material to the business or financial condition of Seller; or (c) entered into
any transaction not in the ordinary course of its business except as permitted
in or contemplated by other sections of this Agreement.
2.04 Physical Properties. Seller has good title to all of the assets
and properties which it purports to own (including those reflected on the
Balance Sheet, except for assets and properties sold, consumed, or otherwise
disposed of in the ordinary course of business since the date of the Balance
Sheet) and which are material to the business financial condition of Seller,
free and clear of all liens, security interest, or other encumbrances
("encumbrances"), except (a) as set forth in Schedule C attached hereto, (b)
liens of current taxes not yet due or being contested in good faith by
appropriate proceedings, and (c) Encumbrances which individually or in the
aggregate do not have a material adverse effect on the business or financial
condition of Seller.
<PAGE>
2.05 Commitments. Schedule D attached hereto contains a list of each
contract, agreement, or understanding (including each governmental license,
permit, or other governmental authorization) whether written or oral (inclluding
any and all amendments thereto) to which Seller is a party, or by which it may
be bound, which relates to the ownership of the Assets or the conduct of the
business ( collectively, the "Commitments") and which is material to the
business or financial condition of Seller. Except as disclosed in Schedule D,
Seller's knowledge, Seller is not in default under any of the commitments, which
default would have a material adverse effect on the business or financial
condition of Seller.
2.06 Litigation. Except as set forth in Schedule E attached hereto,
there is no action or proceeding in any court or before any governmental
authority ("Litigation") pending (a) to Seller's knowledge against Seller in
connection with the ownership of the Assets or the conduct of Seller's business,
with respect to which there is a reasonable likelihood of a determination which
would have a material adverse effect on the business or financial condition of
Seller, or (b) which seeks to enjoin or obtain damages in respect of the
consummation of the transactions contemplated hereby.
2.07 Compliance with Laws. To the best of Seller's knowledge, Seller is
in compliance with all laws, rules, regulations, and orders applicable to its
business ( including, without limitation, those relating to environmental
protection, occupational safety and health, and equal opportunity employment
practices) except where the failure to comply therewith does not have a material
adverse effect on the business or financial condition of Seller.
2.08 Corporate Power and Authority; Effect of Agreement. The execution,
delivery, and performance by Seller of this Agreement and the consummation by
Seller of the transactions contemplated hereby have been duly authorized by all
necessary corporate action on the part of Seller. This Agreement has been duly
and validly executed and delivered by Seller and constitutes the valid and
binding obligation of Seller, enforceable in accordance with its terms, subject
to (a) applicable bankruptcy, insolvency, or other similar laws relating to
creditors' rights generally, and (b) general principles of equity. The
execution, delivery, and performance by Seller of this Agreement and the
consummation by Seller of the transactions contemplated hereby will not, with or
without the giving of notice or the lapse of time, or both, subject to obtaining
any required consents, approvals, authorizations, exemptions or waivers, (i)
violate any provision of law, rule, or regulation to which Seller is subject,
(ii) violate any order, judgment, or decree applicable to Seller, or (iii)
conflict with, or result in a breach or default under, any term or condition of
the Articles of Incorporation or the Bylaws of Seller or any agreement or other
instrument to which Seller is a party or by which Seller may be bound; except in
each case, for violations, conflicts, breaches, or defaults which in the
aggregate would not materially hinder or impair the consummation of the
transactions contemplated hereby.
2.09 Employee Benefit Plans. Schedule F lists all of Seller's Benefit
Plans and Benefit Arrangements (each as defined in Section(9.01 hereof)). Each
Benefit Plan and Benefit Arrangement has been maintained and administered in all
material respects in accordance with applicable law.
2.10 Consents. Except as set forth, no consent, approval, authorization
of, exemption by, or filing with, any governmental or regulatory authority is
required in connection with the execution, delivery, and performance by Seller
of this Agreement or the taking of any other action contemplated hereby,
excluding, however, consents, approvals, authorizations, exemptions, and
filings, if any, which Buyer is required to obtain or make.
2.11 Disclaimer. SELLER MAKES NO WARRANTY, EXPRESS OR IMPLIED, EXCEPT
AS SET FORTH IN THIS ARTICLE II. IN ANY EVENT, SELLER MAKES NO WARRANTY OF
MERCHANTABILITY, SUITABILITY, OR FITNESS FOR A PARTICULAR PURPOSE, OR QUALITY,
AS TO THE ASSETS, OR ANY PART THEREOF, OR AS TO THE CONDITION OR WORKMANSHIP
THEREOF, OR THE ABSENCE OF ANY DEFECTS THEREIN, WHETHER LATENT OR PATENT, IT
BEING UNDERSTOOD THAT THE ASSETS ARE TO BE CONVEYED HEREUNDER "AS IS" ON THE
CLOSING DATE, AND IN THEIR THEN PRESENT CONDITION, AND BUYER SHALL RELY UPON ITS
OWN EXAMINATION THEREOF.
<PAGE>
ARTICLE III: REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller as follows:
3.01 Organization. Buyer is a corporation duly organized, validly
existing, and good standing under the laws of Nevada and has the requisite
corporate power and authority to carry on its business as it is now being
conducted, and to execute, deliver, and perform this Agreement and to consummate
the transaction contemplated hereby.
3.02 Corporate Power and Authority; Effect of Agreement. The
execution, delivery, and performance by Buyer of this Agreement and the
consummation by Buyer of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of Buyer. This
Agreement has been duly and validly executed and delivered by Buyer and
constitute the valid and binding obligation of Buyer, enforceable in accordance
with its terms, subject to (a) applicable bankruptcy, insolvency, or other
similar law relating to creditors' rights generally, and (b) general principles
of equity. The execution, delivery, and performance by Buyer of this Agreement
and the consummation by Buyer of the transactions contemplated hereby will not,
with or without the giving of notice or the lapse of time, or both, subject to
obtaining any required consents, approvals, authorizations, exemptions or
waivers, (i) violate any provision of law, rule, or regulation to which Buyer is
subject, (ii) violate any order judgement, or decree applicable to Buyer, or
(iii) conflict with, or result in a breach or default under, any term or
condition of the Articles of Incorporation or the Bylaws of Buyer or any
agreement or other instrument to which Buyer is a party or by which Buyer may be
bound; except in each case, for violations, conflicts, breaches, or default
which in the aggregate would not materially hinder or impair the consummation of
the transactions contemplated hereby.
3.03 Consents. Except as set forth herein, no consent, approval, or
authorization of, or exemption by, or filing with, any governmental or
regulatory authority is required in connection with the execution, delivery, and
performance by Buyer of the Agreement or taking of any other action contemplated
hereby, excluding, however, consents, approvals, authorizations, exemptions, and
filings, if any, which Seller is required to obtain or make.
3.04 Litigation. There is no litigation pending (i) to Buyer's
knowledge against Buyer with respect to which there is a reasonable likelihood
of a determination which would have a material adverse effect on the ability of
Buyer to perform its obligations under this Agreement, or (ii) which seeks to
enjoin or obtain damages in respect of the consummation of the transactions
contemplated hereby.
ARTICLE IV: COVENANTS OF SELLER
Seller hereby covenants and agrees with Buyer as follows:
4.01 Cooperation and Assignments. Seller will use its best efforts, and
will cooperate with Buyer, to secure all necessary consents, approvals,
authorizations, exemptions, and waivers from third parties as shall be required
in order to enable Seller to effect the transactions contemplated hereby and
will otherwise use its best efforts to cause the consummation of such
transaction in accordance with the terms and conditions hereof. Notwithstanding
anything herein to the contrary, to the extent the assignment of any right to be
assigned to Buyer pursuant to the provisions hereof shall require the consent of
any other party, this Agreement shall not constitute a breach thereof or create
rights in others not desired by Buyer. If any such consent is not obtained,
Seller shall, at Buyer's expense, cooperate with Buyer in any reasonable
arrangement designed to provide for Buyer the benefit of any such right,
including enforcement of any and all rights of Seller against the other party to
any Commitment arising out of the breach or cancellation thereof by such party
or otherwise
<PAGE>
4.02 Conduct of Business. Except as may be otherwise contemplated by
this Agreement or required by any of the documents listed in Schedule D, or
except as Buyer may otherwise consent to in writing (which consent shall not be
unreasonably withheld), between the date hereof and the Closing Date, Seller
will (a) in all material respects, operate its business only in the ordinary
course; (b) use its best efforts to preserve the business organization intact;
(c) maintain its properties, machinery, and equipment in sufficient operation
condition and repair to enable it to operate in all material respects its
business in the manner in which it was operated during the 12-month period
immediately prior to the date hereof; (d) continue all material existing
policies of insurance (or comparable insurance) of or relating t Seller's
business in full force and effect; (e) use its best efforts to keep available
the services of its present officers, employees, and agent (as a group); and (f)
use its best efforts to preserve its relationships with its material lenders,
suppliers, customers, licensors and licensees, and other having material
business dealings with is such that its business will not be substantially
impaired.
4.03 Access. Between the date hereof and the Closing, Seller shall
provide Buyer with such information as Buyer may from time to time reasonably
request with respect to the transactions contemplated by this Agreement, and
shall provide Buyer and its representatives reasonable access during regular
business hours and upon reasonable notice to the Books and Records and the
properties of Seller, as Buyer may from time to time reasonably request;
provided that Seller shall not be obligated to provide Buyer with any
information relating to trade secrets. Any disclosure whatsoever to Buyer shall
not constitute an enlargement of or additional warranties or representations of
Seller beyond those specifically set forth in this Agreement.
4.04 Right of Endorsement. From and after the Closing Date, Buyer shall
have the right and authority to endorse, without recourse, the name of Seller on
any check or any other evidence of indebtedness received by Buyer and to which
it is entitled on account of any receivable or other Asset transferred by Seller
pursuant hereto, and Seller shall deliver to Buyer at the Closing documents
sufficient to permit Buyer to deposit such checks or other evidences of
indebtedness in bank accounts in the name of Buyer.
4.05 Accounts Receivable. Seller shall remit in cash to Buyer, promptly
upon the receipt of the cash, the proceeds of all checks and other payments for
accounts receivable purchased by Buyer under this Agreement and coming into the
possession of Seller.
4.06 Further Assurances. At any time from time to time after the
Closing Date, Seller shall, at the request of Buyer and at Buyer's expense,
execute and deliver any further instruments or documents and take all such
further action as Buyer may reasonably request in order to evidence the
consummation of the transaction contemplated hereby.
ARTICLE V: COVENANTS OF BUYER
Buyer hereby covenants and agrees with Seller as follows:
5.01 Cooperation and Assumption. Buyer will use its best efforts, and
will cooperate with Seller, to secure all necessary approvals, authorizations,
exemptions, and waivers from third parties as shall be required in order to
enable Buyer to effect the transactions contemplated hereby, and will otherwise
use its best efforts to cause the consummation of such transactions in
accordance with the terms and conditions hereof.
5.02 Books and Records; Personnel. For a period of seven years from the
Closing Date:
(a) Buyer shall neither dispose nor destroy any of the Books and
Records without first offering to turn over possession thereof to Seller by
written notice to Seller at least 30 days prior to the proposed date of such
disposition or destruction.
(b) Buyer shall allow Seller and its agents access to all Book and
Records during normal working hours at Buyer's principal places of business or
at any location where any Books and Records are stored, and Seller shall have
the right, at its own expense, to make such copies of any Books and Records;
provided, however, that any such access or coping shall be had or done in such a
manner so as not to interfere with the normal conduct of Buyer's business.
<PAGE>
(c) Buyer shall make available to Seller upon written request and at
Seller's expense, but consistent with Buyer's business requirements, (i) Buyer's
personnel to assist Seller in locating and obtaining the Books and Records and
(ii) and of Buyer's personnel whose assistance or participation is reasonably
required by Seller in anticipation of, or in preparation for, existing or future
litigation, tax returns, or other matters in which Seller is involved.
(d) The foregoing provisions of this Section 5.02 shall be in addition
to the obligations of Buyer under Section 6.01 hereof.
5.03 Buyer's Knowledge of Business; Seller's Representations Modified
by Buyer's Knowledge. To the knowledge of Buyer, Seller's representations and
warranties made in this Agreement are true and correct. Buyer hereby agrees that
to the extent any representation or warranty of Seller made herein is, to the
knowledge of Buyer acquired prior to the Closing, untrue or incorrect, if Buyer
elects to close, (a) Buyer shall have no rights under this Agreement by reason
of such untruth or inaccuracy, and (b) any such representation or warranty by
Seller shall be deemed t be amended to the extent necessary to render it
consistent with such knowledge of Buyer.
5.04 Further Assurances. At any time or from time to time after the
Closing Date, Buyer shall, at the request of Seller and at Seller's expense,
execute and deliver any further instruments or documents and take all such
further action as Seller may reasonably request in order to evidence the
consummation of the transactions contemplated hereby.
ARTICLE VI: ADDITIONAL COVENANTS
6.01 Taxes.
(a) Seller shall be liable for all income and franchise taxes payable
as a result of the operations of Seller prior to the Closing. Buyer shall be
liable for all income and franchise taxes payable as a result of the operation
of the business acquired hereunder from and after the Closing.
(b) After the Closing Date, Buyer and Seller shall make available to
the other, as reasonably requested, and to any taxing authority, all
information, records, or documents relating to tax liabilities or potential tax
liabilities of or relating to Seller for all periods prior t or including the
Closing Date and shall preserve all such information, records, and documents
until the expiration of any applicable statute of limitations or extensions
thereof. Buyer shall prepare and provide to Seller any federal, state, local, or
foreign tax information package requested by Seller for Seller's use in
preparing its tax returns. Such tax information packages shall be completed by
Buyer and provided to Seller within 90 days after the Closing. Each party shall
bear its own expenses in complying with the foregoing provisions.
(c) Buyer shall promptly notify Seller in writing upon receipt by Buyer
or any affiliate of Buyer of notice of any pending or threatened federal, state,
local, or foreign income or franchise tax audits or assessments of or relating
Seller's business for taxable periods ending prior to or including the Closing
Date. Seller shall have the sole right to represent its interests in any tax
audit or administrative or court proceeding relating to taxable period for which
Seller is responsible for the payment of taxes, and to employ counsel of its
choice at its expense. Buyer agrees that it will cooperate fully with Seller and
its counsel in the defense against or compromise of any claim in any said
proceeding.
ARTICLE VII: CONDITIONS TO BUYER'S OBLIGATIONS
The obligations of Buyer to purchase the Assets and assume the
Liabilities shall be subject to the satisfaction (or waiver) on or prior to the
Closing Date of all of the following conditions.
7.01 Representations, Warranties, and Covenants of Seller. Seller shall
have complied in all material respects with all of its agreements and covenants
contained herein to be performed at or prior to the Closing Date, and all the
representations and warranties of Seller contained herein shall be true in all
material respects on and as of the Closing Date with the same effect as though
made on and as of the Closing Date, except otherwise contemplated hereby, and
except to the extent that such representations and warranties were made as of a
specified date and as to such representations and warranties the same shall
continue on the Closing Date to have been true as of the specified date, and
except to the extent that any failure of such representations and warranties to
be true as aforesaid when taken in the aggregate would not have a material
adverse effect on the business or financial condition of Seller. Buyer shall
have received a certificate of Seller, dated as of the Closing Date and signed
by an officer of Seller, certifying as to the fulfillment of the condition set
forth in this Section 7.01.
<PAGE>
7.02 No Prohibition. No statute, rule, or regulation or order of any
court or administrative agency shall be in effect which restrains or prohibits
Buyer from consummating the transactions contemplated hereby.
7.03 Further Action. All consents, approvals, authorizations,
exceptions, and waivers from third parties that shall be required in order t
enable Buyer t consummate the transactions contemplated hereby shall have been
obtained (except for such consents, approvals, authorizations, exemptions, and
waivers the absence of which would not render such consummation illegal).
ARTICLE VIII: CONDITIONS TO SELLER'S OBLIGATIONS
The obligations of Seller to sell the Assets shall be subject to the
satisfaction (or waiver) on or prior to the Closing Date of all of the following
conditions:
8.01 Representations, Warranties, and Covenants of Buyer. Buyer shall
have complied in all material respects with all of its agreements and covenants
contained herein to be performed at or prior to the Closing Date, and all of the
representations and warranties of Buyer contained herein shall be true in all
material respects on and as of the Closing Date with the same effect as though
made on and as of the Closing Date, except as otherwise contemplated hereby, and
except to the extent that such representations and warranties were made as of a
specified date and as to such representations and warranties the same shall
continue on the Closing Date to have been true as of the specified date, and
except to the extent that any failure of such representations and warranties to
be true as aforesaid when taken in the aggregate would not have a material
adverse effect on the business or financial condition of Buyer. Seller shall
have received a certificate of Buyer, dated as of the Closing Date and signed by
an officer of Buyer, certifying as to the fulfillment of the condition set forth
in this Section 8.01.
8.02 No Prohibition. No statute, rule, or regulation or order of any
court or administrative agency shall be in effect which restrains or prohibits
Seller from consummating the transactions contemplated hereby.
8.03 Further Action. All consents, approvals, authorizations,
exemptions, and waivers from third parties that shall be required in order to
enable Seller to consummate the transactions contemplated hereby shall have been
obtained (except for such consents, approval, authorizations, exemptions, and
waivers the absence of which would not render such consummation illegal).
ARTICLE IX: EMPLOYMENT AND EMPLOYEE BENEFITS ARRANGEMENTS
9.01 Definitions.
(a) The term "Employees" shall mean all current employees ( including
those on lay-off or leave of absence, whether paid or unpaid), former employees
and retired employees of Seller;
(b) The term "Company Benefit Plans" shall mean each and all "employee
benefit plans" as defined in Section 3 (3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA") maintained or contributed to by
Seller and covering Employees, including (i) any such plans that are "employee
welfare benefit plans" as defined in Section 3 (1) of ERISA and (ii) any such
plans that are "employee pension benefit plans" as defined in Section 3 (2) of
ERISA;
(c) The term "Benefit Arrangements" shall mean life and health
insurance, hospitalization, savings, bonus, deferred compensation, incentive
compensation, holiday, vacation, severance pay, sick pay, sick leave,
disability, tuition refund, service award, company car, scholarship, relocation,
patent award, fringe benefit, and other employee benefit plans, contracts (
other than individual employment, consultancy, or severance contracts), policies
or practices of Seller providing employee or executive compensation or benefits
to Employees, other than the Company Benefit Plans.
<PAGE>
9.02 Employment. As of the Closing Date, Buyer shall offer to all
current Employees employment at the same salaries and wages ( including
commission and sales incentive programs) and on substantially the same or better
terms and conditions as those in effect immediately prior to the Closing Date.
9.03 Pension and Other Plans.
(a) As of the Closing Date, Seller shall terminate the Digitel, Inc.
Employee Profit Sharing and Stock Ownership Plan and Trust and distribute
account balances to all Employees who are participants in such Plan in
accordance with the provisions of such Plan and applicable law.
(b) As of the Closing Date, Buyer shall adopt and become the successor
sponsor of the Digitel, Inc. 401(k) Profit Sharing Plan and Trust ( the "401(k)
Plan"). As of the Closing Date, Buyer shall assume all of the Seller's
liabilities and obligations with respect to the 401(k) Plan, including without
limitation all obligations to make contributions required to be made to the
401(k) Plan after the Closing Date.
9.04 Other Benefit Plans. With respect t Employees, Buyer agrees to
assume and maintain for a period of two years commencing on the Closing Date
those Company Benefit Plans (other than those Company Benefit Plans which are
covered by Section 9.03 hereof) and Benefit Arrangements maintained or sponsored
by Seller immediately Prior to the Closing Date solely for Employees, and to
establish employee benefit plans providing benefits which are equivalent to or
better than the benefits provided to Employees under each other Company Benefit
Plan ( other than those Company Benefit Plans which are covered by Section 9.03
hereof) and Benefit Arrangements. Buyer shall grant all Employees after the
Closing Date credit for all service with Seller, its affiliates, and their
respective predecessors prior to the Closing Date for all purposes for which
such service was credited to Employees by Seller, its affiliates, and their
perspective predecessors. Buyer shall assume all liabilities and obligations of
Seller and its affiliates under the Company Benefit Plans (other than those
Company Benefit Plans which are covered by Section 9.03 hereof), Benefit
Arrangements and workers compensation arrangements with respect to the Employees
and their dependants, including, but not limited to, (i) liabilities and
obligations for benefits, compensation, contributions, insurance premiums, and
administrative expenses, whether incurred or accrued before, on, or after the
Closing Date and whether or not reported as of the Closing Date, (ii)
liabilities and obligations arising under the continuation coverage requirements
of Section 162(k) of the code and Section 601 of ERISA with respect to all
Employees (or any beneficiary or dependent of any Employee) who, as of the
Closing Date, have exercised or are eligible to exercise their right to such
continuation coverage and (iii) liabilities and obligations to provide
post-retirement health and life insurance benefits to Employees (whether or not
currently retired), and Buyer shall indemnify Seller and its affiliates and hold
each of them harmless for any loss which any of them may incur in respect of any
of the foregoing.
ARTICLE X: TERMINATION PRIOR TO CLOSING
10.01 Termination. This Agreement may be terminated at any time prior
to the Closing:
(a) By the mutual written consent of Buyer and Seller, or
(b) By either Seller or Buyer in writing, without liability to the
terminating party on account of such termination (provided the termination party
is not otherwise in default or in breach of this Agreement), if the Closing
shall not have occurred on or before June 15, 1992; or
<PAGE>
(c) By either Seller or Buyer in writing, without liability to the
terminating party on account of such termination (provided the terminating party
is not otherwise in default or in breach of this Agreement), if the other party,
as the case may be, shall (i) fail to perform in any material respect its
agreements contained herein required to be performed prior to the Closing Date,
or (ii) material breach any of its representations, warranties, or covenants
contained herein.
10.02 Effect on Obligations. Termination of this Agreement pursuant to
this Article shall terminate all obligations of the parties hereunder, except
for the obligations under Sections 11.08 and 11.09 and the last sentence of
Section 4.03; provided, however, that termination pursuant to paragraph (b) or
(c) of Section 10.01 shall not relieve the defaulting or breaching party from
any liability to the other party hereto.
ARTICLE XI: MISCELLANEOUS
11.01 No Survival. The representations and warranties made in this
Agreement or in any certificate or other document delivered pursuant hereto or
in connection herewith and the covenants and agreements contained herein to be
performed or complied with at or prior to the Closing shall not survive the
Closing (except for the representations and warranties of Seller contained in
Section 2.04 hereof which shall survive the Closing and shall thereupon expire
(except to the extent a written notice asserting a claim for breach of such
Section shall have been given to Seller prior to such first anniversary date)).
The covenants and agreements contained herein to be performed or complied with
after the Closing shall survive without limitation as to time, unless the
covenant or agreement specifies a term, in which case such covenant or agreement
shall survive for a period of one year following the expiration of such
specified term and shall thereupon expire (except to the extent a written notice
asserting a claim for breach of such covenant or agreement shall have been given
to the party alleged to have committed such breach prior to the end of such
one-year period).
11.02 Entire Agreement. This Agreement (including the Exhibits and
Schedules) constitute the sole understanding of the parties with respect to the
subject matter hereof. Matters disclosed by Seller to Buyer pursuant to any
Section of this Agreement shall be deemed to be disclosed with respect to all
Sections of this Agreement.
11.03 Successors and Assigns. The terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the respective
successors of the parties hereto; provided, however, that this Agreement may not
be assigned by any party without the prior written consent of the other party
hereto. If this Agreement is assigned with such consent, the terms and
conditions hereof shall be binding upon and shall inure to the benefit of the
parties hereto and their respective assigns; provided, however, that no
assignment of this Agreement or any of the frights or obligations hereof shall
relieve the assignor of its obligations under this Agreement.
11.04 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall for all purposes be deemed to be an original
and all of which shall constitute the same instrument.
11.05 Headings. The headings of the Articles, Sections, and paragraphs
of this Agreement are inserted for convenience only and shall not be deemed to
constitute part of this Agreement or to affect the construction hereof.
11.06 Modification and Waiver. No amendment, modification, or
alteration of the terms or provisions of this Agreement shall be binding unless
the same shall be in writing and duly executed by the parties hereto, except
that any of the terms or provisions of this Agreement may be waived in writing
at any time by the party which is entitled to the benefits of such waived terms
or provisions. No waiver of any of the provisions of this Agreement shall be
deemed to or shall constitute a waiver of any other provision hereof (whether or
not similar). No delay on the part of any party in exercising any right, power,
or privilege hereunder shall operate as a waiver thereof.
11.07 Broker's Fees. Each of the parties hereto (i) represents and
warrants that it has not taken and will not take any action that would cause the
other party hereto to have any obligation or liability to any person for a
finder's fee or broker's fee, and foregoing representation and warranty, whether
or not the Closing occurs.
<PAGE>
11.08 Expenses. Seller and Buyer shall each pay all costs and expenses
incurred by it or on its behalf in connection with this Agreement and the
transactions contemplated hereby, including, without limited the generality of
the foregoing, fees, and expenses of its own financial consultants, accountants,
and counsel.
11.09 Notices. Any notice, request, instruction, or other document to
be given hereunder by either party hereto to the other party shall be in writing
and delivered personally or sent by registered or certified mail, postage
prepaid,
If to Seller: Digitel, Inc.
3990 W. Russell Road, #5
Las Vegas, NV 89118
If to Buyer: Western Communications, Inc.
3990 W. Russell Road, #5
Las Vegas, NV 89118
or at such other address for a party as shall be specified by like notice. Any
notice which is delivered personally in the manner provided herein shall be
deemed to have been duly given to the party to whom it is directed upon actual
receipt by such party. Any notice which is addressed and mailed in the manner
herein provided shall be conclusively presumed to have been duly given to the
party to which it is addressed at the close of business, local time of the
recipient, on the third day after the day it is so placed in the mail.
11.10 Governing Law. This Agreement shall be constructed in accordance
with and governed by the laws of the State of Nevada applicable to agreements
made to be performed wholly within such jurisdiction.
11.11 Public Announcements. Neither Seller nor Buyer shall make any
public statements, including, without limitation, any press releases, with
respect to this Agreement and the transactions contemplated hereby without the
prior written consent of the other party (which consent may not be unreasonably
withheld) except as may be required by law.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed on its behalf as of the date first above written.
"Seller"
DIGITEL, INC.
By:/s/Gordon E. Beckstead
Gordon E. Beckstead, President
"Buyer"
WESTERN COMMUNICATIONS, INC.
By:/s/Michael C. Curry
Michael C. Curry, President
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONSOLIDATED
AUDITED CONDENSED FINANCIAL STATEMENTS FILED WITH THE COMPANY'S MAY 31, 1992
ANNUAL REPORT ON FORM 10-KSB AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000775351
<NAME> HYTK INDUSTRIES INC
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<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAY-31-1992
<PERIOD-START> JUN-01-1991
<PERIOD-END> MAY-31-1992
<EXCHANGE-RATE> 1
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 15,000
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0
0
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<TOTAL-COSTS> 93,171
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<INCOME-TAX> 29,300
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