<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10 - SB
GENERAL FORM FOR REGISTRATION OF SEURITIES OF
SMALL BUSINESS ISSUERS Under Section 12(b) or
(g) of the Securities Exchange Act of 1934
NuTek, Inc.
---------------------------------------------------
(Name of Small Business Issuer in its charter)
Nevada 87-0374623
------------------------------- ---------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
15722 Chemical Lane, Huntington Beach, CA 92649
------------------------------------------------ -------------
(Address of principal executive offices) (zip code)
714-799-7266 (Telephone) 714-799-5466 (Fax)
---------------------------------------------------------
Issuer's Telephone Number
Securities to be registered under section 12(b) of the Act:
Title of Each Class Name on each exchange on which
to be registered each class is to be registered
-------------------------- --------------------------------
-------------------------- --------------------------------
Securities to be registered under section 12(g) of the Act:
Common Stock, $.001 par value per share, 50,000,000 shares authorized,
36,328,044 issued and outstanding as of December 31, 1999. Preferred
Stock, $.001 par value per share, 5,000,000 shares authorized, 793,500
issued and outstanding as of December 31, 1999.
1
<PAGE>
FORWARD LOOKING STATEMENTS
CAUTIONARY NOTICE REGARDING FORWARD LOOKING STATEMENTS
NuTek, Inc., ("NuTek, Inc.," or "NUTK" or the "Company" or the "Registrant")
cautions readers that certain important factors may affect the Company's
actual results and could cause such results to differ materially from any
forward-looking statements that may be deemed to have been made in this
Document or that are otherwise made by or on behalf of the Company. For
this purpose, any statements contained in the Document that are not statements
of historical fact may be deemed to be forward-looking statements. This
Registration contains statements that constitute "forward-looking
statements." These forward-looking statements can be identified by the use
of predictive, future-tense or forward-looking terminology, such as "believes,"
"anticipates," "expects," "estimates," "plans," "may," "will," or similar
terms. These statements appear in a number of places in this Registration
and include statements regarding the intent, belief or current expectations of
the Company, its directors or its officers with respect to, among other
things: (i) trends affecting the Company's financial condition or results
of operations for its limited history; (ii) the Company's business and
growth strategies; (iii) the Internet and Internet commerce; and, (iv) the
Company's financing plans. Investors are cautioned that any such
forward-looking statements are not guarantees of future performance and
involve significant risks and uncertainties, and that actual results may
differ materially from those projected in the forward-looking statements
as a result of various factors. Factors that could adversely affect actual
results and performance include, among others, the Company's limited
operating history, dependence on continued growth in the use of the Internet,
the Company's inexperience with the Internet, potential fluctuations in
quarterly operating results and expenses, security risks of transmitting
information over the Internet, government regulation, technological change
and competition.
The accompanying information contained in this Registration, including,
without limitation, the information set forth under the heading "Risk
Factors," "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Business" identifies important additional factors
that could materially adversely affect actual results and performance. All
of these factors should be carefully considered and evaluated. All forward-
looking statements attributable to the Company are expressly qualified in
their entirety by the foregoing cautionary statement. Any forward-looking
statements in this report should be evaluated in light of these important
risk factors. The Company is also subject to other risks detailed herein
or set forth from time to time in the Company's filings with the Securities
and Exchange Commission.
2
<PAGE>
INFORMATION REQUIRED IN REGISTRATION STATEMENT
Part I ......................................................... 4
Item 1. Description of Business.................................. 4
Item 2. Management's Discussion and Analysis or Plan of
Operation................................................ 29
Item 3. Description of Property.................................. 30
Item 4. Security Ownership of Management and Others and Certain
Security Holders......................................... 31
Item 5. Directors, Executives, Officers and Significant
Employees................................................ 32
Item 6. Remuneration of Directors and Executive
Officers................................................. 36
Item 7. Certain Relationships and Related Transactions........... 37
Part II ......................................................... 38
Item 1. Market Price of and Dividends of the Registrant's
Common Equity and Other Stockholder Matters.............. 38
Item 2. Legal Proceedings........................................ 40
Item 3. Recent Sales of Unregistered Securities.................. 41
Item 4. Description of Securities................................ 41
Item 5. Indemnification of Directors and Officers................ 42
Part F/S ......................................................... 45
Item 1. Financial Statements..................................... 45
Item 2. Changes in and Disagreements With Accountants on
Accounting and Financial Disclosure..................... 45
Part III ........................................................ 46
Item 1. Index to Exhibits....................................... 46
Item 2. Description of Exhibits................................. 46
The following Registration Statement is qualified in its entirety by, and
should be read in conjunction with, the more detailed information and the
Financial Statements and Notes related thereto appearing elsewhere in this
Registration. Except where the context otherwise requires, all references
in this Registration to (a) the "Registrant" or the "Company" or "NUTK"
refer to NuTek, Inc., a Nevada corporation, (b) the "Web" refer to the
World Wide Web and (c) the "site" refer to the Company's Web site.
3
<PAGE>
PART I
ITEM 1. DESCRIPTION OF BUSINESS
A. Business Development, Organization and Acquisition Activities
The Company was incorporated under the laws of the State of Nevada, on
August 23, 1991, under the name Swiss Technique, Inc. The original
Articles of the Company authorized the issuance of fifty million
(50,000,000) shares of common stock with a par value of $0.001. On or
about August 23, 1991, pursuant to Section 78.486, Nevada Revised
Statutes as amended, the Company filed with the Nevada Secretary of
State Articles of Merger, whereby the Company merged with Sun
Investments, Inc., a Utah corporation. On or about April 10, 1992, the
Issuer, with majority shareholder vote filed Articles of Amendment to
the Articles of Incorporation with the Secretary of State of Nevada,
authorizing five million (5,000,000) shares of Preferred Stock each have
a par value of $0.001, with such rights, preferences and designations
and to be issued in such series as determined by the Board of Directors
of the Corporation. The Company in accordance with Section 78.250 of
the Nevada Revised Statues and as a result of the majority consent of
shareholders executed on or about March 3, 1995 changed the name of the
Company from Swiss Technique, Inc., to NuTek, Inc. The Company filed
a Certificate of Amendment of Articles of Incorporation with the
Secretary of State of Nevada to change its name. On or about September
20, 1997, the Company filed with the Nevada Secretary of State a Plan
of Reorganization and Agreement between itself and International
Licensing Group, Inc., a Delaware Corporation.
The Company is engaged multiple business activities, which include but
are not limited to:
a) Elite Fitness Systems which markets video "fitness program" tapes
through infomercials;
b) BuyNetPlaza.com, Internet marketing;
c) Century Clocks, which plans to produce wall clocks;
d) Vac-U-Lift Production, which owns the rights to oil leases in Texas;
e) Other consumer/industrial products which include: a plastic buffet
plate, producing "light switch" covers plates; and, plastic coverings for
metal rails,.
The Company's mailing address is: 15722 Chemical Lane, Huntington Beach,
CA 92649, phone number: 714-799-7266. The Company website can be found
at: www.nutk.com.
4
<PAGE>
B. Business of Issuer
1) Principal Products, Services and Principal Markets.
a) Elite Fitness Systems
Elite Fitness Systems was responsible for the Company generating its
first profit during calendar 1999. The Company has identified a
product which can be mass marketed through radio, television and print
media. Elite Fitness Systems mission is to provide quality media and
distribution of its products in an efficient, profitable manner. The
Company has developed a series of exercise videos originally produced by
Mr. Scott Helvenston, a former Navy Seal. These videos are marketed
through three (3) different series of exercise videos. They are:
"Ultimate Aerobic Workout," "Total Body Workout" and "Ab Blast."
The second series consists of an 11 minute Lower Body Workout and 11
minute Upper Body Workout; the third series consists of ISO Workouts,
Stamina and Strength videos. These video tapes generated approximately,
$197,000 in revenues last year, with approximately $135,000 in profit.
These exercise video tapes are promoted through infomercials, and print
media, include the "Sky Mall" magazine, found on many commercial airline
flights and various mail order catalogs. The Company spent approximately
$40,000 this past year on advertising this product.
The infomercials discuss the product attributes, and through testimonials
encourage the consumer to purchase these products, by calling an 800
number. The company contracts with "phone rooms" to take orders for these
products. The company also hires the services of Maximum Coverage Media,
Inc., in San Diego, who purchases block quantities of air time with television
and radio stations. Product fulfillment and order processing is handled
through the offices of Mr. Scott Helvenston.
The highlights of the terms of the agreement which the company has
entered into with Mr. Scott Helvenston includes (See Exhibit 10.3
Purchase Agreement):
i) Mr. Scott Helvenston guarantees to the Company a minimum sales revenue
of Two Hundred Thousand ($200,000.00) per year from existing catalogs and
clients, failing which the "Royalty Payments" will be reduced by Two and
One half (2.5%) percent, effective from date of signing of contract.
ii) NuTek agrees to place an additional Twenty Thousand ($20,000.00)
dollars into the current business as a loan account from NuTek to fund
operations. This will include a minimum of Three Thousand Five Hundred
($3,500.00) dollars per month to fund print media advertising. The revenue
sharing is to be increased by five (5%) percent until loan is paid back from
this additional five (5%) Percent. In addition to this, if media roll out
of exercise video campaign returns a rate greater then 2:1, NuTek will
forward additional funding, a minimum of One Hundred Thousand ($100,000)
Dollars to Elite Fitness Systems to continue promoting commercial.
iii) NuTek will also assist in raising additional funding for the
construction of an outdoor rock climbing gym and sports area.
iv) NuTek to receive from fifty (50%) of all net monthly proceeds after
deduction of salary and royalty payments.
5
<PAGE>
Risks Associated with Infomercials. The Company is not experienced
with other infomercial projects or ventures. The average industry cost
to produce an infomercial can cost as much as $100,000. If a project is
successful, that is, it generates more sales than the cost of the product
and media time, the company can expect to recoup its cost and make a profit.
According to industry standards, the average infomercial produces nine (9)
percent in profits, after all expenses. When a product is advertised via
mass media, where the consumer orders the product by calling an 800 number,
the industry standards set the retail price of the product eight (8) times
higher than the cost of the product. This spread is needed to justify the
cost of mass advertising, research, development, production, order takers,
warehousing, shipping, invoicing, etc. If the project is not successful, a
company loses its entire investment in the project it undertakes. Generally
speaking, successful companies will have one successful project for every
five projects they bring to the market via infomercials.
The company must subcontract the purchase of media time. NuTek reimburses
their media up-front for the purchase of air-time, therefore, their company
does not keep any of the profits.
The Company does not have the capabilities, and infrastructure to produce
its own quality infomercials. Therefore, the Company must subcontract
services, an experience the cost of maintaining heavy overhead as where
competitive companies, with broader experienced, larger budgets and production
studios can produce a similar product at a lessor cost. If the Company can
identify other infomercials to undertake, they can expect competitive
pressures to produce similar products, which would adversely affect any
potential profits and results. There is a great deal of competition to
market a variety of products through infomercials. Additionally, the
Company does not have the resources to test new product ideas, as compared
to companies that focus all of their resources in identifying products and
producing infomercials to sell these products.
b) BuyNetPlaza.com
The Company plans to seek outside suppliers who would be willing to allow
the Company's e-commerce site, www.BuyNetPlaza.com to merchandise, market
and sell their products through the Company's Internet Web site, whereby the
Company receives a fifteen (15%) percent fee, for products sold through it
Website. These suppliers would be responsible for inventory, billing and
shipping their products to the potential customers generated through the
Company's e-commerce Web site. The company plans to focus, but not limit
itself to retail-type products, e.g., books, videos, health care products,
etc. Additionally, the Company plans to seek advertisers, to advertise
their product(s) on the Company's Web site. For any advertisers on the
Company's Web site, the Company will provide a link to the advertisers' Web
site and charge a customary/nominal fee, for each customer who links to
their advertisers Web site.
Evaluation of the Company, its current business and its prospects can be
based, each of which must be considered in light of the risks, expenses and
problems frequently encountered by all companies engaged in new business
activities, such as e-commerce and particularly by such companies entering
new and rapidly developing markets like the Internet. Such risks include,
without limitation, the lack of broad acceptance of the company's products
and the possibility that the Internet will fail to achieve broad acceptance,
the inability of the Company to generate significant based revenues
from its customers, the company's inability to anticipate and adapt to a
developing market, the failure of the company's network infrastructure
(including its server, hardware and software) to efficiently handle its
Internet traffic, production capabilities, changes in laws that adversely
affect the company's business, the ability of the Company to manage its
operations, including the amount and timing of capital expenditures and
other costs relating to the expansion of the company's operations, the
introduction and development of different or more extensive communities by
direct and indirect competitors of the Company, including those with greater
financial, technical and marketing resources, the inability of the Company
to maintain and increase levels of traffic on its marketing Web site, the
inability of the Company to attract, retain and motivate qualified personnel
and general economic conditions. The Company's prospects must be considered
in light of the risks, uncertainties, expenses and difficulties frequently
encountered by companies in their early stages of new product development,
particularly companies in new and rapidly evolving markets such as online
commerce.
6
<PAGE>
(i) Anticipated Revenues for the Foreseeable Future
The Company's website has achieved approximately $29,000 in revenues to date,
and the Company anticipates that its e-commerce website will generate minimal
profits in the foreseeable future. The extent of these profits will depend,
in part, on the amount of growth in the Company's revenues from sales of its
products, and possibility advertising revenues on its Web site. The Company
expects that its operating expenses will increase significantly during the next
several years, especially in the areas of sales and marketing, and brand
promotion. Thus, the Company will need to generate increased revenues to
achieve profitability. To the extent that increases in its operating
expenses precede or are not subsequently followed by commensurate increases in
revenues, or that the Company is unable to adjust operating expense levels
accordingly, the Company's business, results of operations and financial
condition would be materially and adversely affected. There can be no
assurances that the Company can achieve or sustain profitability or that
the Company's operating losses will not increase in the future.
(ii) Dependence on Continued Growth and Viability of the Internet
The Company's e-commerce success is substantially dependent upon continued
growth in the use of the Internet. To generate product sales, advertising
sales, e-Commerce service fees for NuTek, Inc., the Internet's recent and
rapid growth must continue, and e-Commerce on the Internet must become
widespread. None of these can be assured. The Internet may prove not to be a
viable commercial marketplace. Additionally, due to the ability of
consumers to easily compare prices of similar products or services on competing
Web sites, gross margins for e-Commerce transactions may narrow in the future
and, accordingly, the Company's revenues from e-Commerce arrangements may be
materially negatively impacted. If use of the Internet does not continue
to grow, the Company's business, results of operations and financial condition
would be materially and adversely affected. Additionally, to the extent
that the Internet continues to experience significant growth in the number of
users and the level of use, there can be no assurance that its technical
infrastructure will continue to be able to support the demands placed upon
it. The necessary technical infrastructure for significant increases in
e-Commerce, such as a reliable network backbone, may not be timely and
adequately developed. In addition, performance improvements, such as
high-speed modems, may not be introduced in a timely fashion. Furthermore,
security and authentication concerns with respect to transmission over the
Internet of confidential information, such as credit cared numbers, may
remain. Issues like these could lead to resistance against the acceptance
of the Internet as a viable commercial marketplace. Also, the Internet could
lose its viability due to delays in the development or adoption of new
standards and protocols required to handle increased levels of activity, or
due to increased governmental regulation. Changes in or insufficient
availability of telecommunications services could result in slower response
times and adversely affect usage of the Internet. Demand and market
acceptance for recently introduced services and products over the
Internet are subject to a high level of uncertainty, and there exist few
proven services and products.
7
<PAGE>
The Internet may not be commercially viable in the long term for a number
Of reasons, including potentially inadequate development of the necessary
network infrastructure or delayed development of enabling technologies,
performance improvements and security measures. To the extent that the
Internet continues to experience significant growth in the number of users,
their frequency of use or their band width requirement, there can be no
assurance that the infrastructure for the Internet and other online
services will be able to support the demands placed upon them. In addition,
the Internet or other online services could lose their viability due to
delays in the development or adoption of new standards and protocols required
to handle increased levels of Internet or other online service activity, or
due to increased governmental regulation. Changes in or insufficient
availability of telecommunications services to support the Internet or other
online services also could result in slower response times and adversely
affect usage of the Internet and other online services generally and NuTek,
Inc. in particular. If use of the Internet and other online services does
not continue to grow or grows more slowly than expected, if the
infrastructure for the Internet and other online services does not
effectively support growth that may occur, or if the Internet and other
online services do not become a viable commercial marketplace, the
Company's business, results of operations and financial condition would
be adversely affected.
(iii) Risk of System Failures
The Company's ability to facilitate e-commerce trade successfully and provide
high quality customer service, depends on the efficient and uninterrupted
operation of its computer and communications through its designated Internet
Service Provider (ISP). These systems and operations are vulnerable to damage
or interruption from earthquakes, floods, fires, power loss, telecommunication
failures, break-ins, sabotage, intentional acts of vandalism and similar
events. The Company does not have fully redundant systems, a formal disaster
recovery plan or alternative providers of hosting services and does not carry
business interruption insurance to compensate it for losses that may occur.
Despite any precautions taken by, and planned to be taken by the Company, the
occurrence of a natural disaster or other unanticipated problems with its ISP
could result in interruptions in the services provided by the Company.
In addition, the failure by the ISP to provide the data communications
capacity required by the Company, as a result of human error, natural
disasters other operational disruption, could result in interruptions in the
Company's service. Any damage to or failure of the systems of the Company
could result in reductions in, or terminations of, Company service, which
could have a material adverse effect on the Company's business, results of
operations and financial condition. In the case of frequent or frequent or
persistent system failures, the Company's reputation and name brand could be
materially adversely affected. Although the Company has implemented certain
network security measures, the Company and its IPS are also vulnerable to
computer viruses, physical or electronic break-ins and similar disruptions,
which could lead to interruptions, delays, loss of data or the inability to
complete customer auctions. In addition, although the Company works to
prevent unauthorized access to Company data, it is impossible to eliminate
this risk completely. The occurrence of any and all of these events could
have a material adverse effect on the Company's business, results of
operations and financial condition.
8
<PAGE>
(iv) e-Commerce Competition
The market for consumer products over the Internet is relatively new,
rapidly evolving and intensely competitive, and the Company expects
competition to intensify further in the future. Barriers to entry are
relatively low, and current and new competitors can launch new sites at a
relatively low cost using commercially-available software. The Company
potentially competes with a number of other companies marketing similar
health care products over the Internet. Competitive pressures created by
any of the Company's competitors, could have a material adverse effect on
the Company's business, results of operations and financial condition.
The Company believes that the principal competitive factors in its market
are volume and selection of goods, population of buyers and sellers,
community cohesion and interaction, customer service, reliability of delivery
and payment by users, brand recognition, WEB site convenience and
accessibility, price, quality of search tools and system reliability. Some
of the Company's potential competitors have longer operating histories,
larger customer bases, greater brand recognition and significantly greater
financial, marketing, technical and other resources than the Company. In
addition, other online trading services may be acquired by, receive
investments from or enter into other commercial relationships with larger,
well-established and well-financed companies as use of the Internet and other
online services increases.
Therefore, certain of the Company's competitors with other revenue sources
may be able to devote greater resources to marketing and promotional
campaigns, adopt more aggressive pricing policies and devote substantially
more resources to Web site and systems development than the Company or may
try to attract traffic by offering services for free. Increased competition
may result in reduced operating margins, loss of market share and diminished
value in the Company's brands. There can be no assurance that the Company
will be able to compete successfully against current and future competitors.
Further, as a strategic response to changes in the competitive environment,
the Company may, from time to time, make certain pricing, service or
marketing decisions or acquisitions that could have a material adverse effect
on its business, results of operations and financial condition. New
technologies and the expansion of existing technologies may increase the
competitive pressures on the Company by enabling the Company's competitors to
offer a lower-cost service. Certain Web-based applications that direct
Internet traffic to certain Web sites may channel users to trading services
that compete with the Company. Although the Company plans to establish
arrangements with online services and search engine companies, there can be
no assurance that these arrangements will be renewed on commercially
reasonable terms or that they will otherwise bring traffic to the
the Company's WEB site. In addition, companies that control access to
transactions through network access or Web browsers could promote the
Company's competitors or charge the Company substantial fees for inclusion.
Any and all of these events could have a material adverse effect on the
Company's business, results of operations and financial condition.
(v) Risk Of Capacity Constraints And Systems Failures
A key element of the Company's strategy is to generate a volume of user
traffic to its Web site. The Company's ability to attract customers and to
achieve market acceptance of its products depends significantly upon the
performance of the Company and its network infrastructure (including its
server, hardware and software). Any system failure that causes interruption
or slower response time of the Company's products and services could result
in less traffic to the Company's Web site and, if sustained or repeated,
could reduce the attractiveness of the Company's products. An increase in
the volume of user traffic could strain the capacity of the Company's
technical infrastructure, which could lead to slower response time or system
failures, and could adversely affect the delivery of the number of impressions
that are owed to advertisers and thus the Company's advertising revenues. In
addition, as the number of Web pages on and users of BuyNetPlaza.com increase,
9
<PAGE>
there can be no assurance that the Company and its technical infrastructure
will be able to grow accordingly, and the Company faces risks related to its
ability to scale up to its expected customer levels while maintaining superior
performance. Any failure of the Company's server and networking systems to
handle current or higher volumes of traffic would have a material adverse
effect on the Company's business, results of operations and financial
condition. The Company is also dependent upon third parties to provide
potential users with Web browsers and Internet and online services necessary
for access to the site. In the past, users have occasionally experienced
difficulties with Internet and online services due to system failures,
including failures unrelated to the Company's systems. Any disruption in
Internet access provided by third parties could have a material adverse
effect on the Company's business, results of operations and financial
condition. Furthermore, the Company is dependent on hardware suppliers for
prompt delivery, installation and service of equipment used to deliver the
Company's products and services. The Company's operations are dependent in
part upon its ability to protect its operating systems against damage from
human error, fire, floods, power loss, telecommunications failures,
break-ins and similar events. The Company does not presently have redundant,
multiple-site capacity in the event of any such occurrence. The Company's
servers are also vulnerable to computer viruses, break-ins and similar
disruptions from unauthorized tampering with the Company's computer systems.
The occurrence of any of these events could result in the interruption, which
could have a material adverse effect on the Company's business, results of
operations and financial condition. In addition, the Company's reputation
could be materially and adversely affected.
(vi) Online Commerce Security Risks
A significant barrier to online commerce and communications is the secure
transmission of confidential information over public networks. NuTek, Inc.
plans to accept credit cards for purchases of its products. The Company will
rely on encryption and authentication technology licensed from third parties
to provide the security and authentication technology to effect secure
transmission of confidential information, including customer credit card
numbers. There can be no assurance that advances in computer capabilities,
new discoveries in the field of cryptography, or other events or developments
will not result in a compromise or breach of the technology used by the
Company to protect customer transaction data.
If any such compromise of the Company's security were to occur, it could have
a material adverse effect on the Company's reputation and, therefore, on its
business, results of operations and financial condition. Furthermore, a
party who is able to circumvent the Company's security measures could
misappropriate proprietary information or cause interruptions in the
Company's operations. The Company may be required to expend significant
capital and other resources to protect against such security breaches or to
alleviate problems caused by such breaches. Concerns over the security of
transactions conducted on the Internet and other online services and the
privacy of users may also inhibit the growth of the Internet and other online
services generally, and the Web in particular, especially as a means of
conducting commercial transactions. To the extent that activities of the
Company involve the storage and transmission of proprietary information, such
as credit card numbers, security breaches could damage the Company's
reputation and expose the Company to a risk of loss or litigation and
possible liability. There can be no assurance that the Company's security
measures will prevent security breaches or that failure to prevent such
security breaches will not have a material adverse effect on the Company's
business, results of operations and financial condition.
10
<PAGE>
(vii) Risks Associated With International Operations
A component of the Company's strategy is to offer its e-commerce products
online to international customers. Expansion into the international markets
will require management attention and resources. The Company has limited
experience in localizing its service, and the Company believes that many of
its competitors are also undertaking expansion into foreign markets. There
can be no assurance that the Company will be successful in expanding into
international markets. In addition to the uncertainty regarding the
Company's ability to generate revenues from foreign operations and expand
its international presence, there are certain risks inherent in doing
business on an international basis, including, among others, regulatory
requirements, legal uncertainty regarding liability, tariffs, and other
trade barriers, difficulties in staffing and managing foreign operations,
longer payment cycles, different accounting practices, problems in collecting
accounts receivable, political instability, seasonal reductions in business
activity and potentially adverse tax consequences, any of which could
adversely affect the success of the Company's international operations.
To the extent the Company expands its international operations and has
additional portions of its international revenues denominated in foreign
currencies, the Company could become subject to increased risks relating to
foreign currency exchange rate fluctuations. There can be no assurance that
one or more of the factors discussed above will not have a material adverse
effect on the Company's future international operations and, consequently, on
the Company's business, results of operations and financial condition.
(viii) Distribution Methods of the Products and Services
The Company will be significantly dependent on a number of third-party
relationships to supply product(s), to ship product(s), and increase traffic
to BuyNetPlaza.com. The Company is generally dependent on other Web site
operators that provide links to BuyNetPlaza.com.
The Company does has a agreement in place with another website operator to
to provide reciprocal links that provide links to BuyNetPlaza.com, and, if the
Company can established such links the other Web site operators may
terminate such links at any time without notice to the Company. (See Exhibits
10.1, Agreement for Internet Sales and Marketing; and Exhibit 10.2, Agreement
for Promotion and Revenue Sharing Plan.) There can be no assurance that
third parties will regard their relationship with the Company as important
to their own respective businesses and operations.
There can be no assurance that the Company will ever develop any additional
relationships with third parties that supply the Company with links to their
Web site. In particular, the elimination of a pre-installed bookmark on a Web
browser that directs traffic to the Company's Web site could significantly
reduce traffic on the Company's Web site, which would have a material adverse
effect on the Company's business, results of operations and financial
condition.
(ix) Industry Background
Global commerce and the online exchange of information is new and evolving,
it is difficult to predict with any assurance whether the Web will prove to
be a viable commercial marketplace in the long term. The Web has
experienced, and is expected to continue to experience, significant growth in
the numbers of users and amount of traffic. To the extent that the Web
continues to experience increased numbers of users, frequency of use or
increased bandwidth requirements of users, there can be no assurance that the
Web infrastructure will continue to be able to support the demands placed on
it by this continued growth or that the performance or reliability of the Web
will not be adversely affected.
11
<PAGE>
Industry estimates that spending on Internet advertising in the United States
will grow from $940 million in 1997 to $7.7 billion in 2002. The Internet has
become a compelling advertising vehicle that provides advertisers with
targeting tools not available from traditional advertising media. The
interactive nature of the Internet and the development of "click-through"
advertising banners and other feedback tools enable advertisers to measure
impression levels, establish a dialogue with users and receive "real-time"
direct feedback from their target markets.
Such feedback provides advertisers with an effective means to measure the
attractiveness of their offerings among targeted audiences and make
modifications to their advertising campaigns on short notice. Community sites
are generally able to provide advertisers significantly more information
regarding consumers than other Web sites because they collect detailed
demographic data and facilitate the development of user-created affinity
groups. The ability to target advertisements to broad audiences, specific
regional populations, affinity groups or individuals makes community Web site
advertising a highly versatile and effective tool for delivering customized
and cost-effective messages. One indicator of the Internet's popularity as
an advertising medium is the growing number and diversity of Internet
advertisers.
Furthermore, the Web has experienced a variety of outages and other delays
as a result of damage to portions of its infrastructure, and could face such
outages and delays in the future, including outages and delays resulting from
the inability of certain computers or software to distinguish dates in the
21st century from dates in the 20th century. These outages and delays could
adversely affect the level of Web usage and also the level of traffic for
NuTek, Inc. In addition, the Web could lose its viability due to delays in
the development or adoption of new development or adoption of new standards
and protocols to handle increased levels of activity or due to increased
governmental regulation.
The Internet allows marketers to collect meaningful demographic information
and feedback from consumers, and to rapidly respond to this information with
new messages. This offers a significant new opportunity for businesses to
increase the effectiveness of their direct marketing campaigns. In
traditional media, a significant portion of all advertising budgets are spent
on direct marketing because of its effectiveness. However, the effectiveness
of direct marketing campaigns is dependent upon the quality of consumer data
used to develop and place complementary products, services or facilities
are developed and the Web becomes a viable commercial marketplace in the long
term, the Company might be required to incur substantial expenditures in
order to adapt its products to changing Web technologies, which could have a
material adverse effect on the Company's business, results of operations and
financial condition.
(x) E-Commerce and Direct Marketing.
The Internet has become a significant marketplace for buying and selling
goods and services. Industry estimates that the amount of goods or services
purchased in online consumer transactions will grow from approximately $2.6
billion in 1997 to approximately $37.5 billion in 2002. Improvements in
security, interface design and transaction-processing technologies have
facilitated an increase in online consumer transactions. Early adopters of
such improvements include online merchants offering broad product catalogs
(such as books, music CDs and toys), those seeking distribution efficiencies
(such as PCs, flowers and groceries) and those offering products and services
with negotiable pricing (such as automobiles and mortgages). The Company
believes that as the volume of online transactions increases, traditional
retailers will offer a wide variety of products and services online. The
Company believes that online companies provide businesses an opportunity
to link Internet customers with like interests. The Internet allows marketers
to collect meaningful demographic information.
12
<PAGE>
The Company's business strategy relies on advertising by and agreements with
other companies. Any significant deterioration in general economic conditions
that adversely affected these companies could also have a material adverse
effect on the Company's business, results of operations and financial
condition.
c) Century Clocks Inc.
Century Clocks Inc., has developed a joint venture with the Department
of Veterans Industries, the Company plans to produces wall clocks assembled
and packaged by US Veterans. (See Exhibit 10.7, Transitional Employer
Agreement.)
The Company has analyzed the clock market. Mr. Conradie, President and CEO
of the Company founded Century Clocks S.A. (in South Africa) 13 years ago.
His experience in the clock industry has determined that certain models
are required in order to offer a complete range that can be offered for
retail sales as well as promotional sales worldwide. Clocks are universally
purchased and utilized throughout the world. There are a number of households,
and office settings have more than one wall clock.
Century Clocks, over the years, has conducted market research, and analyzed
buying patterns. Through this analysis they believe they have determined
consumer likes and dislikes in a clock design, designing clock faces and
colors for the clocks that could complement many tastes and decor styles.
A strategic alliance has been formed between the National Department of
Veteran Affairs and NuTek Inc., whereby Century Clocks will be using both able
and disabled Veterans in most of the assembly, production and packaging of
the clocks. This alliance employs the Long Beach, California, Veterans
Rehabilitation Center as a pilot program. Century Clocks plans to offer the
veterans jobs and teach them skills in order for them to go back into the
workforce or continue their employment with NuTek Inc. NuTek Inc. has
negotiated to start the assembly and production at the VA's Long Beach
facility. Century Clocks plans to increase its veterans workforce and
teaching these Veterans job skills at the same time as they produce
products for the Company.
The main marketing policy of Century Clocks is to offer a product, through
a contract sales force and offer satisfactory customer service. The Company
plans to offer immediate shipment on all lines. The Company plans on
maintaining adequate inventory levels to be to dispatch clocks as soon as
orders are placed for those clients who require immediate shipment. In terms
of promotional clocks, there are very few clock manufacturers' that customize
clocks in the way Century Clocks proposes to do. A promotional clock allows
the client to display his sales message. With the experience and learnings
Century Clocks has implemented over the years in design and manufacture of
promotional clocks, management feels confident they will be able to identify
consumer needs.
(i) Anticipated Losses for the Foreseeable Future
Century Clocks has not achieved profitability to date, and the Company
anticipates that Century Clocks will continue to incur net losses for the
foreseeable future. The extent of these losses will depend, in part, on the
amount of growth in the Company's revenues from sales of its products,
meeting production capability, and identifying a customer base. The Company
expects that its operating expenses will increase significantly during the
next several years, especially in the areas of sales and marketing, product
development/design, and brand promotion. Thus, the Company will need to
generate increased revenues to achieve profitability. To the extent that
increases in its operating expenses precede or are not subsequently followed
by commensurate increases in revenues, or that the Company is unable to
adjust operating expense levels accordingly, the Company's business, results
of operations and financial condition would be materially and adversely
affected. There can be no assurances that the Company can achieve or sustain
profitability or that the Company's operating losses will not increase in the
future.
13
<PAGE>
(ii) Industry
The total clock market size in the United States is approximately $2 billion
annually. U. S. made competition is limited, in that, clock manufacturing
is a specialized field which requires a great deal of knowledge about
timepieces, and the designing of timepieces. The startup and tooling costs
prohibit the entrance of competition as it requires large capital expenditures.
The competition is extensive in the market place, as it includes, but is not
limited to: Ingraham Clocks, Sunbeam Clocks, Elgin Clocks, Heirloom Clocks,
Spartus Clocks. These Companies together generate annual sales
approximately $200 million. Other clock manufactures include: Westclox,
Kienzle Clocks, and Jan Bell Marketing, who sells imported clocks only. These
Companies generate annual sales of approximately $500 million.
There are five (5) major manufacturers of clocks in the United States:
1. Spartus - $68 million annual sales
2. Gemini Display - $20 million annual sales
3. Salton Time - unknown
4. Faraday Inc - $500 million annual sales
5. Howard Miller Clock Co - $1 billion annual sales
The major importers and distributors of clocks can be broken down into
these major companies:
1. Timex Clocks - $850 million annual sales
2. Jan Bell Marketing - $272 million annual sales
3. General Time - $59 million annual sales
4. Ingraham - $40 million annual sales
5. Sunbeam - $37 million annual sales
(iii) Competition
The competition that does exist comes from products either manufactured outside
of the United States or are repackaged on arrival in the United States.
Century wants to offer a totally American made product, and with the systems
they have created over the years, they hope to establish an advantage when it
comes to competing against the other clock manufacturers.
Approximately seventy (70%) percent of all clocks sold in the United States
contain some imported product. When the imported product is the mechanism as
is the case in most instances, this means 45% of the clocks costs comprise of
an imported product.
(iv) Marketing Strategy
Century Clocks over the years has studied consumer likes and dislikes in a
clock design, designer clock faces and colors for the clocks that could
complement various tastes and decor styles.
Although, there has been the emergence of digital technology, the market
remains firm for the analog timepieces within the home and work environment.
Management believes this form of display makes it far easier to estimate time
by hours or minutes to, or remaining from a predetermined time. This form of
display is still the principle choice for educating children on ways to tell
time. Management believes this form of display makes telling time a lot easier
from a distance as one can recognize the layout that the clock hands.
14
<PAGE>
The Company plans to market these clocks in various ways, the principle method
will be targeted at the major department stores throughout the United States.
The premium promotional clocks will be sold by in-house marketing staff. The
Company also plans to offer them to members of the Advertising Specialties
Institute. These are companies that offer advertising and promotional items
to companies.
The Company plans to utilize a variety of methods to market its clocks, this
includes but is not limited to the following:
(a) An in-house Marketing Director in conjunction with Mr. Conradie,
President and CEO will establish and contract Manufacturers' Agents that are
already trading and providing products to the department stores. These agents
will be evaluated on the product lines they carry as well as their past
performances. The Manufacturers agents will have a commission for sales
negotiated with them and depending on the services they offer and the
geographic regions in which they operate, a commission structure will be
established. This will vary in percentage from 5% to about 10%. These agents
will be responsible for collecting orders from the department stores on a
regular basis, as well as all merchandising functions. All the Manufacturers
Agents will report directly to a Marketing Director on a weekly basis. The
Marketing Director will then report his findings at the weekly management
meetings. The Marketing Director will oversee all sales on a national basis,
and handle as house accounts those accounts that fall within the immediate
geographic region that Century is operating in.
(b) Century will also arrange for meetings with the Head Buyers of the various
department stores to present their lines of clocks.
(c) Century's marketing and customer service plans to offer a minimum of a
5 year warranty, on its Clocks.
(d) For the Promotional clocks Century plans to produce its own full color
display catalog to be sent to Advertising Specialty companies for their use.
Promotional clocks obtain a higher margin of profit than the regular
clocks.
Management experience has seen that the wholesale clock market tends to offer
peak periods from August to November when all Christmas orders are being
processed. The premium market is fairly constant year round.
(v) Manufacturing Plan
The Company plans to manufacture its clocks in Long Beach, California.
The factory would initially need to be a minimum of 12,480 sq. feet. This size
enables the Company to plan for future expansion and can facilitate full
production of $400,000.00 per month.
The equipment that will be needed within the factory will be basically tables
that are waist height and placed in long lines for the assembly to take place.
A caged off area will contain the movements and an adjacent caged off area
will contain all finished products either waiting for dispatch or placed in
storage. The factory does not require any specialized equipment or mechanized
conveyors, as the assembly process has been found to be more effective with
simple manual assembly.
As production increases, Century plans to introduce its own screen printing
equipment into the factory to handle the printing in-house. At an
implementation cost of approximately $10,000.00, Century plans to invest in
once production has reached the limits for the printing to be carried out
in-house feasibly. In the meantime, the Company plans to subcontract these
services through one of the several available Screen Printers in the Los
Angeles area.
15
<PAGE>
(vi) Production and Factory Personnel
The manufacturing process consists of the following steps:
1. The components are injection molded at an outside production facility,
who operate and maintain the molds belonging to Century Cocks. These
components are then delivered to Century Clocks where they will be checked for,
quality and counted, and entered into stock.
2. Production for the day is always predetermined weekly, and the allocated
mechanisms for each day are signed out of locked storage and at the end of
the days production this is again totaled to audit the mechanisms. If the
mechanisms are kept under strict control, this provides total control of
clock production and shortages.
3. The orders for components will be placed by the Production Manager,
and these will be authorized and signed off by the senior management. The
molder will be responsible for delivering components to Century. The
estimated turnaround once orders are placed on the molder till received at
Century, will be an average of 14 days.
4. Movements will be purchased locally at from either two (2) suppliers
who can provide the volume Century will be requiring, as well as having
dealt with Century for 8 years, Century has built up a reputation with both of
them. The fact that both suppliers are local, this does away with many delays
and problems by ordering movements ex stock and reduce lead times for ordering
of this major component of the clocks.
5. Production will be planned on a monthly basis, with the most popular
styles and colors kept at a level of approximately 500 per color of each
model, and at 6 colors per model this translates into 3,000 pieces per
style, and at an average cost of $3.00 this is $9,000.00 per model. This
means all dispatching is made directly from inventory, and daily
production thus goes into inventory to be stored for dispatching. All
stock is signed in and out of the storage facility, and thus month end
stocktaking is also much simpler as totals are already known by the
production manager.
6. The employees needed will be as follows:
1- inserting movements into base of clock
2- applying faces to base of clock
2- applying hands to clock face
2- applying lens onto base of clocks
3- packaging and boxing clocks, and applying bar coding
2- applying labels for shipping and storage to inventory
1- production manager to oversee all production, the issuing of movements
daily as well as components for production. This manager will also
handle all receiving and dispatching. He will be
responsible for the storage facilities of both
movements and finished goods, and will be responsible for
monthly stock take figures.
Of the thirteen (13) factory employees, only the Production Manager needs to
be skilled in administration as well as production planning techniques. The
remainder of the staff can be unskilled laborers that can be trained in about
two (2) weeks to assemble the clocks.
16
<PAGE>
(vii) Special Retail Risk Considerations
The Company's retail operations require expertise in the areas of sourcing,
merchandising, selling, personnel, training, systems and accounting. The
Company must establish a customer base, for expansion. The retail market is
particularly subject to the level of consumer discretionary income and the
subsequent impact on the type and value of goods purchased. The opening and
success of retail distribution of the Company's products, will depend on
various factors, including general economic and business conditions affecting
consumer spending, the performance of the Company's retail operations, the
acceptance by consumers of the Company's retail programs and concepts, and the
ability of the Company to manage the locations and future expansion and hire
and train personnel. Please refer "Forward-Looking Statements and Cautionary
Notice Regarding Forward Looking Statements."
d) Vac-U-Lift Production
The Registrant, on or about November 1, 1999, signed a Letter of Intent to
purchase the mineral acres, equipment, and corporate assets which operates
the production of twenty (20) oil leases, consisting of ninety-four (94) oil
wells, in Texas, one geographic area, in the continental United States from
Clipper Operating Co., Inc. The Company plans to acquire assets of the Clipper
Operating Co. through a newly established subsidiary, NuTek Oil Inc. The
Clipper Operating Co. has been managing and operating oil wells belonging to
Vac-U-Lift Production Co. The Company plans to purchase all fixed assets
valued at approximately $1.4 million, as well as, all leases, farm-outs and
mineral interests of Clipper Operating Co. (See Exhibit 10.9, Letter of
Intent - Mineral Acres.)
NuTek Oil, plans to acquire a 100 percent working interest in all property
held by Clipper Operating Co. in the Big Foot and Koyote fields of Frio and
Atascosa Counties, Texas. These wells have been shut down for the past two (2)
years, and have generated no income during that time. They have started
generating nominal income as of August, 1999.
The highlights of the purchase agreement of Clipper Operating Co., Inc.,
within the Letter of Intent includes the following terms:
A. Purchase of all corporate assets of Clipper Operating Co.,
Inc. will be at a price of seventeen thousand three hundred thirty
dollars ($17,330.00) paid to the sole shareholder, P R. Maupin.
B. Purchase of all mineral acreage will be at a price of one
hundred dollars ($100.00)per acre. Total price will be four
hundred sixty four thousand six hundred thirty five dollars
($464,635.00).
C. Purchase of all equipment will be at market value. Total price
will be eight hundred thirty three thousand nine hundred fifteen and
no/100 dollars ($833,915.00).
D. Purchase of pipeline will be at market value. Total price will
be thirty six thousand seven hundred twenty and no/100 dollars
($36,720.00).
E. Method of payment will be one-half in the stock of NuTek, Inc.
and one-half in cash.
(i) General Business - Oil Producing Activities, Proved Reserves,
Acreage, Productive Wells
17
<PAGE>
Reserves - The Registrant's proved oil and gas reserves were estimated as
of November 1, 1999 by William G. Ellis, a Registered Professional
Engineer.
William G. Ellis, B.S., M.A., a registered independent geologist in both
Texas and California and consultant to major oil companies has more than 39
years experience in the field of Petroleum Geology, was retained to determine
the oil reserves on the properties and concluded his report by stating,
"It is estimated that there are 90 million barrels in place, at a 12% recovery
factor 10.8 million barrels are recoverable on the Clipper Properties." The
Company plans to initiate an infield drilling program in order to yield a
discounted 'payout' of each new well in under two years. The Company plans to
recover these reserves in stages starting with the drilling of 20 new wells
over the next 18 months. See: "Uncertainties Related to the Oil and Gas
Business in General."
Estimates of oil and gas reserves are, of necessity, projections based on
engineering data. There are uncertainties inherent in the interpretation of
such data, and there can be no assurance that the reserves set forth herein
will ultimately be realized. No estimates have been filed with or included
in reports to any Federal Authority or agency other than the Securities and
Exchange Commission ("SEC"), in this Registration Statement. The Registrant
has no reserves outside the United States.
Proved Reserves - The following table was prepared in accordance with
the rules and regulations of the SEC and is based on the report of
William G. Ellis, a Registered Professional Geologist.
<TABLE>
<CAPTION>
Proved Reserves
As of November 1, 1999
Oil (bbls) Gross Net
- ----------------------------------------------------------------
<S> <C> <C>
Proved developed 117,000 12,562
Proved undeveloped 758,027 98,778
TOTAL 875,027 111,340
</TABLE>
Acreage - The following table shows the developed and undeveloped
leasehold acreage held by the Registrant as of November 1, 1999:
<TABLE>
<CAPTION>
Acreage
Developed Acreage Undeveloped Acreage
Gross(1) Net(2) Gross(1) Net(2)
- -----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Texas 260 27.92 371 48.34
Total 260 27.92 371 48.34
</TABLE>
Productive Wells - The following table summarizes the productive oil
wells in which the Registrant had an interest at November 1, 1999:
<TABLE>
<CAPTION>
Productive Wells
Oil Wells Gross(1) Net(2)
- -------------------------------------
<S> <C> <C>
Texas 25 2.625
Total 25 2.625
</TABLE>
18
<PAGE>
(1) A "gross acre" or a "gross well" is an acre or well in which a
working interest is owned by the Registrant and the number of gross acres or
gross wells is the total number of acres or wells in which a working interest
is owned by the Registrant.
(2) A "net acre" or a "net well" exists when the sum of the
Registrant's fractional ownership interests in gross acres or gross wells
equals one. The number of net acres or net wells is the sum of the
fractional interests owned in gross acres or gross wells, and does not
include any royalty, overriding royalty or reversionary interests.
Production, Price and Cost Data - The following table summarizes certain
information relating to the production, price and cost data for the Registrant
for the fiscal years ended, 1999.
<TABLE>
<CAPTION>
Oil
- ---------------------------------------------------------------
<S> <C>
Production (bbls) 818.41
Revenue $ 18,414
Average barrels per day 6.8
Average sales price per barrel $ 22.50
Production costs $ 12,889
Equivalent (bbls) 572.84
Production costs per equivalent bbl $ 15.75
Total oil revenues $ 18,414
</TABLE>
The above results reflect the anticipated income to NuTek as the interests
owned in these two wells were Royalty Interests (RI) and Overriding Royalty
Interests (ORR). As of November 1, 1999 the foster lease had 8 wells shut
in and the Davidson still had 13 wells shut in. These were the only two
leases which were operating.
These undeveloped wells produced from August 26 through December 31, 1999.
Management decided not to open additional wells for the remainder of 1999,
once it began negotiations to acquire Clipper. It was decided by
management to direct its efforts and funding toward the purchase of Clipper
Oil.
In view of the current economic conditions within the industry in which the
Registrant participates, the Registrant anticipates that cash flow from
operations for fiscal 2000 will be insufficient to satisfy all of its
general working capital requirements, necessitating additional capital
infusions either from affiliates or from sales of assets, borrowed funds,
equity participations. The Registrant does not believe its future oil
production activities will be subject to any significant seasonal
fluctuations.
(ii) Competition and Markets
There are many companies and individuals engaged in the oil business. Some
are very large and well established with substantial capabilities and long
earnings records. The Registrant is at a competitive disadvantage with some
other firms and individuals in acquiring and disposing of oil properties
since they have greater financial resources and larger technical staffs than
the Registrant. In addition, in recent years a number of small companies
have been formed which have objectives similar to those of the Registrant and
which present substantial competition to the Registrant.
A number of factors, beyond the Registrant's control and the effect of which
cannot be accurately predicted, affect the production and marketing of
oil. These factors include crude oil imports, actions by foreign oil producing
nations, the availability of adequate pipeline and other transportation
facilities, the marketing of competitive fuels and other matters affecting the
availability of a ready market, such as fluctuating supply and demand.
19
<PAGE>
The Registrant plans to sell a substantial portion of its oil production
to Texas oil refineries. The Registrant has no written contracts with
purchasers. The Registrant does not believe that the loss of either of these
purchasers would significantly impair its operations.
(iii) NuTek's Oil Employees
The Registrant currently coordinates all oil field maintenance and
supervision activities using contract labor. P. R. Maupin, current
president of Clipper Operating Co., is scheduled to head NuTek's Oil's
operations. The Registrant plans to retain consultants with respect to
current and proposed properties and operations. The Registrant from time to
time retains independent engineering and geological consultants and the
services of lease brokers and geophysicists in connection with its
operations.
(iv) Properties - Oil Reserves
(See General Business - Oil Producing Activities, Proved Reserves,
Acreage, Productive Wells).
Title to Properties
As is customary in the oil industry, the Registrant conducts only a
perfunctory title examination prior to acquisition of properties believed
to be suitable for drilling operations. Prior to the commencement of actual
drilling operations, a thorough title examination is usually conducted and
significant defects remedied before proceeding with operations. A thorough
title examination has been performed by the Registrant or its predecessor in
interests with respect to substantially all of the Registrant's producing
properties and the Registrant believes that the title to its properties is
generally acceptable to third parties. The Registrant's properties are
subject to royalty, over-riding royalty and other interests customary in the
industry, liens incident to operating agreements, current taxes and other
burdens, minor encumbrances, and easement restrictions. The Registrant does
not believe that any of these burdens materially detract from the value of
the properties or will materially interfere with their use. Oil leases
generally provide that properties are subject to reversion for
non production.
(v) Uncertainties Related to the Oil and Gas Business in General
The Registrant's operations are subject to all of the risks normally
incident to the exploration for and production of oil and gas, including
blow-outs, cratering, pollution, fires, and theft of equipment. Each of
these incidents could result in damage to or destruction of oil and gas wells
or formations of production facilities or injury to persons, or damage to or
loss of property. As is common in the oil and gas industry, the Registrant
is not fully insured against these risks either because insurance is not
available or because the Registrant has elected not to insure due to
prohibitive premium costs.
The Registrant's oil activities have in the past involved exploratory
drilling, which carries a significant risk that no commercial oil production
will be found. The cost of drilling, completing and operating wells is often
uncertain. Further, drilling may be curtailed or delayed as a result of
many factors, including title problems, weather conditions, delivery delays,
shortages of pipe and equipment, and the availability of drilling rigs.
20
<PAGE>
The oil business is further subject to many other contingencies which
are beyond the control of the Registrant. Wells may have to be shut-in
because they have become uneconomical to operate due to changes in the price
of oil, depletion of reserves, or deterioration of equipment. Changes in the
price of imported oil, the discovery of new oil and gas fields and the
development of alternative energy sources have had and will continue to have a
dramatic effect on the Registrant's business.
e) Other Products
Management is considering other growth opportunities and potential acquisitions
of businesses and/or the acquisition of exclusive proprietary rights in
consumer/commercial products similar or complementary to that of the Company,
but there can be no assurance that such opportunities will arise or will be
profitable to the Company. The pursuit of any such growth opportunities will
require a significant investment of funds and management attention. Any such
growth opportunities will be subject to all of the risks inherent in the
establishment of a new product or service, including competition, lack of
sufficient customer demand, unavailability of experienced management,
unforeseen complications, delays and cost increases. The Company may incur
costs in connection with pursuing new growth opportunities that it cannot
recover, and the Company may be required to expense certain of these
costs, which may negatively impact the Company's reported operating
performance for the periods during which such costs are incurred. Please
refer "Forward-Looking Statements and Cautionary Notice Regarding Forward
Looking Statements."
Some of the products it has acquired includes the following:
(i) Handi-Plate
NuTek's FULL SERVICE(tm) handi-plate is a unique, dish washer safe, versatile
plastic buffet plate which has a multitude of uses including social gatherings
such as back yard barbecues, buffets, picnics, tailgate and parties of any
kind.
The FULL SERVICE(tm) system is a unique newly patented versatile product for
holding food and beverage on one plate. This product incorporates both plate
and cup into one unit, making it easy to hold with one hand. This unique
plate offer the convenience of carrying any meal and a beverage with one hand,
while leaving the other hand free. Additionally, the FULL SERVICE(tm) system
is suited for sales promotions, utilizing logo identification of brand
products and companies.
(ii) Electro Static Switch Cover Plate
The Company has purchased the U.S. Patent to produce and market the Electro
Static Switch Cover Plate. Switch Cover Plate Providing Automatic Emergency
Lighting Patent #5833350. (See Exhibit 10.4, Purchase Agreement.)
The Company has signed an agreement, on or about August 27, 1999 to
purchase a Patent for a Switch Cover Plate which provides emergency
lighting. The product is currently in its prototype state. The molds
and tooling to manufacture the product are not in existence, neither are
the tooling to manufacture the packaging for the product. NuTek Inc. is
seeking to purchase all rights, title and interest to the product. This
product offers the potential as a safety device for every home, office,
hotel and hospital. In the event of a power failure, the electrostatic
sensors, in this device, immediately activate the light diodes in the cover
which are strong enough to emit light into a 30x30 room for up to 12 hours.
This device runs on AA batteries just like a smoke detector. Nearly all light
switches are located at an entry way, and therefore, white or amber lights
will be used for internal light covers and red for exit way covers. All that
is required is to unscrew the existing light switch cover and screw the new
safety cover plate on. There is no special wiring required.
21
<PAGE>
(iii) Super Glide
Super Glide is a rail covering made of durable, slick polymer designed to
reduce friction between rails and hangers. Its lack of friction prevents
finished garments from not being crushed as they across the Super Glide rail.
Super glide negates the need for sprays and waxes in use currently, and
eliminates rust and dirt and keeps operator's hands and fingers clean. The
glides will be available for a variety of both flat and round rails. This
product is unique and patented and is already selling in the dry-cleaning and
garment industries.
The Company has purchased the rights to produce this product from SRC
International, Lombard, IL. (See Exhibit 10.4, "Plan of Purchase and
Agreement.") The Company is in the process of moving the production
facilities to manufacture this product from Lombard, IL to California.
Until this move is completed, the Company will be unable to produce this
product.
a) Competition
The retailing industry is highly competitive. The Company's competitors include
foreign and domestic suppliers, and competitive companies that have established
their products with national and regional chains, department stores, catalog
showrooms, discounters, direct mail suppliers, televised home shopping
networks, manufacturers, distributors and large wholesalers and importers,
some of whom have greater resources than the Company. The Company believes
that competition in its markets is based primarily on price, design, product
quality and service.
2) Raw Materials and Suppliers
The Company does not use any raw materials or have any principal suppliers
of raw materials, with the exception of its leased oil fields.
3) Customers
The Company believes that establishing and maintaining brand identity is a
critical aspect of its efforts to attract new customers. In order to attract
new customers, advertisers and commerce vendors, and in response to competitive
pressures, the Company intends to make a commitment to the creation and
maintenance of brand loyalty among these groups. The Company plans to
accomplish this, although not exclusively, through advertising its products
through its Web site through the various search engines, through other Web
sites, marketing its site to businesses/customers through e-mail, online media,
and other marketing and promotional efforts.
There can be no assurance that brand promotion activities will yield
increased revenues or that any such revenues would offset the expenses
incurred by the Company in building its brands. Further, there can be no
assurance that any new users attracted to BuyNetPlaza.com will conduct
transactions over BuyNetPlaza.com on a regular basis. If the Company fails
to promote and maintain its brand or incurs substantial expenses in an
attempt to promote and maintain its brand or if the Company's existing or
future strategic relationships fail to promote the Company's brand or
increase brand awareness, the Company's business, results of operations
and financial condition would be materially adversely affected.
4) Potential Fluctuations in Operating Results; Quarterly Fluctuations
The Company's operating results may fluctuate significantly in the future
as a result of a variety of factors, many of which are outside the Company's
control. As a strategic response to changes in the competitive environment,
the Company may from time to time make certain pricing, marketing decisions
or acquisitions that could have a material short-term or long-term adverse
effect on the Company's business, results of operations and financial
condition.
22
<PAGE>
In particular, in order to accelerate the promotion of its e-commerce web site,
the Company intends to heavily market it Web site. The Company believes that
it may experience seasonality in its business, with use of its e-commerce site
being somewhat lower during the summer vacation and year-end holiday periods.
Advertising impressions (and therefore revenues) may be expected to decline
accordingly in those periods. Additionally, seasonality may affect
significantly any potential advertising revenues during the first
and third calendar quarters, as advertisers historically spend less during
these periods.
There can be no assurance that such patterns will not have a material adverse
effect on the Company's business, results of operations and financial
condition. In addition to selling its brands, it is the Company's strategy
is to generate additional revenues through e-Commerce arrangements including
for other companies to advertise on the company's Web site. There can be no
assurance that the Company will receive any material amount of revenue
under these agreements in the future. The foregoing factors, in some future
quarters, may lead the Company's operating results to fall below the
expectations.
5) Risks Associated With New Services, Features and Functions
There can be no assurance that the Company would be able to expand its
operations in a cost-effective or timely manner or that any such efforts
would maintain or increase overall market acceptance. Furthermore, any new
business launched by the Company that is not favorably received by consumers
could damage the Company's reputation and diminish the value of its brand
name. Expansion of the Company's operations in this manner would also
require significant additional expenses and development, operations train the
Company's management, financial and operational resources. The lack of
market acceptance of the Company's products would result in the Company's
inability to generate satisfactory revenues and its inability to offset their
costs could have a material adverse effect on the Company's business, results
of operations and financial condition.
6) Risks Associated with Acquisitions
If appropriate opportunities present themselves, the Company would acquire
businesses, technologies, services or product(s) that the Company believes
are strategic.
The Company recently signed a Letter of Intent to purchase oil leases. There
can be no assurance that the Company will be able to identify, negotiate or
finance future acquisitions successfully, or to integrate such acquisitions
with its current business. The process of integrating an acquired business,
technology, service or product(s) into the Company may result in unforeseen
operating difficulties and expenditures and may absorb significant management
attention that would otherwise be available for ongoing development of the
Company's business. Moreover, there can be no assurance that the anticipated
benefits of any acquisition will be realized. Future acquisitions could result
in potentially dilutive issuances of equity securities, the incurrence of debt,
contingent liabilities and/or amortization expenses related to goodwill and
other intangible assets, which could materially adversely affect the Company's
business, results of operations and financial condition. Any future
acquisitions of other businesses, technologies, services or product(s) might
require the Company to obtain additional equity or debt financing, which might
not be available on terms favorable to the Company, or at all, and such
financing, if available, might be dilutive.
23
<PAGE>
7) Patents, Trademarks, Licenses, Franchises, Concessions, Royalty
Agreements, or Labor Contracts
The Company entered into an agreement to purchase Patent # 5833350 from
Electro Static Solutions, LLC, or Irvine, CA. The product is the Switch
Cover Plate Providing Emergency Lighting. The product is currently in
its prototype state. The molds and tooling to manufacture the product
are not in existence, neither are the tooling to manufacture the packaging
for the product. NuTek Inc. is seeking to purchase all rights, title and
interest to the product.
The Company regards substantial elements of its future Web site and
underlying infrastructure and technology as proprietary and attempts to
protect them by relying on trademark, service mark, copyright and trade
secret laws and restrictions on disclosure and transferring title and other
methods. The Company plans to enter into confidentiality agreements with its
future employees, future suppliers and future consultants and in connection
with its license agreements with third parties and generally seeks to control
access to and distribution of its technology, documentation and other
proprietary information. Despite these precautions, it may be possible for a
third party to copy or otherwise obtain and use the Company's proprietary
information without authorization or to develop similar technology
independently.
With regards to the Company's future oil production, the Registrant does not
hold any patents, trademarks, licenses, etc., with respect to, nor are patents
significant in regard to, the Registrant's oil production activities (for a
discussion of the sources and availability of the Registrant's oil reserves,
see "Properties").
Legal standards relating to the validity, enforceability and scope of
protection of certain proprietary rights in Internet-related businesses are
uncertain and still evolving, and no assurance can be given as to the future
viability or value of any of the Company's proprietary rights. There can be
no assurance that the steps taken by the Company will prevent misappropriation
or infringement of its proprietary information, which could have a material
adverse effect on the Company's business, results of operations and financial
condition. Litigation may be necessary in the future to enforce the Company's
intellectual property rights, to protect the Company's trade secrets or to
determine the validity and scope of the proprietary rights of others. Such
litigation might result in substantial costs and diversion of resources and
management attention. Furthermore, there can be no assurance that the
Company's business activities will not infringe upon the proprietary
rights of others, or that other parties will not assert infringement claims
against the Company, including claims that by directly or indirectly providing
hyperlink text links to Web sites operated by third parties. Moreover,
from time to time, the Company may be subject to claims of alleged
infringement by the Company or service marks and other intellectual property
rights of third parties. Such claims and any resultant litigation, should it
occur, might subject the Company to significant liability for damages, might
result in invalidation of the Company's proprietary rights and, even if not
meritorious, could result in substantial costs and diversion of resources and
management attention and could have a material adverse effect on the Company's
business, results of operations and financial condition.
24
<PAGE>
The Company bears certain risks in purchasing parallel marketed goods which
includes certain products. Parallel-marketed goods are products to which
trademarks are legitimately applied but which were not necessarily
intended by their foreign manufacturers to be imported and sold in the
United States. The laws and regulations governing transactions involving
such goods lack clarity in significant respects. From time to time, trademark
or copyright holders and their licensees initiate private suits or
administrative agency proceedings seeking damages or injunctive relief based
on alleged trademark or copyright infringement by purchasers and sellers of
parallel-marketed goods. While the Company believes that its practices and
procedures with respect to the purchase of goods lessen the risk
of significant litigation or liability, the Company from time to time may
be involved in such proceedings and there can be no assurance that claims or
suits will not be initiated against the Company or any of its affiliates, and
there can be no assurances regarding the results of any pending or future
claims or suits. Further, legislation has been introduced in Congress from
time to time regarding parallel marketed goods. Certain legislative or
regulatory proposals, if enacted, could materially limit the Company's ability
to sell parallel marketed goods in the United States. There can be
no assurances as to whether or when any such proposals might be acted
upon by Congress or that future judicial, legislative or administrative
agency action will restrict or eliminate these sources of supply. Please
refer "Forward-Looking Statements and Cautionary Notice Regarding Forward
Looking Statements."
8) Regulation
The law relating to the liability of online companies is currently unsettled.
It is possible that claims could be made against online e-Commerce companies
under both United States and foreign law for defamation, libel, invasion of
privacy, negligence, copyright or trademark infringement, or other theories
based on the nature and content of the materials disseminated through their
Web site. Several private lawsuits seeking to impose such liability upon
other online companies are currently pending.
The Company's operations are affected by numerous federal and state laws that
impose disclosure and other requirements upon the origination, servicing and
enforcement of credit accounts and limitations on the maximum amount of
finance charges that may be charged by a credit provider. In addition to the
Company's acceptance of credit cards through its Internet site, credit to the
Company's customers is provided primarily through bank cards such as
Visa/registered trademark/, Mastercard/registered trademark/ and
Discover/registered trademark/, without recourse to the Company based upon a
customer's failure to pay. Any change in the regulation of credit which
would materially limit the availability of credit to the Company's traditional
customer base could adversely affect the Company's results of operations or
financial condition. Please refer "Forward-Looking Statements and Cautionary
Notice Regarding Forward Looking Statements."
The Registrant's oil production activities are, and any drilling
operations of the Registrant would be, subject to extensive regulation by
numerous federal, state and local governmental authorities, including state
conservation agencies, the Department of Energy and the Department of the
Interior (including the Bureau of Indian Affairs and Bureau of Land
Management). Regulation of the Registrant's production, transportation
and sale of oil or gas have a significant effect on the Registrant and
its operating results.
State Regulation - The current production operations of the Registrant
are, and any drilling operations of the Registrant would be, subject to
regulation by state conservation commissions which have authority to
issue permits prior to the commencement of drilling activities, establish
allowable rates of production, control spacing of wells, prevent waste
and protect correlative rights, and aid in the conservation of natural
gas and oil. Typical state regulations require permits to drill and
produce oil, protection of fresh water horizons, and confirmation that
wells have been properly plugged and abandoned.
25
<PAGE>
9) Effect of Existing or Probable Government Regulations
Government legislation has been proposed that imposes liability for or
prohibits the transmission over the Internet of certain types of information.
The imposition upon the Company and other online providers of potential
liability for information carried on or disseminated through their services
could require the Company to implement measures to reduce its exposure to
such liability, which may require the Company to expend substantial
resources and/or to discontinue certain service offerings. In addition,
the increased attention focused upon liability issues as a result of these
lawsuits and legislative proposals could impact the growth of Internet use.
The Company does not believe that such regulations, which were adopted
prior to the advent of the Internet, govern the operations of the Company's
business nor have any claims been filed by any state implying that the
Company is subject to such legislation. There can be no assurance,
however, that State government will not attempt to impose these regulations
upon the Company in the future or that such imposition will not have a
material adverse effect on the Company's business, results of operations and
financial condition. Several States have also proposed legislation that
would limit the uses of personal user information gathered online or require
online services to establish privacy policies. The Federal Trade Commission
has also recently settled a proceeding with one online service regarding the
manner in which personal information is collected from users and provided to
third parties. Changes to existing laws or the passage of new legislation,
could create uncertainty in the marketplace that could reduce demand for
the services of the Company or increase the cost of doing business as a
result of litigation costs or increased service delivery costs, or could in
some other manner have a material adverse effect on the Company's business,
results of operations and financial condition. In addition, because the
Company's services are accessible worldwide, and the Company may facilitate
sales of goods to users worldwide, other jurisdictions may claim that the
Company is required to qualify to do business as foreign corporation in
particular state or foreign country.
Due to the increasing popularity and use of the Internet and other online
services, it is possible that a number of laws and regulations may be
adopted with respect to the Internet or other online services covering issues
such as user privacy, freedom of expression, pricing, content and quality of
products and services, taxation, advertising, intellectual property rights and
information security. Although sections of the Communications Decency
Act of 1996 (the "CDA") that, among other things, proposed to impose criminal
penalties on anyone distributing "indecent" material to minors over the
Internet, were held to be unconstitutional by the U.S. Supreme Court,
there can be no assurance that similar laws will not be proposed and adopted.
Certain members of Congress have recently discussed proposing legislation
that would regulate the distribution of "indecent" material over the
Internet in a manner that they believe would withstand challenge on
constitution law.
Any new legislation or regulation, or the application of laws or regulations
from jurisdictions whose laws do not currently apply to the Company's
business, for third-party activities and jurisdiction. The adoption of
new laws or the application of existing laws may decrease the growth in the
use of the Internet, which could in turn decrease the demand for the
Company's services, increase the Company's cost of doing business or
otherwise have a material adverse effect on the Company's business, results
of operations and financial condition.
26
<PAGE>
The Company does not believe that such regulations, which were adopted
prior to the advent of the Internet, govern the operations of the Company's
business nor have any claims been filed by any state implying that the
Company is subject to such legislation. There can be no assurance,
however, that State government will not attempt to impose these regulations
upon the Company in the future or that such imposition will not have a
material adverse effect on the Company's business, results of operations and
financial condition.
10) Research and Development Activities
The Company, among other things, plans to develop and market its Web
site, enhance its brands, implement and execute its business and marketing
strategy successfully, continue to develop and upgrade its technology and
information-processing systems, meet the needs of a changing market,
provide superior customer service, respond to competitive developments
and attract, integrate, and motivate qualified personnel provided
the company can generate sales and profit.
The Company also needs to develop and identify products that achieve
market acceptance by its users and e-Commerce customers. There can be no
assurance that any Internet company, including Nutek, will achieve
market acceptance. Accordingly, no assurance can be given that the
Company's business model will be successful or that it can sustain
revenue growth or be profitable. The market for Internet products is new,
rapidly developing and characterized by an increasing number of market
entrants. As is typical of any new and rapidly evolving market, demand
and market acceptance for recently introduced products are subject to a
high level of uncertainty and risk. Moreover, because this market is
new and rapidly evolving, it is difficult to predict its future growth
rate, if any, and its ultimate size. If the market fails to develop,
develops more slowly than expected or becomes saturated with competitors,
or if the Company's products do not achieve or sustain market acceptance,
the Company's business, results of operation may be materially and
adversely affected.
There can be no assurances the Company will be successful in accomplishing
any or all of its plans, and the failure to do so could have a material
adverse effect on the company's business, results of operations and
financial condition.
11) Impact of Environmental Laws
Environmental Matters - Various federal and state authorities have
authority to regulate the exploration and development of oil and gas and
mineral properties with respect to environmental matters. Such laws and
regulations, presently in effect or as hereafter promulgated, may
significantly affect the cost of its current oil production and any
exploration and development activities undertaken by the Registrant and
could result in loss or liability to the Registrant in the event that
any such operations are subsequently deemed inadequate for purposes of
any such law or regulation.
The Company is not aware of any federal, state or local environmental
laws which would effect its other operations.
12) Employees
The Company currently has thirteen (13) employees of which three (3) are
Officers of the Company. As the Company begins to develop its other
product lines it will need to add employees.
27
<PAGE>
(i) The Company's performance is substantially dependent on the performance
of its President and CEO, Murray N. Conradie. In particular, the Company's
success depends on his ability to identify, develop, acquire, design and
market the company's products.
(ii) The Company does not carry key person life insurance on any of its
personnel. The loss of the services of any of its executive officers or
other key employees could have a material adverse effect on the business,
results of operations and financial condition of the Company. The Company's
future success also depends on its ability to retain and attract highly
qualified technical and managerial personnel.
(iii) There can be no assurance that the Company will be able to retain
its key managerial and technical personnel or that it will be able to attract
and retain additional highly qualified technical and managerial personnel in
the future. The inability to attract and retain the technical and
managerial personnel necessary to support the growth of the Company's business,
due to, among other things, a large increase in the wages demanded by such
personnel, could have a material adverse effect upon the Company's business,
results of operations and financial condition.
13) Year 2000 Implications
Many currently installed computer systems and software products are coded
to accept only two digit entries in the date code field. Beginning in Year
2000, these date code fields will need to accept four digit entries in order
to distinguish 21/st century dates. All of the Company's computers comply
with "Year 2000" requirements. However, there can be no assurance that
other companies with which the Company transacts business will be corrected
on a timely basis, or that failure by such third party entities to correct
a Year 2000 problem, or a correction which is incompatible with the Company's
information systems, would not a material adverse effect on the
Company's business, results of operations and financial condition.
14) The Industry & Potential Effect on the Company's Plan of Operations
The rapid adoption of the Internet as a means to gather information,
communicate, interact and be entertained, combined with the vast
proliferation of Web sites, has made the Internet an important new mass
medium. Industry estimates that the number of Web users exceeded 68
million in 1997, and will grow to over 319 million by 2002. The Internet
enables advertisers to target advertising campaigns utilizing sophisticated
databases of information on the users of various sites. As a result, the
Internet has become a compelling means to advertise and market products
and services. With the volume of sites and vast abundance of information
available on the Internet, users are increasingly seeking an online home
where they can interact with others with similar interests and quickly
find information, products and services related to a particular interest
or need.
The Company plans to market its products through the retail channels of
distribution, the Internet, and utilizing contract sales representatives.
Failure by the Company to adapt to changing market conditions could have
a material adverse effect on the Company's business, results of operations
and financial condition.
28
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
All statements, trend analysis and other information contained in this
Registration relative to markets for the Company's products and trends in
revenues, gross margin and anticipated expense levels, as well as other
statements including words such as "believe," "anticipate," "expect,"
"estimate," "plan" and "intend" and other similar expressions, constitute
forward-looking statements. Those forward-looking statements are subject
to business and economic risks, and the Company's actual results of
operations may differ from those contained in the forward-looking statements.
The following discussion of the financial condition and results of
Operations of the Company should also be read in conjunction with the
Financial Statements and Notes related thereto included elsewhere in this
Registration.
ITEM 2. MANANAGEMENTS'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
A. Management's Plan of Operation
1) During calendar year ended December 31, 1999 the Company incurred a
net loss of $296,799 from operations against revenues of $238,039 as
compared to a net loss from operations of $497,161 against revenues of
$12,501 for calendar year ending December 31, 1998.
As of December 31, 1999, the Company has thirty-six million three hundred
twenty-eight thousand forty-four (36,328,044) shares of its $0.001 par
value common voting stock issued and outstanding which are held by
approximately four hundred thirty-seven (437) shareholders of record.
The Company also has seven hundred ninety-three thousand five hundred
(793,500) shares of its $0.001 par value Preferred Stock issued and
outstanding, as of December 31, 1999. All Preferred shares which have
been issued were issued for cash at $1.00 a share. Series B Preferred
shares have the same voting rights as the common shares but have priority
in the event of Company liquidation. All of the shares outstanding were
to be redeemed at $1.00 a share plus all accrued dividends prior to
December 31, 1993. This has been extended by mutual agreement. Series B
shares have annual dividends of $.15 a share payable quarterly. They are
convertible to common shares on a one for one basis at the holders' option.
In December, 1999, a stock offering was made in reliance upon an exemption
from registration provisions 4(2) of the Securities Act of 1933, as amended,
pursuant to Regulation D, Rule 504 of the Act. The Company raised one
hundred thousand ($100,000) dollars through this Offering purchased by one
individual. The Company is not scheduled to receive the proceeds from
this Offering until January, 2000. ("See Financial Statements, Statement
of Changes in Shareholders' Equity, Subscription Receivable.")
The Company currently anticipates that it has enough available funds to
meet its anticipated needs for working capital, capital expenditures and
business expansion for the next 12 months. The Company expects that it will
continue to experience a small operating cash flow for the foreseeable future
as a result of significant new product development, advertising and
infrastructure.
As an On Going concern, if the Company needs to raise additional funds in
order to fund expansion, develop new or enhanced services or products,
respond to competitive pressures or acquire complementary products,
businesses or technologies, any additional funds raised through the issuance
of equity or convertible debt securities, the percentage ownership of the
stockholders of the Company will be reduced, stockholders may experience
additional dilution and such securities may have rights, preferences or
privileges senior to those of the Company's Common Stock. The Company
does not currently have any contractual restrictions on its ability to
incur debt and, accordingly, the Company could incur significant amounts
of indebtedness to finance its operations. Any such indebtedness could
contain covenants which would restrict the Company's operations. There
can be no assurance that additional financing will be available on terms
favorable to the Company, or at all. If adequate funds are not available
or are not available on acceptable terms, the Company may not be able to
continue in business, or to a lessor extent not be able to take advantage
of acquisition opportunities, develop or enhance services or products or
respond to competitive pressures.
2) No engineering, management or similar report has been prepared or
provided for external use by the Company in connection with the offer of
its securities to the public.
29
<PAGE>
3) Management believes that the Company's future growth and success will
depend on its ability to find products and suppliers, and to find
customers for these products. The Company expects to continually evaluate
its potential products to determine what additional products or enhancements
are required by the marketplace. The Company does not plan to develop
products internally, but find suppliers and businesses who would be willing
to sell, market or license their products/business through the Company.
This can help avoid the time and expense involved in developing actual
products.
4) The Company currently owns its own equipment, office furniture,
computers, oil equipment.
B. Segment Data
As of December 31, 1999, the Company generated $238,039 in revenues
as compared to $12,501, for calendar year ending December 31, 1998.
Accordingly, the Statement of Operations expresses the financial information
as consolidated and no table showing percentage breakdown of revenue by
business segment or product line is included.
ITEM 3. DESCRIPTION OF PROPERTY
A. Description of Property
The address of the principal office is: 15722 Chemical Lane, Huntington
Beach, CA 92649. The Company is leasing approximately 6,600 square feet
at this property. (See Exhibit 10.8, Lease.) The Company also has
available approximately, 40,000 sq. feet from the V.A., to store product
and inventory. The Company hires the manpower at the V.A., to package its
products, in return, the Company receives free warehouse space.
Management believes that this is currently suitable for the Company's
needs for the next twenty-four (24) months.
30
<PAGE>
ITEM 4. SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN SECURITY HOLDERS
A. Security Ownership of Management and Certain Beneficial Owners
The following table sets forth information as of the date of this
Registration Statement certain information with respect to the beneficial
ownership of the Common Stock of the Company concerning stock ownership
by (i) each director, (ii) each executive officer, (iii) the directors and
officers of the Company as a group, (iv) and each person known by the
Company to own beneficially more than five (5%) of the Common Stock.
Unless otherwise indicated, the owners have sole voting and investment
power with respect to their respective shares.
<PAGE>
<TABLE>
<CAPTION>
Title Name & Address Amount of Percent
of of Beneficial shares of
Class Owner of Shares Position held by Owner Class
- ------ --------------- -------- ------------- -------
<S> <C> <C> <C> <C>
Common Murray N. Conradie (1) President/ 1,050,000 2.89%
CEO
None Kristi Hough(2) VP/Director 0 0.00%
None Pamela Horick Secretary/ 0 0.00%
Director
- ----------------------------------------------------------------------
All Executive Officers and
Directors as a Group (3 persons) 1,050,000 2.89%
</TABLE>
Company address for all Officers is c/o NuTek, Inc. 15722 Chemical Lane,
Huntington Beach, CA 92649
(1) Murray N. Conradie, received 1,050,000 shares of common stock for
the Century Clock Mold purchase. He will also receive 150,861
shares as outstanding compensation for 1999. These shares are
scheduled to be issued to him in January, 2000.
(2) Joanne L. Hough, mother to Kristi Hough, beneficially owns 75,000
shares of restricted stock. Lorraine and Prescott Earle, grandparents to
Kristi Hough, beneficially own 100,000 shares of restricted stock. Kristi
Hough, has entered into a preliminary agreement with the Company to
purchase Kristi & Co., Inc. She is President/CEO and Director of Kristi &
Co., Inc., a women's resort clothing line. Upon consummation of this
agreement, she will receive 250,000 restricted shares for the purchase of
Kristi and Company. These shares are not scheduled to be issued until
January, 2000. (See, Item 7 -- Interest of Management and Others in Certain
Transactions.)
31
<PAGE>
B. Persons Sharing Ownership of Control of Shares
No person owns or shares the power to vote ten percent (10%) or more of
the Company's securities.
C. Non-voting Securities and Principal Holders Thereof
The Company has not issued any non-voting securities.
D. Options, Warrants and Rights
There are no options, warrants or rights to purchase securities of the
Company.
E. Parents of Issuer
Under the definition of parent, as including any person or business entity
who controls substantially all (more than 80%) of the issuers of common
stock, the Company has no parents.
F. Other
By Corporate Resolution, the Company purchased clock molds from Century
Clock Company of South Africa. Murray N. Conradie, President and CEO of
The Company was the former President and a major stockholder of Century
Clocks in South Africa. (See, Item 7 -- Interest of Management and
and Others in Certain Transactions.)
ITEM 5. DIRECTORS, EXECUTIVES, OFFICERS AND SIGNIFICANT EMPLOYEES
The names, ages and positions of the Company's directors and executive
officers are as follows:
<TABLE>
<CAPTION>
Name Age Position
- -------- ------ ----------
<S> <C> <C>
Murray N. Conradie 35 President, CEO and Director
Kristi Hough 36 Vice President and Director
Pamela Horick 35 Secretary and Director
</TABLE>
B. Family relationships
None - not applicable, at this time. However, it should be noted that
Murray N. Conradie and Kristi Hough are fiancees.
32
<PAGE>
C. Work Experience
Murray N. Conradie
April 1999 - Present, NuTek Inc.
President/CEO, Director and Chairman of the Board.
1998 - Dec, 1999, NuTek, Inc.
CFO, Director
1997 - 1999, WorldTek Corporation.
President/CEO and Director.
Internet startup company which hosted and designing websites.
1996 - 1999, Global Entertainment Network Inc.
President/CEO Director.
Started this company which is an Internet based crossword puzzle game
which he developed and patented, and now currently in negotiations for
the sale of this company.
1994 - 1996, Authentic Apparel
Screen printing company for clothing. Started this company which he sold
after securing several major national contracts, including the
"Clinnochio" line of clothing.
1992-1994, Quantum Time
President of this company he founded for the manufacture of wooden wall
clocks.
1989 - 1992, M.C. Clothing.
Co-owner of woman's clothing manufacturing company doing in excess of $2
million sales a year. Sold this company to concentrate on the Century
Clocks.
1987 - 1994, Century Clocks.
President and Director
Started company which bought out major competitor Smith's clocks 18
months later. Went to $1.8 million in sales the first year and averaged
$5 million in sales thereafter. Sold this company, and currently
negotiated to purchase some of the molds and tooling for US operation.
EDUCATION:
1983-1985, University of Natal at Durban, South Africa. B.A., Studied
Business Law for 2 1/2 years
1985-1988, Technikon Natal at Durban, South Africa. Accounting Degree
specializing in Auditing.
1999 Selected for Strathmore's Who's Who in Finance
1999 Selected for Marquis Who's Who in Finance Millennium Edition
33
<PAGE>
Kristi L. Hough
1999 - Present, NuTek Inc.
Vice-President and Director.
1999 - Present, Kristi & Co., Inc., President/CEO Director and designer.
Women's resort clothing line. Started company with a vision to help
veterans by employing them and helping with their goals through work.
1998 - Present, Opportunities Unlimited
Owner of push carts that sell Haagen Dazs Ice-Cream
This company Hires and supports veterans. The carts are independently
operated by Veterans and I support their rehabilitation efforts by
integrating work skills with their treatment goals. Intention here is
to have several carts operated by vets.
1995 - Present, KHLA, Inc.
President and Director
Founder, and designer of a women's resort clothing line.
Started company with a vision to help veterans by employing them and
helping with their goals through work. Responsible for taking the company
from a start up and no recognition to its' current status of sales of
one million, selling across the country to specialty antiques, department
stores, starting our own stores in resort areas, and selling overseas.
Intention with this company is to hire and train veterans in all aspects
of the production (cuffing, sewing, quality control) to shipping,
receiving, and marketing together with integrating their treatment goals
with their job goals.
1992 - 1996, Veterans Administration Medical Center, Long Beach, CA.
Aftercare Coordinator/Substance Abuse Counselor
Responsible for coordinating patients aftercare treatment. Integrated the
Veterans treatment needs with work placement, out-patient treatment and
community involvement. Worked closely with the community developing new
programs, and enhancing follow-up care. Designed, implemented and taught
classes on all aspects of relapse prevention, substance abuse recovery,
family roles and cocaine addiction. Created and ran a Relapse track of
treatment. Experienced in: dual diagnosis, relapse prevention, 12 core
functions, 12-Step programs, group & individual therapy, family therapy
and education.
1990-1991, Vertex Design Systems, San Francisco, CA.
Sales Support & Marketing Coordinator
Created, implemented and managed several training, internal operations
and marketing programs, including staffing, production and performance
tracking. Instrumental in determining marketing strategy and knowing
which marketing materials were successful. Result: 100% increase in sales
for this company which was also a start-up computer company.
1989 (May -Dec), Arizona Bar & Bistro, Sydney, Australia
Promotions/Marketing Representative
Instrumental in the design and implementation of marketing programs for a
new "image" restaurant in Australia. Hired to take a new restaurant
concept for Australia and make it mainstream. Worked on everything from
restaurant design, menu selections, wine selections, promotional programs,
marketing materials, advertising, and hiring. Result: Restaurant opened on
time and enjoyed immediate and sustained success.
1988-1989, Melveny & Myers, Los Angeles, CA.
Support Services Coordinator - Legal Services
Managed all aspects of document handling, including sensitive legal
materials. Provided support services, which included proofreading &
word processing. Trained new employees and handled communications between
attorneys and clients.
34
<PAGE>
1986-1988, Delphi Information Systems, Westlake Village, CA.
Regional Area Supervisor - Customer Service
Responsible for maintaining a team of technical support employees to
service the customer base for a computer design and installation company.
Wrote technical manuals and taught procedural classes on how to use the
software. Handled customer needs that ranged from computer programming,
database problems, hardware problems and processing glitches. Made sure
problem was resolved efficiently and timely. Always won the employee of
the month award for handling the most calls/crisis' and most efficient.
EDUCATION:
University of California at Los Angeles, March 1986, B.A., Psychology and
Computer Science with concentration in Business Administration
California Paramedical and Technical College, Long Beach, CA, April 1992
C.A.D.C. (Certified Alcohol and Drug Counselor)
N.A.ID.C. (National Alcohol and Drug Counselor)
Pamela Horick
1999-Present, NuTek Inc., Secretary and Director
1996-Present, Edventure Partners
Pamela Horick is Vice President at Edventure Partners, a privately-owned
college marketing company, where she is responsible for marketing, sales,
and account management. During her tenure over the past three years, the
company has grown from 19 to 30+ employees and from serving one client to
multiple clients, including Wells Fargo, Clairol and Time Magazine.
1988-1996, American Express
Prior to Edventure Partners, Pamela worked for American Express for eight
years in sales and human resources. In these positions, she interacted
with a variety of individuals from wide range of companies, including Levi
Strauss & Co., American President Lines and Clorox.
EDUCATION:
Pamela received a Masters of Business Administration from the Haas School
of Business, University of California at Berkeley and a Bachelor of Arts
degree in Political Science, from the University of California at Los
Angeles.
OTHER:
Pamela has been active in her community and currently serves on two
boards. First she is a Director for the Haas Alumni Network Board, which
is responsible for increasing participation of Haas alumni in contributing
funds and attending events. She is also on the Board of Big Brothers Big
Sisters of Marin, where she is responsible for initiating and managing an
all-volunteer marketing committee. This committee is responsible for all
aspects of marketing the non-profit agency, including public relations,
research, a speakers bureau and recruiting big brothers and sisters.
In her mid-twenties, Pamela was one of the founding members of a grass-
roots youth focused non-profit agency, San Francisco Youth at Risk. She
devoted 10+ hours per week to develop a management organization, recruit
volunteers, and fund raise to deliver an intensive camp and mentor program
for 26 highly at-risk youth. She personally raised $5,000 by running the
San Francisco marathon.
35
<PAGE>
D. Conflicts of Interest
Kristi Hough (VP & Director) and Pamela Horick (Secretary & Director)
are associated with other firms involved in a range of business activities.
Consequently, there are potential inherent conflicts of interest in their
acting as officers and directors of the Company. Insofar as the officers and
directors are engaged in other business activities, management anticipates
they will devote a minimal amount of time to the Company's affairs.
The officers and directors of the Company are now and may in the
future become shareholders, officers or directors of other companies which may
be engaged in business activities similar to those conducted by the Company.
Accordingly, additional direct conflicts of interest may arise in the future
with respect to such individuals acting on behalf of the Company or other
entities. Moreover, additional conflicts of interest may arise with respect to
opportunities which come to the attention of such individuals in the
performance of their duties or otherwise. The Company does not currently have
a right of first refusal pertaining to opportunities that come to management's
attention insofar as such opportunities may relate to the Company's proposed
business operations.
The officers and directors are, so long as they are officers or
directors of the Company, subject to the restriction that all opportunities
contemplated by the Company's plan of operation which come to their attention,
either in the performance of their duties or in any other manner, will be
considered opportunities of, and be made available to the Company and the
companies that they are affiliated with on an equal basis. A breach of this
requirement will be a breach of the fiduciary duties of the officer or
director. If the Company or the companies in which the officers and directors
are affiliated with both desire to take advantage of an opportunity, then said
officers and directors would abstain from negotiating and voting upon the
opportunity. However, all directors may still individually take advantage of
opportunities if the Company should decline to do so. Except as set forth
above, the Company has not adopted any other conflict of interest policy with
respect to such transactions.
ITEM 6. REMUNERATION OF DIRECTORS AND EXECUTIVE OFFICERS
(1) Compensation of Executive Officers
<TABLE>
<CAPTION>
Compensation of Executive Officer
Name Title Salary Bonus Common Stock
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Murray Conradie President/CEO $5,000/mo(1)(2) None 150,861(1)(3)
Kristi Hough VP/Director None(2) None None(3)
Pamela Horick Sec/Director None(2) None None(3)
All Executive Officers as a Group (3 persons)
</TABLE>
(1) Per a Board Resolution, since April 1, 1999, Murray N. Conradie,
President, CEO and Director has received remuneration of $5,000 per month
plus $2,500 of restricted common stock each month (based on the mean average
price of the stock for each month), this amounts to 150,861 shares through
December 31, 1999. He has no options nor warrants. The other Officers have
not received any compensation during calendar year 1999.
(2) Effective January 1, 2000, the Company entered into Compensation Plan
(See Exhibit 10.10--"Compensation Plan"). The key terms of the agreement
include:
"4.1 No employee shall receive Total Direct Compensation for any year of
employment greater than twenty-five (25) times the wages paid to the lowest
paid full time employee, using the lowest hourly wage rate for a 40-hour week
for a 52-week year. Example: The lowest paid full time employee earns $6.72
per hour. For a 40-hour week, that is $268.80, which for a 52-week year is
$13,977.60. The limitation for Total Direct Compensation is $349,440,
calculated as 25 times $13,977.60.
4.2 No employee who receives fixed-base compensation in excess of twelve
and one-half (12.5) times the hourly wage rate paid to the lowest paid full
time employee shall also receive commission-based compensation in an amount
which, when combined with the fixed-base compensation, exceeds the restriction
under 4.1 above.
36
<PAGE>
4.3 Except as provided in 4.2 above, there shall be no limitation on
commission-based compensation payable to any employee of NuTek, Inc.
provided that the variable basis selected to measure the employee's performance
is reasonably related to such employee's responsibilities (ability to affect
such basis) and the commission calculation reasonably reflects such employee's
contribution to the basis, and the commission rate is commercially reasonable.
4.4 The limitations imposed by Paragraphs 4.1 and 4.2 shall be increased
for non-U.S. based employees to the extent that the cost-of-living at the
non-U.S. base exceeds the equivalent cost in the United states." (See
Exhibit 10.1 "--Compensation Plan.")
(3) The Company has also adopted a "Key Employee Stock Option Plan, the key
terms of this Plan state:
"6. Price. The purchase price per share of Common Stock purchasable
under options granted pursuant to the Plan shall not be less than 100 percent
of the fair market value at the time the options are granted. The purchase
price per share of Common Stock purchasable under options granted pursuant
to this Plan to a person who owns more than ten percent (10%) of the voting
power of the Corporation's vesting stock shall not be less than 110 percent
of the fair market value of such shares, at the time the options are granted."
(See Exhibit 10.11 "--Key Employee Stock Option Plan.")
(4) Compensation of Directors
There were no arrangements pursuant to which any director of the Company
was compensated through December 31, 1999 for any service provided as a
director. In addition, no such arrangement is contemplated for the
foreseeable future as the Company's only directors are its current
executive officers.
ITEM 7. INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS
From 1987 through 1994, Murray N. Conradie, current President/CEO of
NuTek, held the position of President and Director of Century Clocks in
South Africa. In 1999, as President of NuTek, Inc., he negotiated a
purchase agreement with Century Clocks of South Africa, where he received
1,050,000 common shares of restricted stock from NuTek, Inc. As of
December 31, 1999, Murray Conradie, loaned the Company $57,000 ("See
Note 5 and Note 9 in Financial Statements.")
Kristi Hough, VP and Director of the Company, has entered into a
Preliminary agreement with the Company to purchase Kristi & Co., Inc. She
is President/CEO and Director of Kristi & Co., Inc., a women's resort
clothing line. Upon consummation of this agreement, she will receive
250,000 restricted shares for the purchase of Kristi and Company. These
shares are not scheduled to be issued until January, 2000.
The Company has number notes payable to certain stockholders. This includes:
E. Grant ($25,000); J. Frank, ($55,000); Roger Wheeler ($75,000); Velma Shaw
Myers ($13,400); Dudley Frank ($70,000); Roger Garrity, ($203,806); Murray
Conradie ($57,000); John L. Rainaldi ($200,00). ("See Note 5 in Financial
Statements.")
Through a Board Resolution, the Company hired the professional services
of James E. Slayton, Certified Public Accountant, to perform audited
financials for the Company. Mr. Slayton owns no stock in the Company. The
company has no formal contracts with its accountant, he is paid on a fee
for service basis.
37
<PAGE>
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS OF THE REGISTRANT'S COMMON EQUITY
AND OTHER STOCKHOLDER MATTERS
A. Market Information
(1) The Company's common stock is listed and trading on the NASDAQ Over
The Counter Bulletin Board under trading symbol NUTK.
CERTAIN MARKET INFORMATION
The Company's Common Stock is traded on the OTC Bulletin Board under the
symbol "NUTK." The following table sets forth the high and low bid
quotations for the Common Stock for the periods indicated. These
quotations reflect prices between dealers, do not include retail mark-ups,
mark-downs, and commissions and may not necessarily represent actual
transactions. These bid quotations have not been adjusted retroactively
by any stock split.
<TABLE>
<CAPTION>
Common Stock
PERIOD HIGH LOW
- ------ ---- ---
<S> <C> <C>
Calendar Year 1997
- ------------------
First Quarter ended 3/31/97 $1.187 $0.500
Second Quarter ended 6/30/97 $0.625 $0.062
Third Quarter ended 9/30/97 $0.281 $0.062
Fourth Quarter ended 12/31/97 $0.375 $0.125
Calendar Year 1998
- ------------------
First Quarter ended 3/31/98 $0.26 $0.10
Second Quarter ended 6/30/98 $0.50 $0.11
Third Quarter ended 9/30/98 $0.19 $0.06
Fourth Quarter ended 12/31/98 $0.20 $0.05
Calendar Year 1999
- ------------------
First Quarter ended 3/31/99 $0.12 $0.035
Second Quarter ended 6/30/99 $0.22 $0.05
Third Quarter ended 9/30/99 $0.35 $0.08
Fourth Quarter ended 12/31/99 $0.73 $0.20
</TABLE>
(2)(i) There is currently no Common Stock which is subject to
outstanding options or warrants to purchase, or securities convertible
into, the Company's Common Stock.
(ii) There are approximately 8,016,250 shares restricted common Stock of
the Company, of which approximately 2,848,469 restricted shares which are
more than two years old that could be sold under Rule 144 under the
Securities Act of 1933, as amended. Additionally, there are approximately
5,346,584 restricted shares out of the approximately 8,016,250 restricted
shares which are more than one year old.
38
<PAGE>
(iii) There is currently no common equity that is being or is proposed to
be publicly offered by the registrant, the offering of which could have a
material effect on the market price of the issuer's common equity.
B. Holders
As of December 31, 1999, the Company has approximately four hundred Thirty
Seven (437) stockholders of record. Penny Stock Regulation Broker-dealer
practices in connection with transactions in "Penny Stocks" are regulated
by certain penny stock rules adopted by the Securities and Exchange
Commission. Penny stocks generally are equity securities with a price of
less than $5.00 (other than securities registered on certain national
securities exchanges or quoted on the NASDAQ system). The penny stock
rules require a broker-dealer, prior to a transaction in a penny stock
not otherwise exempt from the rules, to deliver a standardized risk
disclosure document that provides information about penny stocks and the
risk associated with the penny stock market. The broker-dealer must also
provide the customer with current bid and offer quotations for the penny
stock, the compensation of the broker-dealer and its salesperson in the
transaction, and monthly account statements showing the market value of
each penny stock held in the customer's account. In addition, the penny
stock rules generally require that prior to a transaction in a penny
stock, the broker-dealer must make a written determination that the penny
stock is a suitable investment for the purchaser and receive the
purchaser's written agreement to the transaction. These disclosure
requirements may have the effect of reducing the level of trading activity
in the secondary market for a stock that becomes subject to the penny
stock rules. When the Registration Statement becomes effective and the
Company's securities become registered, the stock will likely have a
trading price of less than $5.00 per share and will not be traded on
any exchanges. Therefore, the Company's stock will become subject to
the penny stock rules and investors may find it more difficult to sell
their securities, should they desire to do so.
C. Dividend Policy
The Company has not paid any dividends to date. In addition, it does not
anticipate paying dividends in the immediate foreseeable future. The
Board of Directors of the Company will review its dividend policy from
time to time to determine the desirability and feasibility of paying
dividends after giving consideration to the Company's earnings, financial
condition, capital requirements and such other factors as the board may
deem relevant.
D. Reports to Shareholders
The Company intends to furnish its shareholders with annual reports
containing audited financial statements and such other periodic reports
as the Company may determine to be appropriate or as may be required by
law. Upon the effectiveness of this Registration Statement, the Company
will be required to comply with periodic reporting, proxy solicitation and
certain other requirements by the Securities Exchange Act of 1934.
E. Transfer Agent and Registrar
The Transfer Agent for the shares of common voting stock of the Company
is Colonial Stock Transfer, 455 East 400 South, Suite 100, Salt Lake City,
UT 84111.
39
<PAGE>
ITEM 2. LEGAL PROCEEDINGS
The Company is from time to time involved in litigation incident to the
conduct of its business. Certain litigation with third parties and
present and former employees of the Company is routine and incidental, such
litigation can result in large monetary awards for compensatory or punitive
damages.
The Company is currently in litigation with two separate lawsuits. They
are:
A former employee at Vac-u-lift, herein referred to as the Plaintiff,
slipped and fell on wet grass outside the offices, in Jourdanton, TX, and
subsequently alleged that she twisted her knee. She file a complaint against
the company for various health conditions, and $500,000. Their attorney filed
two separate suits, of which the company was unable to properly Respond to the
first suit, and subsequently the Plaintiff received Summary judgment against
NuTek. Since Plaintiff did not follow specific legal procedures against NuTek,
which is considered a foreign corporation where the suit was filed in Texas,
the Company has initiated a restricted appeal to have the ruling reversed.
The second suit was answered, in July, 1999, and since it is tied to the
first suit, nothing has happened since. The Company plans to concurrently
file a counter suit for $150,000 in damages.
The other case pending in the court system involves an individual who
represented himself to the company to be an attorney. It was later
discovered that this individual misrepresented himself and was not an
attorney. This individual offered to find purchasers of the Company's common
stock, in order to enhance the capitalization for the Company, so that it
could pursue other projects. The Company issued the transfer company, which
is controlled by this individual 1,000,000 shares of common stock to sell
for the Company in order to enable this individual to raise money for the
company. No sales took place, nor was any of these shares sold for NUTK. The
individual in question, has refused to return these common shares to the
Company. The company has initiated a lawsuit to recover the stock, and under
court Jurisdiction, this block of stock was interpleaded with the Court. The
Company is scheduled to meet with the Court, in the middle of February,
2000 to determine next steps.
40
<PAGE>
ITEM 3. RECENT SALES OF UNREGISTERED SECURITIES
Since April 27, 1999, the Company has sold the unregistered securities
listed below. These issuances were deemed exempt from registration
under the Securities Act in reliance on either (a) Section 4(2) of the
Securities Act, as transaction not involving a public offering, or (b)
Rule 701 promulgated under the Securities Act. No commissions were
paid to any placement agent or underwriter for any of these issuances.
<TABLE>
<CAPTION>
Date of Amount
Purchase Title Sold Purchasers Consideration
- ---------------------------------------------------------------------
<S> <C> <C> <C> <C>
4/99(1) Common Stock 65,000 Brett Peattie Clock Molds
4/99(1) Common Stock 200,000 Edward Shaw Clock Molds
4/99(1) Common Stock 1,050,000 Murray Conradie Clock Molds
8/99(2) Common Stock 600,000 Electro Static Patent #5833350
Solutions, LLC
10/99(3) Common Stock 125,000 Elite Fitness Video Rights
Systems, Inc.
</TABLE>
(1) See Purchase Agreement, Exhibit 10.4
(2) See Purchase Agreement, Exhibit 10.5
(3) See Purchase Agreement, Exhibit 10.3
The Company signed a Letter of Intent with Clipper Operating Co., Inc.
in November, 1999. The terms of the Agreement include cash and Company
stock for oil mineral rights. No stock has been issued to Clipper
Operating through December 31, 1999. (See "Letter of Intent," Exhibit
10.9)
ITEM 4. DESCRIPTION OF SECURITIES
A. Common Stock
(1) Description of Rights and Liabilities of Common Stockholders
i. Dividend Rights - The holders of outstanding shares of common stock
are entitled to receive dividends out of assets legally available therefore
at such times and in such amounts as the board of directors of the Company
may from time to time determine.
ii. Voting Rights - Each holder of the Company's common stock are
entitled to one vote for each share held of record on all matters submitted
to the vote of stockholders, including the election of directors. All voting
is non cumulative, which means that the holder of fifty percent (50%) of the
shares voting for the election of the directors can elect all the directors.
The board of directors may issue shares for consideration of previously
authorized but unissued common stock without future stockholder action.
41
<PAGE>
iii. Liquidation Rights - Upon liquidation, the holders of the common
stock are entitled to receive pro rata all of the assets of the Company
available for distribution to such holders.
iv. Preemptive Rights - Holders of common stock are not entitled to
preemptive rights.
v. Conversion Rights - No shares of common stock are currently subject to
outstanding options, warrants, or other convertible securities.
vi. Redemption rights - no redemption rights exist for shares of common
stock.
vii. Sinking Fund Provisions - No sinking fund provisions exist.
viii. Further Liability For Calls - No shares of common stock are subject
to further call or assessment by the issuer. The Company has not issued
stock options as of the date of this Registration Statement.
(2) Potential Liabilities of Common Stockholders to State and Local
Authorities
No material potential liabilities are anticipated to be imposed on
stockholders under state statues. Certain Nevada regulations, however,
require regulation of beneficial owners of more than 5% of the voting
securities. Stockholders that fall into this category, therefore, may be
subject to fines in circumstances where non-compliance with these
regulations are established.
B. Preferred Stock
(1) Description of Rights and Liabilities of Preferred Stockholders
i. Dividend Rights - The holders of outstanding shares of Preferred stock
are entitled to receive dividends out of assets legally available therefore
at such times and in such amounts as the board of directors of the Company
may from time to time determine. Series B shares have annual dividends of
$.15 a share payable quarterly. All of the shares outstanding were to be
redeemed at $1.00 a share plus all accrued dividends prior to December 31,
1993.
ii. Voting Rights - The holders of record of said shares of Series B
Preferred Stock shall be entitled to one vote per share at all meetings of,
shareholders of the Corporation. The holders of record shares of the Series
B Preferred Stock shall vote such shares together with the holders of the
Corporation's Common Stock, and not as a separate class. The board of
directors may issue shares for consideration of previously authorized but
unissued preferred stock without future stockholder action.
iii. Liquidation Rights - In case of the dissolution, liquidation or
winding-up of the Corporation, whether voluntary or involuntary or in
any instance, the holders of record of shares of the Series B Preferred
Stock then outstanding shall be entitled to participate in the distributions,
either in cash or in kind, of the assets of the corporation on a priority
basis but only to, the extent of outstanding shares of Preferred Stock
multiplied by its par value per share. Series B shares have priority
over the common shares in the event of Company liquidation.
iv. Preemptive Rights - The holders of the shares of Series B Preferred
Stock will have no preemptive, redemption or other rights other that as
established by applicable corporate law.
v. Conversion Rights - The Preferred shares can be converted after a holding
period of one year at the rate of 10 shares of Common Stock for each share
of Preferred Stock converted. They are convertible to common shares on a one
for one basis at the holders' option.
vi. Sinking Fund Provisions - No sinking fund provisions exist.
vii. Further Liability For Calls - No shares of Preferred stock are subject
to further call or assessment by the issuer. The Company has not issued
stock options as of the date of this Registration Statement.
C. Debt Securities
The Company has issued convertible debt in the amount of $34,000.00 with
an interest rate of 10%. This can be converted at the rate of $1.00
of debt per share of Common Stock issued.
D. Other Securities To Be Registered
The Company is not registering any security other than its Common Stock
and Preferred Stock.
Item 5. Indemnification of Directors and Officers
Article XI of the Company's Articles of Incorporation for the Company
do contain provisions for indemnification of the officers and directors;
in addition, Section 78.751 of the Nevada General Corporation Laws
provides as follows: 78.751 Indemnification of officers, directors,
employees and agents; advance of expenses.
1) A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative, except an action by or in the right of the corporation,
by reason of the fact that he is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise,
against expenses, including attorney's fees, judgments, fines and amounts
paid in settlement actually and reasonably incurred by him in
connection with the action, suitor proceeding if he acted in good faith
and in a manner which he reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal
42
<PAGE>
action or proceeding, had no reasonable cause to believe his conduct was
unlawful. The termination of any action, suit or proceeding by judgment,
order, settlement, conviction, or upon a plea of nolo contendere or its
equivalent, does not, of itself, create a presumption that the person did
not act in good faith and in a manner which he reasonably believed to be
in or not opposed to the best interests of the corporation, and that, with
respect to any criminal action or proceeding, he had reasonable cause to
believe that his conduct was unlawful.
2. A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the corporation to procure a judgment
in its favor by reason of the fact that he is or was a director, officer,
employee or agent of the corporation, or is or was serving at the request
of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
expenses, including amounts paid in settlement and attorneys' fees actually
and reasonably incurred by him in connection with the defense or settlement
of the action or suit if he acted in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
corporation. Indemnification may not be made for any claim, issue or matter
as to which such a person has been adjudged by a court of competent
jurisdiction, after exhaustion of all appeals therefrom, to be liable to
the corporation or for amounts paid in settlement to the corporation, unless
and only to the extent that the court in which the action or suit was brought
or other court of competent jurisdiction determines upon application that
in view of all the circumstances of the case, the person is fairly and
reasonably entitled to indemnity for such expenses as the court deems proper.
3. To the extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in defense of
any action, suit or proceeding referred to in subsections 1 and 2, or in
defense of any claim, issue or matter therein, he must be indemnified by
the corporation against expenses, including attorneys' fees, actually and
reasonably incurred by him n connection with the defense.
4. Any indemnification under subsections 1 and 2, unless ordered by a
court or advanced pursuant to subsection 5, must be made by the corporation
only as authorized in the specific case upon a determination that
indemnification of the director, officer, employee or agent is proper in
the circumstances. The determination must be made: (a) By the stockholders:
(b) By the board of directors by majority vote of a quorum consisting of
directors who were not parties to act, suit or proceeding; (c) If a majority
vote of a quorum consisting of directors who were not parties to the act, suit
or proceeding so orders, by independent legal counsel in a written opinion;
or (d) If a quorum consisting of directors who were not parties to the act,
suit or proceeding cannot to obtained, by independent legal counsel in a
written opinion; or
5. The articles of incorporation, the bylaws or an agreement made by the
corporation may provide that the expenses of officers and directors
incurred in defending a civil or criminal, suit or proceeding must be paid
by the corporation as they are incurred and in advance of the final
disposition of the action, suit or proceeding, upon receipt of an
undertaking by or on behalf of the director or officer to repay the amount
if it is ultimately determined by a court of competent jurisdiction that
he is not entitled to be indemnified by corporation. The provisions of this
subsection do not affect any rights to advancement of expenses to which
corporate personnel other than the directors or officers may be entitled
under any contract or otherwise by law.
43
<PAGE>
6. The indemnification and advancement of expenses authorized in or
ordered by a court pursuant to this section: (a) Does not exclude any
other rights to which a person seeking indemnification or advancement of
expenses may be entitled under the articles of incorporation or any bylaw,
agreement, vote of stockholders or disinterested directors or otherwise,
for either an action in his official capacity or an action in another
capacity while holding his office, except that indemnification, unless
ordered by a court pursuant to subsection 2 or for the advancement of
expenses made pursuant to subsection 5, may not be made to or on behalf
of any director or officer if a final adjudication establishes that his
act or omissions involved intentional misconduct, fraud or a knowing
violation of the law and was material to the cause of action. (b) Continues
for a person who has ceased to be a director, officer, employee or agent
and endures to the benefit of the heirs, executors and administrators
of such a person.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred or paid
by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the opinion
of its counsel the matter has been settled by controlling precedent, submit
to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such
issue.
44
<PAGE>
PART F/S
Item 1. Financial Statements
The following documents are filed as part of this report:
a) NuTek, Inc.
Report of James E. Slayton, CPA
FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page Number
<S> <C>
ACCOUNTANT'S REPORT of James E. Slayton, CPA 1
Balance Sheet 2
Statement of Operations and Deficit
Accumulated During the Development Stage 3
Statement of Changes in Stockholder's Equity 4
Statement of Cash Flows 5
Notes to the Financial Statements 6
</TABLE>
b) Interim Financial Statements are not provided at this time as they
are not applicable at this time.
c) Financial Statements of Businesses Acquired or to be acquired are not
provided at this time, as they are not applicable at this time.
d) Pro-forma Financial Information is not provided at this time as it is
not applicable at this time.
Item 2. Changes In and Disagreements With Accountants on Accounting and
Financial Disclosure
None--Not Applicable
45
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
<S> <C>
INDEPENDENT AUDITORS' REPORT....................................... F-1
BALANCE SHEET..................................................... F-2-3
STATEMENT OF OPERATIONS............................................ F-4
STATEMENT OF STOCKHOLDERS' EQUITY.................................. F-5
STATEMENT OF CASH FLOWS............................................ F-6
NOTES TO FINANCIAL STATEMENTS...................................... F-7-10
</TABLE>
<PAGE>
James E. Slayton, CPA
3867 West Market Street
Suite 208
Akron, Ohio 44333
INDEPENDENT AUDITORS' REPORT
Board of Directors January 12, 2000
Nutek, Inc. (The Company)
I have audited the Consolidated Balance Sheet of Nutek, Inc., as of
December 31, 1998 and December 31, 1999, and the related Consolidated
Statements of Operations, Stockholders' Equity and Cash Flows for the
years ending December 31, 1998 and December 31, 1999. These financial
statements are the responsibility of the Company's management. My
responsibility is to express an opinion on these financial statements
based on my audit. I conducted my audit in accordance with generally
accepted auditing standards. Those standards require that I plan
and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit
includes examining, on a test basis evidence supporting the amounts
and disclosures in the financial statement presentation. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. I believe that my audit provides a
reasonable basis for my opinion.
In my opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
Nutek, Inc., at December 31, 1998 and December 31, 1999, and the
results of its operations and cash flows for the years ending December
31, 1998 and December 31, 1999, in conformity with generally accepted
accounting principles. The accompanying consolidated financial statements
have been prepared assuming the Company will continue as a going concern.
As discussed in Note 10 to the financial statements, the Company has had
limited operations and has not established a long term source of revenue.
The Company has had operating losses for the two operating periods reported.
This raises substantial doubt about its ability to continue as a going
concern. Management's plan in regard to these matters are also described
in Note 10. The financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
/s/ James E. Slayton
- -----------------------------
James E. Slayton, CPA
Ohio License ID# 04-1-15582
<PAGE>
Nutek, Inc.
CONSOLIDATED
BALANCE SHEET
AS AT
December 31, 1998 and December 31, 1999
BALANCE SHEET
<TABLE>
<CAPTION>
ASSETS
December 31 December 31
1999 1998
<S> <C> <C>
CURRENT ASSETS
Cash 81,404.00 11,250.00
Accounts Receivable 75,706.00 0.00
Inventory 40,463.00 10,100.00
Prepaid Expenses 0.00 0.00
-------------- -------------
Total Current Assets 197,573.00 21,350.00
PROPERTY AND EQUIPMENT
Property and Equipment
(net of depreciation) 1,368,035.00 701,636.00
------------ -----------
Total Property and Equipment 1,368,035.00 701,636.00
OTHER ASSETS
Patent Rights Acquired
(net of amortization) 1,259,692.00 14,644.00
Long Term Investments 234,000.00
Goodwill (net of amortization) 0.00 0.00
Rent Deposit 3,310.00 0.00
------------- -----------
Total Other Assets 1,497,002.00 14,644.00
-------------- ----------
TOTAL ASSETS $3,062,610.00 $737,630.00
============= ===========
</TABLE>
See accompanying notes to financial statements
F-2
<PAGE>
Nutek, Inc.
CONSOLIDATED
BALANCE SHEET
AS AT
December 31, 1998 and December 31, 1999
BALANCE SHEET
<TABLE>
<CAPTION>
LIABILITIES & EQUITY
December 31 December 31
1999 1998
<S> <C> <C>
CURRENT LIABILITIES
Accounts Payable $30,392.00 $33,149.00
Short Term Notes Payable 43,297.00 55,872.00
-------------- --------------
Total Current Liabilities 73,689.00 89,021.00
OTHER LIABILITIES
Long Term Notes Payable 699,206.00 1,004,704.00
Accrued Bond Interest 28,000.00 0.00
Bonds Payable 142,000.00 142,000.00
Deposits received 15,000.00 5,000.00
Patent Rights Acquired Liability 770,000.00 0.00
------------ --------------
Total Other Liabilities 1,654,206.00 1,151,704.00
------------ --------------
Total Liabilities 1,727,895.00 1,240,725.00
EQUITY
Common Stock, $0.001 par value,
authorized 50,000,000 shares; 36,328.00 20,173.00
issued and outstanding at
December 31, 1999, 36,328,044
common shares; issued and
outstanding at December 31, 1998,
20,173,375 common shares.
Additional Paid in Capital 6,144,403.00 3,980,949.00
Preferred Stock, $.001 par
value, authorized
5,000,000 shares 794.00 794.00
issued and outstanding at
December 31, 1998 and
1999, 793,500 preferred shares
Royalty Investors 55,000.00 0.00
Treasury Stock (45,448.00) (45,448.00)
Retained (Deficit) (4,756,362.00) (4,459,563.00)
Common Stock Subscribed (100,000.00) 0.00
-------------- -------------
Total Stockholders' Equity 1,334,715.00 (503,095.00)
TOTAL LIABILITIES &
OWNER'S EQUITY $3,062,610.00 $737,630.00
============== ===========
</TABLE>
See accompanying notes to financial statements
F-3
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
Nutek, Inc.
CONSOLIDATED
STATEMENT OF OPERATIONS
FOR YEARS ENDED
December 31, 1998 and December 31, 1999
January 1 January 1
to to
December 31 December 31
1999 1998
REVENUE
<S> <C> <C>
Revenues 238,039.00 12,501.00
COSTS AND EXPENSES
Cost of Goods Sold 30,267.00 2,500.00
Selling, General and
Administrative 306,498.00 380,150.00
Depreciation Expense 135,706.00 116,837.00
Amortization of Intangibles 62,367.00 10,175.00
-------------- ------------
Total Costs and Expenses 534,838.00 509,662.00
-------------- ------------
Net Ordinary Income or
(Loss) (296,799.00) (497,161.00)
============== =============
Basic weighted average
number of common
shares outstanding 21,519,597 10,248,809
Basic Net Loss Per Share (0.01) (0.05)
</TABLE>
See accompanying notes to financial statements
F-4
<PAGE>
Nutek, Inc.
CONSOLIDATED
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR YEARS ENDED
December 31, 1998 and December 31, 1999
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
Deficit
accumulated
Additional during Total
Common Preferred paid-in Treasury Retained Stockholders'
Stock Stock Capital Stock Deficit Equity
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balances 9,347 794 3,152,667 (3,392,402) 799,594
as at
December 31,
1997
Issuance of
Common Stock 10,826 0 828,282 839,108
Treasury
Stock (45,448) (45,448)
Net Loss for
year ended
12/31/1998 (497,161) (497,161)
- ------------------------------------------------------------------------------
Balances at
December 31,
1998 $20,173 $794 $3,980,949 ($45,448) ($4,459,563) ($503,095)
Issuance of
Common Stock 16,155 2,163,454 2,179,609
Royalty
Investors 55,000
Subscriptions
Receivable (100,000)
Net Loss for
year ended
Dec 31, 1999 ($296,799) (296,799)
- ------------------------------------------------------------------------------
$36,328 $794 $6,144,403 ($45,448) ($4,756,362) $1,334,715
==============================================================================
</TABLE>
See accompanying notes to financial statements
F-5
<PAGE>
Nutek, Inc.
CONSOLIDATED
STATEMENT OF CASH FLOWS
FOR YEARS ENDED
December 31, 1998 and December 31, 1999
<TABLE>
<CAPTION>
STATEMENT OF CASH FLOWS
January 1, 1999 January 1, 1998
to December 31 to December 31
1999 1998
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) from operations (296,799.00) (497,161.00)
Adjustments to reconcile net
income to net cash provided
Items not requiring cash
Depreciation Expense 135,706.00 116,837.00
Amortization of Intangibles 62,367.00 10,175.00
(Increase)/Decrease in
accounts receivable (61,456.00) 14,250.00
(Increase)/Decrease in
inventory (30,363.00) 63,430.00
(Increase)/Decrease in Deposits (3,310.00)
Increase/(Decrease) in Accounts
Payable (2,757.00) 2,130.00
Net cash flow provided by operating
activities (196,612.00) (290,339.00)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of Century Clock Molds 43,000.00 0.00
Net cash used by investing
activities (43,000.00) (0.00)
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of Capital Stock 627,839.00 439,044.00
Increase/(Decrease) in Notes
payable (318,073.00) (101,130.00)
Treasury Stock 0.00 (45,448.00)
Net cash provided by financing
activities 309,776.00 292,466.00
Balance at beginning of
period 11,250.00 9,123.00
Net increase (decrease) in cash 70,154.00 2,127.00
Balance as at end of
period 81,404.00 11,250.00
</TABLE>
See accompanying notes to financial statements
F-6
<PAGE>
Nutek, Inc.
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
NOTE 1 - HISTORY AND ORGANIZATION OF THE COMPANY
The Company was incorporated in August of 1991 (Date of Inception) under
the laws of the State of Nevada, as Nutek, Inc. (The Company) and is engaged
primarily in the oil and gas industry.
SRC International, Inc. was incorporated in Illinois. SRC International,
Inc. manufactures "Super Glide" a rail covering made of an extremely durable,
super-slick, space age polymer designed to reduce friction between rails and
hangers in the dry cleaning and garment industries.
Vac-U-Lift Production Company was incorporated in the state of Texas in March
of 1995 and is in the oil extracting industry on leases in Texas. The Company
remained inactive until it was acquired in June of 1996 by Nutek.
Century Clocks Inc. with it's joint venture with the Department of Veterans
Industries, produces clocks assembled and packaged by U.S. veterans.
Elite Fitness Systems Inc. markets a proven fitness system that has kept
the world's finest fighting force in supreme physical condition.
NOTE 2 - ACCOUNTING POLICIES AND PROCEDURES
The accompanying consolidated financial statements include the accounts of
Nutek, Inc., and its wholly-owned subsidiaries, SRC International, Inc.,
Vac-U-Lift Production Company, Inc., Century Clocks Inc., and Elite Fitness
Systems Inc. All significant intercompany balances and transactions have
been eliminated.
Accounting polices and procedures have not been determined except as follows:
1. The Company uses the accrual method of accounting.
2. Inventories are stated at the lower of cost or market, cost being
determined on the first in, first out (FIFO) basis.
3. Basic earnings per share is computed using the weighted average
number of shares of common stock outstanding. Diluted earnings per share
were not included as the inclusion of convertible notes, convertible
preferred stock and warrants would be anti-dilutive and all contingencies
for conversion have not occurred.
4. The Company has not yet adopted any policy regarding payment of
dividends. The Company has authorized 5,000,000 shares of Series B
preferred stock with a par value of $0.001 (one tenth of one cent).
All of the shares which have been issued were issued for cash at $1.00
a share. Series B shares have the same voting rights as the common
shares but have priority in the event of Company liquidation. All of
the shares outstanding were to be redeemed at $1.00 a share plus all
accrued dividends prior to December 31, 1993. This has been extended
by mutual agreement. Series B shares have annual dividends of $.15 a
share payable quarterly. They are convertible to common shares on a
one for one basis at the holders' option.
5. The Company experienced losses during its the past two fiscal tax years
reported. The Company will review its need for a provision for federal
income tax after each operating quarter.
6. The preparation of financial statements in conformity with
generally accepted accounting principles requires that management make
estimates and assumptions which affect the reported amounts of assets
and liabilities as at the date of the financial statements and revenues
and expenses for the period reported. Actual results may differ from
these estimates.
7. The cost of equipment is depreciated over the estimated useful
life of the equipment utilizing the straight line method of deprecation.
Depreciation recorded during 1998 was $116,837.00. Depreciation recorded
during 1999 was $135,706.00.
8. The Company has adopted December 31 as its fiscal year end.
9. The Company expenses its research and development in the period
it is incurred.
10. All exchanges of stock for services rendered were recorded at
the market value of the stock exchanged.
11. The Company's Statement of Cash Flows is reported utilizing cash
(currency on hand and demand deposits) and cash equivalents (short-term,
highly liquid investments).
12. The Company is reporting business combinations using the consolidated
method of accounting.
F-7
<PAGE>
Nutek, Inc.
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
13. Start-up costs and reorganization costs are being amortized using
the straight-line method over a period of 5 years.
14. Oil well leases are depleted over the units of production, or
12 years, whichever is shorter.
15. Identifiable intangibles including patents are amortized over
five years. The amount of amortization recorded in 1998 was $10,175.
The amount of amortization record in 1999 was $62,367.00
16. Investments are recorded at the lower of cost or market. Any
reductions in market value below cost are shown as unrealized losses in
the consolidated statement of operations.
NOTE 3 - PROPERTY AND EQUIPMENT
Property and equipment consists of manufacturing equipment, clock molds,
furniture and fixtures.
NOTE 4 - OTHER ASSETS
Other assets consists patents, design, artwork, and bailer pump technology.
These assets were valued at the existing market value of Nutek stock at the
time of purchase.
NOTE 5 - LONG-TERM DEBT
Long-term debt consists of the following:
Note payable to E. Grant, a stockholder, $25,000.00
interest only payable monthly at 24%,
principal due on demand
Notes payable to J. Frank, a stockholder, $55,000.00
non-interest bearing
Note payable to Roger Wheeler, a stockholder, $75,000.00
no maturity date, secured by 100,000 shares of
Nutek Common stock
Note payable to Velma Shaw Myers, a stockholder $13,400.00
no maturity date, unsecured
Note payable to Dudley Frank, a stockholder, $70,000.00
Due on demand, secured by 200,000 shares of
Nutek common stock
Note payable to Roger Garrity, stockholder, $203,806.00
Non-interest bearing, no maturity
Note payable to Murray Conradie, President, $57,000.00
non-interest bearing, no maturity
Notes payable to John L. Rainaldi, a stockholder, $200,00.00
payments based upon the terms of the related
Loan agreements, secured by certain
stockholders of the Company
-------------
$ 699,206.00
=============
Principal payments over the next five years approximate the following:
Year ending December 31,
2000 $ 278,183
2001 145,536
2002 26,718
2003 28,332
2004 25,137
Thereafter 195,300
----------
$ 699,206
==========
F-8
<PAGE>
Nutek, Inc.
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
NOTE 6 - INCOME TAXES
Nutek, Inc. and its subsidiaries available net operating loss carry
forwards to offset future federal taxable income of approximately
$4,756,362.00. The carry forwards expire through 2014. The Company
has deemed it less than likely that this benefits will be utilized.
The Company has adopted the Statement of Financial Accounting Standards
No. 109 - "Accounting for Income Taxes."
NOTE 7 - CONTINGENCIES AND COMMITMENTS
1. Office Lease
The Company leases office space in California on a month-to-month basis
with aggregate monthly rent of approximately $2856.00. Rent recorded
during 1998 and 1998 respectfully was $22,643.50 and $21,218.25.
2. Handi-Plate royalty
As part of acquiring the patents for this product, Nutek Inc. to provide
the inventor a 2.5% royalty interest on the gross sales of this product.
3. Clock royalty
As part of the acquisition of Century Clocks SA clock molds, a 7.5% royalty
interest was given. The royalty owners advanced $55,000.00 to Nutek, Inc.
Murray Conradie has the option of converting the loan which he made to Nutek,
Inc. in the amount of $57,000.00 to a royalty interest and becoming a
participant in the 7.5% royalty interest.
4. Subscriptions receivable
The Company has received common stock subscriptions in the amount of
$100,000.00. The Company reported this as part of shareholder's equity.
The Company received the payment for the subscriptions in the year 2000.
NOTE 8 - ACQUISITIONS
Vac-U-Lift Production Company, Inc.
In June of 1996, the company exchanged 100,000 shares of its common stock
and a certain amount of cash to acquire all of the outstanding common shares
of Vac-U-Lift Production Company, Inc., a Texas corporation. The business
combination has been accounted for under the purchase method of accounting.
(Note: During the period of January 1, 1996 to June 30, 1996, the leases on
Vac-U-Lift produced revenues of approximately $76,000 which have reported on
a different entity.)
At December 31, 1996, the balances consist of the following:
Oil Leases
- ----------
Acquisition of Vac-U-Lift 67,000
Purchases during 1995 77,600
Purchases during 1996 76,500
- ----------
Accumulated amortization (3,604)
- ----------
$217,496
========
NOTE 9 - RELATED PARTY TRANSACTIONS
As of December 31, 1999, Murray Conradie, President of Nutek, Inc., has
loaned the Company $57,000.
As discussed in note 5, the Company has notes payable to certain
stockholders.
NOTE 10 - GOING CONCERN
The Company's financial statements are prepared using the generally
accepted accounting principles applicable to a going concern, which
contemplates the realization of assets and liquidation of liabilities
in the normal course of business. However, the Company has a minimal
source of revenue. Without realization of additional capital, it would
be unlikely for the Company to continue as a going concern. It is
management's plan to seek additional capital through a private placement
memorandum.
NOTE 11 - YEAR 2000 ISSUE
The Year 2000 issue arises because many computerized systems use two
digits rather than four to identify a year. Date-sensitive systems may
recognize the year 2000 as 1900 or some other date, resulting in errors
when information using year 2000 dates is processed. In addition, similar
problems may arise in systems which use certain dates in 1999 to represent
something other than a date. The effects of the Year 2000 issue may be
experienced before on, or after January 1, 2000 and if not addressed, the
impact on operations and financial reporting may range from minor errors
to significant systems failure which could affect an entity's ability to
conduct normal business operations. It is not possible to be certain that
all aspects of the Year 2000 issue affecting the entity, including those
related to the efforts of customers, suppliers, or other third parties will
be fully resolved.
F-9
<PAGE>
Nutek, Inc.
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
NOTE 12. - SUPPLEMENTARY OIL AND GAS INFORMATION
Proved oil and gas quantities
The estimates of proved reserves and related valuations of the leases in
Texas was determined by Wilbur E. Hammock, a registered independent petroleum
engineer. Estimates of proved reserves are inherently imprecise and are
continually subject to revision based on production, history, results of
additional exploration, development and other factors.
Proved reserves are reserves judged to produce economically in future
years from known reservoirs under existing economic and operating conditions,
i.e., prices and costs as of the date the estimate is made and assuming
continuation of current regulatory practices using conventional production
methods and equipment. Proved developed reserves are expected to be
recovered through existing wells, equipment and operating methods.
Following is a summary of the estimated proved developed reserves of the
company stated in barrels) which are located in Texas, as of December 31,
1999.
Oil (Bbl)
---------
Proved developed reserves
Beginning of period 875,845
Revision of previous estimates -
Production (818)
Balance end of period 875,027
The above reserves relate to leases in Texas. The oil reserves on those
properties were acquired by the company from the previous owners in lieu of
the previous owners having to expend funds to plug the existing wells. The
company has additional leases, however, as of the date of these consolidated
financial statements there has not been a reserve study done to establish oil
reserves for these leases. Therefore, the schedule of estimated proved
reserves does not contain an amount for barrels of oil for these leases.
Standardized measure of discounted future net cash flows and changes therein
relating to proved developed oil and gas reserves.
Statement of Financial Accounting Standards No. 69 prescribes guidelines for
computing a standardized measure of the future net cash flows and changes
therein relating to estimated proved reserves. The company has followed
these guidelines which are briefly discussed in the following paragraphs.
Future cash inflows and future production and development costs are determined
by applying year-end prices and costs to the estimated quantities of oil and
gas to be produced. Estimated future income taxes are computed using year-end
statutory income tax rate including consideration for previously legislated
future statutory depletion rates. The resulting future net cash flows are
reduced to present value amount by applying a 10% annual discount factor.
For the schedule of future net cash flows as of December 31, 1999 the Company
has limited cash flows to projected recovery of reserve for the next 25 years
only, which is approximately 770,024 barrels of a projected total of 875,027
barrels of reserve. The Company felt that this more closely presents the
economic results of recovery of reserves.
The assumptions used to compute the standardized measure are those prescribed
by the Financial Accounting Standards Board and as such, do not necessarily
reflect the Company's expectations of actual revenue to be derived from those
reserves or their present worth. The limitations inherent in the reserve
quantity estimation process, as discussed previously, are equally applicable
to the standardized measure computations since these estimates are the basis
for the valuation process.
Future cash inflows 18,095,564
Future production and development costs (3,890,546)
Future income tax expense (5,044,822)
Future net cash flows 9,160,196
10% annual discount for estimated timing of cash flows (4,935,154)
Standardized measure of discounted future net cash flows 4,225,094
F-10
<PAGE>
Part III
Item 1. Index to Exhibits (Pursuant to Item 601 of Regulation SB)
Exhibit Number Name and/or Identification of Exhibit
1. Underwritten agreement
None. Not Applicable
2. a) Plan of Acquisition, Reorganization, Arrangement, Liquidation, or
Succession.
2.1 Plan and Articles of Merger, filed 8/23/91
2.2 Plan of Reorganization and Agreement, dated 9/20/97
b) Asset Purchase and Liability Assumption Agreement
None. Not Applicable
c) Interest Purchase Agreement
None. Not Applicable
d) Agreement for Bill of Sale and Assignment of Assets
None. Not Applicable
e) Exchange Stock Agreement
None. Not Applicable
3. Articles of Incorporation & By-Laws
3.1 Articles of Incorporation of the Company Filed August 23, 1991
3.2 Articles of Amendment filed on April 10, 1992
3.3 Certificate of Amendment of Articles of Incorporation filed on 3/3/95
3.4 By-Laws of the Company adopted August 24, 1991
4. Instruments Defining the Rights of Security Holders
4.1 Those included in exhibit 3, and sample of Stock Certificate
4.2 Preferred Stock
5. Opinion on Legality
None. Not Applicable
6. No Exhibit Required
Not Applicable
7. Opinion on Liquidation Preference
None. Not Applicable
8. Opinion on Tax Matters
None. Not Applicable
9. Voting Trust Agreement and Amendments
None. Not Applicable
10. Material Contracts
10.1 Agreement for Internet Sales and Marketing, dated 9/2/99
10.2 Agreement for Promotion and Revenue Sharing Plan, dated 9/2/99
10.3 Purchase Agreement - Elite Fitness, dated 10/4/99
10.4 Purchase Agreement - Patent #5833350, dated 9/15/99
10.5 Purchase Agreement - Clock Mold, dated 4/30/99
10.6 Plan of Purchase and Agreement, dated 11/30/97
10.7 Transitional Employer Agreement
10.8 Lease, dated October 15, 1999
10.9 Letter of Intent - Mineral Acres, dated 11/1/99
10.10 Compensation Plan
10.11 Key Employees Incentive Stock Option Plan
46
<PAGE>
11. Statement Re Computation of Per Share Earnings
None. Not Applicable. Computation of per share earnings can be
clearly determined from the Statement of Operation from the
Company's financial statements.
12. No Exhibit Required
13. Annual or Quarterly Reports - Form 10-Q
None. Not Applicable
14. Material Foreign Patents
None. Not Applicable
15. Letters on Unaudited Interim Financial Information
None. Not Applicable
16. Letter on Change in Certifying Accountant
None. Not Applicable
17. Letter of Director Resignation
None. Not Applicable
18. Letter on Change in Accounting Principles
None. Not Applicable
19. Reports Furnished to Security Holders
None. Not Applicable
20. Other Documents or Statements to Security Holders
None. Not Applicable
21. Subsidiaries of Small Business Issuers
None. Not Applicable
47
<PAGE>
22. Published Report Regarding Matters Submitted to Vote of
None. Not Applicable
23. Consent of Experts and Counsel
23.1 Statement from James E. Slayton, CPA
24. Power of Attorney
None. Not Applicable
25. Statement of Eligibility of Trustee
None. Not Applicable
26. Invitations for Competitive Bids
None. Not Applicable
27. Financial Data Schedule
27.1 Financial Data Schedule
28. Information from Reports Furnished to State Insurance Regulatory
Authorities
None. Not Applicable
29. Additional Exhibits
None. Not Applicable
48
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Nutek, Inc.
/s/ Murray N. Conradie
- -------------------
Murray N. Conradie,
President and Chairman
Date: January 21, 2000
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Nutek, Inc.
/s/ Pamela Horick
- ------------------------
Pamela Horick, SECRETARY
Date: January 21, 2000
49
<PAGE>
EXHIBIT 2.1
PLAN AND ARTICLES OF MERGER
This Plan and these Articles of Merger are hereby adopted by Sun Investments,
Inc., a Utah corporation (hereinafter "SII"), and Swiss Technique, Inc., a
Nevada corporation (hereinafter "STI") This Plan and these Articles of Merger
are adopted pursuant to Section 78.486, Nevada Revised Statutes as
amended; and Section 16-10-72, Utah Code Annotated, 1953, as amended; all of
such laws including the laws of Nevada expressly permit the merger described
herein; subject to and pursuant to all of the terms and conditions as set
forth herein.
I. PARTIES TO THE AGREEMENT
The parties to the Agreement are those corporation referred to in the
introductory paragraph hereof.
SII owns 100% of the issued and outstanding common stock of STI.
SII is to be merged into STI; and STI shall be and is hereinafter
designated as the "Surviving Corporation."
II. TERMS AND CONDITIONS OF MERGER
The merger shall be deemed effective when this Plan and these Articles have
been delivered to and filed with the Secretary of State for the State of Nevada.
The laws which are to govern the terms of this merger are the laws of Nevada
and the laws of Utah. The Surviving Corporation shall be a Nevada
corporation and shall be governed by the laws of a Nevada and shall
be continued to be governed by its existing Articles of Incorporation on file
in the State of Nevada.
Upon the effective date of this merger, the following results shall occur:
1. The two corporations which are parties to this Plan of
Merger shall become a single corporation, which shall be the Surviving
Corporation, namely STI, a Nevada corporation, as
2. The separate existence of SII shall cease.
3. The Surviving Corporation as designated herein shall have
the rights, privileges, immunities and powers and shall be subject to all
duties and obligations of the Corporation organized under the Nevada Business
Corporation Act.
4. The Surviving Corporation shall, upon the effective date hereof and
thereafter, possess all at the rights, privileges, immunities,
and franchises as well of a public and as of a private nature of each of the
merged corporations; all property, real, personal and mixed, and all debts
due on whatever account, including subscriptions to shares, and all other
chases in action and all and every other interest, of or belonging to or due
to each of the corporation so merged, shall be taken and deemed to be
transferred and invested in such Surviving Corporation without further act or
deed; and the title to any real estate or other property, or any interest
therein, vested in any of such corporations shall not revert to any other
party or be in any way impaired by reason of such merger but shall vest in the
Surviving Corporation.
5. The Surviving corporation shall henceforth be responsible and liable for
all of the liabilities and obligations and debts of each of the corporations
so merged; and any claim to existing or action or proceeding pending by or
against any of such Corporations may be prosecuted as if such merger had not
taken place or such Surviving Corporation may be substituted in the place of
any submerged corporation. Neither the rights of creditors nor any liens upon
the property of any merged corporation shall be impaired by the terms of this
merger.
1
<PAGE>
III. OWNERSHIP OF SHARES
STI is a Nevada corporation and is wholly-owned subsidiary of and it has issued
and outstanding 100 shares of common stock of which are owned by SII.
SII is a Utah corporation and as of August 23, 1991, had 2,514,000 shares of
common stock issued and outstanding.
In the merger, STI shall issue 2,514,00O.shares of its common stock to the
existing stockholders of SII and shall issue 5,142,000 shares to the
shareholders of Swiss Cellular Laboratories, Inc. As a part of the acquisition
of that company by SII. All prior issued and outstanding shares of common
stock of SII shall be canceled in the merger along with the 100 shares of
STI presently held by SII.
IV. CORPORATE APPROVAL
This Plan and these Articles of Merger were duly approved by the shareholders
of SII and STI at a meeting held on August 23,1991, in Salt Lake City, Utah,
after due notice of the purpose of the meeting was mailed to the stockholders
of each of said Corporation at said stockholder's address as they appeared on
the records of the Corporation. The plan and Articles of merger were duly
approved by a majority of the outstanding shares of the common stock of each
corporation. The number of common shares of SII voting in favor of said
proposal being 2,380,550 (95%) and the number of shares voted against
the proposal to merge being ___. All outstanding shares of common stock of
STI were voted in favor of the merger.
V. COMPLIANCE WITH LAWS
All conditions required by the laws of the States of Nevada and Utah
applicable to the proposed merger have been satisfied.
VII. SERVICE UNDER UTAH LAW
The Surviving Corporation hereby agrees that it may be served with process
in Utah in any proceeding for the enforcement of the rights of a dissenting
shareholder of SII against the Surviving Corporation. The Surviving
Corporation hereby grants an irrevocable appointment of the Director of the
Division of Corporations and Commercial Code of the State of Utah or legal
successor as its agent to accept service of process in any such proceeding; and
agrees that it will promptly pay to the dissenting shareholders SII the amount,
if any, to which they shall be entitled under the provisions of Utah law with
respect to the rights of dissenting shareholders.
VIII. SIGNATURES
This Plan and these Articles of Merger were duly adopted and executed in
duplicate by the president and Secretary of the Surviving corporation and each
of the corporations which were parties hereto this 23 day of August, 1991.
Attest: SUN INVESTMENTS, INC.
a Utah corporation
By: /s/ Robert A. Larkins
- ----------------------------
Robert A. Larkins, Secretary
By: /s/ F. Lynn Mickelsen
- ----------------------------
F. Lynn Mickelsen, President
SWISS TECHNIQUE, INC.
a Nevada corporation
By: /s/ Robert A. Larkins
- -----------------------------
Robert A. Larkins, President
and Secretary
2
<PAGE>
VERIFICATION
The undersigned, after being duly sworn, does hereby depose and state, that
the undersigned is the secretary of Sun Investments, Inc., a Utah
corporation, and the undersigned Secretary of Swiss Technique, Inc., a
Nevada corporation, and that each has read the foregoing Plan and Articles of
Merger and knows the contents thereof, and do hereby certify that this Plan
and these Articles of Merger contain a truthful statement of the Plan and
Articles of Merger as duly adopted by the Directors and Stockholders of
the corporations.
SUN INVESTMENTS, INC.
/s/ Robert A. Larkins
- -----------------------
Robert A. Larkins, Secretary
SWISS TECHNIQUE, INC.
- ----------------------------
/s/ Robert A. Larkins
- ---------------------
Robert A. Larkins, Secretary
3
<PAGE>
EXHIBIT 2.2
PLAN OF REORGANIZATION AND AGREEMENT
Plan of Reorganization and Agreement dated this 20th day of September,
1997 by and between NUTEK, INC., a publicly held corporation, organized and
existing under the laws of the State of Nevada, with its principal office at
1820 E. Garry Ave., Ste 111, Santa Ana, CA 92705 (the "PURCHASER"); and
International Licensing Group, Inc. ("ILG"), a closely held corporation,
organized and existing under the laws of the State of Delaware with its
principal office at 15540 Rockfield Blvd., #C-200, Irvine CA 92618 and its
SHAREHOLDER AUTHORIZED REPRESENTATIVE ("SHAREHOLDER REP").
WHEREAS, the PURCHASER, by its Certificate of Incorporation, has
authorized capital stock consisting of 50,000,000 shares of voting Common
Stock par value $.001 per share of which 11,730,000 shares are issued and
Outstanding ("Purchasers' Common Stock"), and
WHEREAS, ILG, by its Certificate of Incorporation, has authorized capital
stock consisting of 4,800,000 shares of voting Common Stock, par value $.001
per share, of which 4,800,000 shares are now issued and outstanding owned by
its SHAREHOLDERS, and,
WHEREAS, the parties hereto desire to adopt a tax-free B-type Plan of
Reorganization (the "PLAN OF REORGANIZATION") pursuant to Section 368(1)
(B) of the Internal Revenue Code of 1954, as amended, and,
WHEREAS, the parties hereto believe many efficiencies can be accomplished as
a result of this Plan of Reorganization, such as, development of a stronger
organization with greater access to capital for growth and lower financing
costs, diversification into new fields, improvement of competitive position,
and promotion of the expansion of the business and operations presently
conducted by the PURCHASER and ILG.
NOW THEREFORE, in consideration of the foregoing and the mutual agreements
hereinafter set forth, the parties hereto agree as follows:
1. Adoption of Plan of Reorganization
The parties hereto hereby adopt the Plan of Reorganization which will
comprise the acquisition by the PURCHASER of 100% of the outstanding voting
shares of ILG solely in exchange for voting shares of the Common Stock, par
value $ .001 per share (the "Common Stock") of the PURCHASER upon and subject
to the terms and conditions of this PLAN of REORGANIZATION as hereinafter set
forth. The parties hereto will promptly take such corporate and legal action as
in the opinion of their respective officers may be necessary or desirable
to effect such PLAN OF REORGANIZATION.
2. Manner of Exchange of Shares
2.1 Subject to the terms and conditions of this PLAN OF
REORGANIZATION and
AGREEMENT, the manner of exchange of the outstanding shares of the Common
Stock of IX for the shares of the PURJIASER shall be as follows:
2.1.1 The SHAREHOLDERS OF ILG agree to assign, transfer and deliver
all of their shares of the Common Stock of ILG owned by them, for a total of
4,800,000 shares, constituting 100% of the outstanding shares of ILG and free
and clear of all liens, pledges, charges and encumbrances of every kind, nature
and description to the PURCHASER on the closing (as hereinafter defined) in
exchange for the shares of the PURCHASER referred to in paragraph 2.1.2
pursuant to the PLAN OF REORGANIZATION AND AGREEMENT.
2.1.2 On the Closing Date, the PURCHASER hereby agrees to assign,
transfer and deliver to the SHAREHOLDER REPRESENTATIVE, its Common Stock, for
a total of 1,600,000 shares.
1
<PAGE>
3. Closing
The Closing provided for in this Agreement shall take place at the
offices of the PURCHASER on the 20th day of September , 1997, or at such
other place or such other time as the parties shall mutually agree (the
"Closing").
4. Schedules of Properties' Contracts, and Personnel Data to be
Delivered by ILG prior to Closing.
ILG shall deliver to the PURCHASER, as soon as practicable after
the execution hereof, but in no event no later than ten days before the
Closing, accurate lists and summary descriptions, certified correct by
authorized officers of ILG, of the following:
4.1 Real Property - All real property owned of record or
beneficially or leased by the Company, including oil leases, accompanied by
the original or certified copies of the deeds, leases, title insurance
policies and other relevant documents.
4.2 Inventories - Inventories of materials, machinery, equipment,
furniture and fixtures, as recorded in the books of account of ILG.
4.3 Patents, Trademarks, Trade Secrets, Etc. - All patents, patent
applications, trademarks, trade-mark registration and applications therefore,
patent licenses, contracts with employees or others relating in whole or in
part to disclosure, assignments or patenting of any invention, discoveries,
improvements, processes, formulae or other know-how and all other agreements
relating to any item in any categories referred to herein owned partially or
totally by ILG, accompanied by the originals or certified copies thereof.
4.4 Automobiles and Trucks - A schedule of all autos, trucks and
other vehicles owned or leased by ILG.
4.5 Insurance policies - A schedule of all insurance policies,
with
respect to ILG and covering its properties, buildings, machinery,
equipment, furniture, fixtures, and operations, accompanied by the originals or
certified copies thereof.
4.6 Powers of Attorney - The names of all persons, if any, holding
powers of attorney from ILG.
4.7 Stock Options - The names of all optionees, if any, holding
outstanding options to purchase the stock of ILG, the date and expiration
date thereof, the number of shares of stock subject thereto and option
price.
4.8 Loan and Credit Agreements - All mortgages, deeds of trust,
loan or credit agreements, performance bonds, and similar instruments to which
ILG is a party.
4.9 Government Authorization Or License - All authorizations,
licenses or registrations or applications therefor not otherwise covered herein,
presently issued to, registered in the name of, ILG, necessary for the conduct
of its business, accompanied by the originals or certified copies thereof.
5. Documents to be Delivered to the PURCHASER by ILG at the Closing
5.1 At the Closing, ILG and/or the SHAREHOLDER REP shall deliver
to the PURCHASER the following:
5.1.1 Certificates representing all of the outstanding shares of
ILG, for a total of 4,800,000 shares, all of which shall be duly endorsed
in blank, or, in the alternative, with stock powers affixed thereto, in
proper form for transfer, with transfer taxes with respect to such shares,
if applicable, paid, or a check for the necessary costs thereof delivered.
2
<PAGE>
5.1.2 Resignations of all officers and directors of ILG.
5.1.3 The minute book, stock certificate book and ledger and other
similar corporate records, including the items listed in paragraphs 4.1
through 4.9 hereof, if not previously delivered, together with all books,
records, tax returns and other similar items necessary or convenient to the
conduct of the business of ILG.
5.1.4 The original or certified copies of the Certificate of
Incorporation and By-Laws of ILG.
5.1.5 A certified Balance Sheet and Statement of Profit and Loss of
ILG, for the period ending August 31, 1997, in conformity with generally
accepted accounting principles applied on a consistent basis.
6. Warranties of ILG and the SHAREHOLDERS
6.1 ILG and the SHAREHOLDER REP represent, warrant and covenant
6.1.1 ILG is a corporation organized and existing under the laws of the State
of Delaware, with full authority and licenses wherever required in order to
conduct its business as presently being carried on and with full power and
authority to carry out the transaction contemplated under this Plan of
Reorganization and Agreement.
6.1.2 The Common Stock of ILG to be delivered to the PURCHASER has
been validly issued, fully paid and no assessable, and that such shares are,
and shall be free and clear of all liens, pledges, charges, options, calls,
agreements and encumbrances of every kind, nature and description.
6.1.3 All corporate and other proceedings required to be taken by or
on its part to authorize it to carry out this plan of Reorganization and
Agreement have been duly and properly taken and this Plan of Reorganization
and Agreement is valid and binding obligation of ILG and the SHAREHOLDERS and
enforceable in accordance with its terms.
6.1.4 The original or certified copies of the Certificate of
Authority and By-Laws of ILG delivered to the PURCHASER are correct and
complete.
6.1.5 ILG has no material liabilities or obligations except those
disclosed on the financial statements of ILG delivered to the PURCHASER
pursuant to paragraph 5.1.5 hereof or incurred in the normal and regular
conduct of its business since the date of the aforesaid financial statements.
6.1.6 ILG is not a party to any written or oral, express or implied,
agreement of any kind, nature or description; except those required to be
set forth in paragraphs 4.1 through 4.9 hereof.
6.1.7 ILG has in all respects performed all obligations required
to be performed by it to date and is not in default under any agreement,
lease, or other instrument of which it is a party.
6.1.8 There are no actions, suits, proceedings, or investigations
(whether or not purportedly on behalf of ILG), threatened against or
affecting ILG or its properties, business, at law or in equity, or before any
federal, state, municipal or other governmental department, commission, board,
bureau, agency, instrumentality, domestic or foreign.
6.1.9 ILG has complied in all material respects with all laws,
regulations, and judicial or administrative tribunal orders applicable to
its business and holds all licenses or permits required to conduct the business
now being conducted by it.
6.1.10 All federal, state and local tax returns required to be
filed by ILG have been duly filed. All federal, state, city, profits, franchise,
sales, use, occupation, property, excise or other taxes due have been duly
paid or adequately reserved for upon the books of ILG.
3
<PAGE>
6.1.11 No representation or warranty by ILG or the SHAREHOLDERS in
this Plan of Reorganization and Agreement or in any document delivered
pursuant to the terms hereof or in connection with the consummation of the
transaction contemplated hereby will contain any untrue statement of material
fact or omit to state a material fact necessary to make the statement contained
therein not misleading.
6.1.12 The representations and warranties of ILG and the
SHAREHOLDERS contained herein shall be true as of The Closing with the same
effect as though all such representations and warranties had been made on
and as of that date.
7. Documents to be Delivered to ILG By the Purchaser at the Closing
7.1 At the Closing, the PURCHASER will deliver to the SHAREHOLDER
REP or any other person or persons authorized, in writing signed by the
SHAREHOLDER, certificates of its Common Stock, in The name of each
SHAREHOLDER, to which he is entitled pursuant to the provisions of
paragraph 2.1.2 hereof, with transfer taxes with respect to such shares,
if applicable, paid, provided, the PURCHASER receives or has received the
shares of the common stock of ILG to which it is entitled pursuant to
paragraph 2.1.1 hereof.
8. Warranties of the Purchaser
8.1 The PURCHASER represents and warrants that:
8.1.2 The PURCHASER is a corporation duly organized and existing and
in good standing under the laws of the State of Nevada, with full authority
and licenses wherever required, in order to conduct its business as now
being carried on, and with full power and authority to carry out the
transactions contemplated under this Plan of Reorganization and Agreement.
8.1.3 The Common Stock of The PURCHASER to be delivered hereunder
is, and will be, validly issued, fully paid and no assessable, and such stock
is and shall be free and clear of all encumbrances of every kind, nature or
description.
8.1.4 All corporate and other proceedings required to be taken by or
on its part to authorize it to carry out this Plan of reorganization and
Agreement have been duly and properly taken and this Agreement is a valid and
binding obligation of the PUICHASER enforceable in accordance with its terms.
8.1.5 The PURCHASER has authorized capital stock consisting of
50,000,000 shares of Common Stock, par value $ .001 per share of which
11,730,000 Shares are issued and outstanding.
8.1.6 There are no actions, suits, proceedings or investigations
pending or to the knowledge of the PURCHASER threatened against or affecting
the PURCHSER or its properties or business, at law, or in equity, or before
any federal, state, municipal or other governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign.
8.1.7 The PURCHASER is not in default with respect to any order,
injunction or decree of any court of federal, state, municipal or other
governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign.
8.1.8 The PURCHASER has complied in all material respect with all
laws, regulations and judicial or administrative tribunal orders applicable
to its business now being conducted by it.
4
<PAGE>
8.1.9 The financial statements of the PURCHASER heretofore
delivered by it to ILG are true and correct in all material respects and
the PURCHASER has no material liabilities except those disclosed on such
financial statements or incurred in the normal and regular conduct of its
business since the date of such statements.
8.1.10 The representations and warranties of the PURCHASER
contained herein shall be true as of the Closing with the same effect as though
all such had been made on and as of that date.
9. Investment Purpose
9.1 The SHARSHOLDERS and ILG each understand that the Common Stock
to be acquired by him pursuant to this Plan of Reorganization and Agreement
have not been registered under the Securities Act of 1933, as amended (the
"Act"). Each SHAREHOLDER represents that he is acquiring the Common Stock to be
issued to him pursuant to this Plan of Reorganization and Agreement for
investment and not with a view to, or for sale in connection with, any
distribution thereof and that he has no present intention of or
distributing the Common Stock, and understands that an appropriate legend is
noted on each stock certificate.
9.2 The SHAREHOLDERS each agree that he will not offer, sell or
transfer or otherwise dispose of any of the Common Stock, acquired by him
pursuant to this Plan of Reorganization and Agreement, except in compliance
with the Securities Act of 1933, as amended, the Securities Exchange Act of
1934, as amended and the Rates and Regulations promulgated there under by the
Securities and Exchange Commission.
10. Registration of the Common Stock
If the PURCHASER shall at any time register any securities for its
own account or for the account of others under the Act on Form S-l or any
comparable form, the PURCHASER will give the SHAREHOLDERS timely notice of such
registration (either prior to or upon the filing of a registration statement in
respect thereof) and promptly, after receipt of a written request made by the
SHAREHOLDERS or any one or more of them, within twenty (20) days after the
giving of such notice, the PURCHSER at its sole expense will register under
such Act all or part of such Common Stock covered by such request; provided the
offering of such Common Stock may be deferred for a period not exceeding forty
(40) days from the effective date of such registration statement, if the
underwriter for securities to be sold by the PURCHASER is of the opinion that a
simultaneous offering of such Common Stock would adversely interfere with the
sale of such securities.
11. Survival of Representations
All representations, warranties and agreements of the parties shall
survive the closing.
12. Assigns
All of the terms and provisions of this Plan of Reorganization and
Agreement shall be binding upon and inure to the benefit of and be enforceable
by the Individual parties hereto and their respective executors,
administrators, heirs, successors and assigns, and the corporate parties
hereto and their respective successors and assigns.
5
<PAGE>
13. Hold Harmless
The PURCHASER agrees to indemnify and hold each shareholder,
officer, director and employee, of ILG harmless, from any and all
liabilities to any other person(s) or entity, based on a claim arising out of
such status, during the time, he or she was a shareholder, officer,
director or employee of ILG.
14. Expenses
In connection with this Plan of Reorganization and Agreement and the
transactions contemplated hereby, ILG and the SHAREHOLDERS shall pay their
expenses and costs and the PUICHASER shall pay its own expenses and costs.
15. Further Assurances
Each of the parties hereto will at any time and from time to time
before and after the Closing, upon request of another party so to do, execute,
acknowledge, and deliver all such further acts, deeds, assignments,
transfers, conveyances, powers of attorney and assurances which may be
required to carry out the provisions of this Agreement.
16. Notices
Any notice or other document to be given hereunder or pursuant
hereto to any party shall be in writing and delivered personally or sent
by certified or registered mail, return receipt requested, to the respective
address of the party set forth in the first paragraph on the first page of
this Plan of Reorganization and Agreement.
17. Governing Law
The parties hereto agree that this agreement, regardless of where
executed or delivered, the laws of the State of Nevada shall govern the
interpretation of this Plan of Reorganization and venue shall be in a court
of competent jurisdiction located in Las Vegas, Nevada.
18. Amendments and Counterparts
This instrument contains the entire agreement between the parties
and may not be altered, amended or terminated except in writing signed by
all parties. This Plan of Reorganization and Agreement may be executed in one
or more counterparts, each of which shall be deemed to be an original, but all
of which together shall constitute one and the same instrument
IN WITNESS WHEREOF, the parties hereto have caused this Plan
Of Reorganization and Agreement to be duly executed as of the day and year
written in the space provided below next to the respective lines for
signatures.
6
<PAGE>
EXHIBIT 3.1
FILED # 7442-91
Aug 23, 1991
IN THE OFFICE OF
Dean Heller
DEAN HELLER SECRETARY OF STATE
Articles of Incorporation
Of
Swiss Technique Inc.
WE, THE UNDERSIGNED natural persons of the age of twenty-one (21) years or
more, acting as incorporators of a corporation under the Nevada Business
Corporation Act, adopt the following Articles or Incorporation for such
corporation.
ARTICLE I - NAME
The name of the Corporation is Swiss Technique, Inc.
ARTICLE II - DURATION
The duration of the corporation is perpetual.
ARTICLE XII - PURPOSES
The purpose or purposes for which this corporation is engaged are:
(a) To engage in the specific business of looking for business
acquisitions and related items; also the business of making investments,
including investments in, purchase and ownership of any and all kinds of
property, assets or business, whether alone or in conjunction with others.
Also, to acquire, develop, explore and otherwise deal in and with all kinds
of real and personal property and all related activities, and for any and
all other lawful purposes.
(b) To acquire by purchase, exchange, gift, bequest, subscription, or
otherwise; and to hold, own, mortgage pledge, hypothecate, sell, assign,
transfer, exchange, or otherwise dispose of or deal in or with its own
corporate securities or stock or other securities including, without
limitations, any shares of stock, bonds, debentures, notes, mortgages, or
other obligations, and any certificates, receipts or other instruments
representing rights or interests therein on any property or assets created
or issued by any person, firm, associate, or corporation, instrumentalities
thereof; to make payment therefore in any lawful manner or to issue in
exchange therefore its unreserved earned surplus for the purchase of its
own shares, and to exercise as owner or holder of any securities, any
and all rights, powers, and privileges in respect thereof.
(C) To do each and everything necessary, suitable, or proper for the
accomplishment of any of the purposes or the attainment of any one or
more of the subjects herein enumerated, or which may, at any time, appear
conducive to or expedient for the protection or benefit of this corporation,
and to do said acts as fully and to the sane extent as natural persons might,
or could do in any part of the world as principals, agents, partners,
trustees, or otherwise, either alone or in conjunction with any other person,
association or corporation.
(d) The foregoing clauses shall be construed both as purposes and powers and
shall not be held to limit or restrict in any manner the general powers of the
corporation, and the enjoyment and exercise thereof, as conferred by the
laws of the State of Nevada; and it is the intention that the purposes and
powers specified in each of the paragraphs of this Article III shall be
regarded as independent purposes and powers.
ARTICLE IV - STOCK
The aggregate number of shares which this corporation shall have
authority to issue is 50,000,000 shares of Common stock having a par value
of $.001 per share. All stock of the corporation shall be of the same
class, common, and shall have the same rights and preferences. Fully-paid
stock of this corporation shall not be liable to any further call or
assessment.
1
<PAGE>
ARTICLE V - AMENDMENT
These Articles of Incorporation may be amended by the affirmative
vote of "a majority" of the shares entitled to vote on each such amendment.
ARTICLE VI - SHAREHOLDER RIGHTS
The authorized and treasury stock of this corporation may be issued
at such time, upon such terms and conditions and for such consideration as
the Board of Directors shall determine. Shareholders shall not have pre-emptive
rights to acquire unissued shares of the stock of this corporation.
ARTICLE VII - INITIAL OFFICE AND AGENT
The corporate Trust company of Nevada
One East First Street
Reno, Nevada 89501
ARTICLE VIII - DIRECTORS
The directors are hereby given the authority to do any act on behalf
of the corporation by law and in each instance where the Business Corporation
Act provides that the directors may act in certain instances where the
Articles of Incorporation authorize such action by the directors, the
directors are hereby given authority to act in such instances without
specifically numerating such potential action or instance herein.
The directors are specifically given the authority to mortgage or
pledge any or all assets of the business without stockholders' approval.
The number of directors constituting the initial Board of Directors
of this corporation is one. The names and addresses of persons who are to
serve as Directors until the first annual meeting of stockholders or until
their successors are elected and qualify are:
NAME
Robert A. Larkins
ADDRESS
1136 Birch Circle
Alpine, Utah 84403
ARTICLE IX - INCORPORATORS
The name and address of each incorporator is:
Thomas G. Kimble
311 South State, Suite 440
Salt Lake City, Utah 84111
2
<PAGE>
ARTICLE X
COMMON DIRECTORS - TRANSACTIONS BETWEEN CORPORATION
No contract or other transaction between this corporation and any one or more
of its directors or any other corporation, firm, association, or entity in
which one or more of its directors or officers are financially interested,
shall be either void or voidable because of such relationship or interest, or
because such director or directors are present at the meeting of the Board of
Directors, or a committee thereof, which authorizes, approves, or ratifies such
contract or transaction, or because his or their votes are counted for such
purpose if: (a) the fact of such relationship or interest is disclosed or
known to the Board of Directors or committee which authorizes, approves, or
ratifies the contract or transaction by vote or consent sufficient for the
purpose without counting the votes or consents of such interested director; or
(b) the fact of such relationship or interest is disclosed or known to the
stockholders entitled to vote and they authorize, approve, or ratify such
contract or transaction by vote or written consent, or (c) the contract or
transaction is fair and reasonable to the corporation.
Common or interested directors may be counted in determining the presence
of a quorum at a meeting of the Board of Directors or committee thereof which
authorizes, approves, or ratifies such contract or transaction.
ARTICLE XI
LIABILITY OF DIRECTORS AND OFFICERS
No director or officer shall be personally liable to the Corporation or its
stockholders for monetary damages for any breach of fiduciary duty by such
person as a director or officer. Notwithstanding the foregoing sentence, a
director or officer shall be liable to the extent provided by applicable
law,
(i) for acts or omissions which involve intentional misconduct, fraud or a
knowing violation of law, or (ii) for the payment of dividends in violation
of NRS 78.300.
The provisions hereof shall not apply to or have any effect on the
liability or alleged liability of any officer or director of the Corporation
for or with respect to any acts or omissions of such person occurring prior
to such amendment.
Under penalties of perjury, I declare that these Articles of Incorporation
have been examined by me and are, to the best of my knowledge and belief,
true, correct and complete.
DATED this 20 day of August, 1991
/s/ Thomas A. Kimble
- ------------------------
Thomas A. Kimble, Incorporator
3
<PAGE>
Exhibit 3.2
Filed
In the office of the
Secretary of State of the
STATE OF NEVADA
April 10, 1992
No. 7442-91
Cheryl A. Lau, Secretary of State
ARTICLES OF AMENDMENT TO THE ARTICLES OF INCORPORATION
OF
SWISS TECHNIQUE, INC.
Pursuant to the applicable provisions of the Nevada Business Corporation Act,
Swiss Technique, Inc. (the "Corporation" Adopts the following Articles of
Amendment to its Articles of Incorporation by stating the following:
FIRST: The present name of the Corporation is Swiss Technique, Inc.
SECOND: The following amendment to its Articles of Incorporation was adopted
by majority vote of shareholders of the Corporation on August 23, 1991 in
the manner prescribed by Nevada Law.
1. Article IV here amended to read as follows:
Capitalization. (a) Common Stock. The Corporation shall have
the authority to issued 50,000,000 shares of common stock having
a par value of $.001. All common stock of the Corporation shall be
of the same class and shall have the same rights and preferences.
Fully paid common stock of this Corporation shall not be liable for
further call or assessment. The authorized common shares shall be
issued at the discretion of the Directors. (b) Preferred Stock.
the Corporation shall have the authority to issued 5,000,000 shares
of preferred stock each having a par value of $.001, with such
rights, preferences and designations and to be issued in such
series as determined by the Board of Directors of the Corporation.
THIRD: The number of shares of the Corporation outstanding
and entitled to vote at the time of the adoption of said amendment
was 2,514,000.
FOURTH: The number of shares voted for such amendments was 2,380,550
(95%) and the number voted against such amendment was -0-
DATED this 23rd day of August, 1991
ATTEST:
By: /s/ Frankie M. Garrity
- ------------------------------
Frankie M. Garrity
Secretary
SWISS TECHNIQUE, INC.
By: /s/ Rodger W. Carrity
- ------------------------------
Rodger W. Carrity,
Senior Vice President
1
<PAGE>
VERIFICATION
------------
The undersigned being first duly sworn, deposes and states:
that the undersigned is the Secretary of Swiss Technique, Inc., that
the undersigned has read the Articles of Amendment and knows the
contents thereof and that the same contains a truthful statement of
the Amendment duly adopted by the sole director and stockholders of
the Corporation.
/s/ Frankie M. Garrity
- ------------------------------
Frankie M. Garrity
Secretary
STATE OF UTAH )
)ss.
COUNTY OF SALT LAKE )
Before me the undersigned Notary Public in and for the said
County and State, personally appeared the President and Secretary
of Swiss Technique, Inc., a Nevada corporation, and signed the
foregoing Articles of Amendment as their own free and voluntary
acts and deeds pursuant to a corporate resolution for the uses and
purposes set forth.
IN WITNESS WHEREOF, I have set my hand and seal this 23rd day of
August, 1991.
/s/ Thomas G. Kimball
- ------------------------
NOTARY PUBLIC, residing at
Salt Lake City, Utah
My Commission Expires:
Nov 1, 1993
Notary Public
Thomas G. Kimble
311 South State #440
Salt Lake City, Utah 84111
My Commission Expires
November 1, 1993
State of Utah
2
<PAGE>
Exhibit 3.3
Filed
In the office of the
Secretary of State of the
STATE OF NEVADA
March 3, 1995
7442-91
Dean Heller Secretary of State
CERTIFICATE OF AMENDMENT OF ARTICLES OF INCORPORATION
(After Issuance of Stock)
Filed by:
Swiss Technique, Inc.
---------------------
Name of Corporation
We the undersigned Rodger W. Garrity and
---------------------------
President or Vice President
Frankie M. Garrity of Swiss Technique, Inc.
- -------------------------------- ----------------------
Secretary of Assistant Secretary Name of Corporation
Do hereby certify:
The Board of Directors of said corporation at a meeting duly convened,
held on the 16th day of January, 1995, adopted a resolution to amend the
original article as follows:
Article I is hereby amended to read as follows:
The name of the corporation is NuTek, Inc.
The number of shares of th4e corporation outstanding and entitled to
vote on an amendment to the Articles of Incorporation is 755084; that
the said change(s) and amendment have been consented to and approved by a
majority vote of the stockholders holding at least a majority of each class
of stock outstanding and entitled to vote thereon.
/s/Rodger W. Garrity
- ---------------------
President or Vice President
/s/ Frankie M. Garrity
- ------------------------
Secretary of Assistant Secretary
State of California )
) ss.
County of Orange )
On February 15, 1995, personally appeared before me, a Notary Public
Rodger W. Garrity and Frankie M. Garrity, who acknowledged that they
executed the above instrument.
/s/ A. Mesbah
- -------------------------
Signature of Notray
A. Mesbah
Comm. #921382
Notary Public - California
Orange County
My Commission Expires May 17, 1995
1
<PAGE>
Exhibit 3.4
BY-LAWS
OF
SWISS TECHNIQUE, INC.
ARTICLE I - OFFICES
The principal office of the corporation in the State of Nevada shall be
located at the office of its registered agent, the Corporation Trust Company of
Nevada, at One East First Street, in the city of Reno, County of Washoe. The
corporation nay have such other offices, either within or without the State of
incorporation as the board of directors may designate or as The business of the
corporation nay from time to tine require.
ARTICLE II - STOCKHOLDERS
1. ANNUAL MEETING.
The annual meeting of the stockholders shall be held on such date as is
determined by the Board of Directors for the purpose of electing directors and
for the transaction of such other business as may come before the meeting.
2. SPECIAL MEETINGS.
Special meetings of the stockholders, for any purpose or purposes, unless
otherwise prescribed by statute, may be called by the president or by the
directors, and shall be called by the president at the request of the holders
of not less than ten per cent of all the outstanding shares of the corporation
entitled to vote at the meeting.
3. PLACE OF MEETING.
The directors may designate any place, either within or without the State
unless otherwise prescribed by statute, as the place of meeting for any annual
meeting or for any special meeting called by the directors. A waiver of notice
signed by all stockholders entitled to vote at a meeting may designate
any place, either within or without the state unless otherwise prescribed by
statute, as the place for holding such meeting. If no designation is made, or
if a special meeting be otherwise called, the place of meeting shall be the
principal office of the corporation.
4. NOTICE OF MEETING.
Written or printed notice stating the place, day and hour of the meeting and,
in case of a special meeting, the purpose or purposes for which the meeting
is called, shall be delivered not less than ten nor more than thirty days
before the date of the meeting, either personally or by mail, by or at the
direction of the president, or the secretary, or the officer or persons
calling the meeting, to each stockholder of record entitled to vote at such
meeting. If mailed, such notice shall be deemed to be delivered when
deposited in the United States mail, addressed to the stockholder at his
address as it appears on the stock transfer books of the corporation, with
postage thereon pre-paid.
5. CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD DATE.
For the purpose of determining stockholders entitled to notice of or to
vote at any meeting of stockholders or any adjournment thereof, or stockholders
entitled to receive payment of any dividend or in order to make a determination
1
<PAGE>
of stockholders for any other proper purpose, the directors of the corporation
may provide that the stock transfer books shall be closed for a stated period
but not to exceed, in any case, thirty days. If the stock transfer books
shall be closed for the purpose of determining stockholders entitled to
notice of or to vote at a meeting of stockholders, such books shall be closed
for at least ten days immediately preceding such meeting. In lieu of closing
the stock transfer books, the directors may fix in advance a date as the record
date for any such determination of stockholders, such date in any case to be
not more than thirty days and, in case of a meeting of stockholders, not less
than ten days prior to the date on which the particular action requiring such
determination of stockholders is to be taken. If the stock transfer books are
not closed and no record date is fixed for the determination of stockholders
entitled to notice of or to vote at a meeting of stockholders, or stockholders
entitled to receive payment of a dividend, the date on which notice of the
meeting is mailed or the date on which the resolution of the directors
declaring such dividend is adopted, as the case may be, shall be the record
date for such determination of stockholders. When a determination of
stockholders entitled to vote at any meeting of stockholders has been made as
provided in this section, such determination shall apply to any adjournment
thereof.
6. VOTING LISTS.
The officer or agent having charge of the stock transfer books for shares
of the corporation shall make, at least ten days before each meeting of
stockholders, a complete list of the stockholders entitled to vote at such
meeting, or any adjournment thereof, arranged in alphabetical order, with: the
address of and the number of shares held by each, which list, for a period of
ten days prior to such meeting, shall be kept on file. at the principal office
of the corporation or transfer agent and shall be subject to inspection by any
stockholder at any time during usual business hours. such list shall also be
produced and kept open at the time and place of the meeting and shall be
subject to the inspection of any stockholder during the whole time of the
meeting. The original stock transfer book shall be-prima facie evidence as to
who are the stockholders entitled to examine such list or transfer books or to
vote at the meeting of stockholders.
7. QUORUM.
Unless otherwise provided by law, at any meeting of stockholders one-third
of the outstanding shares of the corporation entitled to vote, represented in
person or by proxy, shall constitute a quorum at a meeting of stockholders. If
less than said number of the outstanding shares are represented at a meeting, a
majority of the shares so represented may adjourn the meeting from time to time
without further notice. At such adjourned meeting at which a quorum shall be
present or represented, any business may be transacted which might have been
transacted at the meeting as originally notified. The stockholders present at a
duly organized meeting may continue to transact business until adjournment,
notwithstanding the withdrawal of enough stockholders to leave less than a
quorum.
8. PROXIES.
At all meetings of stockholders, a stockholder may vote by proxy executed
in writing by the stockholder or by his duly authorized attorney in fact.
Such proxy shall be filed with the secretary of the corporation before or
at the time of the meeting.
2
<PAGE>
9. VOTING.
Each stockholder entitled to vote in accordance with the terms and provisions
of the certificate of incorporation and these by-laws shall be entitled to
one vote, in person or by proxy, for each share of stock entitled to vote
held by such stockholders. Upon the demand of any stockholder, the vote for
directors and upon any question before the meeting shall be by ballot. All
elections for directors shall be decided by plurality vote; all other questions
shall be decided by majority vote except as otherwise provided by the
Certificate of Incorporation or the laws of the state of Nevada
10. ORDER OF BUSINESS.
The order of business at all meetings of the stockholders, shall be as follows:
1. Roll Call.
2. Proof of notice of meeting or waiver of notice.
3. Reading of minutes of preceding meeting.
4. Reports of officers.
5. Reports of committees.
6. Election of Directors.
7. Unfinished Business.
8. New Business.
11. INFORMAL ACTION BY STOCKHOLDERS.
Unless otherwise provided by law, any action required to be taken at a meeting
of the shareholders, or any other action which may be taken at a meeting of the
shareholders, may be taken without a meeting if a consent in writing, setting
forth the action so taken, shall be signed by the same percentage of
all of the shareholders entitled to vote with respect to the subject matter
thereof as would be required to take such action at a meeting.
ARTICLE III - BOARD OF DIRECTORS
1. GENERAL POWERS.
The business and affairs of the corporation shall be managed by its board of
directors. The directors shall in all cases act as a board, and they may adopt
such rules and regulations for the conduct of their meetings and the
management of the corporation, as they may deem proper, not inconsistent with
these by-laws and the laws of this state.
2. NUMBER, TENURE AND QUALIFICATIONS.
The number of directors of the corporation shall as established by the board of
directors, but shall be no less than one. Each director shall hold office
until the next annual meeting of stockholders and until his successor shall
have been elected and qualified.
3
<PAGE>
3. REGULAR MEETINGS.
A regular meeting of the directors, shall be held without other notice than
this by-law immediately after, and at the same place as, the annual meeting of
stockholders The directors may provide, by resolution; the time and place for
the holding of additional regular meetings without other notice than such
resolution.
4. SPECIAL MEETINGS.
Special meetings of the directors may be called by or at the request of the
president or any director. The person or persons authorized to call special
meetings of the directors may fix the place for holding any special meeting of
the directors called by them.
5.NOTICE.
Notice of any special meeting shall be given at least two days previously
thereto by written notice delivered personally, or by telegram or mailed to
each director at his business address. If mailed, such notice shall be deemed
to be delivered when deposited in the United States mail so addressed, with
postage thereon prepaid. If notice be given by telegram, such notice shall be
deemed to be delivered when the telegram is delivered to the telegraph company.
The attendance of a director at a meeting shall constitute a waiver of notice
of such meeting, except where a director attends a meeting for the express
purpose of objecting to the transaction of any business because the meeting
is not lawfully called or convened.
6.QUORUM.
At any meeting of the directors a majority shall constitute a quorum for the
transaction of business, but if less than said number is present at a meeting,
a majority of the directors present may adjourn the meeting from time to time
without further notice.
7. MANNER OF ACTING.
The act of the majority of the directors present at a meeting at which a quorum
is present shall be the act of the directors
8. NEWLY CREATED DIRECTORSHIPS AND VACANCIES.
Newly created directorships resulting from an increase in the number of
directors and vacancies occurring in the board for any reason except the
removal of directors without cause may be filled by a vote of a majority of the
directors then in office although less than a quorum exists. Vacancies
occurring by reason of the removal of directors without cause shall be filled
by vote of the stockholders. A director elected to fill a vacancy caused by
resignation, death or removal shall be elected to hold office for the unexpired
term of his predecessor.
9.REMOVAL OF DIRECTORS.
Any or all of the directors may be removed for cause by vote of the
stockholders or by action of the board. Directors may be removed without cause
only by vote of the stockholders.
4
<PAGE>
10. RESIGNATION.
A director may resign at any time by giving written notice to the board, the
president or the secretary of the corporation. Unless otherwise specified in
the notice, the resignation shall take effect upon receipt thereof by the board
or such officer, and the acceptance of the resignation shall not be necessary
to make it effective.
11. COMPENSATION.
No compensation shall be paid to directors, as such, for their services,
but by resolution of the board a fixed sum and expenses for actual attendance
at each regular or special meeting of the board may be authorized. Nothing
herein contained shall be construed to preclude any director from serving the
corporation in any other capacity and receiving compensation therefor.
12. PRESUMPTION OF ASSENT.
A director of the corporation who is present at a meeting of the directors
at which action on any corporate matter is taken shall be presumed to have
assented to the action taken unless his dissent shall be entered in the
minutes of the meeting or unless he shall file his written dissent to such
action with the person acting as the secretary of the meeting before the
adjournment thereof or shall forward such dissent by registered mail to the
secretary of the corporation immediately after the adjournment of the meeting.
Such right to dissent shall not apply to a director who voted in favor of
such action.
13. EXECUTIVE AND OTHER COMMITTEES.
The board, by resolution, may designate from among its members an executive
committee and other committees, each consisting of three or more directors.
Each such committee shall serve at the pleasure of the board.
ARTICLE IV - OFFICERS
1. NUMBER.
The officers of the corporation shall be a president, a secretary and a
treasurer, each of whom shall be elected by the directors. Such other officers
and assistant officers as may be deemed necessary may be elected or appointed
by the directors.
2. ELECTION AND TERM OF OFFICE.
The officers of the corporation to be elected by the directors shall be elected
annually at the first meeting of the directors held after each annual meeting
of the stockholders. Each officer shall hold office until his successor
shall have been duly elected and shall have qualified or until his
death or until he shall resign or shall have been removed in the manner
hereinafter provided.
3. REMOVAL.
Any officer or agent elected or appointed by the directors may be removed by
the directors whenever in their judgment the best interests of the corporation
would be served thereby, but such removal shall be without prejudice to the
contract rights, if any, of the person so removed.
5
<PAGE>
4. VACANCIES.
A vacancy in any office because of death, resignation, removal,
disqualification or otherwise, may be filled by the directors for the
unexpired portion of the term.
5. PRESIDENT.
The president shall be the principal executive officer of the corporation and
subject to the control of the directors, shall in general supervise and control
all of the business and affairs of the corporation. He shall, when
present, preside at all meetings of the stockholders and of the directors. He
may sign, with the secretary or any other proper officer of the corporation
thereunto authorized by the directors, certificates for shares of the
corporation, and deeds, mortgages, bonds, contracts, or other instruments which
the directors have authorized to be executed, except in cases where the signing
and execution thereof shall be expressly delegated by the directors or by these
by-laws to some other officer or agent of the corporation, or shall be required
by law to be otherwise signed or executed; and in general shall perform all
duties incident to the office of president and such other duties as may be
prescribed by the directors from time to time.
6. VICE-PRESIDENT.
In the absence of the president or in event of his death, inability or refusal
to act, a vice-president may perform the duties of the president, and when so
acting, shall have all the powers of and be subject to all the restrictions
upon the president. A vice-president shall perform such other duties as from
time to time may be assigned to him by the president or by the directors.
7. SECRETARY.
The secretary shall keep the minutes of the stockholders and of the
directors' meetings in one or more books provided for that purpose, see that
all notices are duly given in accordance with the provisions of these by-laws
or as required, be custodian of the corporate records and of the seal of the
corporation and keep a register of the post office address of each stockholder
which shall be furnished to the secretary by such stockholder, have general
charge of the stock transfer books of the corporation and in general perform
all duties incident to the office of secretary and such other duties as from
time to time may be assigned to him by the president or by the directors.
8. TREASURER.
If required by the directors, the treasurer shall give a bond for the faithful
discharge of his duties in such sum and with such surety or sureties as the
directors shall determine. He shall have charge and custody of and be
responsible for all funds and securities of the corporation; receive and give
receipts for moneys due and payable to the corporation from any source
whatsoever, and deposit all such moneys in the name of the corporation in such
banks, trust companies or other depositories as shall be selected in accordance
with these by-laws and in general perform all of the duties incident to the
office of treasurer and such other duties as from time to time may be assigned
to him by the president or by the directors.
9. SALARIES.
The salaries of the officers shall be fixed from time to time by the directors
and no officer shall be prevented from receiving such salary by reason of the
fact that he is also a director of the corporation.
6
<PAGE>
ARTICLE V - CONTRACTS LOANS CHECKS AND DEPOSITS
1. CONTRACTS.
The directors may authorize any officer or officers, agent or agents, to enter
into any contract or execute and deliver any instrument in the name of and on
behalf of the corporation, and such authority may be general or confined to
specific instances.
2. LOANS.
Indebtedness shall be issued in its name unless authorized by a resolution of
the directors. Such authority may be general or confined to specific instances.
3. CHECKS, DRAFTS, ETC.
All checks, drafts or other orders for the payment of money, notes or other
evidences of indebtedness issued in the name of the corporation, shall be
signed by such officer or officers, agent or agents of the corporation and in
such manner as shall from tine to time be determined by resolution of the
directors.
4. DEPOSITS.
All funds of the corporation not otherwise employed shall be deposited
from time to time to the credit of the corporation in such banks, trust
companies or other depositaries as the directors may select.
ARTICLE: VI - CERTIFICATES FOR SHARES AND THEIR TRANSFER
1. CERTIFICATES FOR SHARES.
Certificates representing shares of the corporation shall be in such form as
shall be determined by the directors. Such certificates shall be signed by the
president and by the secretary or by such other officers authorized by law and
by the directors. All certificates for shares shall be consecutively
numbered or otherwise identified. The name and address of the stockholders,
the number of shares and date of issue, shall be entered in the stock transfer
books of the corporation. All certificates surrendered to the corporation for
transfer shall be canceled and no new certificate shall be issued until the
former certificate for a like number of shares shall have been surrendered and
cancelled, except that in case of a lost, destroyed or mutilated certificate a
new one may be issued therefor upon such terms and indemnity to the corporation
as the directors may prescribe.
2. TRANSFERS OF SHARES.
(a) Upon surrender to the corporation or the transfer agent or the
corporation of a certificate for shares duly endorsed or accompanied by proper
evidence of succession, assignment or authority to transfer, it shall be the
duty of the corporation to issue a new certificate to the person entitled
thereto, and cancel the old certificate; every such transfer shall be entered
on the transfer book of the corporation which shall be kept at its principal
office.
(b) The corporation shall be entitled to treat the holder of record of
any share as the holder in fact thereof, and, accordingly, shall not be
bound to recognize any equitable or other claim to or interest in such share
on the part of any other person whether or not it shall have express or other
notice thereof, except as expressly provided by the laws of this state.
7
<PAGE>
ARTICLE VII - FISCAL YEAR
The fiscal year of the corporation shall end on the last day of such month
in each year as the directors may prescribe.
ARTICLE VIII - DIVIDENDS
The directors may from time to time declare, and the corporation may pay,
dividends on its outstanding shares in the manner and upon the terms and
conditions provided by law.
ARTICLE IX - SEAL
The directors may at their discretion provide a corporate seal which shall
have inscribed thereon the name of the corporation, the state of incorporation
and the words, "corporate seal".
ARTICLE X - WAIVER OF NOTICE
Unless otherwise provided by 1aw, whenever any notice is required to be given
to any stockholder or director of the corporation under the provisions of these
by-laws or under the provisions of the articles of incorporation, a waiver
thereof in writing, signed by the person or persons entitled to such notice,
whether before or after the time stated therein, shall be deemed equivalent
to the giving of such notice.
ARTICLE XI - AMENDMENTS
These by-laws may be altered, amended or repealed and new by-laws may be
adopted by action of the Board of Directors.
8
<PAGE>
EXHIBIT 4.1
Stock Certificate
NuTek, Inc.
INCORPORATED UNDER THE LAWS OF THE STATE OF NEVADA
50,000,000 SHARES COMMON STOCK AUTHORIZED $0.001 VALUE
5,000,000 SHARES OF PREFERRED STOCK AUTHORIZED $0.001 VALUE
SHARES
CUSIP NO. 670589-10-0
THIS CERTIFIES THAT
-------------------------------
IS THE RECORD HOLDER OF
Shares of NuTek, Inc. Common Stock transferable on the books of
the Corporation in person or by duly authorized attorney upon surrender of
this Certificate properly endorsed. This Certificate and the shares
represented hereby are subject to the laws of the State of Nevada, and to
the Certificate of Incorporation and Bylaws of the Corporation, as now or
hereafter amended. This certificate is not valid until countersigned by the
Transfer Agent.
WITNESS the facsimile seal of the Corporation and the signature of its
duly authorized officers.
Dated:
/s/ Murray N. Conradie /s/ Pamela Horick
- ------------------------ --------------------
PRESIDENT SECRETARY
Countersigned & Registered:
Colonial Stock Transfer
455 East 400 South, Suite 100
Salt Lake City, UT 84111
By:
------------------------------------------
Authorized Signature
<PAGE>
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in
full according to applicable laws or regulations:
TEN COM - as tenants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right of survivorship
and not as tenants in common
UNIF GIFT MIN ACT - . . . . Custodian. . . .
(Cust) (Minor)
under Uniform Gifts to Minors Act ____________ (State)
Additional abbreviations may also be used though
not in the above list.
For the value received ----------------hereby sell,
assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING
NUMBER OF ASSIGNEE [ ]
- ---------------------------------------------------
(Please print or typewrite name and address including
postal zip code of assignee)
- ----------------- Shares
of capital stock represented by the within Certificate,
do hereby irrevocably constitute and appoint
- ---------------------------
to transfer the sad Shares, on the books of the within names Corporation
with full power of substitution in the premises.
Dated -----------------------
X-----------------------------------------------
THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS
WRITTERN UPON THE FACE OF THIS CERTIFICATE IN EVERY PARTICULAR, WITHOUT
ALTERNATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER. THE SIGNATURE(S)
MUST BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION (Banks,
Stockbrokers, Savings and Loan Associations and Credit Unions).
SIGNATURE GUARANTEED:
TRANSFER FEE WILL APPLY
<PAGE>
EXHIBIT 4.2
SERIES B
PREFERRED STOCK CERTIFICATE
Certificate No. _______ Shares ______
SWISS TECHNIQUE, INC
(A Nevada Corporation)
Series B Preferred Stock, $.001 par value;
100,000 shares authorized
This certifies that __________________________________ is the
owner of _____________ shares of Series B preferred Stock of Swiss
Technique, Inc., fully paid and nonassessable, transferable only
on the books of the Corporation in person or by duly authorized
attorney upon the surrender of this certificate properly endorsed,
and subject to the designations, rights, voting powers, preferences
and the other rights or restrictions set forth hereon.
Witness the seal of the Corporation and the signature of its
authorized officers.
DATED this ______ day of 1991.
SWISS TECHNIQUE, INC.
1. Voting Rights.
The holders of record of said shares of Series B Preferred Stock shall be
entitled to one vote per share at all meetings of, shareholders of the
Corporation. The holders of record shares of the Series B Preferred Stock shall
vote such shares together with the holders of the Corporation's Common Stock,
and not as a separate class.
2. Liquidation' Rights.
In case of the dissolution, liquidation or winding-up of the Corporation,
whether voluntary or involuntary or in any instance, the holders of record of
shares of the Series B Preferred Stock then outstanding shall be entitled to
participate in the distributions, either in cash or in kind, of the
assets of the corporation on a priority basis but only to, the extent
of outstanding shares of Preferred Stock multiplied by its par value
per share.
3. Annual Dividends.
The Corporation shall pay an annual dividend of $0.l5 per share of outstanding
Series B Preferred Stock payable on a quarterly basis within 45 days after each
calendar quarter.
4. Other Dividends
The holders of record of shares of the Series B Preferred Stock outstanding
shall not be entitled to receive other dividends.
5. Optional Conversion
The Series B Preferred Stock shall convertible in whole or in part at the
option of the holder thereof to common stock of the Corporation on the basis
of one Series B Preferred share for one common share at any time. The
conversion rights shall be automatically adjusted to reflect any common stock
splits.
6. Mandatory Redemption.
The corporation must redeem, at $l.00 per share, plus accrued dividends, all
unconverted outstanding shares of Series B Preferred Stock which are
outstanding at the close of business on ___________ or as soon as practicable
after said date.
7. Other Matters.
The holders of the shares of Series B Preferred Stock will have no pre-emptive,
redemption or other rights other that as established by applicable corporate
law.
<PAGE>
Exhibit 10.1
Agreement for Internet Sales and Marketing
AGREEMENT
FOR
INTERNET SALES AND MARKETING; and
DEVELOPMENT OF FUTURE PRODUCTS
THIS AGREEMENT, and each part of it, is entered into as of this 7th day
of September, in the year 1999, by and through Nutek, Inc. with offices at
23792 Rockfield Blvd, Suite 140, Lake Forest, CA 92630 (hereinafter
referred to as "NUTEK") and Kaire Holdings, Inc., a Delaware Corporation with
offices at 7348 Bellaire Avenue, North Hollywood, California 91605 (hereinafter
referred to as "Kaire"). Throughout this Agreement, the names "Kaire" and
"Vitaplanet" and "vitaplanet.com" shall refer to the same ownership entity
which is the above stated Kaire Holdings, Inc. Nutek is in the process of
developing a world wide web e-commerce site which shall be referred to in
this agreement as "NUTEK Site."
WITNESSETH
WHEREAS, NUTEK currently owns or controls certain proprietary rights,
including the use of the name, likeness and character of Scott Helvenston;
certain copyrights, articles, various existing videotapes (as of the date
of this Agreement), exercise manuals, trademarks, artwork, advertising and
marketing paraphernalia, T-shirts, films and in the most general sense, a
vast number of existing "products," which involve or portray or communicate
through the senses, various acts involving Scott Helvenston, and various
associates, partners, characters, and/or agents and other independent
contractors, all of whom have provided services at the direction of an
Scott Helvenston; and
WHEREAS, NUTEK shall in the future develop certain products and/or
properties to which NUTEK shall own or control or retain a proprietary
interest in, including the name, likeness, and character of Scott
Helvenston; certain copyrights, various articles, videotapes which are
currently in production or which shall be in future production, exercise
manuals, trademarks, and each of them, of various descriptions, artwork,
advertising and marketing paraphernalia, T-shirts, films and in the most
general sense, a vast number of "products," which will involve or portray
or communicate through the senses, various acts involving Scott Helvenston,
and various associates, partners, characters, and/or agents and other
independent contractors , all of whom have provided services at the
direction of a NUTEK authority figure; and
WHEREAS, Kaire, who owns and markets an Internet based e-commerce business
which may be found on the world wide web at "vitaplanet.com," desires to
sell certain NUTEK products which include the name, likeness, and character
of Scott Helvenston; specifically, Kaire wishes to sell, among other
things, various existing videotapes which are owned in part or wholly by NUTEK;
and
WHEREAS, Kaire wishes to develop products which include the name, likeness,
and character of Scott Helvenston; specifically, Kaire wishes to share in
the production and ownership and realization of any and all profits
generated from the production of videotapes, workout manuals and fitness
equipment, and any kind of fitness equipment; and
1
<PAGE>
THEREFORE, the parties agree as follows:
Existing NUTEK Owned Products Involving Scott Helvenston.
Kaire shall internationally sell, market and distribute, any all products
owned by NUTEK as of the date this Agreement is executed, which involve
in any way, shape or fashion Scott Helvenston.
Other than the vitaplanet.com Internet site, during any period in which
this agreement is in effect, any all products owned by NUTEK, as of the
date this Agreement is executed, which involve in any way, shape or fashion
Scott Helvenston, may only be sold on the following internet world wide web
addresses: (1) sealtraining.com and (2) NUTEK owned internet sites.
The costs that NUTEK charges Kaire for products in Section 1 of this
Agreement shall not change during the existence of this agreement or any
subsequent period thereof.
NUTEK shall pay Scott Helvenston any and all royalties owed or which may
become due as compensation for any and all sales of existing products.
Development and Production of Videos, Fitness Equipment and
Fitness/Training Manuals.
Both Kaire and NUTEK shall have the right to invest up to 50% (fifty
percent) of the development and production costs necessary to create
future fitness videos, fitness equipment, and fitness/training manuals
which involve Scott Helvenston.
The percentage to which Kaire and NUTEK each contribute for said
development and production costs relative to the overall development
and production costs shall determine each entity's ownership interest in
the final product.
Each entity shall have the right to market said products in any responsible
way necessary for the promotion and sale of the product. Said marketing
costs shall be considered a "development and production cost" for the
purposes of this Agreement. The marketing and/or promotion of any product in
Section 2 on either the Kaire or NUTEK web site shall not be considered a
"marketing cost" for the purpose of this Agreement.
Regarding profits from II. (A.)(1-2)
Profits for products sold on the vitaplanet.com or any other internet web
site owned by Kaire Holdings: 75 % to Kaire and 25 % to NUTEK. Royalties
to Scott Helevenston shall be paid according to the same 75/25 breakdown.
Profits for products sold on the NUTEK Site or any other internet web
site owned by NUTEK: 75 % to NUTEK and 25 % to Kaire. Royalties to Scott
Helevenston shall be paid according to the same 75/25 breakdown.
Profits from 3rd party sales (or non-Kaire/NUTEK owned businesses) shall
be split 50/50. Royalties to Scott Helevenston shall be paid according to
the same 50/50 breakdown.
2
<PAGE>
Term of Agreement.
The terms of this agreement shall be effective for a period no less than
1 year, beginning on the date this Agreement is executed. This Agreement
may be terminated after any 1 year period by either party by giving 30 days
written notice via U.S. mail to the addresses listed above. If no notice
is given, up to three additional 1 year periods shall begin and become
effective at 12:01 a.m. on the day following the last effective day of the
prior period of this Agreement.
Entirety of Agreement.
The provisions contained above, and each of them, are the entire Agreement.
No other part or provision, either written or oral, shall be relevant with
respect to the interpretation this Agreement. Any subsequent addition or
amendment to this Agreement shall be operative to the extent that it
explicitly supplants or replaces any term or condition contained herein.
Kaire Holdings, Inc. NUTEK Inc.
By: Owen Naccarato By: Murray N.Conradie
- ----------------------- ---------------------------
Chief financial Officer President/CEO
Date: 9/2/99 Date: 9/2/99
3
<PAGE>
Exhibit 10.2
Agreement for Promotion and Revenue Sharing Plan
AGREEMENT
FOR
PROMOTION and REVENUE SHARING PLAN
THIS AGREEMENT, and each part of it, is entered into as of this 7th day of
September, in the year 1999, by and through Nutek, Inc.with offices at
23792 Rockfield Blvd, Suite 140, Lake Forest, CA 92630 (hereinafter referred to
as "NUTEK") and Kaire Holdings, Inc., a Delaware Corporation with offices
at 7348 Bellaire Avenue, North Hollywood, California 91605 (hereinafter
referred to as "Kaire"). Throughout this Agreement, the names "Kaire" and
"Vitaplanet" and "vitaplanet.com" shall refer to the same ownership entity
which is the above stated Kaire Holdings, Inc. Nutek is in the process of
developing a world wide web e-commerce site which shall be referred to in this
agreement as "NUTEK Site."
WITNESSETH
WHEREAS, NUTEK in the in the process of developing and launching an internet
based e-commerce site on the world wide web; and
WHEREAS, NUTEK agrees to and desires to promote the "vitaplanet.com"
internet web site;
NOW THEREFORE, the parties agree as follows:
Terms
The "vitaplanet.com" Listing and Link.
NUTEK Shall List "vitaplanet.com" under the heading "Health and Beauty"
or an equivalent category on the home page of the NUTEK Site. Said
"vitaplanet.com" listing shall provide the NUTEK Site visitor with a
link to the "vitaplanet.com" world wide web site once his or her mouse
clicks twice on the "vitaplanet.com" listing or logo.
Consideration.
As consideration for the aforementioned listing and link, Kaire shall
compensate NUTEK in the following way:
4% of the gross sale for any and all non-prescription order from which
the customer was led to the vitaplanet.com web site from the NUTEK web
site; and
A flat fee of .20 US Dollars for each and every prescription sold to a
customer who was led to the vitaplanet.com web site from the NUTEK web
site.
Additional Pharmacies and Health-Related Businesses on the NUTEK Site.
NUTEK agrees that it shall not list in the same competing category as
"vitaplanet.com," at any time during the existence of this agreement,
more than two additional businesses/listings which sell prescription
medications and/or vitamins, and/or herbal remedies, and/or provide
general health care information.
1
<PAGE>
Term of Agreement.
The terms of this agreement shall be effective for a period no less than
180 days, beginning on the date this Agreement is executed. This Agreement
may be terminated after any 180 period by either party by giving 30 days
written notice via U.S. mail to the addresses listed above. If no notice
is given, up to three additional 180 periods shall begin and become effective
at 12:01 a.m. on the day following the last effective day of the prior
period of this Agreement.
Entirety of Agreement.
The provisions contained above, and each of them, are the entire Agreement.
No other part or provision, either written or oral, shall be relevant with
respect to the interpretation this Agreement. Any subsequent addition or
amendment to this Agreement shall be operative to the extent that it
explicitly supplants or replaces any term or condition contained herein.
Kaire Holdings, Inc. NUTEK Inc.
By: /s/ Owen Naccarato By: /s/ Murray N.Conradie
- --------------------------- -------------------------------
Chief financial Officer President/CEO
Date: 9/2/99 Date: 9/2/99
2
<PAGE>
Exhibit 10.3
Purchase Agreement
Elite Fitness Systems Inc.
Nutek Inc.
23792 Rockfield Blvd., Suite 140
Lake Forest CA. 92630
Tel: (949) 587-9400 Fax: (949) 587-9534
<PAGE>
Table of Contents
Table of Contents............................................ 2
Confidentiality Statement ................................... 3
Existing Corporation ........................................ 3
Elite Fitness Systems ....................................... 3
Purchase Agreement with Nutek Inc............................ 3
RECITALS .................................................... 3
PAYMENT...................................................... 4
CONSIDERATIONS............................................... 4
CONFIDENTIALITY.............................................. 5
WARRANTIES................................................... 5
INTEGRATION.................................................. 6
CONSTRUCTION AND JURISDICTION................................ 6
ATTORNEY'S FEES.............................................. 6
2
<PAGE>
Confidentiality Statement
The information embodied in this Purchase Agreement is strictly confidential
and is supplied on the understanding that it will be held confidentially and
not disclosed to third parties without the prior written consent of Nutek,
Inc.
Existing Corporation
Elite Fitness Systems
The existing Corporation Elite Fitness Systems, Inc. is a Nevada Corporation
doing business in California.
Currently, the products in existence in Elite Fitness Systems Inc. are 3 series
of exercise videos, the first being the Ultimate Aerobic Workout, Total Body
Workout and Ab Blast, the second series is 11 minute Lower Body Workout and
11 minute Upper Body Workout, and finally the third series is the ISO
Workouts, Stamina and Strength videos. The company also has it's own website at
sealtraining.com.
Purchase Agreement with Nutek Inc.
Agreement entered into this ____ day of October 1999 by and between Elite
Fitness Systems Inc "SELLER" and Stephen S. Helvenston (President) of 1315 Via
Isidro, Oceanside, CA 92056 hereinafter, referred to as "SELLER" and Nutek
Inc. of 23792 Rockfield Blvd. Suite 140 Lake Forest CA 92630 hereinafter
"PURCHASER".
RECITALS
WHEREAS, PURCHASER is engaged in the business of acquiring, controlling and
managing various companies and corporations, Stephen S. Helvenston has
created and/or holds copyrights to certain video products.
WHEREAS, PURCHASER and SELLER have agreed to enter into this Agreement
whereby PURCHASER will acquire SELLER by purchasing all issued and/or
outstanding shares of SELLER.
WHEREAS, Stephen S. Helvenston has created the various exercise workout
videos, hereinafter referred to as the "product", and
WHEREAS, PURCHASER seeks to acquire this corporation, Elite Fitness Systems,
Inc. which holds all exclusive rights, title and interest to the product
and all future related video exercise products produced by Stephen S.
Helvenston; and
WHEREAS, PURCHASER has an interest and is in the business of developing,
marketing, and the management, promotion, and financing of companies and
products, and has the management knowledge and expertise to promote and
market the product; and
WHEREAS, PURCHASER is willing provide SELLER, the services of financing,
management, promotion and marketing of Product to date and in the future,
in television and all other mediums pursuant to the following terms and
conditions:
Upon execution of this Agreement PURCHASER will acquire SELLER as a wholly
owned subsidiary of Nutek and serves to confirm the arrangement made
between PURCHASER and SELLER as of April 7, 1999.
NOW, THEREFORE, in consideration of these premises and those other terms
and conditions set forth hereinafter, the parties agree as follows:
3
<PAGE>
1. PAYMENT.
1. Stephen S. Helvenston, President of SELLER shall receive Twenty Five
Thousand ($25,000.00) dollars in cash within 30 days maximum of
signing this Agreement. PURCHASER is to sell stock issued to
Stephen S. Helvenston within this 30 day period.
2. Stephen S. Helvenston is to receive a "Royalty Payment" of Twenty
(20%) percent of Net Gross revenues on the sales of existing
products to existing vendors.
3. Stephen S. Helvenston is to receive a "Royalty Payment" of Fifteen
(15%) percent of Net Gross revenues on the sales of products to new
vendors.
4. Stephen S. Helvenston is to receive a "Royalty Payment" of Ten (10%)
percent on all additional revenue generated exclusive of the
existing Product.
5. Royalty Payments to be made monthly no later then the 10th day of
each month following the previous months sales.
6. Stephen S. Helvenston is to receive a monthly salary of Three
Thousand Five Hundred ($3,500.00) dollars with an annual increase of
Ten (10%) percent.
7. Stephen S. Helvenston is to receive One Hundred and Twenty Five
Thousand (125,000) shares of Nutek Restricted stock under Rule 144
which is Restricted from sale for a period of 0ne (1) year from day
of issue. This stock is to be issued within 10 days of signing this
Agreement.
2. CONSIDERATIONS.
1. Failure of PURCHASER to pay SELLER a minimum of 50% of initial
payment as set out in paragraph 1, section 1 above within the 30 day
period and the balance within 45 days will be at SELLER's sole
discretion to cancel this Agreement and retain all funds and stock
issued to SELLER as liquidated damages.
2. SELLER guarantees a minimum sales revenue of Two Hundred Thousand
($200,000.00) per year from existing catalogs and clients, failing
which the "Royalty Payments" will be reduced by Two and One half
(2.5%) percent, effective from date of signing of contract.
3. PURCHASER also agrees to place an additional Twenty Thousand
($20,000.00) dollars into the SELLER's business as a loan account
from PURCHASER to fund operations. This will include a minimum of
Three Thousand Five Hundred ($3,500.00) dollars per month to fund
print media advertising. The revenue sharing is to be increased by
Five (5%) percent until loan is paid back from this additional Five
(5%) Percent. In addition to this, if media rollout of exercise
video campaign returns a rate greater then 2:1, Nutek will forward
additional funding to Elite Fitness Systems to continue promoting
commercial. This amount to be a minimum of One Hundred Thousand
($100,000.00) dollars.
4. PURCHASER will also assist in raising additional funding for SELLER
for the construction of outdoor rock climbing gym and sports area.
5. Net Gross Revenues as referred to in this agreement is sales
revenues less returns, and excludes shipping costs.
6. Stephen S. Helvenston is to submit all contracts submitted to or
issued from SELLER to PURCHASER for approval.
7. PURCHASER to receive from SELLER Fifty (50%) of all net monthly
proceeds after deduction of salary and royalty payments.
8. PURCHASER is to receive all operating books of account of SELLER and
to be responsible for the day to day administration of Elite Fitness
Systems Inc, which is to include all invoicing, accounts receivable
processing and general day to day management of books of record.
4
<PAGE>
3. CONFIDENTIALITY.
SELLER and Stephen S. Helvenston agrees to hold all information that SELLER
and Stephen S. Helvenston obtains as confidential for the purposes of this
agreement. SELLER and Stephen S. Helvenston agree not to use or disclose
confidential information to any person or entity, except as necessary under
this Agreement. Nothing herein above written shall prevent the parties from
making any disclosure which is required by law, government regulation, or
rule, or which disclosure is ordered or otherwise required by a court of
competent jurisdiction through its subpoena power or otherwise or by a state or
federal regulatory or other governmental agency.
4. WARRANTIES.
SELLER hereby represents and warrants to PURCHASER the following:
SELLER is a corporation duly incorporated, validly existing and in good
standing under the laws of the State Nevada.
The execution, delivery and performance of this Agreement is within SELLER's
powers and does not contravene any law or contractual restriction binding
on or affecting SELLER.
This Agreement is a legal, valid and binding obligation of SELLER
enforceable against SELLER in accordance with its respective terms.
SELLER has full right, title and ownership of the Product.
PURCHASER hereby represents and warrants to SELLER the following:
PURCHASER is a corporation duly incorporated, validly existing and in good
standing under the laws of the State Nevada.
The execution, delivery and performance by PURCHASER of this Agreement is
within PURCHASER's corporate powers, has been duly authorized by all necessary
corporate or stockholder action on its part, does not contravene restriction
binding on or affecting PURCHASER or any of its properties, and do not result
in or require the creation of any lien, security interest or other charge or
encumbrance upon or with respect to any of its properties.
This Agreement is a legal, valid and binding obligation of PURCHASER
enforceable against PURCHASER in accordance with its respective terms.
5
<PAGE>
5. INTEGRATION.
This Agreement together with all exhibits amendments and supplements represents
the complete and entire Agreement between the parties hereto. This Agreement
either embodies or supersedes all prior, contemporaneous or subsequent oral
agreements, representations, understandings, and all written notations,
memoranda or correspondence of any party hereto, their agents, employees or
other related persons, related to the work contemplated in this Agreement.
6. CONSTRUCTION AND JURISDICTION.
This Agreement shall be construed and enforced pursuant to the laws of the
State of California. By affixing their signatures to this agreement, the
parties hereby submit themselves to the courts of the State of California, for
the judicial resolution of any disputes arising under the terms, interpretation
or performance of this agreement. If any one or more paragraphs in this
Agreement is found to be unenforceable or invalid, the parties agreement on
all other paragraphs shall remain valid. Non enforcement of any section of this
Agreement by either party does not constitute a waiver or consent and both
parties reserve the right to enforce this Agreement at their discretion.
7. ATTORNEY'S FEES.
In the event either party is required to retain counsel to enforce the
provisions of this Agreement or to bring legal action to enforce the provisions
of this Agreement or remedy any breaches of this Agreement, the prevailing
party in such action shall be entitled to its costs and attorney's fees
incurred in such action or procedure, whether or not an action is ultimately
filed in a court of proper agreed jurisdiction.
WHEREFORE, the parties have affixed their signatures to this Agreement the date
first above stated. Furthermore, by signing this Agreement all signature
parties acknowledge they fully understand and agree to all the terms and
conditions of this Agreement.
PURCHASER SELLER
By: /s/ Murray N. Conradie By: /s/ Stephen S. Helvenston
- ----------------------------- ---------------------------------
Murray N. Conradie Stephen S. Helvenston
President/CEO President
Nutek Inc. Elite Fitness
Systems, Inc.
Date: October 4, 1999 Date: October 4, 1999
6
<PAGE>
EXHIBIT 10.4
Purchase Agreement
Switch Cover Plate Providing Automatic Emergency Lighting Patent #5833350
Nutek Inc.
23792 Rockfield Blvd. Suite 140
Lake Forest CA. 92630
Tel: (949) 587-9400 Fax: (949) 587-9534
<PAGE>
Table of Contents
Table of Contents.......................................... 2
Confidentiality Statement.................................. 3
Existing Product........................................... 3
PRODUCT ................................................... 3
Purchase Agreement with Nutek Inc.......................... 3
RECITALS................................................... 3
SERVICE.................................................... 4
PRODUCT.................................................... 4
RESPONSIBILITIES........................................... 4
PAYMENT.................................................... 4
CONFIDENTIALITY............................................ 5
NON COMPETE................................................ 5
WARRANTIES................................................. 5
INTEGRATION................................................ 6
CONSTRUCTION AND JURISDICTION.............................. 6
ATTORNEY'S FEES............................................ 6
2
<PAGE>
Confidentiality Statement
The information embodied in this Purchase Agreement is strictly confidential
and is supplied on the understanding that it will be held confidentially and
not disclosed to third parties without the prior written consent of Nutek,
Inc.
Existing Product
PRODUCT
The product is the Switch Cover Plate Providing Emergency Lighting covered by
Patent number 583350
Currently, the product exists and has been Patented in the United States with
Patent Numbers 583350, the product is currently is in the prototype stage.
The molds and tooling to manufacture the product are not in existence, neither
are the tooling to manufacture the packaging for the product. Nutek Inc. is
seeking to purchase all rights, title and interest to the product.
Purchase Agreement with Nutek, Inc.
Agreement entered into this 27th day of August, 1999 by and between Electro
Static Solutions LLC, of 10005 Muirlands Ave, Suite I-J, Irvine CA 92618
hereinafter, referred to as "SELLER" and Nutek Inc. of 23792 Rockfield
Blvd., Suite 140 Lake Forest CA 92630 hereinafter "PURCHASER".
RECITALS
WHEREAS, SELLER has created the Switch Cover Plate Providing Emergency Lighting
covered by Patent number 583350 the "product". SELLER has not produced the
required tooling and dies to produce the product and packaging, and
WHEREAS, SELLER seeks to manufacture and market this product which he holds all
rights, patents, title and interest to, to the general public at large; and
WHEREAS, PURCHASER has an interest and is in the business of developing,
marketing, manufacturing and the management, promotion, and financing of
companies and products, and has the management knowledge and expertise to
manufacture, promote and market the product; and
WHEREAS, PURCHASER is willing to purchase all rights, patents, title and
interest to the "product" pursuant to the following terms and conditions:
NOW, THEREFORE, in consideration of these premises and those other terms and
conditions set forth hereinafter, the parties agree as follows:
3
<PAGE>
1. SERVICE.
PURCHASER is to receive all rights, patents, title and interest to the
"product". The parties may amend and supplement this agreement from time to
time in writing under mutual agreement, and such supplement, signed by both
parties with all amendments and supplements thereto, shall be attached to this
Agreement, and made a part hereof.
2. PRODUCT.
PURCHASER will acquire and retain sole and exclusive rights to the Product, and
any and all updates and revisions, PURCHASER shall have as sole and exclusive
all the world wide rights hereinafter, referred to as the "territory", rights,
to market, and air the Product, as well as all updates and revisions, and sole
and exclusive right in the Territory to distribute the product in all media,
now or hereafter devised, including without limitation the following media:
(i) all forms of direct response television including 800/900 and similar,
telephone numbers; (ii) print media; (iii) outbound telemarketing; (iv)
package inserts; (v) catalogs; (vi) direct sales; (vii) radio; (viii) televised
shopping; (ix) credit card syndication; (x) direct mail; (xi) retail; and
(xii) seminars.
3. RESPONSIBILITIES.
PURCHASER will create infomercials with direct response phone numbers,
addresses and, if applicable, sales tax and shipping message integrated
into infomercials.
PURCHASER shall accommodate consumer payments for Product; and shall establish
and maintain or contract out for the services of 800 inbound telephone services
to take calls from customers regarding Product; and shall establish and
maintain production services in order to deliver Product to consumers; and
shall maintain continuity and customer service support programs if and when
under the circumstances determines it is appropriate; and shall establish and
maintain marketing programs through direct response media other than
television, which by way of example include but are not limited to radio,
print, catalog, and others, if and when under the circumstances it is
determined it is appropriate; and shall market the Product in retail,
professional, institutional and all other markets, if and when under the
circumstances it is determined to be appropriate; and may modify the services
it performs and perform additional services as it may determine is
appropriate under the circumstances in order to promote the Product.
4. PAYMENT.
I. PURCHASER shall receive all rights, title and interest to the product.
PURCHASER shall pay SELLER a "Royalty Payment" of Three (3%) percent of Net
Gross revenues.
II. PURCHASER to pay Six Hundred Thousand (600,000) shares of Nutek
restricted stock within 14 days of signing of agreement. This stock has a
value of $0.30 per share and represents One Hundred Eighty Thousand dollars
($180,000.00). This stock is to be restricted for a period of one (1) year.
III. PURCHASER will pay Fifty Thousand ($50,000.00) dollars once it has
completed it's due diligence on the product, this is to take no more than
thirty (30) days. The purchaser will then pay an additional Thirty Thousand
($30,000.00) dollars 30 days later, an additional Thirty Thousand ($30,000.00)
dollars 60 days later and a final cash payment of Forty Thousand ($40,000.00)
no later than 90 days after the first payment has been made. This gives a
total cash investment of One Hundred and Fifty Thousand ($150,000.00) dollars.
IV. Royalty payments will be increased by Seven (7%) percent until the
balance of the Six Hundred and Seventy Thousand ($670,000.00) still remaining
from the One Million ($1,000,000.00) dollar purchase price has been paid.
V. Royalty Payments to be made quarterly on the first day of each quarter
commencing from date of first launching of the product. PURCHASER agrees to
submit quarterly reports to SELLER and to keep SELLER informed of the number
of Products shipped and amount paid. Reports shall be submitted within
thirty (30) days of the end of each quarter. Such reports shall include the
number of Product shipped, sold and amount paid from previous quarter.
4
<PAGE>
5. CONFIDENTIALITY.
SELLER agrees to hold all information that SELLER obtains as confidential for
the purposes of this agreement. SELLER agrees not to use or disclose
confidential information to any person or entity, except as necessary under
this Agreement. Nothing herein above written shall prevent the parties from
making any disclosure which is required by law, government regulation, or rule,
or which disclosure is ordered or otherwise required by a court of competent
jurisdiction through its subpoena power or otherwise or by a state or federal
regulatory or other governmental agency.
6. NON COMPETE.
The SELLER and PURCHASER both agree that during the term of this Agreement they
shall not either directly or indirectly compete or enter into any agreement to
compete in any way with each other. The provisions of this section shall be
enforceable in a court of law or equity by an injunction or an action of
specific performance.
7. WARRANTIES.
SELLER hereby represents and warrants to PURCHASER the following:
The execution, delivery and performance of this Agreement is within SELLER's
powers and does not contravene any law or contractual restriction binding
on or affecting SELLER.
This Agreement is a legal, valid and binding obligation of SELLER enforceable
against SELLER in accordance with its respective terms.
SELLER has full right, patents, title and ownership of the Product.
PURCHASER hereby represents and warrants to SELLER the following:
PURCHASER is a corporation duly incorporated, validly existing and in good
standing under the laws of the State Nevada.
The execution, delivery and performance by PURCHASER of this Agreement is
within PURCHASER's corporate powers, has been duly authorized by all necessary
corporate or stockholder action on its part, does not contravene restriction
binding on or affecting PURCHASER or any of its properties, and do not result
in or require the creation of any lien, security interest or other charge or
encumbrance upon or with respect to any of its properties.
This Agreement is a legal, valid and binding obligation of PURCHASER
enforceable against PURCHASER in accordance with its respective terms.
5
<PAGE>
8. INTEGRATION.
This Agreement together with all exhibits amendments and supplements represents
the complete and entire Agreement between the parties hereto. This Agreement
either embodies or supersedes all prior, contemporaneous or subsequent oral
agreements, representations, understandings, and all written notations,
memoranda or correspondence of any party hereto, their agents, employees or
other related persons, related to the work contemplated in this Agreement.
9. CONSTRUCTION AND JURISDICTION.
This Agreement shall be construed and enforced pursuant to the laws of the
State of California. By affixing their signatures to this agreement, the
parties hereby submit themselves to the courts of the State of California, for
the judicial resolution of any disputes arising under the terms, interpretation
or performance of this agreement. If any one or more paragraphs in this
Agreement is found to be unenforceable or invalid, the parties agreement on all
other paragraphs shall remain valid. Non enforcement of any section of this
Agreement by either party does not constitute a waiver or consent and both
parties reserve the right to enforce this Agreement at their discretion.
10. ATTORNEY'S FEES.
In the event either party is required to retain counsel to enforce the
provisions of this Agreement or to bring legal action to enforce the provisions
of this Agreement or remedy any breaches of this Agreement, the prevailing
party in such action shall be entitled to its costs and attorney's fees
incurred in such action or procedure, whether or not an action is ultimately
filed in a court of proper agreed jurisdiction.
WHEREFORE, the parties have affixed their signatures to this Agreement the date
first above stated. Furthermore, by signing this Agreement all signature
parties acknowledge they fully understand and agree to all the terms and
conditions of this Agreement.
PURCHASER SELLER
Signature Signature
/s/ Murray N. Conradie /s/ Dan Delmonico
- --------------------------- --------------------------
CEO/President Nutek Inc.
/s/ Howard Walman
-------------------------
Electro Static Solutions, LLC
Date: 9/15/99 Date: 9/15/99
6
<PAGE>
EXHIBIT 10.5
Purchase Agreement - Clock Molds
Nutek Inc.
23792 Rockfield Blvd., Suite 140
Lake Forest, CA 92630 Tel: (949) 587-9400
Fax: (949) 587-9534
<PAGE>
Table of Contents
Table of Contents................................................ 2
Confidentiality Statement........................................ 3
Existing Product................................................. 3
PRODUCT.......................................................... 3
Purchase Agreement with Nutek Inc................................ 3
RECITALS......................................................... 3
SERVICE.......................................................... 4
PRODUCT.......................................................... 4
RESPONSIBILITIES................................................. 4
PAYMENT.......................................................... 4
CONFIDENTIALITY.................................................. 5
NON COMPETE...................................................... 5
WARRANTIES....................................................... 5
INTEGRATION...................................................... 6
CONSTRUCTION AND JURISDICTION.................................... 6
ATTORNEY'S FEES.................................................. 6
2
<PAGE>
Confidentiality Statement
The information embodied in this Purchase Agreement is strictly confidential
and is supplied on the understanding that it will be held confidentially and
not disclosed to third parties without the prior written consent of Nutek,
Inc.
Existing Product
PRODUCT
The product is the clock molds currently owned by certain individuals and
Century Clocks, S.A.
The molds and tooling to are in existence. Nutek Inc. is seeking to purchase
all rights, title and interest to the product.
Purchase Agreement with Nutek Inc.
Agreement entered into this 27th day of April, 1999 by and between Century
Clocks S.A., Brett Peattie, Edward Shaw and Murray Conradie hereinafter,
referred to as "SELLER" and Nutek, Inc. of 23792 Rockfield Blvd., Suite 140
Lake Forest CA 92630 hereinafter "PURCHASER".
RECITALS
WHEREAS, SELLER has created and has sole right and title to several molds used
for the manufacture of clocks the "product". SELLER has the required tooling
and dies to produce the clocks Nutek requires, and
WHEREAS, SELLER seeks to sell this product which he holds all rights, patents,
title and interest to, to the general public at large; and
WHEREAS, PURCHASER has an interest and is in the business of developing,
marketing, manufacturing and the management, promotion of clocks and has the
management knowledge and expertise to manufacture, promote and market the
product; and
WHEREAS, PURCHASER is willing to purchase all rights, patents, title and
interest to the "product" pursuant to the following terms and conditions:
NOW, THEREFORE, in consideration of these premises and those other terms and
conditions set forth hereinafter, the parties agree as follows:
3
<PAGE>
1. SERVICE.
PURCHASER is to receive all rights, patents, title and interest to the
"product". The parties may amend and supplement this agreement from time to
time in writing under mutual agreement, and such supplement, signed by both
parties with all amendments and supplements thereto, shall be attached to this
Agreement, and made a part hereof.
2. PRODUCT.
PURCHASER will acquire and retain sole and exclusive rights to the Product.
4. PAYMENT.
I. PURCHASER shall receive all rights, title and interest to the product.
PURCHASER shall pay SELLER a "Royalty Payment" of Three (3%) percent of Net
Gross revenues, and a payment of Five Hundred and Twenty Thousand ($520,000.00)
dollars made up as follows in the next paragraphs.
II. PURCHASER to pay Sixty Five Thousand (65,000) shares of Nutek restricted
stock within 30 days of signing of agreement to Brett Peattie. This stock
has a value of $0.185 per share and represents Twelve Thousand dollars
($12,000.00). PURCHASER to pay Two Hundred Thousand (200,000) shares of
Nutek restricted stock within 60 days of signing of agreement to Edward
Shaw. This stock has a value of $0.20 per share and represents Forty Thousand
dollars ($40,000.00). PURCHASER to pay One million Fifty Thousand (1,050,000)
shares of Nutek restricted stock within 150 days of signing of agreement to
Murray Conradie. This stock has a value of $0.35 per share and represents
Forty Thousand dollars ($367,500.00). This stock is to be restricted for a
period of one (1) year.
III. PURCHASER will pay Forty Three Thousand ($43,000.00) dollars in cash to
Century Clocks SA in no more than thirty (30) days. Murray Conradie will
enter on the books of Century Clocks Inc, an amount owed to him by Century
Clocks Inc. of Fifty Seven Thousand ($57,000.00) dollars for cash already paid
to Century Clocks SA for the molds. The molds are to be utilized as
collateral for this loan.
IV. Royalty payments will be increased by Two (2%) percent until the balance
of the loan as referenced in paragraph (III) has been paid in full.
V. PURCHASER agrees to submit quarterly reports to SELLER and to keep SELLER
informed of the number of Products shipped and amount paid. Reports shall be
submitted within thirty (30) days of the end of each quarter. Such reports
shall include the number of Product shipped, sold and amount paid from previous
quarter.
4
<PAGE>
4. CONFIDENTIALITY.
SELLER agrees to hold all information that SELLER obtains as confidential for
the purposes of this agreement. SELLER agrees not to use or disclose
confidential information to any person or entity, except as necessary under
this Agreement. Nothing herein above written shall prevent the parties from
making any disclosure which is required by law, government regulation, or rule,
or which disclosure is ordered or otherwise required by a court of competent
jurisdiction through its subpoena power or otherwise or by a state or federal
regulatory or other governmental agency.
5. NON COMPETE.
The SELLER and PURCHASER both agree that during the term of this Agreement they
shall not either directly or indirectly compete or enter into any agreement to
compete in any way with each other. The provisions of this section shall be
enforceable in a court of law or equity by an injunction or an action of
specific performance.
6. WARRANTIES.
SELLER hereby represents and warrants to PURCHASER the following:
The execution, delivery and performance of this Agreement is within SELLER's
powers and does not contravene any law or contractual restriction binding on
or affecting SELLER.
This Agreement is a legal, valid and binding obligation of SELLER enforceable
against SELLER in accordance with its respective terms.
SELLER has full right, title and ownership of the Product.
PURCHASER hereby represents and warrants to SELLER the following:
PURCHASER is a corporation duly incorporated, validly existing and in good
standing under the laws of the State Nevada. The execution, delivery and
performance by PURCHASER of this Agreement is within PURCHASER's corporate
powers, has been duly authorized by all necessary corporate or stockholder
action on its part, does not contravene restriction binding on or affecting
PURCHASER or any of its properties, and do not result in or require the
creation of any lien, security interest or other charge or encumbrance upon
or with respect to any of its properties.
This Agreement is a legal, valid and binding obligation of PURCHASER
enforceable against PURCHASER in accordance with its respective terms.
5
<PAGE>
7. INTEGRATION.
This Agreement together with all exhibits amendments and supplements represents
the complete and entire Agreement between the parties hereto. This Agreement
either embodies or supersedes all prior, contemporaneous or subsequent oral
agreements, representations, understandings, and all written notations,
memoranda or correspondence of any party hereto, their agents, employees or
other related persons, related to the work contemplated in this Agreement.
8. CONSTRUCTION AND JURISDICTION.
This Agreement shall be construed and enforced pursuant to the laws of the
State of California, USA. By affixing their signatures to this agreement, the
parties hereby submit themselves to the courts of the State of California, for
the judicial resolution of any disputes arising under the terms, interpretation
or performance of this agreement. If any one or more paragraphs in this
Agreement is found to be unenforceable or invalid, the parties agreement on all
other paragraphs shall remain valid. Non enforcement of any section of this
Agreement by either party does not constitute a waiver or consent and both
parties reserve the right to enforce this Agreement at their discretion.
9. ATTORNEY'S FEES.
In the event either party is required to retain counsel to enforce the
provisions of this Agreement or to bring legal action to enforce the provisions
of this Agreement or remedy any breaches of this Agreement, the prevailing
party in such action shall be entitled to its costs and attorney's fees
incurred in such action or procedure, whether or not an action is ultimately
filed in a court of proper agreed jurisdiction.
WHEREFORE, the parties have affixed their signatures to this Agreement the date
first above stated. Furthermore, by signing this Agreement all signature
parties acknowledge they fully understand and agree to all the terms and
conditions of this Agreement.
PURCHASER SELLER
Signatures Signatures
/s/ Murray N. Conradie /s/ Brett Peattie
- ------------------------- ------------------------
CEO/President Nutek Inc. Century Clocks, SA
/s/ Edward Shaw
------------------------
Century Clocks, SA
/s/ Murray Conradie
------------------------
Century Clocks, SA
Date: April 30, 1999 Date: April 30, 1999
6
<PAGE>
EXHIBIT 10.6
PLAN OF PURCHASE AND AGREEMENT
Plan of Purchase and Agreement dated this 30 day of November, 1997,
by and between NUTEK, INC. a publicly held corporation, organized and
existing under the laws of the State of Nevada, with its principal office
at 23792 Rockfield Blvd., Suite #140, Lake Forest, California, 92630 (the
'PURCHASER' and SRC INTERNATIONAL INC., a closely held corporation,
organized and existing under the laws of the State of Illinois, with its
principal Office at 142 S. Lodge Lane, Lombard, Illinois 60148 ("SRC")
and its SHAREHOLDERS, listed on Attachment A.
WHEREAS, the PURCHASER, By its Certificate of Incorporation, has authorized
capital stock consisting of 50,000,000 shares of voting Common Stock par
value $.001 per share, of which shares are issued and outstanding ("Purchasers"
Common Stock), and,
Whereas, SRC, by its Certificate of Incorporation, has authorized
capital stock consisting of 50,000,000 shares of voting Common Stock,
par value $.001 per share, of which are now issued and outstanding,
owned by its SHAREHOLDERS, as listed on Attachment A, and,
WHEREAS, the parties hereto desire to adopt a tax-free stock for
stock exchange of shares, and,
WHEREAS, the parties hereto believe many efficiencies can be accomplished
as a result of this Plan of Purchase, such as, development of a stronger
organization with greater access to capital for growth and lower financing
costs, diversification into new fields, improvement of competitive position,
and promotion of the expansion of the business and operations presently
conducted by the PURCHASER and SRC.
NOW, THEREFORE, in consideration of the foregoing and mutual agreements
hereinafter set forth, the parties hereto agree as follows:
1. Adoption of the Plan of Purchase
The parties hereto hereby adopt the plan of Purchase which will comprise
the acquisition by the PURCHASER of 100% of the outstanding voting
shares of S R C solely in exchange for voting shares of the Common Stock,
par value $.001 per share (the Common stock) of the PURCHASER upon and
subject to the terms and conditions of this Plan of Purchase as hereinafter
set forth. The parties hereto will promptly take such corporate and legal
action as in the Opinion of their respective officers may be necessary
or desirable to effect such Plan of Purchase.
2. Manner of Exchange of Shares
2.1 Subject to the terms and conditions of this Plan of Purchase
and Agreement, the manner of exchange of the outstanding shares of the
Common Stock of S R C for the shares of the PURCHASER shall be as follows:
2.1.1 The SHAREHOLDERS of S R C each agree to assign, transfer and deliver
all of the Common Stock of SRC owned by them, for a total ----- of shares,
constituting 100% of the outstanding shares of S R C and free and clear of
all liens, pledges, charges and encumbrances of every find, nature
and description to the PURCHASER on the closing (as hereinafter defined) in
exchange for the shares of the PURCHASER referred to in paragraph 2.1.2
pursuant to the Plan of Purchase and Agreement.
2.1.2 On the Closing Date, the PURCHASER hereby agrees to assign, transfer
and deliver to each SHAREHOLDER one share of NuTek, Inc. Common Stock for
every one share of S R C Common Stock delivered, for a total of --- shares.
1
<PAGE>
3. Closing
The Closing provided for in this Agreement shall take place at the offices of
the PURCHASER on the day of November, 1997, or at such other place or such
other time as the parties shall mutually agree (the "Closing"),
4. Schedules of Properties, Contracts and Personnel Data to be Delivered by
S R C prior to Closing SRC shall deliver to the PURCHASER, as soon as practical
after the execution hereof, but in no event later than ten days before the
Closing, accurate lists and summary descriptions, certified correct by
authorized officers of SRC, of the following:
4.1 Real Property - All real property owned of record or beneficially or
leased by the Company, accompanied by the original or certified copies of the
deeds, leases, title insurance polices and other relevant documents.
4.2 Inventories - Inventories of materials, machinery, equipment,
furniture and fixtures, as recorded in the books of account of SRC.
4.3 Patents, Trademarks, Trade secrets, Etc. All patents, patent
applications, trademarks, trademark registration and applications thereof,
patent licenses, contracts with employees or others relating in whole or in
part to disclosure, assignments or patenting of any invention, discoveries,
improvements, processes, formulae or other know-how and all other
agreements relating to any item in any categories referred to herein owned
partially or totally by S R C, accompanied by the originals or certified
copies thereof.
4.4 Automobiles and Trucks - A schedule of all autos, trucks and other
vehicles owned or leased by SRC.
4.5 Insurance policies - A schedule of all insurance policies, respect to
S R C and covering its properties, building, machinery, equipment, furniture,
fixtures, and operations, accompanied by the originals or certified Copies
thereof.
4.6 Certain Salaried Employees - the names and current salary
rates of all of S R C's present officers, directors and employees whose
current annual salary rate is equivalent to $15,000 or more, together
with a summary of bonuses, additional compensation Such as an overriding
royalty, and other like benefits, if any, paid or payable to such persons
for the calendar years 1997 and 199a
4.7 Banks - The name or each bank, in which S R C has an account
or safety deposit box, the amount of deposit therein, and the names of
all persons authorized to draw thereon or have access thereto.
4.8 Powers of Attorney - The names of all persons, if any, holding powers
of attorney from S R C.
4.9 Stock Options - The names of all optionees, if any, holding
outstanding options to purchase the stock of SRC, the date and expiration date
thereof, the number of shares of stock subject thereto and the option price.
4.10 Loan and Credit Agreements - All mortgages, deeds of trust,
loan or credit agreements, performance bonds, and similar instruments
to which S R C is a party.
2
<PAGE>
4.11 Government Authorization or License - All authorizations,
licenses or registrations or applications therefor not otherwise covered
herein, presently issued to registered in the name of, SRC, necessary
for the conduct of its business, accompanied by the originals or certified
copies thereof.
5. Documents to be Delivered to the PURCHASER By S R C at the Closing
5.1 At the Closing, S R C and/or the SHAREHOLDERS shall deliver
to the PURCHASER the following:
5.1.1 Certificates representing all of the outstanding shares of S R C, for
a total of shares, all of which shall be duly endorsed in blank, or, in the
alternative, with stock powers affixed thereto, in proper form for transfer,
with transfer taxes with respect to such shares, it applicable, paid, or a
check for the necessary costs thereof delivered.
5.1.2 Contracts for all of the officers and directors of SRC who are
remaining with the Company. Resignations for those who are not remaining.
5.1.3 The minute book, stock certificate book and ledger and other similar
corporate records, including the items listed in paragraph 4.1 through 4.11
hereof, it not previously delivered, together with all books, records, tax
returns and other similar items necessary or convenient to the conduct of the
business of the COMPANY.
5.1.4 The original or certified copies of the certificate of Incorporation
and By-Laws of S R C.
3.1.5 A management prepared Balance sheet and Statement of Profit and
Loss of S R C, for the period ending November 30, 1997, In conformity with
generally accepted accounting principles applied on a consistent basis.
6. Warranties of SRC and the SHAREHOLDERS that:
6.1 S R C and the SHAREHOLDERS represent, warrant and covenant
6.1.1 S R C is a corporation organized and existing under the
laws of the State of Illinois, with full authority and licenses wherever
required in order to conduct its business as presently being carried on
and with full power and authority to carry out the transaction contemplated
under this Plan of Purchase and Agreement.
6.1.2 The Common Stock of SRC to be delivered to the PURCHASER
has been validly issued, fully paid and non-assessable and that such shares
are, and shall be free and clear of all liens, pledges, charges, options,
calls, agreements and encumbrances of every kind, nature and description.
6.1.3 All corporate and other proceedings required to be taken
by or on its part to authorize it to carry this Plan of Purchase and
Agreement have been duly and properly taken and this Plan of Purchase
and Agreement is valid and binding obligation of S R C and the SHAREHOLDERS
and enforceable in accordance with its terms.
6.1.4. The original or certified copies of the Certificate of
Authority and by-Laws of S R C delivered to the PURCHASER are correct
and complete.
6.1.5 S R C has no material liabilities or obligations except those disclosed
on the financial statements of S R C delivered to the PURCHASER pursuant to
paragraph 5.1.5 hereof or incurred in the normal and regular conduct of its
business since the date of the aforesaid financial statements.
3
<PAGE>
6.1.6 S R C is not a party to any written or oral, express or implied,
agreement of any kind, nature or description, except those required to be set
forth in paragraphs 4.1 through 4.11 hereof.
6.1.7 S R C has in all respects performed all obligations required to be
performed by it to date and is not in default under any agreement, lease,
or other instrument of which it is a party.
6.1.8 There are no actions, suits, proceedings, or investigations (whether
or not purportedly on behalf of S R C), threatened against or affecting S R C
or its properties, business, at law or in equity, or before any federal, state
municipal or other governmental department, Commission board, bureau,
agency, instrumentality, domestic or foreign.
6.1.9 SRC has complied in all material respects with all laws regu1ations
and judicial or administrative tribunal orders applicable to its business and
holds all licenses or permits required to conduct the business now being
conducted by it.
6.1.10 All federal, state and local tax returns required to be filed by
SRC have been duly filed. All federal, state, city, profits, franchise,
sales, use, occupation, property, excise or other taxes due have been duly
paid or adequately reserved for upon the books of S R C.
6.1.11 No representation or warranty by S R C or the SHAREHOLDERS in
this Plan of Purchase and Agreement or in any document delivered pursuant
to the terms hereof or in connection with the consummation of the
transaction contemplated hereby will contain any untrue statement of material
fact or omit to state a material fact necessary to make the statement contained
therein not misleading.
6.1.12 The representations and warranties of S R C and the
SHAREHOLDERS contained herein shall be true as of the Closing with the
same effect as though all such representations and warranties had been
made on and as of that date.
7. Documents to be Delivered to S R C by the PURCHASER at the Closing
7.1 At the Closing, the PURCHASER will deliver to each SHAREHOLDER or
any person or persons authorized, in writing signed by the SHAREHOLDER,
a certificate for the number of shares tendered, on a one for one basis,
of its Common Stock, in the name of each SHAREHOLDER, to which he/she is
entitled pursuant to the provisions of paragraph 2.1.2 hereof, with
transfer taxes and fees with respect to such shares, if applicable, paid,
provided, the PURCHASER receives or has received the shares of the common
stock of S R C to which it is entitled pursuant to paragraph 2.1.1 hereof.
8. Warranties of the Purchaser
8.1 The PURCHASER represents and warrants that:
8.1.1 The PURCHASER is a corporation duly organized and existing
and in good standing under the laws of the State of Nevada, with full
authority and licenses wherever required in order to conduct its business
as now being carried on, and with full power and authority to carry out
the transactions contemplated under this Plan of Purchase and Agreement.
8.1.2 The Common Stock of the PURCHASER to be delivered hereunder is,
and will be, validly issued, fully paid and non-assessable, and such stock
is and shall be free and clear of all encumbrances of every kind, nature or
description.
4
<PAGE>
8.1.3 All corporate and other proceedings required to be taken
by or on its part to authorize it to carry out this Plan of Purchase and
Agreement have been duly and properly taken and this Agreement is a valid
and binding obligation of the PURCHASER enforceable in accordance with
its terms.
8.1.4 The PURCHASER has authorized capital stock consisting of
50,000,000 shares of Common Stock, par value $.001 per share of which
shares are issued and outstanding.
8.1.5 The PURCHASER has authorized preferred stocks outstanding which
amounts, terms and conditions are to be disclosed in writing.
8.1.6 There are no actions, suits, proceedings or investigations
pending or to the knowledge of the PURCHASER threatened against or
affecting the PURCHASER or its properties or business, at law, or in
equity, or before any federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality, domestic
or foreign.
8.1.7 The PURCHASER is not in default with respect to any order,
writ, injunction or decree of any court of federal, state, municipal or
other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign.
8.1.8 The PURCHASER has compiled in all material respect with all laws,
regulations and judicial or administrative tribunal orders applicable to
its business now being conducted by it.
8.1.9 The financial statements of the PURCHASER heretofore
delivered by it to S R C are true and correct in all material respects
and the PURCHASER has no 'material liabilities except those disclosed on
such financial statements or incurred in the normal and regular conduct
of its business since the date of such statements.
8.1.10 The representations and warranties of the PURCHASER
contained herein shall be true as of the Closing with the same effect
as though all such had been made on and as of that date.
8.1.11 The PURCHASER has in all respects performed all obligations
required to be performed by it to date and is not in default under any
agreement, lease, or other instrument of which it is a party
8.1.12 The PURCHASER represents and warranties that no rollback
(reverse split) of NuTek's Common Stock is intended at this time. If
a rollback (reverse split) is performed over the next two years, then
the maximum rollback (reverse split) that the shares issued to the
SHAREHOLDERS of S P C will be subject to is a one new share for two old
shares.
9. Investment Purpose
9.1 The SHAREHOLDERS each understand that the Common Stock to be acquired
by him/her pursuant to this Plan of Purchase and Agreement have not been
registered under the Securities Act of 1933, as amended (the 'Act'). Each
SHAREHOLDER represents that he/she is acquiring the Common Stock to be issued
to them pursuant to this Plan of Purchase and Agreement for investment and
not with a view to, or for sale in connection with, any distribution thereof
and that he/she has no present intention of or distributing the Common stock,
and understands that an appropriate legend is noted on each stock certificate.
5
<PAGE>
9.2 The SHAREHOLDERS each agree that he/she will not offer, sell or
transfer or otherwise dispose of any of the Common Stock, acquired by him/her
pursuant to this Plan of Purchase and Agreement, except in compliance with
the Securities Act of 1933, as amended the Securities Exchange Act of 1934, as
amended and the Rules and Regulations promulgated there under by the
Securities and Exchange Commission.
10. Registration of the Common Stock
If the PURCHASER shall at any time register any securities for its own account
or for the account of others under the Act on Form S-I or any comparable
form, the PURCHASER will give the SHAREHOLDERS timely notice of such
registration (either prior to or upon the filing of a registration statement
in respect thereof) and promptly, after receipt of a written request made by
the SHAREHOLDERS or any one or more of them, within twenty (20) days after
giving of such notice, the PURCHASER at its sole expense, will register under
such Act all or part of such Common Stock covered by such request provided the
offering of such Common Stock may be deferred for a period not exceeding
forty (40) days from the effective date of such registration statement, if
the underwriter for securities to be sold by the PURCHASER is of the opinion
that a simultaneous offering of such Common Stock would adversely interfere
with the sale of such securities.
11. Assigns
All of the terms and provisions of this Plan of Purchase and Agreement shall
be binding upon and inure to the benefit of and be enforceable by the
individual parties hereto and their respective executors, administrators,
heirs, successors and assigns, and the corporate parties hereto and their
respective successors and assigns.
12, Survival of Representations
All representations, warranties and agreements of the parties shall
survive the Closing.
13 Hold Harmless
The PURCHASER agrees to indemnify and hold harmless each shareholder,
officer, director and employee of SRC harmless, from any and all liabilities
to any other person(s) or entity, based on a claim arising out of such
status, during the time, he or she was a shareholder, officer, director or
employee of S R C.
14, Expenses
In connection with this Plan of Purchase and Agreement and the transactions
contemplated hereby, SRC and the SHAREHOLDERS shall pay their own expenses
and costs and the PURCHASER shall pay its own expenses and costs.
15. Further Assurances
Each of the parties hereto will at any time and from time to time before and
after the Closing, upon request of another party so to do, execute,
acknowledge, and deliver all such further acts, deeds, assignments,
transfers, conveyances, powers of attorney and assurances which may be
required to carry out the provisions of this Agreement.
6
<PAGE>
16. Notices
Any notice or other document to be given hereunder or pursuant
hereto to any party shall be in writing and delivered personally or sent
by certified or registered mail, return receipt requested, to the
respective address of the party set forth in the first paragraph on the
first page of this Plan of Purchase and Agreement or listed on the
Attachment A (Shareholder's List).
17. Governing Law
The parties hereto agree that this agreement, regardless of where
executed or delivered, the laws of the State of Nevada shall govern the
interpretation of this Plan of Purchase and venue shall be in a court of
competent jurisdiction located in Las Vegas, Nevada.
18. Amendments and Counterparts
This instrument contains the entire agreement between the parties
and may not be altered, amended or terminated except in writing signed
by all parties. This Plan of Purchase and Agreement may be executed in
one or more counterparts, each of which shall be deemed to be an original,
but all of which together shall constitute one and the same instrument.
IN WITNESS WHEREOF. the parties hereto have caused this plan of Purchase and
Agreement to be duly executed as of the day and year written in the space
provided below or on Attachment A next to the respective lines for signatures.
NUTEK, INC. (PURCHASER)
ATTEST FOR NUTEK, INC.
By: By:
/s/ Michael A. Furr
- ------------------------------
President/CEO, Secretary
Dated: November 30, 1997
NuTek, Inc.
Corporate Seal
S R C INTERNATIONAL, INC. (SELLER)
By: /s/ David K. Zorn
- ----------------------
David Zorn
President
Dated: November 30, 1997
S R C INTERNATIONAL, INC
CORPORATE SEAL
ATTEST FOR S R C INTERNATIONAL, INC.
By: /s/ David K. Zorn
- ----------------------
David Zorn
Secretary
Dated: November 30, 1997
7
<PAGE>
EXHIBIT 10.7
TRANSITIONAL EMPLOYER AGREEMENT
This agreement is made and executed by and between the U.S. Department of
Veterans Affairs Long Beach Medical Center (hereinafter referred to as
V.A.) and NuTek Inc. - Century Clocks (hereinafter referred to as Principal),
located at 23792 Rockfield Suite # 140 Lake Forest, CA 92630 Fax (949) 547-9534
Background: The V.A. would like to provide appropriate work therapy for
veterans with disabilities. Principal recognizes the need to provide work for
veterans with disabilities, and the two parties would like to develop a
project to provide these work opportunities.
1. Project Scope
Labor: V.A. will provide workers from the Compensated Work Therapy
(C.W.T.) Program to perform the following duties: clock manufacture & assembly
Materials and Facilities: For the aforementioned project, Principal shall
provide to V.A., work space, equipment, and supervision except for the
following:
N/A
Cost: The cost to Principal for V.A. workers to perform the work will be $6.50
per hour Any hours over 40 per week will follow conditions outlined by federal
labor laws. Principal agrees to pay the amount stated, subject to the
conditions specified herein.
BILLING: Billings shall be made on a bi-monthly basis for the total hours
worked during the month. Payment is due upon receipt of an invoice and is
considered delinquent (30) days after receipt. Checks shall be made to
"V.A. Account 36X4048", and shall included the bill number on the billing
notice.
Payments shall be mailed with invoice copy to:
Veterans Industries (10/1 17V)
VA Long Beach Health System
5901 F. 7th Street
Long Beach, CA 90822
RECORD KEEPING and VERIFICATION: The work site supervisor shall verify the
hours worked be each V.A. C.W.T. worker at the end of each week. The Principal
shall assign work to V.A. C.W.T. worker within the scope of specifics noted
in this agreement. The Principal shall plan work hours, days and assignments
for V.A. C.W.T. worker in cooperation with V.A. C.W. T. Program Representative.
The workers timecard hours will be faxed by the employer each Monday to Fax #
(562) 494-5764 to insure prompt payment for workers.
2. Independent Contractor
It is agreed that V.A. shall be an independent contractor with respect to
Principal. It is explicitly agreed that patients, volunteers, and V.A.
staff who are involved with the project are in no event to be considered
employees, agents of servants of the Principal.
3. Term and Termination
TERM: The term of this agreement shall be from 5-24-99 to 5-24-02. Unless
terminated by either party prior to 5-24-02.
TERMINATION: This agreement shall be binding on the parties herein
unless either party it necessary to terminate this agreement.
1
<PAGE>
4. Miscellaneous
SAFETY: Principal agrees to comply at its expense with safety, health and
work laws, regulations and rules. Principle will also ensure compliance with
safe work practices and use of protective equipment as required by federal,
state and local governments.
INJURY: Veterans will return to the V.A. for non-life threatening medical
conditions which may arise. If the requirement for treatment is not urgent
and the veteran is able, the veteran should use his or her own means of
transportation to return to the V.A Medical Center.
For non-life threatening but urgent medical problems, the principal shall
contact Jim Bradford at (562) 494-5588 or Cheryl Iwata, Compensated Work
Therapy Manager at (562) 494-5590, extension 2118. If unable to reach either
of the aforementioned, contact the Chief, Vocational Rehabilitation Therapy
(562) 494-5511.
IN THE EVENT OF A LIFE THREATENING EMERGENCY DIAL 911. Expense for
transportation and treatment will be born by the V.A.
RISK OF LOSS: The Department of Veterans Affairs shall not be liable for any
loss or damage to the principals property or expenses incidental to such loss
or damage, except that the United States shall be responsible for any such loss
or damage, not covered by insurance or for which the Principal is not otherwise
reimbursed, which is caused by the negligent or wrongful act or omission of a
V.A. C.W.T. worker acting within the scope of his or her employment, but only
to the extent permitted by and in accordance with the procedure of the Federal
Tort Claims Act.
All participants in the C.W.T. program will be veterans undergoing treatment by
V.A. and are entitled to benefits as such, including treatment and/or
compensation as appropriate for injuries suffered. They shall not be held or
considered as employees of V.A. or private industries with whom contractual
arrangements have been entered. The C.W.T. participants are in a prescribed
therapeutic treatment program, and are not covered by Workers Compensation --
but are covered by the V.A.
TOOLS and EQUIPMENT;
The principal will provide special tools and/or equipment required for the
Tools or equipment of a general nature will be the responsibility of V.A.
Definitions of "special" and "general' will he negotiated. List of tools
supplied: None.
TAX: V.A. C.W.T. workers are participants receiving treatment in
a vocational rehabilitation program. V.A. is responsible for all income
reporting. The Principal is not responsible for social security, federal
and state income taxes. Any other federal, state and local taxes that would
be applicable to this agreement will be the responsibility of the Principal.
ALTERATIONS: This agreement may not be altered or amended except
by written agreement.
ENTIRETY: This agreement is the entire agreement and supersedes any previous
agreement of representation with respect to the subject matter between
Principal and V.A.
2
<PAGE>
AGREEMENT RE: CHANGE OF MANAGEMENT OF Nutek Inc.
This Agreement Regarding Change of management of NuTek, Inc., ("Nutek") is made
and entered into by and among, Michael Furr ("Furr'), having his principal
place of business at 15540 Rockfield Blvd., #C-200, Irvine CA 92618 and
Rodger W.Garrity ("Garrity"), an individual, having his principal office at
1820 B. Garry Ave., #111, Santa Ana, California 92705.
RECITALS
NuTek is a publicly traded Nevada corporation listed on the Over-The-Counter
Bulletin Board ("OTCBB"), under the trading symbol "NUTK", its CUSIP Number
is 670589-10-0.
A. Garrity at the present time effectively manages NuTek and is its
President, Chief Executive Officer and Chairman of its Board of
Directors.
B. Furr desires to acquire effective management of NuTek and be and become
its President, CEO and Chairman of its Board of Directors, in
consideration of his undertakings, warranties, representations,
indemnifications and agreements set forth below. Solely in reliance
thereon, Garrity is willing to turn over effective management of NuTek to
Furr. Furr expressly understands and agrees that Garrity would not permit
Furr to obtain such effective management of NuTek if any representation or
warranty made herein by Furr is materially false or known by Garrity to
be materially false.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing recitals and upon the mutual
covenants and conditions hereinafter set forth and for other good and valuable
consideration, the receipt and sufficiency of which Furr hereby acknowledges,
Furr makes the representations, warranties, and covenants to Garrity, set forth
below, in order to induce him to turn over effective management of NuTek, and
the parties mutually agree as follows:
SECTION ONE
Receipt of Financial and Operations Information
Furr acknowledges that there has been made available to him, during the course
of this transaction and prior to the execution of this agreement, the
Audited financial Statements of NuTek for years ending December 31, 1995
and 1996; that he has been furnished with all materials requested by him; that
all inquires of NuTek and Garrity concerning NuTek and its activities and all
other matters relating to the operations of NuTek have been satisfactorily
answered by Garrity and NuTek; that he has received all the information both
oral and written desired by him; and, that he expressly agrees to accept
effective management of NuTek upon the basis hereinafter set forth on an "as is
condition" without any warranties, representations, or indemnifications from
Garrity, NuTek, its officers and directors of any kind, nature or description.
SECTION TWO
Status of New Lift, Inc. Representations
Furr understands, recognizes and agrees (1) that New Lift, Inc. (("New Lift")
an Oklahoma corporation is a wholly owned subsidiary of NuTek; (2) that the
assets and liabilities of New Lift and/or the corporate entity or both, has
been or will be disposed of by NuTek, either prior to or concurrent with the
3
<PAGE>
effective date of this agreement; that such disposition benefits NuTek and its
shareholders by elimination of New Lift's substantial liabilities which
substantially exceed its assets and pose a serious contingent liability to
NuTek; (3) that NuTek has forgiven the debt owed to it by New Lift; and, (4)
that upon execution of this Agreement, all claims and rights of any kind,
nature, or description related in any way to such disposition of New Lift are
expressly waived, including, but without any limitation, rights and claims to
New Lift's assets whether covered by NuTek's audited consolidated financial
statements or otherwise verified solely by Garrity.
SECTION THREE
Knowledge and Experience Representations
Furr has such knowledge and experience in business and financial matters that he
is capable of evaluating NuTek and its operations and the activities thereof and
the risks and merits of assuming effective management of NuTek and of making an
informed decision thereon.
SECTION FOUR
Payment of Liability to Frankie and Rodger Garrity Covenant
Furr recognizes and agrees that NuTek is indebted to Rodger and Frankie Garrity
for funds loaned and/or advanced to NuTek and for back compensation. Furr
covenants that he will cause the new Directors to issue 600,000 shares of its
fully paid nonassessable stock in full payment therefore calculated the same as
if NuTek had already made a one share for ten share reverse split of its
outstanding stock as of the date hereof, regardless of the effective date of
such split all as more fully set forth in Exhibit "A" attached hereto.
SECTION FIVE
Acquisition Covenant
Furr has caused the shareholders of International Licensing Group, Inc. ("ILG")
to agree to sell to NuTek 100% of the outstanding common stock of such
corporation consisting of 4,800,000 fully paid and nonassessable shares, in
consideration that NuTek will issue 1,600,000 shares of its fully paid
non-assessable stock in exchange therefore calculated the same as if NuTek had
already made a one share for ten share reverse split of its outstanding stock
as of the date hereof, regardless of the effective date of such split all as
core fully set forth in Exhibit "A" attached hereto.
Furr covenants and represents that the financial condition of ILG is fully set
forth in the financial statements of such company, signed by Furr, heretofore
furnished to Garrity, is true and correct in all respects.
SECTION SIX
Closing Representations
Furr has requested Garrity to cause the Board of Directors of NuTek ("Current
Directors") to hold a special meeting upon execution of this agreement for the
sole purpose of:
(1) Causing Furr and Eric BAUCHMAN to become Directors of NuTek ("New
Directors"), and
(2) Frankie and Rodger Garrity resigning from the NuTek Board of Directors,
4
<PAGE>
(3) Furr covenants that he will cause the new directors to continue the
special meeting of the Board of Directors and to adopt and execute a
resolution in form and substance identical to EXHIBIT "A" attached
hereto. EXHIBIT "A" attached hereto is incorporated herein and forms
a part of this Agreement with the same force and effect as if the
undertaking set forth in such resolution are fully set forth herein,
which shall survive any change or attempted change therein by
NuTek's Board of Directors or shareholders or any other interested
parties.
SECTION SEVEN
Covenant Not to Sue
Furr, for himself, his spouse, his heirs, legal representatives, assigns and
successors, covenants with Garrity, Frankie Garrity, their heirs, assigns and
legal representatives and covenants with NuTek, its affiliate companies, their
respective legal representatives, assigns and successors to never individually
or otherwise institute any suit or action at law or in equity against than or
any one of than nor aid in any one in the institution or prosecution of any
claim, demand, action or cause of action for damages or any other kind of
relief, arising directly or indirectly out of or in any way connected with this
Agreement.
SECTION EIGHT
Indemnification Covenant
Furr for himself, his spouse, his heirs and assigns covenants with Garrity,
Frankie Garrity, their heirs, assigns and legal representatives and covenants
with NuTek, its affiliate companies, their current and former officers and
directors, their respective legal representatives, assigns and successors
agrees to indemnify and hold harmless each and all of them, jointly and
severally from any and all damages, losses, costs and expenses (including
reasonable attorneys fees and expenses) which they or any one of them may
incur,
(1) By Furr's failure to fulfill any of the terms of this agreement,
(2) By reason of any breach by Furr or his heirs, and
(3) By reason of any materially false or misleading warranty,
representation or covenant contained in this agreement.
SECTION NINE
Reciprocal Indemnification Covenant
Except for claims of any kind, nature or description arising out of (i) NuTek's
disposal of its wholly owned subsidiary, New Lift, Inc., (ii)NuTek's Joint
Venture Agreement with Regent Oil & Gas L.L.C., a Texas limited liability
Company("Regent") executed the 2nd day of February, 1996, (iii) the obligations
of NuTek and Rodger and Frankie Garrity set forth in Exhibit "B" attached
hereto, and (iv) any other indebtedness of NuTek of any kind, nature or
description, Garrity for himself, his spouse, his heirs, assigns and legal
representatives covenants with Furr and NuTek, its affiliate companies, current
and former directors and officers, legal representatives, assigns and
successors agrees to indemnify and hold harmless each and all of them,
jointly and severally from any and all damages, losses, costs and expenses
(including reasonable attorney's fees and expenses) which they or any one of
than may incur, arising out of the intentional misconduct, fraud or knowing
violation of law, in the conduct of NuTek's business, by its officers,
directors, employees or agents prior to the date of the execution of this
Agreement.
5
<PAGE>
SECTION TEN
Additional Indemnity and Assumption of Liability
Furr, for himself, his spouse, his heirs, legal representatives, assigns and
successors, covenants with Garrity, Frankie Garrity, their heirs, assigns and
legal representatives, that by this instrument he has as assumed all personal
liability of Garrity in the place and stead of Garrity, as personal Guarantor of
certain financial obligations specified in Exhibit "B" attached hereto and
made a part hereof for all purposes the same as if fully set forth herein.
Furr, for himself, his spouse, his heirs, legal representatives, assigns and
successors, covenants with Garrity, Frankie Garrity, their heirs, assigns and
legal representatives from any and all liability, damages, losses, costs and
enemies (including reasonable attorney's fees) incurred in connection with
defending any claim brought by the holder(s) of such obligations, their
successors, assigns, legal representatives or any other interested party,
regardless of the nature of a judgment rendered by a court of competent
jurisdiction or otherwise.
SECTION ELEVEN
Covenant Not To Assign
Furr shall not assign all or any part of his rights and duties hereunder,
without the prior written consent of Garrity.
SECTION TWELVE
Covenant of Garrity
In sole reliance upon inducement of Furr stemming from his foregoing covenants,
warranties and representations, Garrity agrees to cause the Board of Directors
of NuTek ("Current Directors") to hold a special meeting upon execution of this
agreement for the purpose set forth in SECTION SIX above.
SECTION THIRTEEN
Miscellaneous Provisions
This Agreement shall be governed by California Law and shall survive its
execution. Any waiver or delay by Garrity in enforcing this Agreement shall
not deprive him of the right to take appropriate action at a later time or due
to a subsequent breach. This agreement and exhibits supersede all prior oral
and written representations that may have been entered into by the parties and
shall be interpreted as if written jointly by both parties hereto. Such
parties hereby consent to the jurisdiction of California state and federal
courts and stipulate to Orange County, California as the proper venue for any
litigation that may arise out of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the 20th
day of September, 1997, but shall have no force and effect until the above
referenced New Board has executed and implemented EXHIBIT "A" attached
hereto.
6
<PAGE>
LEASE
BETWEEN
Wischmeyer Properties
("LESSOR")
AND
Nutek, Inc.
("LESSEE")
<PAGE>
LEASE
This lease agreement is made and entered into this 15th day of
October, 1999, by and between, Wischmeyer Properties, ("Lessor") and
Nutek, Inc., a Nevada Corporation, ("Lessee").
WITNESSETH:
FOR VALUE RECEIVED, it is hereby agreed as follows:
ARTICLE I - DEMISED PREMISES
1.1 The Lessor, by these presents does hereby lease and rent unto the
said Lessee and said Lessee hereby agrees to lease and take upon the
terms and conditions which hereinafter appear the following described
property: premises (approximately 4,200 square feet in size) an
additional (approximately 2,200 square feet in size Mezzanine level
which is rent free), of office warehouse space, which is part of an
approximate 8,470 square foot building hereinafter called "Demised
Premises." This rental does not include another building which is
located on this property which is approximately 4,200 square feet in
size. Said Demised Premises are located on the corner of Chemical
Lane and Research Drive, Huntington Beach, California. The exact
physical address being 15722 Chemical Lane, Huntington Beach, CA
92649.
ARTICLE 2 - RENTAL
2.1 Minimum Guaranteed Rental. Beginning with the "Commencement Date"
as defined in Article 3, and throughout the term hereof. Lessee agrees
to pay to Lessor, or its agents, at the address first above written,
or at any other place designated by Lessor, without offset, notice or
deduction, a monthly rental payment of two thousand eight hundred and
fifty six ($2,856.00) per month for months (1-12), a monthly rental
payment of two thousand nine hundred and forty one dollars and sixty
eight cents ($2,941.68) per month for months (13-24), a monthly
rental payment of three thousand and twenty nine dollars and ninety
three cents ($3,029.93) per month for months (25-36). . This monthly
rental payment represents a fair market value for the rental of the
Demised Premises.
Lessee's share of common area operating expenses are forty nine (49%)
percent, common area operating to only include increases in property
taxes and property insurance. (See Article 7)
Said monthly installments are hereinafter referred to as "Minimum
Guaranteed Rental."
1
<PAGE>
ARTICLE 3 - TERM
3.1 The term of this Lease shall be for two (3) years, commencing on
December 1, 1999 and terminating on November 30, 2002. Rent commencement
date is December 1, 1999.
ARTICLE 4 - SECURITY DEPOSIT
4.1 Security Deposit of Three Thousand and twenty nine dollars and
ninety three cents ($3,029.93) , which shall be returned to Lessee
without interest within ten (l0) days after the expiration of term of
this Lease (not with standing this Lease may be sooner terminated),
provided, however that Lessee has fully and faithfully carried out all
off the terms, covenants and conditions on its part to be performed.
Lessor shall have the right to apply any part of said Security Deposit
to cure any default of Lessee.
4.2 In the event of bankruptcy or other debt-creditor proceedings
against, any Security Deposit shall be deemed to be applied first to
the payment of Minimum Guaranteed Rental and other charges due Lessor
by Lessee for all periods prior to the filing of such proceedings.
4.3 In the event Lessee subleases, assigns or otherwise transfers its
interest in this Lease, as more fully set forth in Article 17 of this
Lease, Lessor may demand and Lessee shall be obligated to pay upon
such demand, a sum equal to the then current Minimum Guaranteed
Rental, as additional Security Deposit to be held by Lessor for the
balance of the term of this Lease.
ARTICLE 5 - REAL ESTATE TAXES
5.1 Lessor shall be responsible for all real estate taxes, the
Lessee's proportion of the real estate taxes are included in the
Minimum Guaranteed Rental of the Demised Premises. This proportion
is based upon the ratio of square feet of the Demised Premises
compared to the total square feet of leasable space in the Demised
Premises. Lessee shall pay all assessments and all taxes levied on
its own personal property. Additionally, Lessee shall pay its
proportionate share of the cost of any appeals made by Lessor of the
real property assessment based upon the same billing ratio as the real
estate taxes. Lessee shall further pay any tax that may be levied or
assessed upon the rent reserved hereunder by any government authority
acting under any present or future laws as a substitute in whole or in
part for any real estate taxes.
SECTION 6 - PROPERTY INSURANCE
6.1 Lessor shall maintain during the term of this Lease, insurance
policy or policies covering, without limitation, public liability,
personal and bodily injury and property damage liability coverage,
fire and extended coverage, vandalism and malicious mischief and all
broad form coverage's, rent loss insurance, sign insurance and any
other insurance that may be carried by Lessor covering the common
areas and the Demised Premises in all limits and deductibles selected
by Lessor. Lessee's Minimum Guaranteed Rent includes its proportional
share of the property insurance.
2
<PAGE>
ARTICLE 7 - DEMISED PREMISES'S OPERATING COSTS
7.1 The term "common areas" means all areas and the facilities outside the
Demised Premises and within the exterior boundaries of the Demised Premises
as may be modified from time to time that are provided and designated by
Lessor from time to time for the general use and convenience of Lessee and
of other terms of the Demised Premises and their respective authorized
representatives and invitees. Common areas include, without
limitation, walkways, landscaped areas, sidewalks, storage areas,
loading areas, parking areas, roads, canopies and public restrooms.
The common areas provided by Lessor shall at all times by subject to
the exclusive control and management of Lessor. Lessor shall have the
right to establish, modify and enforce uniform, nondiscriminatory
rules and regulations with respect to the common areas hereinbefore
mentioned, and Lessee agrees at all times to abide by and conform to
such rules and regulations.
7.2 All common areas and facilities not within the Demised Premises
which Lessee may be permitted to use and occupy are to be used and
occupied under a revocable license, and if any such license be
revoked, or if the amount of such areas be diminished, Lessor shall
not be subject to any liability nor shall Lessee be entitled to any
compensation or diminution or abatement of Minimum Guaranteed Rental,
nor shall such revocation or diminution of such areas be deemed
constructive or actual eviction.
7.3 Lessee Guaranteed Minimum Rental includes, its prorata share of
the costs of maintaining, managing, operating and repairing the
Demised Premises and the common areas. Lessee's prorata share is
included in its Guaranteed Minimum Rental. This was determined in
determining that portion of the whole which the rentable square feet
area of the Demised Premises bears to the total square feet of
leasable space in the Demised Premises.
7.4 The "Demised Premises' Operating Costs" shall be the total costs
and expense incurred by Lessor in operating, managing, maintaining and
repairing the Demised Premises and the common areas including, without
limitation: repairs to curbs, sidewalks, gutters, drywells, perimeter
and trash container walls and pavements; sealing, renovating,
repairing, maintaining or replacing roofs on the canopies and other
common area structures: purchase, construction and maintenance of
trash receptacles, seating and furnishings; utilities; removal of
rubbish and debris; regulation of traffic: costs and expenses incurred
in renting and the depreciation on a straight line basis over a
reasonable useful life thereof or any owned equipment and machinery
used in the operation with such equipment; costs and expenses of
planting, replanting, maintaining and replacing systems(s) including
water charges; sprinkler repair, replacement and maintenance costs;
public liability and property damage insurance and pest control plus
an amount for the administration, management, operation and overseeing
of the Demised Premises and the common areas of the Demised Premises
whether said services are provided by Lessor or by a third party
property management agent.
3
<PAGE>
ARTICLE 8 - HOLDING OVER
33.1 If Lessee, with Lessor's consent, remains in possession of the
Demised Premises after the expiration of the term hereof, it shall be
considered a month-to-month Lessee. During any such month-to-month
tenancy, Lessee shall pay to Lessor one hundred fifty (150%) percent
of the Minimum Guaranteed Rental paid during the last month of the
Lease term plus any forms of additional rent including Percentage
Rental, if required by said Lease. All other provisions of tiffs Lease
except those pertaining to term and option to extend shall apply
during the month-to-month tenancy.
ARTICLE 9 - LATE CHARGE.
9.1 In the event Lessee is late in the payment of Minimum Guaranteed
Rental or other sums of money required to be paid under this Lease,
Lessee agrees to pay Lessor a late charge equal to the greater of One
Hundred ($100.00) Dollars or ten (10) cents each dollar of each
payment five (5) days or more in arrears. Said late charge shall be to
cover extra expenses incurred by Lessor in handling delinquent
payments. In addition to the late charge referred to above, any and
all payments in arrears for more than fifteen (15) days shall bear
interest, from the due date, payable as additional rent to Lessor at
the interest rate of eighteen (18%) percent per annum. The provisions
of this Article are cumulative and shall in no way remove the other
remedies available to Lessor in the event of Lessee's default as
provided under this Lease. Lessor shall have the right to require
that Lessee pay any sums due hereunder in the form of Cashiers Check
or Money Order should any payments made by Lessee to Lessor be
returned to Lessor for any reason. Lessee shall pay to Lessor a charge
of $100.00 for each dishonored check from Lessee returned by Lessor.
ARTICLE 10 - LESSOR'S RIGHT TO CURE
10.1 In the event of breach, default, or noncompliance hereunder by
Lessor, Lessee shall, before exercising any right or remedy available
to it, give Lessor written notice of the claimed breach, or
noncompliance. If prior to its giving such notice Lessee has been
notified in writing by way of Notice of Assignment of Rents and
Leases, or otherwise to the address of a lender which has furnished
financing that is secured by a mortgage or deed of Trust on the
Demised Premises concurrently with giving the aforesaid notice to
Lessor, Lessee shall, by Certified Mail, transmit a copy thereof to
such lender. For the thirty (30) days following such notice (or such
longer period of time as may be reasonably required to cure a matter
which, due to its nature, cannot reasonable be remedied within thirty
(30) days), Lessor shall have the right to cure the breach, default or
noncompliance involved. If Lessor has failed to cure a Default within
said period, any such lender shall have an additional thirty (30) days
within which to cure the same or, if such default cannot be cured
within that period, such additional time as may be necessary if within
such thirty (30) day period said lender has commenced and is
diligently pursuing the actions or remedies necessary to cure the
breach, Default or noncompliance involved (including, but not limited
to, commencement and prosecution
4
<PAGE>
of proceedings to foreclose or otherwise exercise its rights under its
mortgage or other security instrument if necessary to effect such
cure, in which event this Lease shall not be terminated by Lessee so
long as such actions or remedies are being diligently pursued by said
lender.)
10.2 Anything in this Lease to the contrary notwithstanding, Lessee
agrees that it shall look solely to the estate and property of Lessor
in the land and buildings comprising the Demised Premises and subject
to prior rights of any mortgagee of the Demised Premises or any part
thereof, for the collection of any judgment (or other judicial
process) requiring the payment of money by Lessor in the event of any
default or breach by Lessor with respect to any terms, covenants, and
conditions of this Lease to be observed and/or performed by Lessor,
and no other assets of Lessor shall be subject to levy, execution or
other procedures for the satisfaction of Lessee's remedies.
ARTICLE 11 - FIXTURES
11.1 All fixtures installed by Lessee shall be new or completely
reconditioned. Lessee shall not make or cause to be made any
alternations, additions or improvements, or install or cause to be
installed any fixtures, shades or awnings, or make any changes to the
Demised Premises without first obtaining Lessor's written approval.
Lessee shall present to the Lessor two (2) sets of plans and
specifications for such work at the time approval is sought.
11. 2 All alterations, decorations, additions or improvements made by
Lessee, or made by the Lessor on the Lessee's behalf by agreement
under this Lease, shall remain the property of the Lessee for the term
of the Lease or any extension or renewal thereof. Any alterations,
decorations, additions and improvements shall not bed removed from the
Demised Premises without Lessor's written consent.
11.3 If after default in payment of Minimum Guaranteed Rental or any
other charges provided for in this Lease, the Lessee moves out or is
dispossessed and fails to remove any trade fixtures, signs, or other
property prior to such said default, removal, expiration of Lease, or
fixtures, signs and property shall be deemed abandoned by Lessee and
shall become the property of the Lessor, or Lessor, at Lessor's
option, may notify Lessee to remove same at Lessee's own cost and
expense, and upon the failure of Lessee to do so, Lessor may, in
addition to any other remedies available to is, remove said property,
as the duly authorized agent of Lessee, at Lessee's expense and place
the property in a public storage facility at the expense of Lessee or
deliver the property to Lessee.
ARTICLE 12 - ALTERATIONS
12.1 Lessor shall construct the Demised Premises in compliance with
all governmental building regulations.
Lessee may, at its own expense, make such alterations and improvements
to the
5
<PAGE>
Demised Premises and install interior partitions as it may require,
provided that the written approval of the Lessor is first obtained and
that such improvements and alterations are done in a workmanlike
manner in keeping with all building codes and regulations and in no
way harm the structure of the Demised Premises, provided that at the
expiration of the Lease or any extension thereof, Lessee, at its
expense, restores the within Demised Premises to its original
condition and repairs any damage to the Demised Premises, resulting
from the installation or removal of such partitions, fixtures, or
equipment as may have been installed by Lessee is requested to do so
by Lessor.
12.3 The Lessor shall not be liable for any labor or materials
furnished or to be furnished to the Lessee upon credit, and no
mechanic's or other lien for any such labor or materials shall attach
to or effect the reversion or other estate or interest of the Lessor
in and to the Demised Premises. Whenever any mechanic's lien shall
have been filed against the Demised Premises, based upon any act or
interest of the Lessee or of anyone claiming through the Lessee, or if
any security agreement shall have been filed for or effecting any
materials, machinery, or fixtures used in the repair, construction, or
operation thereof, the Lessee shall immediately take such action by
bonding, deposit, or payment as will remove the lien or security
agreement.
12.4 If Lessee has not removed the lien within ten (10) days after
noticed to Lessee, Lessor may pay the amount of such mechanic's lien
or security agreement or discharge the same by deposit, and the amount
so paid or deposited, shall be deemed additional rent reserved under
this Lease, and shall be payable forthwith by Lessee to Lessor with
interest at eighteen (18%) percent per annum from the date of payment
by Lessor, and with the same remedies to the Lessor, if not paid, as
in the case of default in the payment of Minimum Guaranteed Rental as
herein provided.
12.5 Lessor or its representatives shall have the right to go upon
and inspect the Demised Premises at all reasonable times and shall
have the right to post and keep posted thereon notices of non-
responsibility or such other notices which Lessor may deem to be
proper for the protection of Lessor's interest in the Demised
Premises. Lessee shall, before the commencement of any work which
might result in any such lien, give to Lessor written notice of
Lessee's intention to do so in sufficient time to enable the positing
of such notices.
ARTICLE 13 - MAINTENANCE
13.1 Lessee shall at all times keep the Demised Premises (including
maintenance, replacement and repair of exterior entrances, all glass
and window moldings, all partitions, doors, fixtures, ceiling tile,
lighting, heating and plumbing fixtures, air conditioning system and
any appurtenances thereof) in good order, condition and repair
(including reasonable periodic painting as determined by Lessor.)
Lessee shall maintain the heating and air conditioning equipment
serving the Demised Premises including changes thereto as a result of
laws concerning chlorofluorocarbons. Lessee shall be responsible to
repair any and all damage to the Demised Premises or to the building
of which the Demised Premises are a part, if the damage was caused by
a break-in or burglary or attempted break-pin or burglary of the
Demised Premises.
6
<PAGE>
13.2 Should Lessee not maintain the Demised Premises to Lessor's
satisfaction, Lessor may notify Lessee in writing of the maintenance
item(s) which do not meet Lessor's satisfaction. Lessee shall have
ten (10) days from the date of Lessor's notice to comply with Lessor's
notice. Should Lessee not comply within the ten (10) day period,
Lessor shall have the rig ht to make the necessary repairs or provide
the necessary maintenance to the Demised Premises and Lessor may
charged the cost of such repair of maintenance plus a handling fee
equal to fifteen (15%) percent of the costs of such repair or
maintenance directly to Lessee as additional rent which amount shall
be due and payable by Lessee to Lessor within ten (10) days after the
date of Lessor's billing to Lessee.
ARTICLE 14 - RESPONSIBILITY TO DEMISED PREMISES
14.1 Lessor agrees to keep in good order and repair the roof,
exterior walls (exclusive of all glass and doors which shall be the
responsibility of Lessee), water, sewer and fire sprinkler systems, if
any, but not the fixtures pertaining to such systems which shall be
the responsibility of the Lessee to maintain. Lessor shall also
maintain and repair the structural portions of the Demised Premises
and the building of which the Demised Premises are a part.
14.2 If Lessor is required to make repairs by reason of the acts or
omissions of Lessee, its agents, employees, contractors, its invitees,
Lessor may charge the cost of such repair plus a handling fee equal to
fifteen (15%) percent of total cost of said repairs directly to Lessee
as additional which shall be due and payable by Lessee to Lessor
within ten (10) days after Lessor's billing to Lessee.
14.3 Lessor gives to Lessee exclusive control of the Demised Premises
and Lessor shall be under no obligation to inspect said Demised
Premises. Lessee shall at once reproduce in writing to Lessor any
defective condition known to Lessee which Lessor is required to
repair, and failure to so report such defects shall make Lessee
responsible to Lessor for any liability incurred by Lessor by reason
of such detect. Notwithstanding any provision in this Lease to the
contrary: Lessor shall not be responsible or liable to Lessee for any
injury or damage from acts or omissions of persons occupying the
property adjoining the Demised Premises or any part of the building of
which the Demised Premises is a part, or for any injury or damage
resulting to the Lessee, for its property from bursting, stoppage, or
leaking of water, gas, sewer, or steam pipes, or from any structural
defect in the roof exterior walls or the like.
7
<PAGE>
ARTICLE 15 - USE
15.1 The Demised Premises shall continuously be used general office
use, assembly of plastic clocks and manufacture and distribution of
apparel. Lessee shall do business from the Demised Premises under the
trade name of Nutek Inc, with the following divisions, (Elite Fitness
Systems Inc, Kristi & Co. Inc., Century Clocks Inc.). The Demised
Premises shall not be used for any illegal purpose nor in any manner
to create any nuisance or trespass not in any manner to violate the
insurance or increase the rate of insurance on the Demised Premises or
the Demised Premises and shall be subject to rights of other Lessee's
leases.
15.2 Lessee shall operate one hundred (100%) percent of the Demised
Premises during the entire term of this Lease with due diligence and
efficacy unless prevented from doing so by caused beyond Lessees
control.
15.3 Lessee will not use or occupy the Demised Premises in violation
of the certificate of occupancy issued for the building of which the
Demised Premises form a part, and in the event that any governmental
authority having jurisdiction thereof shall hereafter consent and/or
declare by notice any violation or in any manner whomsoever that the
Demised Premises are being used for a purpose which is a violation of
such certificate of occupancy, Lessee shall upon five,(5) days written
notice from Lessor, immediately discontinue such use of the Demised
Premises.
15.4 Lessee agrees that Lessor shall have the right to prohibit the
continued use by Lessee of any unethical or unfair methods of business
operation, advertising or interior display, if, in the Lessor's
opinion, the continued use thereof would impair the reputation of the
Demised Premises as a desirable place or is otherwise out of harmony
with the general character thereof, and upon notice from Lessor,
Lessee shall refrain from or discontinue such activities.
15.5 Lessee shall not perform any acts or carry on any practices
which may injure the Demised Premises or the Demised Premises or
constitute waste thereof or be a nuisance or menace to other neighbors
in the surrounding area.
ARTICLE 16- ASSIGNMENT AND SUBLETTING
16.1 Lessee shall not assign this Lease, or any interest therein, and
shall not sublet the Demised Premises or any part thereof, or any
right or privilege appurLessee thereto, or permit any other person
(the employees, officers and servants of Lessee excepted) to occupy or
use the Demised Premises, or any portion thereof without first
obtaining the written consent the of Lessor. Consent by Lessor to one
assignment, subletting, occupation or use by another person or entity
shall not be deemed to be consent to any subsequent assignment,
subletting, occupation or use by another person or entity. Consent to
an assignment shall not release file original named Lessee or any
Guarantors from liability for the continued performance of the terms
and provisions on the part of
8
<PAGE>
the Lessee to be kept and performed. Any assignment or subletting
without the prior without approval of Lessor shall be void, and shall,
at the option of the Lessor, terminate this Lease. Neither this Lease
nor any interest therein shall be assignable, as to the interest of
the Lessee by operation of law, without the prior written consent of
Lessor. In addition to any considerations which Lessor may have
relative to approving a proposed assignment of this Lease, the
provisions contained in Article 34.5 of this Lease shall prevail.
16.2 Lessor covenants that Lessor shall not unreasonably withhold its
consent to any requested assignment or subletting. In the event any of
the following are not satisfied in Lessor's sole and absolute
discretion, and Lessor chooses to withhold consent to any such
requested assignment or subletting, such withholding shall be deemed
to be reasonable:
16.3 The intended use of the Demised Premises by such proposed
assignee or sublessee:
(a) shall not violate the Use clause as stated in Article 15.1 of
this Lease, or any laws or rights granted to other Lessee, occupants
or parcel owners of the Demised Premises or those retained by Lessor;
(b) shall confirm with Lessor's desired "Lessee mix" within the
Demised Premises;
(c) shall be in keeping with the quality and character of the
Demised Premises and not constitute a nuisance;
(d) shall not cause an increase in the Demised Premises' Operating
Costs;
(e) The proposed assignee or sublessee shall be of sound financial
net worth and have sufficient liquid capital at properly operate the
business and that the financial capacity of the assignee or sublessee
is not less than the Lessee as of the execution of this Lease or at
the time of the proposed assignment or sublease;
(f) The business skills, experience and reputation of the subLessee
or assignee must be well-established enough to ensure Lessor of a
successful business operation; and,
(g) Any other reasonable ground that the Lessor, in its judgment,
relies upon.
16.4 If the Lessee is a corporation, an unincorporated association or
a partnership, the transfer assignment or hypothecation of any stock
or interest in such corporation, association or partnership, the
transfer, assignment or hypothecation of any stock or interest in such
corporation, association or partnership in the aggregate in excess of
fifty (50%) percent shall be deemed an assignment within the meaning
and provision of this Article 16. Lessee shall have the right
without Lessor's consent to assign this Lease or sublet the Demised
Premises or any part thereof, to any corporation provided that the
9
<PAGE>
resulting entity from such merger or consolidation shall have a net
worth not less than Lessees when Lessee entered into this Lease, and
provided further that any such assignee shall deliver to Lessor a copy
of a document satisfactory to the Lessor by which such assignee agrees
to assume and perform all of the terms, conditions and obligations of
Lessee under this Lease.
16.5 If on account of or in connection with any assignment,
sublease, occupation or use of the Demised Premises by another Lessee
receives rent or other consideration in excess of the monetary
consideration called for in this Lease, Lessee shall pay the Lessor
the excess of such payment of rent or other consideration received by
Lessee promptly after Lessee's receipt of any such payment.
16.6 In the event that Lessor shall consent to an assignment,
sublease, occupation or use of another hereunder, Lessee shall pay to
Lessor Seven Hundred Fifty ($750.00) Dollars, the cost incurred by the
Lessor in connection the processing of documents necessary to the
granting of such consent and assumption by the transferee of the
Lease.
ARTICLE 17 - ESTOPPEL CERTIFICATES
17.1 Within ten days after demand by Lessor, Lessee shall complete,
execute, acknowledge and deliver to Lessor or its designee, a
Certificate (the "Estoppel Certificate") representing that (i) this
Lease is unmodified (or stating the modification); (ii) this Lease is
in full force and effect; (iii) there are no defenses or offsets to
the performance of the obligations of the Lessee under this Lease (or
stating those claimed by the Lessee): (iv) the date of which Rents
have been paid in advance; {v) the amount and balance of the Security
Deposit, if any; (vi) the Lessor is not in default in the performance
of any of its obligations under this Lease (or stating those claimed
by the Lessee): (vii) the Lessee is not in default in the performance
of any of its obligations under this Lease (or stating those
obligations which are in default): and (viii) such other information
as the Lessor or its designee may require. Any purchaser, lessee,
lender or other person or entity to whom an Estoppel Certificate is
delivered, shall be entitled to rely upon the contents, regardless of
the name of the addressee, if any.
17.2. In the event the Lessee fails to complete, sign, acknowledge or
deliver any Estoppel Certificate, within ten days after demand by
Lessor:
(a) The person or entity on whose behalf the Estoppel Certificate was
requested shall be entitled to conclusively presume that: (i) this
Lease is unmodified; (ii) this Lease is in full force and effect:
(iii) that them are no defenses or offsets to the performance of the
obligations of the Lessee under this Lease: (iv) Rents have not been
paid more than one month in advance; (v) there is no Security Deposit:
(vi) there are no outstanding notices of default by the Lessor in the
performance of any of its obligations under this Lease: mid (vii)
Lessor is not in default in the performance of any of its obligations
under this Lease (and if the Lessor is in default that the Lessee has
irrevocably waived its right to require performance of such
obligation); and
10
<PAGE>
(b) The Lessor is irrevocably designated the Lessee's attorney in
fact, with the power to execute, acknowledge and deliver an Estoppel
Certificate in the name of the Lessee.
ARTICLE 18 - QUIET ENJOYMENT
18.1 The Lessor covenants that the Lessee, upon payment of the
Minimum Guaranteed Rental and other charges above reserved, upon the
due performance of the covenants and agreements herein contained,
shall amid may at all times during the term hereby granted peaceably
and quietly have, hold and enjoy the Demised Premises for the term of
this Lease. However, the Lessor shall have no liability whatsoever to
the Lessee for any breach of this covenant occasioned by the acts of
omissions of any transferee, succession or assignee of the Lessor.
ARTICLE 19 - LESSEE NEGLECT
19.1 If Lessee refuses or neglects to repair the Demised Premises as
required to the reasonable satisfaction of the Lessor as soon as
reasonably possible after written demand, Lessor may make such repair
without liability to Lessee for any loss or damage that may occur to
Lessee's merchandise, fixtures or other property or to Lessees
business by reason thereof and upon completion thereof Lessee shall
pay Lessor's costs for making such repairs plus fifteen (15%) percent
for overhead, within ten (10) days after the presentation of bill to
Lessee by Lessor as additional rent. Said bill shall include interest
at eighteen (18%) percent per annum on said cost from the date of
completion of repairs by Lessor.
ARTICIE 20 - UTILITIES
20.1 Lessor, shall not as part of the Minimum Guaranteed Rental
shall provide utilities for the Demised Premises, this includes all
charges for heat, water, sewer, gas, electricity and/or any other
utility used or consumed in the Demised Premises. In no event shall
Lessor be liable for an interruption or failure in the supply of any
such utilities to the Demised Premises, The Lessee shall use
reasonable diligence in the conservation of any utilities supplied to
the Demised Premises.
20.2 Lessee agrees to keep the Demised Premises heated and air-
conditioned at such levels as may be reasonably required by the Lessor
to protect the buildings and prevent dissipation of the heat and air-
conditioning in those areas immediately adjoining the Demised
Premises.
11
<PAGE>
ARTICLE 21 - INSURANCE
21.1 In addition to the Lessees obligations of this Lease, Lessee
shall, from the date the Demised Premises are ready for Lessees
occupancy, and throughout the term of this Lease, at Lessee's sole
cost and expense, provide and keep in full force and effect insurance
on the Lessee's personal property. This would include: the Lessee's
trade fixtures, decorations signs, improvements and contents. The
Lessor shall provide insurance on the structures located on the
Demised Premises.
21.2 All insurance policies shall (i) meet the satisfaction to the
Lessor; (ii) be written as primary policy coverage, not contributing
with, or in excess of any coverage carried by Lessor or another; (iii)
contain an express waiver of the right of subrogation against the
Lessor; (iv) contains a provision that includes the Lessor as an
insured, it shall nevertheless be entitled to recover under the policy
for any loss suffered as a result of the acts or omissions of the
Lessee; and, (v) contains a provision that the insurer shall give the
Lessor at least 30 days prior written notice of any termination of
lapse of insurance coverage, or material change in the terms of
insurance.
21.3 Each party hereto does hereby remise, release and discharge the
either party heretofore, and any officer, agent, employee or
representative of such party, of and from any liability whomever
hereafter arising from loss, damage, or injury caused by any casualty
for which insurance (permitting waiver of liability and containing a
waiver of subrogation) is carried by either party at the time of such
loss, damage or injury to the extent of any recovery by either party
under such insurance.
ARTICLE 22 - DESTRUCTION
22.1 Lessee shall give prompt notice to Lessor in case of any fire or
other damage to the Demised Premises or the building. If the Demised
Premises shall be partially damaged by fire or other casualty insured
under the Lessor's insurance policies, then upon Lessor's receipt of
the insurance proceeds, Lessor shall, except as otherwise provided
herein, promptly repair and restore the same (exclusive of Lessee's
trade fixtures, decorations signs, improvements and contents)
substantially to the condition thereof immediately prior to such
damage or destruction limited, however the extent of the insurance
proceeds actually received by Lessor; such repair and restoration to
be completed within one hundred 180) days after the receipt by Lessor
of the insurance proceeds: (i) If both the Demised Premises and the
Demised Premises shall be damaged to the extent of twenty five (25%)
percent or more of the cost of replacement thereof; (ii) the Demised
Premises or the building of which the Demised Premises are a par shall
be destroyed or partially damaged as a result of a risk not insured by
Lessor; or (iii) the Demised Promises shall be damaged to the extent
to twenty (20%) percent or more of the cost of replacement thereof
during the last two (2) years of the Lease term (or any renewal term);
or (iv) the building constituting the Demised Premises shall be
damaged to the extent of fifty (50%) percent or more of the cost of
replacement thereof whether or not the Demised Premises shall be
damaged; or (v) if any individual retail space
12
<PAGE>
containing 20.000 or more square feet. if any. within the Demised
Premises is damaged and such store or stores are not re-opened for
business for a period of one hundred eighty (180) days after such
damage or destruction, then or in any such event. Lessor may elect to
repair the damage as aforesaid, or to cancel this Lease by written
notice of cancellation given to Lessee within ninety (90) days after
the date of such occurrence, and thereupon this Lease shall cease and
terminate with the same force and effect as though the time set forth
in the Lessor's said notice were the date herein fixed for the
expiration of the Lease term; and Lessee shall vacate and surrender
the Demised Premises to Lessor. Upon the termination of this Lease,
as addressed, Lessee's liability from the Minimum Guaranteed Rent and
other charges reserved hereunder shall cease as of the date of such
damage or destruction the Lessor shall make an equitable refund of any
Minimum Guaranteed Rental and other charges paid by Lessee in advance
and not earned. If there is a destruction, as set forth in
subdivision (iii) or (v) of this Article. Lessee shall have a like
option to terminate, but under subdivision (iii). Lessee shall give
notice thereof before Lessor commences repair or restoration, and in
any event such notice shall be given within thirty (30) days after
such destruction.
22.2 Unless this Lease is terminated by Lessor or Lessee as
aforesaid, this Lease shall remain in full force and effect and the
parties waive the provisions of law to the contrary, and Lessee shall
repair, restore or replace Lessees trade fixtures, decorations,
improvements, signs and contents in the Demised Premises in a rammer
and to at least a condition equal to that existing prior to their
damage or destruction and the proceeds of all insurance carried by
Lessee on said property shall be held by Lessee for the purposes of
said repairs, restoration or replacement. If by reason of such fire or
other casualty the Demised Premises is rendered wholly unLesseeable,
the Minimum Guaranteed Rental shall be fully abated, or if only
partially damaged, such Minimum Guaranteed Rental shall be abated
proportionately as to that potion of the Demised Premises rendered
unLesseeable, the Minimum Guaranteed Rental shall be totally abated,
or if only partially damaged, such Minimum Guaranteed Rental shall be
abated proportionally as to that portion of the Demised Premises
rendered unLesseeable, in either event (unless Lessor shall elect to
terminate this Lease, as aforesaid) until fifteen (15) days after
notice by Lessor to Lessee that the Demised Premises have been
substantially repaired or restored or until Lessee's business
operations are restored in the entire Demised Premises, whichever
shall occur sooner. Lessee shall continue the operation of Lessee's
business in the Demised Premises, whichever shall occur sooner.
Lessee shall continue the operation of Lessee's business in the
Demised Premises or any part thereof not so damaged during any such
period to the extent reasonable practicable from the standpoint of
prudent business management.
22.3 Lessee shall not be entitled to and hereby waives all claims
against Lessor for any compensation or damage for loss or use of the
whole or any pan of the Demised Premises and/or from any inconvenience
or annoyance occasioned by any such damage, destruction, repair or
restoration.
13
<PAGE>
23.4 Despite anything contained in this Lease to the contrary, and
without limiting the Lessor's right or remedies hereunder Lessor may,
without obligation or liability to Lessee, terminate this Lease with
thirty (30) days prior written notice to Lessee and all Minimum
Guaranteed Rental and other charges shall be adjusted as of, and
Lessee shall vacate and surrender the Demised Premises on, such
termination date:
(a) If damage or destruction occurs to the Demised Premises or any
part thereof by reason of any cause in respect of which there are no
proceeds of insurance available to Lessor, or
(b) If the proceeds of insurance are insufficient to pay Lessor for
the costs of rebuilding or making fit for occupancy (including
architectural fees) the Demised Premises or any part thereof
(including the Demised Premises), or
(c) If any mortgagee or other person or entity entitled to the
proceeds of insurance does not consent to the payment to Lessor of
such proceeds for such purpose, or
(d) If in the Lessor's opinion any such damage or destruction is
caused by any neglect, default, negligence, act or omission of Lessee,
or those for whom Lessee is in lawfully responsible, or any other
person entering upon the Demised Premises under express or implied
invitation of Lessee.
(e) Should Lessor elect to repair, reconstruct or rebuild the Demised
Premises the Demised Premises or any parts thereof Lessor may use
plans, specifications and working drawings other than those used in
the original construction of the Demised Premises or any part thereof.
(f) If all or part of the Demised Premises is destroyed or damaged as
set forth in this Article, the Architect designated by Lessor shall
determine the extent of such destruction or damage and provide Lessor
with a certificate a testing to the condition of the Demised Premises
and the Demised Premises the certificate of the Architect shall bind
the parties as to:
(g) The percentage of replacement cost of the Demised Premises or
Demised Premises damaged or destroyed: and
(h) Whether or not Demised Premises cannot be used by the Lessee for
a period of one hundred eight (180) days or more after the occurrence
of the damage of destruction.
ARTICLE 23 - SUBORDINATION
23.1 This Lease is subject and subordination to all ground or
underlying leases which may now or hereafter affect the real property
of which the Demised Premises from a part and to all mortgages or
deeds of trust which may now or hereafter after such leases or the
real property which the Demised Premises form a part and to all
renewals, modifications consolidations replacement and extensions
thereof. This clause shall be self-operative and no further
instrument of subordination shall be required by
14
<PAGE>
Mortgagee or Beneficiary. In confirmation of such subordination,
Lessee shall execute promptly any certificate that Lessor, Mortgagor
or Beneficiary may request. Lessee, hereby constitutes and appoints
Lessor as Lessees attorney-in fact to execute any such certificate or
certificates for on behalf of Lessee.
23.2 Lessee agrees that at any time and from time to time within ten
(10) days following written notice from Lessor it will execute,
acknowledge and deliver to Lessor or any proposed Mortgagee,
Beneficiary or purchaser, in recordable form, a statement in writing
certifying that this Lease is unmodified and in full force and effect
(or if there shall have been modification, that the same is in full
force and effect as modified and stating the modifications), that
there are no defenses or offsets thereto (or stating those claimed by
Lessee) and the dates to which the Minimum Guaranteed Rental and other
charges have been paid, in advance, if any, and stating whether or not
the Lessor is in default in the performance of any covenant,
agreement, or condition contained in this Lease, and if so, specifying
each such default and setting forth such other matters and information
as may be reasonably required from a prospective Mortgagee,
Beneficiary or purchaser of the Demised Premises it being intended
that any such statement delivered pursuant to this Article may be
relied upon by any prospective purchaser of the fee or any Mortgagee
or Beneficiary thereof or any assignee of any mortgage or deed of
trust upon the of the Demised Premises. Lessee agrees to attorn to
such mortgages, deeds of trust or the purchaser at any sale. Failure
by the Lessee to comply with the provisions of this Article shall make
the Lessee liable for all costs and damages suffered by the Lessor as
a result of said failure to act.
23.3 Within ten (10} days after Lessor's request therefor, Lessee of
this Lease shall provide Lessor's mortgagee or Lessor's proposed
Mortgagee, as Lessor shall specify, periodic financial statements and
other information reasonably required by Lessor in order to verify
Lessees current financial condition.
ARTICLE 24 - CONDEMNATION
24.1 In the event that the whole Demised Premises shall be lawfully
tendered or taken in any manner for any public or quasi-public use,
this Lease and the term and estate hereby granted shall forthwith
cease and terminate as of the date of actual taking. In the event of
a condemnation or taking of a substantial part of the Demised Premises
so as to destroy the usefulness of the Demised Premises for the
purpose for which the Demised Premises were leased, Lessee shall have
the right, by delivery of notice in writing to Lessor within thirty
(30) days after the vesting of title, to terminate this Lease and the
term and estate hereby granted as of the date of actual taking.
15
<PAGE>
24.2 If the whole of the common areas of the Demised Premises shall
be acquired or condemned by eminent domain for any public or quasi-
public use or purpose, then the term of this Lease shall cease and
terminate as of the date of title vesting in such proceeding unless
Lessor shall take immediate steps to provide offer parking facilities
substantially equal to the previously existing ratio between the
common parking areas and the Demised Premises, and such substantially
equal parking facilities shall be provided by Lessor at its own
expense within ninety (90) days from the date of acquisition. In the
event that Lessor shall provide such other substantially equal parking
facilities, then this Lease shall continue in full force and effect.
In any event, Lessee shall have no claim against Lessor for the value
of any unexpired term of this Lease.
24.3 In the event of a partial condemnation which is not
substantially enough to destroy the usefulness of the Demised Premises
for the purpose for which they were leased, or in the event Lessee
shall not terminate this Lease within the time above limited, Lessor
shall, provided that the proceeds of the condemnation award are made
available to the Lessor by any fee or leasehold mortgagee whose
interest may be superior to that of the Lessor; and further provided
that the condemnation does not result in a termination or cancellation
of any underlying ground lease, promptly, subject to reasonable
delays, restore the Demised Premises to an architectural unit as
nearly like its condition prior to such taking as shall be
practicable, but including hanging fixtures, furnishings, floor
coverings, equipment, stock or other personality, and this Lease shall
continue in full force and effect, except that, effective as of the
date of actual taking, the Minimum Guaranteed Rental shall be
diminished by the amount representing the part of said Minimum
Guaranteed Rental applicable to that portion, if any of the Demised
Premises which is so condemned or taken.
24.4 In the event of termination in any of the cases hereinabove
provided, this Lease and the term and estate hereby granted shall
expire as of such taking in the same manner and with the same effect
as if that were the date hereinbefore set for the expiration of the
term of this Lease, and the Minimum Guaranteed Rental shall be
apportioned as of such date.
24.5 In the event of any condemnation or taking mentioned herein,
whether or not this Lease is terminated, Lessor shall receive the
entire award in the condemnation proceeding without deduction for any
estate vested by this Lease in Lessee and Lessee shall receive no part
of such award. Lessee hereby assigns to Lessor any and all right,
title and interest of Lessee now or hereafter arising in or to any
such award,
24.6 Although all damages in the event of any condemnation are to
belong to the Lessor whether such damages are awarded as compensation
for diminution in value of the leasehold or to be the fee of the
Demised Premises, Lessee shall have the right to claim and recover
from the condemning authority, but not from Lessor, such compensation
as may be separately awarded or recoverable by Lessee in Lessee's own
right on account of any and all cost or loss to which fixtures,
leasehold improvements and equipment, as well as any award given for
the unamortized value of Lessee's improvements, excluding those paid
for by Lessor.
16
<PAGE>
ARTICLE 25 - INDEMNIFICATION OF LESSOR
25.1 Lessee will indemnify Lessor and Lessor's management agent and
save them harmless from and against any and all claims, actions,
damages, liability and expense in connection with loss of life,
personal injury and/or damage to property arising from or out of any
occurrence in, upon, or at the Demised Premises, or the occupancy or
use by Lessee of the Demised Premises or any part thereof or
occasioned wholly or in part by any breach of this Lease by Lessee or
any act or omission of Lessee, its agents, contractors, employees,
servants, lessees or concessionaires. In case Lessor and/or Lessor's
management agent shall, without fault on their part, be made a party
to any litigation commenced by or against Lessee, then Lessee shall
protect and hold Lessor and/or Lessor's management agent harmless and
shall pay all costs, expenses and reasonable attorney fees incurred or
paid by Lessor in connection with such litigation. Lessee shall also
pay all costs, expenses and reasonable attorney's fees that may be
incurred or paid by Lessor in enforceable the covenants and agreements
in this Lease.
ARTICLE 26 - REAL ESTATE BROKER
28.1 Commissions. Lessee represents and warrants that Lee and
Associates acted as their broker and Lessor represents and warrants
that Ashwill Associates acted as their broker. Claims for brokerage
commission or finders fees in connection with the execution of this
Lease are between Lessor and brokers under a separate agreement..
Lessee agrees to indemnify Lessor against and hold Lessor harmless
from all liabilities arising from any other claims (including, without
limitation, the cost of legal fees and court costs in connection
therewith).
ARTICILE 27 - RENOVATION
27.1 Lessee understands and agrees that Lessor may, at any time or
from time to time during the term of this Lease, perform substantial
renovation work in and to the Demised Premises or the common areas
thereof (which work may include, but need not be limited to, the
repair or replacement of the Demised Premises' exterior facade,
exterior window glass and doors, sidewalks, parking lots, landscaping,
signs or mechanical systems), any of which work may require access to
the same from within the Demised Premises or disruption of the common
areas of the Demised Premises.
27.2 Lessee agrees that:
(a) Lessor shall have access to the Demised Promises at all reasonable
times, upon reasonable notice, for the purpose of performing such
work, and
Lessor shall incur no liability to Lessee, nor shall Lessee be
entitled to any abatement of Minimum Guaranteed Rental or other
charges on the account of any noise, vibration, or other disturbance
to Lessee's business at the Demised Premises (provided
17
<PAGE>
that Lessee and Lessee's customers are not denied access to said
Demised Premises which shall arise out of such access to the Demised
Premises by Lessor or by the performance by Lessor of the aforesaid
renovations to the Demised Premises.
(c) Lessor shall use reasonable efforts (which shall not include any
obligation to employ labor at overtime rates) to avoid disruption of
Lessee's business during such entry in the Demised Premises or the
renovation off the Demised Premises
(d) It is expressly understood and agreed by and between Lessor and
Lessee that if Lessee shall commence any action or proceeding seeking
injunctive, declaratory, or monetary relief in connection with the
rights reserved to Lessor under this provision, or if Lessor shall
commence any action or proceeding to obtain access to the Demised
Premises or to the building of which the Demises Premises is a part in
accordance with this provision, and if Lessor shall prevail in any
such action, then Lessee shall pay to Lessor including any amounts
paid or payable by Lessor to contractors, architects, lenders, etc.
caused by the delays incurred by Lessor due to 'Lessee's action.
ARTICLE 28 - DEFAULT
28.1 The occurrence of any of the following shall constitute a
material default and breach of this Lease by Lessee: (i) Any failure
by Lessee to pay the Minimum Guaranteed Rental or any other monetary
sums required to be paid hereunder when due; (ii) The abandonment or
vacation of the Demised Premises or failure to conduct business on the
Demised Premises for seven (7) consecutive business days; (iii) The
making by Lessee of any general assignment or general arrangement for
the benefit of creditors; or the appointment of a trustee or receiver
to take possession of, or the attachment, execution or other judicial
seizure of substantially all of Lessee's assets located at the Demised
Premises or of Lessee's interest in this Lease; (iv) If Lessee shall
default with respect to any other lease or other agreement between it
and Lessor; {v) If this Lease or any interest therein shall by
operation of law dissolve upon or pass to any person or persons other
than Lessee; (vi) Any failure by Lessee to fully observe and perform
any other provision, covenant or requirement of this Lease to be
observed or performed by Lessee at the time when such performance is
due.
28.2 Lessee hereby grants to Lessor a consensual lien on all property
owned by Lessee which may hereafter at any time be placed in or on the
Demised Premises, for the payment of all Minimum Guaranteed Rental and
any other sums payable hereunder
In the event of any default or breach by Lessee, Lessor may, at any
time thereafter; (i) Maintain this Lease in full force and effect and
recover the Minimum Guaranteed Rental and other monetary charges as
they become due, with or without terminating this Lease, while
attempting to relet the Demised Premises on any basis on which Lessor
may in its discretion determine; (ii) Initiate an action to recover
possession and all sums in default; (iii) Reenter the Demised Premises
and terminate Lessee's right to possession with or without notice or
judicial proceeding, in which case
18
<PAGE>
Lessee shall immediately surrender possession of the Demised Premises to
Lessor; (iv) Pursue any other remedy available at law or in equity.
Effective upon any such re-entry, Lessor shall have the right without
liability to change or alter locks on all doors of the Demised Premises
and exclude Lessee therefrom and, in its discretion, remove all property
located therein. In the event of such removal, such property may be
stored in a public warehouse or elsewhere at the cost of the Lessee.
No such re-entry or execution of any other remedy by Lessor shall
constitute a termination of this Lease unless Lessor notifies Lessee
in writing of such termination. Notwithstanding that Lessor fails to
elect to terminate this Lease initially, Lessor at any time during the
term of this Lease may elect to terminate this Lease by virtue of any
previously uncured default by Lessee.
28.4 Regardless of any re-entry termination, Lessor shall be entitled
to recover from Lessee all damages incurred by Lessor by reason of
Lessees default, including, without limitation thereof any and all
unpaid sums existing at any time, plus the amount by which the charges
which would be due under this Lease until the end of the term exceed
the amount of Minimum Guaranteed Rental and other charges for the
Demised Premises which has actually been received for the entire
period, any other costs incurred by Lessor including the installation
of improvements for Lessee or any replacement Lessee and any leasing
or rental commissions paid on account of this Lease or any subsequent
lease made during the period which was to be the term hereof, any
attorney's fees and costs. Any sums received as rent by Lessor in
excess of the charges hereunder shall belong to Lessor.
28.5 Lessee shall remain responsible for the payment of Minimum
Guaranteed Rental and all other charges until the end of the term
hereof subject only to the actual receipt of rent by Lessor from any
subsequent Lessee in file Demised Premises during the period which was
to be the term hereof and in the event that rent is not received by
Lessor for that entire period, either because of the execution of a
lease for a shorter term or a default or abandonment by any subsequent
Lessee or any other reason, then Lessee shall remain responsible for
the payment of Minimum Guaranteed Rental and all other charges
provided hereunder this Lease to Lessor.
ARTICLE 29 - SIGNS
29.l Prior to the Commencement Date, Lessee shall install and
maintain sign(s), advertising Lessee's business or products sold in
the Demised Promises, provided that the Lessee obtains the necessary
permits from proper governmental authorities for the erection and
maintenance of said sign(s), and the prior written approval and
consent of the Lessor as to size, type, design and location of the
sign(s) on fascia of the building over the Demised Premises, which
approval will not be unreasonably withheld. Signs installed by Lessee
shall be non-audible and non-flashing.
19
<PAGE>
29.2 Lessee shall not be permitted to erect, install, or place any
temporary or permanent signs in the common areas of the Demised
Premises including on the sidewalk, landscaped areas, parking lot,
etc. or use any vehicle parked in or adjacent to the Demised Premises
which in Lessor's reasonable opinion acts as an advertisement for or
to hold a sign advertising Lessees business.
ARTICLE 30 - FORCE MAJEURE
30.1 In the event that either party hereto shall be delayed or
hindered in or prevented from the performance of any act required
hereunder by reason of strikes, lockouts, labor troubles, inability to
procure materials, failure of power, restrictive governmental laws or
regulations, riots, insurrections, war or other reason of a like
nature not the fault of the party delayed in performing work or doing
acts required under the terms of this Lease, then performance of such
act shall be excused for the period of such delay. The provisions of
this Article shall not excuse Lessee from the prompt payment of
Minimum Guaranteed Rental, Percentage Rental, additional rent, or any
other payments required by file terms of this Lease.
ARTICLE 31 - RUBBISH REMOVAL
31.1 The Lessee shall keep the Demised Premises clean, both inside
and outside, and its own expense and will remove the ashes, garbage,
excelsior, straw, and other refuse from said Demised Premises. The
Lessee shall not burn any materials or rubbish of any description upon
said Demised Premises. Lessee agrees to keep all accumulated rubbish
in covered containers and to have same removed regularly, and to store
the same in those areas of the Demised Premises designated by Lessor
from time to time for the storage of rubbish awaiting collection.
31.2 If no such area is designated by the Lessor, then to store said
rubbish awaiting collection within the interior of the Demised
Premises. In the event the Lessee fails to keep the Demised Premises
and other portions therefor described in the proper condition, the
Lessor may cause the same to be done for the Lessee and the Lessee
hereby agrees to pay the expenses thereof on demand, as additional
rent. Lessor shall have the rig ht to contract for rubbish removal
and Lessee agrees to pay its share of said rubbish removal as Lessor
may reasonably apportion as additional rent. Lessor shall have the
right to have Lessee impound on a monthly basis Lessor's reasonable
estimate of Lessees share of the cost of rubbish removal as provided
for in Article 41 of this Lease.
31.3 Lessee covenants and agrees, at its sole cost and expense, to
comply with all present and future laws, orders and regulations of all
state, county, federal, municipal governments, departments,
commissions and boards regarding the collection, sorting, separation,
and recycling of waste products, garbage, refuse, and trash. Lessee
shall sort and separate such waste products, garbage, refuse and trash
shall be placed in separate receptacles reasonably approved by Lessor.
Such separate receptacles may, at Lessor's option, be removed from the
Demised Premises in accordance with a collection schedule prescribed
by law.
20
<PAGE>
31.4 Lessor reserves the right to refuses to collect or accept from
Lessee any waste products, garbage, refuse or trash that is not
separated and sorted as required by law, and to require Lessee to
arrange for such collection at Lessee's sole cost and expense using a
contractor satisfactorily to Lessor. Lessee shall pay all costs,
expenses, fines, penalties or damages that may be imposed on Lessor or
Lessee by reason of Lessees failure to comply with the provisions of
this Article, and, at Lessee's sole cost and expense, Lessee shall
indemnify, defend and hold Lessor and Lessor's agents and employees
harmless (including legal fees and expenses) hem and against all
actions, claims, and suits arising hem such noncompliance, utilizing
counsel reasonably satisfactory to Lessor.
ARTICLE 32 - Hazardous Materials.
32.1 Hazardous Waste Laws. "Hazardous Waste Laws" means any and all federal,
state or local laws, Ordinances, Rules, decrees, orders, regulations
or court decisions (including the so-called "common law") relating to
hazardous substances, hazardous materials, hazardous waste, toxic
substances, environmental conditions on, under or about the Demised
Premises, or soil and ground water conditions, including, but not
limited to, the Comprehensive Enviornmental Response, Compensation and
Liability Act of 1980 ("CERCLAII") as amended, 42 U.S.C. 9601, et.
seq., the Resource Conversation and Recovery Act ("RCRA"), 42 U.S.C.
6901, et. seq., the Hazardous Materials Transportation Act, 49 U.S.C.
I 801, any amendments to the foregoing, and any similar federal,
state or local laws, ordinances, rules, decrees, orders or
regulations.
32.2 Hazardous Materials. "Hazardous Materials" means any chemical,
compound, material substance or other .matter that: (i) is a flammable
explosive, asbestos radioactive material, nuclear medicine material,
drug, vaccine, bacteria, virus, hazardous waste, toxic substance, or
related injurious or potentially hazardous material, whether injurious
or potentially injurious by itself or in combination with other
materials; (ii) is controlled, designated in or governed by any
Hazardous Materials Law: (iii) gives rise to any reposing, notice or
publication requirements under any Hazardous Materials Law; or (iv)
gives rise to any liability, responsibility or duty on the part of the
Lessee or Lessor with respect to any third person under any Hazardous
Materials Law.
32.3 Use. Term shall not allow any Hazardous Material to be used,
generated, released, stored or disposed of on under or about, or
transposed from the Demised Premises unless (i) such use is
specifically disclosed to and approved by Lessor in writing prior to
such use; and (ii) such use is conducted in compliance with the
provisions of this Article. Lessor may withhold approval if Lessor
determines that such proposed use involves a material risk of a
release or discharge of Hazardous Materials or a violation of any
Hazardous Waste Laws or that Lessee has not provided reasonable
assurances of its ability to remedy such a violation and fulfill its
obligations under this Article.
21
<PAGE>
32.4 Compliance With Laws. Lessee shall strictly comply with, and
shall maintain the Demised Premises in compliance with all Hazardous
Waste Laws. Lessee shall obtain and maintain in full force and effect
all permits, licenses, and governmental approvals required for Lessees
operations on the Demised Premises under any Hazardous Waste Laws and
shall comply with all terms and conditions thereof. At Lessor's
request, Lessee shall deliver copies of or allow Lessor to inspect,
all such permits, licenses and approvals. Lessee shall perform any
monitoring, investigation, clean-up, removal and other remedial work
(collectively, "Remedial Work") required as a result of any release or
discharge of Hazardous Materials affecting the Demised Premises or any
violation of Hazardous Waste Laws by Lessee or assignee of sublessee
of Lessee or their respective agents, contractors, employees,
licensees or invitees. Lessor shall have the right to intervene in any
government action or proceeding involving any Remedial Work, and to
approval performance of the work, in order to protect Lessor's
interests.
32.5 Compliance With Insurance Requirements. Lessee shall comply with
the requirements of Lessor's and Lessee's insurers regarding Hazardous
Materials and with such insurer recommendations based upon prudent
industry practices regarding management of Hazardous Materials.
32.6 Notice: Reporting. Lessee shall notify Lessor, in writing, within
five 5 days after any of the following: (a) a release or discharge of
any Hazardous Material, whether or not the release or discharge is in
quantities that would otherwise be reportable to a public agency: (b)
Lessees receipt of any order or a governmental agency requiring any
Remedial Work pursuant to any Hazardous Waste Laws; (c) Lessees
receipt of any warning, notice of inspection, notice of violation the
alleged violation, or Lessee's receipt of notice or knowledge of any
proceeding, investigation of enforcement action, pursuant to any
Hazardous Waste Laws; or (d) Lessee's receipt of notice or knowledge
of any claims made or threatened by any third party against Lessee or
the Demised Premises relating to any loss or injury resulting from
Hazardous Materials. Lessee shall deliver to Lessor copies of all test
results, reports and business or management plans required to be filed
with any governmental agency pursuant to any Hazardous Waste Laws.
32.7 Termination: Expiration. Upon termination or expiration of this
Lease, Lessee shall remove any equipment, improvements or storage
facilities utilized in connection with any Hazardous Materials and
shall clean up, detoxify, repair and otherwise restore the Demised
Premises to a condition free of Hazardous Materials.
32.8 Indemnity. Lessee shall protect, indemnity, defend and hold
Lessor harmless from and against any and all claims, costs, expenses,
suits, judgments, actions, investigations, proceedings and liabilities
arising out of or in connection with any breach of any provisions of
this Article or directly or indirectly arising out of the use,
generation, storage, release, disposal or transportation of Hazardous
Materials by Lessee, or any sublessee or assignee of Lessee or their
respective agents, contractors, employees, licensees or invitees, on,
under or about the Demised Premises during the Lease term of
22
<PAGE>
Lessee's occupancy of the Demised Premises including, but not limited
to, all foreseeable and unforeseeable consequential damages and the
cost of any remedial work. Neither the consent by Lessor to the use,
generation, storage, release, disposal or transportation of Hazardous
Materials nor the strict compliance with all Hazardous Materials Laws
shall excuse Lessee from Lessee's indemnification obligations pursuant
to his Article. The foregoing indemnity shall be in addition to and
not a limitation of the indemnification provisions provided in this
Lease. Lessee's obligations pursuant to this Article shall survive the
termination or expiration of this Lease.
32.9 Assignment: Subletting If Lessor's consent is required for an
assignment of this Lease or a sublease of the Demised Premises, Lessor
shall have the right to refuse such consent if the possibility of a
release of Hazardous Materials is materially increased as a result of
the assignment or sublease or if Lessor does not receive reasonable
assurances that the new Lessee has the experience and the financial
ability to remedy a violation of Hazardous Materials and fulfill its
obligations under this Article.
32.10 Entry and Inspecting: Cure. Lessor, and its agents, employees
and contractors, shall have the right, but not the obligation, to
enter the Demised Promises at all reasonable times to inspect the
Demised Premises and Lessees compliance with the terms and conditions
of this Article, or to conduct investigations and tests. No prior
notice to Lessee shall be required in the event of an emergency, or if
Lessor has reasonable cause to believe that violations of this Article
have occurred, or if Lessee consents at the time of entry. In all
other cases, Lessor shall give at least forty-eight (48) hours' prior
notice to Lessee. Lessor shall have the right, but not the
obligation, to remedy any violation by Lessee of the provisions of
this Article pursuant to Article 16(c) of this Lease or to perform any
Remedial Work which is necessary or appropriate as a result of' any
governmental order, investigation or proceeding. The Lessee shall
pay, upon demand, all costs incurred by Lessor in remedying such
violations or performing all remedial work, plus interest thereon at
the rate of eighteen (18%) percent per annum from the date of demand
until the date received by Lessor.
32.11 Default. The release or discharge of any Hazardous Materials or
the violation of any Hazardous Waste Law shall be a material event of
default by Lessee under this Lease. Ill addition to or in lieu of the
remedies available under this Lease as a result of such default,
Lessor shall have the right, without terminating this Lease, to
require Lessee to suspend its operations and activities on the Demised
Premises until Lessor is satisfied that appropriate Remedial Work has
been or is being adequately performed; and Lessor's election of this
remedy shall not constitute a waiver of Lessor's right thereafter to
declare a default and pursue other remedies set forth in this Lease.
ARTICLE 33 - GENERAL CONDITIONS
33.1 This Lease shall be subject to the following general conditions:
23
<PAGE>
(a) Performance. If the Lessee shall default in the performance of
any covenant or condition in the Lease required to be performed by the
Lessee, the Lessor may perform such covenant or condition for the
account and at the expense of the Lessee. If the Lessor shall incur
any expenses, including reasonable attorney's costs, in instituting,
prosecuting or defending any action or proceeding, instituted by
reason of any default of the Lessee, the Lessee shall reimburse the
Lessor for the amount of such expense as additional rent. The
provision of this paragraph shall survive the termination of this
Lease.
(b) Additions. Lessor hereby reserves the right to make alterations
or additions to and to build additional stories on the building in
which the Demised Premises are contained and to build adjoining to
same. Lessor also reserves the right to construct other buildings or
improvements in the Demised Premises from time to time and to make
alterations thereof or additions thereto and to build additional
stories on any such or buildings and to build adjoining same.
(c) Excavation. If any excavation shall be made upon land adjacent to
the Demised Premises, or shall be authorized to be made, Lessee shall
afford to the person causing or authorized to cause such excavation
license to enter upon the Demised Premises for the purpose of doing
such work as Lessor shall deem necessary to preserve the wall or the
building of which the Demised Premises form a part from injury or
damage and to support the same by proper foundations, without any
claim for damages or indemnification against Lessor for diminution or
abatement of Minimum Guaranteed Rental or other charges payable
hereunder.
(d) Waiver. No delay or omission in the exercise of any right or
remedy of Lessor on any default by Lessee shall imply such a right or
remedy to be construed as a waiver. The receipt and acceptance by
Lessor of a delinquent payment of Minimum Guaranteed Rental or any
amount payable by Lessee to Lessor shall not constitute a waiver of
any other default; it shall only constitute only a waiver of the
timely payment for the particular amount involved. No act or conduct
of Lessor, including, without limitation, acceptance of the keys of
the Demised Premises, shall constitute an acceptance or the surrender
of the Demised Premises by Lessee before the expiration of the term of
this Lease. Only a notice from Lessor to Lessee shall constitute
acceptance or the surrender of the Demised Premises. Lessor's consent
to or approval of any act by Lessee requiring Lessor's consent or
approval shall not be deemed to waive or render unnecessary Lessor's
consent to or approval any subsequent act by Lessee. Any waiver by
Lessor or default by Lessee must be in writing and shall not be a
waiver of any other default concerning the same or of any provision of
this Lease.
(e) Accord and Satisfaction. No payment by Lessee or receipt by Lessor
of an amount less than the amount owed by Lessee shall be deemed to be
other than on account of' the earliest stipulated amount due, nor
shall any endorsement or statement on any check or letter accompanying
any check or payment be deemed an accord and satisfaction, and
24
<PAGE>
Lessor shall accept such check or payments without prejudice to
Lessor's right to recover the balance of the amount due or to pursue
any other remedy provided for in this Lease.
(f) Rights of Redemption. Lessee hereby expressly waives any and all
rights or redemption granted by or under any present or future laws in
the event of Lessee being evicted or dispossessed any cause, or in the
event of Lessor obtaining possession of the Demised Premises by
reason of the violation by Lessee of any of the covenants or
conditions of this Lease, or otherwise.
(g) Successors in Interest. All rights and liabilities herein given
to or imposed upon the respective parties hereto shall extend to and
bind the several respective heirs, executors, administrators,
permitted successors and assigns of the said parties, and if there
shall be more than one Lessee they shall all be bound jointly and
severally by the terms, covenants and agreements herein.
(h) "For Lease" Signs. Lessor may card the Demised Premises "For
Lease" or "For Rent" sixty (60) days before the termination of' this
Lease. Said sign shall be placed in a prominent place in Lessee's
window, as selected by Lessor, and the sign shall be Lessor's or
Lessor's agents leasing sign. Lessor may enter the Demised Premises at
reasonable hours to exhibit same to prospective purchasers or Lessees.
(i) Arbitration. In cases which this Lease provided for the settlement
of a dispute or question by arbitration, the same shall be settled by
arbitration before three (3) arbitrators (unless the Lessor shall
agree to one (1) arbitrator) designated by the American Arbitration
Association and in accordance with the rules of such association. The
expenses or arbitration proceedings conducted hereunder shall be borne
equally by the parties.
(j) Union Labor Lessee agrees that whenever it is necessary to avoid a
strike, boycott or other work stoppage in or about the Demised
Premises that it will employ union labor for the purpose of making
alterations, additions, or improvements on or about the Demised
Premises.
(k) Compliance with Laws. Lessee agrees, at its own expense, to
promptly comply with all requirements of any legally constituted
public authority made necessary by reason of Lessee's occupancy of the
Demised Premises. Lessee's failure to comply with any such
requirements shall constitute a default under this Lease.
(l) Soliciting Business. Lessee and Lessee's employees and agents
shall not solicit business in the parking lot or other common areas,
nor shall Lessee distribute any handbills or other advertising matter
in or on vehicles parking in the Demised Premises.
(m) Governing Laws. This Lease shall be governed by the laws of the
State of California.
25
<PAGE>
(o) Permits and Licenses. Lessee shall obtain and maintain in effect
during the term of this Lease all permits and licenses necessary for
the operation of Lessee's business as herein provided.
(p) Rules and Regulations. Lessee shall comply with all rules and
regulations for the use and occupancy of the Demised Premises as
Lessor, in its sole discretion, from time to time promulgates for the
best interest of the Demised Premises. Lessor shall have no liability
for violation by any other Lessee of the Demised Premises of any rules
or regulations nor shall such violation or the waiver thereof excuse
Lessee from compliance.
(q) Personal Property Taxes. Lessee shall be responsible for and shall
pay before delinquency all municipal, county, state or federal taxes
assessed during the term of this Lease against any leasehold interest
or property of any kind owned by or placed in, upon or about the
Demised Premises by Lessee.
(r) Obstructing Common Areas. Lessee shall neither encumber nor
obstruct the sidewalks adjoining said Demised Premises or allow the
same to be obstructed or encumbered in any manner and Lessee shall
keep said sidewalks free of rubbish and dirt. The Lessee shall not
place or cause to be placed any merchandise, vending machines, signs
or anything on the sidewalk or exterior of the Demised Premises
without prior written consent of the Lessor.
(s) Animals and Pets. Lessee shall not house, keep, feed or allow any
pets or animals in, at, or around the Demised Premises and Lessee
shall be responsible to remove any waste from the Demised Premises and
the Demised Premises which were caused by any animals or pets which
were brought to the Demised Premises by Lessee, its employees,
customers or invitees.
(t) Addendums. Should this Lease contain any Addendum(s) and should
there be a conflict between the terns and conditions of this Lease and
any Addendum(s) attached hereto and made a part hereof the terms and
conditions contained in the Addendum(s) shall prevail.
(u) Deliveries. Lessee shall use its best efforts to complete, or cause
to be completed, all deliveries, loading, unloading and services to the
Demised Premises prior to 10:00 a.m. of each day. Lessee shall attempt to
take all deliveries through Lessee's rear door, if one is provided in the
Demised Premises and shall further attempt to prevent any delivery
vehicles servicing the Demised Premises from parking or standing in
front oh or at the rear of the Demised Premises from 10:00 a.m. and
9:00 p.m. of each day. Lessor reserves the right to regulate further
the activities of Lessee with regard to deliveries and servicing of
the Demised Premises and Lessee agrees ~o abide by such
nondiscriminatory regulations of Lessor.
26
<PAGE>
(v) Financial Statement Upon Lessor's request Lessee shall promptly
furnish Lessor, from time to time, financial statements reflecting
Lessee's or Lessee's financial condition. This request shall be
limited to no more than twice per year.
ARTICLE 34 - NOTICES
34.1 All notices under this Lease must be in writing and:
(a) Any notice by Lessee to Lessor Certified or Registered Mail,
Return addressed to Lessor presently must be personally served or sent
by Receipt Requested, postage prepaid,
(b) Any notice by Lessor to Lessee must be personally served or sent
by Certified or Registered Mail, Return Receipt Requested, postage
prepaid, addressed to Lessee as follows:
Any notices given or delivered by other means shall not be effective.
34.2 Either Lessor or Lessee may designate, by similar written notice
to the other party, any other address for such purposes. All notices
shall be deemed delivered When deposited into the United States Mail
or, if delivered in person, notices shall be deemed delivered on the
date of delivery.
ARTICLE 35 - RECORDATION OF LEASE
35.1 Lessor, in order to protect the benefits of this Lease, may
whenever necessary, record this Lease and abstracts and memorandums
thereof, whether required or permitted by law, in whatever states or
jurisdiction in which the same is recordable, at the Lessor's sole
cost and expense (including, but not limited to, the recording toes,
taxes and all other costs and expenses or recordation).
ARTICLE 36 - VALIDITY OF LEASE
36.1 This Lease contains the entire agreement between the parties and
shall not be modified in any manner except by an instrument in writing
executed by the parties. In any term or provision of this Lease, or
the application thereof to any person or circumstance shall to any
extent, be invalid or unenforceable, the remainder of this Lease, or
the application of such term or provision to persons or circumstances
other than those as to which it is held invalid or unenforceable,
shall not be affected thereby and each term and provision of this
Lease shall be valid and be enforced to the fullest extent permitted
by law.
27
<PAGE>
36.2 It is understood and agreed by the parties hereto that this
Lease contains all of the covenants, agreements, terms, provisions and
conditions relating to the leasing of the Demised Premises, and that
the Lessor or Lessor's leasing or management agents have not made and
are not making, and the Lessee in executing and delivering this Lease
is not relying upon any warranties, representations, promises or
statements except to the extent that the same may expressly be set
forth in this Lease.
36.3 The submission of this Lease for examination does not constitute
a reservation of or an option for the Demised Premises, and this Lease
shall become effective as a lease only upon the execution of this
Lease by Lessor and Lessee and delivery of the Lease.
36.4 If Lessee is a corporation or a partnership, Lessee represents
and warrants that it is duly formed, existing and in good standing
under the laws of the State of Arizona that it has full power and
authority to execute and fully perform its obligations under this
Lease pursuant to its governing instruments without the need for
further action, and that the person(s) executing this Lease on behalf
of Lessee are the duly designated agents of Lessee and are authorized
to do so. Prior to execution of this Lease, Lessee shall supply
Lessor with such evidence as Lessor may request regarding the
authority of Lessee to enter into this Lease.
Article 37 - SURRENDER OF LEASE
37.1 The voluntary or other surrender of this Lease by Lessee, or a
mutual cancellation thereof, shall not work as a merger, and shall, at
the option of Lessor, terminate all of any existing subleases or
subtenancies, or may, at the option of Lessor, operate as an
assignment to Lessor of any or all of such subleases or subtenancies.
ARTICLE 38 - CAPTIONS AND SECTION
38.1 The captions, section numbers, article numbers, and index
appearing in this Lease are inserted only as a manner of convenience
and in no way define, limit, construe or describe the scope or intent
of such sections or articles of this Lease not in any way after this
Lease.
ARTICLE 39 - IMPOUNDS
39.1 Lessor can adjust the monthly impound at the end of each
accounting period on the basis of Lessor's reasonable increases in
estimated costs for the following accounting period. A accounting
period shall be a three months (a quarter of year), except that the
first accounting period shall commence on the Commencement date and
the last accounting period shall end on the date this Lease expires
or terminates.
39.2 Lessor shall endeavor to furnish to Lessee a statement showing
the actual costs for the impounded expenses, Lessee's share of these
costs and the impound payments made by Lessee during the accounting
period within ninety (90) days after the end of the accounting period.
28
<PAGE>
39.3 If Lessees share of the actual costs exceeds the impound
payments made by Lessee, Lessee shall pay Lessor the deficiency within
ten (10) days after Lessee's receipt of the statement. If Lessee's
impound payments made during the accounting period exceed Lessee's
share of the costs, Lessor shall pay to Lessee the excess at the time
Lessor furnishes the statement to Lessee or, at Lessor's option, apply
such excess to other amounts owed by Lessee to Lessor hereunder or
towards the next year's impounds and notify Lessee of such application.
IN WITNESS WHEREOF, the parties herewith have set their hands and
seals the day and year first above written on this Lease.
LESSOR: LESSEE
By: /s/ Douglas John Wischmeyer By: /s/ Murray N. Conradie
- -------------------------------- -----------------------------
Vice President President/CEO
Wischmeyer Properties Nutek, Inc.
LESSOR BROKER LESSEE BROKER
By: David Cox By: Frank Adler
- --------------------------------- -----------------------------
Founding Partner Senior Vice President
Ashwill Associates Lee & Associates
Date: October 15, 1999 Date: October 15, 1999
29
<PAGE>
<PAGE>
EXHIBIT 10.9
LETTER OF INTENT
STATE OF TEXAS )KNOW ALL MEN BY THESE PRESENTS:
COUNTY OF BEXAR)
THAT Nutek, Inc. of 23792 Rockfield Blvd., Suite 140, Lake Forest, California
92630, as represented by its President and CEO, Mr. Murray Conradie, as
Purchaser, desires to purchase the herein described mineral acres, equipment,
and corporation, from P.R Maupin, 18211 Apache Springs Drive, San Antonio,
Texas, P.R. Maupin Profit Sharing Plan, P. R. Maupin, trustee, P.O. Box
17541, San Antonio, Texas 78217, The 3-K Trust, Charlotte Head, trustee, 9785
Westview Drive, Houston, Texas 77055, Mr. & Mrs. C. A. McCulloch, 2111 Linea
Del Pino, Houston, Texas 77077, Roy S. Miller, 4065 49th Ave. South, St.
Petersburg, Florida 33711, and Geodetic Associates, Inc., Richard V. Riddle,
President, 6140 3rd Ave. North, St. Petersburg, Florida 33710, as Sellers under
the terms and agreements described in this Letter of Intent, to-wit:
1. Purchase of corporation known as Clipper Operating Co., Inc. and all of its
assets including, but not limited to, all office equipment, field equipment,
supplies, furniture, and lease operating agreements, by the purchase of all
shares in said corporation from its sole shareholder, P. R. Maupin. Mr. Maupin
will warrant that said corporation is free and clear of any and all claims at
the time of sale and he will personally take responsibility for any such claims
that should arise against said corporation for the period prior to the date of
sale, said personal guarantee shall remain in effect for a period of one year
after the date of sale at which time said guarantee will automatically
terminate.
2. Purchase of all leases, farm-outs, or mineral interests held by Sellers in
the Big Foot and Kyote fields of Frio and Atascosa Counties, Texas insofar as
they cover a seventy five percent (75%) net revenue interest (NRI). Said NRI
would then become a one-hundred percent (100%) working interest (WI) with all
other interests being either royalty interest (RI) or overriding royalty
interest (ORR). Said lands are described on Exhibit 'A' attached hereto and
made a part of this Letter for all purposes. Sellers will give a limited
warranty to purchaser of title "by and through assignors, but not
otherwise".
3. Purchase of all of the personal property associated with the oil and gas
wells on the lands described on Exhibit 'A' hereto including, but not limited
to, all well equipment, spare equipment, tank batteries, lease winch truck,
chemical, and chemical storage tank. Equipment will be sold "as is and with
all faults".
4. Purchase of that certain four (4) inch gas pipeline which extends from the
Talley lease which is owned by the Sellers approx. four (4) miles west to the
sales point at the Virtex Petroleum Company, Inc. pipeline in the Big Foot West
field. Pipeline will be sold "as is and with all faults".
5. Purchase price:
A. Purchase of all shares of Clipper Operating Co., Inc. will be at a price
of sixty seven thousand three hundred thirty dollars ($67,330.00)
paid to the sole shareholder, P R. Maupin.
B. Purchase of all mineral acreage will be at a price of one hundred dollars
($100.00)per acre as set forth in Exhibit 'A' hereto. Total price will be
four hundred sixty four thousand six hundred thirty five dollars
($464,635.00).
1
<PAGE>
C. Purchase of all equipment will be at market value as set forth in Exhibit
'B' hereto. Total price will be eight hundred thirty three thousand
nine hundred fifteen and no/100 dollars ($833,915.00).
D. Purchase of pipeline will be at market value as set forth in Exhibit 'C'
hereto. Total price will be thirty six thousand seven hundred twenty and
no/100 dollars ($36,720.00).
E. Payment for purchase of B., C., and D. above will be made to Sellers as
set forth herein.
6. Method of payment will be one-half in the stock of Nutek, Inc. and one-
half in cash. The stock will be transmitted to sellers via overnight delivery
the day after closing in the same proportions as the disbursement of cash
set forth below. The cash for the purchase of the shares of Clipper Operating
Co., Inc. will be paid to P. R. Maupin by cashier's check at time of closing.
The cash for acreage, equipment and pipeline shall be paid to Clipper Operating
Co., Inc. for the benefit of Sellers to be accounted for and the net
divided three-eighths (3/8th's) to P. R. Maupin and one-eighth (1/8"') each
to the other Sellers.
7. Date of closing shall be tentatively set as Tuesday, January 4th, 2000.
Said closing may be delayed by mutual consent for a period not to exceed
sixty (60) days. It is agreed that the effective date of sale shall be the
first of January, 2000.
8. Sellers will furnish Purchaser an independent geological report setting
forth the remaining reserves on the lands owned by Sellers. Said report
shall be at the sole cost and expense of Sellers. Said report will be
transmitted to Purchaser by the 10th day of November, 1999, or as soon
thereafter as practicable.
9. Sellers shall also furnish a business plan setting forth the proposed
development of the acreage as has been discussed between the parties. This
will include, but not be limited to, the drilling of thirty new wells,
reworking those existing wells in which said reworking would enhance
production, and putting in a gas gathering system in order to connect casing
head gas from wells in the Big Foot Field to the pipeline. Said business plan
shall be initiated by Sellers but shall be finalized with agreement and
consultation of both parties. The costs used for this plan will be those set
forth herein with the cost of drilling each new well to be based upon the cost
estimate set forth in Exhibit 'D'. The initial draft of said business plan
shall be transmitted to Purchaser not later than the 10th day of November,
1999, or as soon thereafter as practicable.
10. Purchaser shall commit to obtain funding for said purchase and development
on a "best efforts" basis. This initial funding shall be based upon the
purchase as set forth herein; reworking a portion of the existing wells,
installing a gas gathering system, and the drilling of twenty (20) new
wells. This funding is expected to cost approximately four million dollars
($4,000,000.00) with the cost of funding to be determined by Purchaser.
Purchaser shall keep Sellers informed of progress in this regard by
maintaining contact with P.R Maupin.
11. Sellers agree not to represent these properties to any other party nor to
enter into discussions concerning a possible sale to any other party during
the term covered by the Letter of Intent.
12. P.R. Maupin shall escort Murray Conradie, or his representative, on an
inspection of all leases and equipment prior to closing in order to confirm
condition.
2
<PAGE>
13. The term of this Letter of Intent shall continue from this date until the
closing as set forth herein. Said closing and the term of this letter may be
extended for a period not to exceed sixty (60) days by mutual consent. This
Letter of Intent may be terminated by written agreement between the parties.
14. The terms of this sale and the plans for development of the minerals
herein described are preliminary only and may be changed in the final terms of
sale which will be executed by all parties.
IN WITNESS WHEREOF, the parties have set their hands on the dates below with
the effective date of this Letter of Intent being the first day of November,
1999.
Purchaser:
Nutek, Inc.
By: /s/ Murray Conradie
- ----------------------------
Murray Conradie, President
Sellers:
By: /s/ P.R. Maupin
- ----------------------------
P. R. Maupin, individually and as sole shareholder
Of Clipper Operating Co., Inc.
3
<PAGE>
EXHIBIT 'A'
ACREAGE
NOTE: The Big Foot and Kyote fields are essentially the same field producing
from the Olmos sand with the Big Foot field being in Frio County, Texas
and producing from the Olmos B and D sands and the Kyote field being in
Atascosa County joining the Big Foot field to the east and producing from
the Olmos D sand only.
BIG FOOT FIELD, FRIO COUNTY
Ann Burns 20 ac.
Ann Burns A 689.43 ac.
Nowlin 93.765 ac.
Burns 637.25 ac. farmout (requires development)
Davidson 300 ac.
Foster 331.062
Jane Burns 80 ac.
Jane Burns 'A' 20 ac.
Jane Burns 'B' 80 ac.
Jane Burns 'C' 80 ac.
Jane Burns 'D' 80 ac.
Jane Burns 'E' 40 ac.
Jane Burns 'F' 20 ac.
Jane Burns 'G' 20 ac.
Shell - C. 80 ac.
Smith, et. al. 327.48 ac.
Talley 800 ac.
Total acreage in Frio Co. = 3,698.987 ac.
KYOTE FIELD, ATASCOSA COUNTY
Crowther 197.42 ac.
Hill 87.41 ac.
Rizik 180 ac.
Tomblin 129.24 ac.
Wright 353.31 ac.
Total acreage in Atascosa Co. = 947.38 ac.
Total acreage in Big Foot/Kyote fields = 4,646.367
<PAGE>
EXHIBIT 'B'
Market value of equipment for average well in field on pump or capable of
pumping (symbol P)
$ 3,920 3200' of 2 3/8's 8R upset tubing (1.20- 1.25/ft) $l.225 avg/ft
895 3200' of 5/8" sucker rods ($7/rod = 0.28/ft)
275 downhole pump and seating nipple
250 well head
50 polish rod
90 pumping tee and stuffing box
65 misc. wellhead equip. (valves, checks, bull plugs, etc...)
2,750 pumpjack (incl. base or skid)
990 1800' (avg.) of line pipe per well at $0.55/fl.
150 elec. motor (low rpm)
375 Electrical (sw. box, time clock, starter, coils, etc...)
$ 9,810 Total
Market value of equipment for average well in field for injection/flowing
(symbol F):
$ 3,920 3200' of 2 3/8's 8R upset tubing
800 packer (tension)
250 wellhead
75 master valve
65 misc. wellhead equip.
15 seating nipple
990 line pipe
85 electrical (sw. box and master disconnect only)
$ 6,200 Total
Additional equipment for injection wells (symbol I):
$ 750 injection pump (small high pressure duplex) with skid
50 elec. motor
290 electrical (time clock, starter, coils. sws, etc...)
$ 1,190 Total
Wells which are not completed (worked over) which are on the Foster and
Davidson
leases:
$ 2,750 Pumpjack (symbol PJ)
250 Welihead (symbol WH)
375 Electrical (symbol elec.)
VALUES, WELLS, AND DESCRIPTIONS (BY LEASE)
Big Foot Field, Frio Co.
Ann Burns
$ 9,810 no.1 well (P)
Ann Burns 'A'
$ 78,480 nos. lA through BA wells (P)
Bohl
$ 39,240 nos. 1, 2, 3, and 5 (P)
Davidson
$ 29,430
$ 8,125
Foster
$ 19,620 nos. 3 and 3A (P)
$ 6,200 no.12 (F)
$ 13,500 nos. 1, lA,
$ 1,875 nos. 2A, 5,
Jane Burns
$ 9,810 no.3(P)
Jane Burns 'A'
$ 6,200 no. lA (F)
Jane Burns 'B'
$ 19,620 nos. 3 and 4 (P)
$ 7,390 no.2 (F + 1)
Jane Burns 'C'
$ 19,620 nos. 2 and 3 (P)
Jane Burns 'D'
$ 9,810 no.1 (P)
Jane Burns 'E'
$ 19,620 nos. 1 and 2 (P)
Jane Burns 'F'
$ 9,810 no. 1(P)
Jane Burns 'G'
$ 6,200 no. lB (F)
nos. 3, 13, and 17(P)
nos. 1,4 through 12, 14, 15, and 16 (wri + elec)
1
<PAGE>
Shell - C
$ 9,810 no.2(P)
$ 18,600 nos. 1, 3, and 4(F)
Smith, et al
$ 9,810 no. 1(P)
Talley
$ 186,390 nos. 1, 3, 4, 5, 7 through 13, 15, 17 through 22, and
24(P)
24,800 nos. 2, 14, 16, and 23 (F)
$563,770 Total for wells in the Big Foot Field
Kyote Field, Atascosa Co.
Crowther
$ 29,430 nos. 1, 2, and 3 (P)
Hill
$ 9,810 no. 1(P)
Rizik
$ 6,200 no. 1(F)
$ 9,810 no.2(P)
Tomblin
$ 19,620 no.1 and 2 (P)
Wright
$ 58,860 nos. 1, 3, 4, 6, 9, and 10(P)
$ 12,400 nos. 5 and 8 (F)
$146,130 Total for wells in the Kyote Field
Totals for wells;
$ 563,770 Big Foot Field
146,130 Kyote Field
$ 709,900 Total for all wells
TANK BATTERIES (BY LEASE)
Market value of equipment in tank batteries:
$ 1,150 Steel tank 210 bbl welded (symbol 21 OT)
1,500 Steel tank 300 bbl welded (symbol 300T)
1,900 Steel tank 400 bbl welded (symbol 400T)
1,000 Fiberglass tank - avg. for both open and closed top (symbol f/g)
1,850 Avg. for steel Gunbarrel welded (symbol g/b)
900 Steel tank 250 bbl bolted (symbol 250T)
650 Steel tank 100 bbl welded for water use (symbol I OOT)
2,250 Steel heater/treater (symbol hit)
Note: all tanks include stairs, landings, valves, and connections Big Foot
Field
Ann Burns
$ 4,000 (210T+g/b+fg)
Ann Burns 'A'
$ 7,000 (2x210T+2xg/b+Vg)
Bohi
$ 5,150 (2x210T+g/b+f/g)
Davidson
$ 7,200 (2x400T + 210T + hit)
Foster
$ 5,150 (2x210T+g/b+flg)
Jane Burns
$ 3,650 (210T+g/b+ lOOT)
Jane Burns 'A' - split with Jane Burns 'G'
$ 3,350 (300T+g/b)
Jane Burns 'B'
$ 3,050 (210T+250T+f!g)
Jane Burns 'C'
$ 4,000 (210T+g/b+~g)
Jane Burns 'D'
$ 3,650 (210T+g/b+ lOOT)
Jane Burns 'E'
$ 3,050 (210T+250T+f/g)
Jane Burns 'F'
$ 4,000 (210T+g/b+Vg)
Jane Burns 'G'
$ 1,500 (300T) - split with Jane Burns 'A'
Shell - C.
$ 4,850 (2x30OT + g,b)
Smith, et al
$ 3,000 (210T + g/b)
Talley
$ 10,700
(4x300T + 2xg/b + Vg)
$ 73,300 total for Big Foot tanks
2
<PAGE>
Kyote Field
Crowther
$ 4,000 (210T+g/b+fg)
Hill
$ 4,350
Rizik
$ 3,000 (2x300T)
Tomblin
$ 4,000
Wright -
$ 5,850
Wright
$ 9,200
$ 30,400 total for Kyote tanks
Total for all tanks
$ 73,300 Big Foot tanks
30,400 Kyote tanks
$103,700 Total for all tanks
ELECTRICAL DISTRIBUTION (OVERALL)
Note that the electrical distribution system on the leases is owned and
maintained by the operator. It consists of approx. ten (10) miles of three
wire (3 phase) heavy gauge line.
Value is as follows:
$ 3,510 52,000' x 3 = 156,000' x $0.0225/ft
1,300 130 elec. poles at $10 ea.
350 approx. 390 insulator/connectors at $0.90 ca.
$ 5,160 Total
MAIN FLOW LINE ON TALLEY LEASE (NOT ACCOUNTED FOR BY WELL)
Note that there is a main flow line on the Talley lease as there is only one
tank battery on this lease which is on Hwy. 472. There is therefore a main
flowline which most of the wells on this lease are connected into. The
value is as follows:
$ 2,250 approx. 3000 of 2 7/8's at $0.75/ft.
MISC. YARD EQUIPMENT (BURNS 'C' LEASE)
Clipper Operating Co., inc. maintains an equipment yard in the Big Foot Field
on the Burns 'C' lease. This is for storage of spare pans, chemical, pipe,
pumpjacks, etc.. The value of this equipment is as follows:
$ 250 Steel storage bldg. (convened tank)
1,000 tank trailer (1000 gal.) for chemical storage
905 approx. 500 gal. (on hand as of this inventory) of paraffin chemical at
SI
.8 l(gal. 1,500 one ton flatbed truck with 8,000 lb. winch for lease use
only (unlicensed)
3,750 large stock of pipe, rods, valves, parts, pipe racks, and misc. eq.
5,500 two pumpjacks (80,000 lb. gearboxes) - one needs bearing, but is
skidded
$12,905 Total
3
<PAGE>
TOTALS
$ 709,900 well equipment
103,700 tanks
5,160 electrical distribution
2,250 main flowline on Talley
12,905 equipment in yard
$ 833,915 Total value of equipment
4
<PAGE>
EXHIBIT 'C'
PIPELINE AND ASSOCIATED EQUIPMENT
The gas pipeline is a four inch (4") low pressure gas pipeline which runs from
the Clipper Operating Co., Inc. Talley lease to the main Virtex line approx.
four (4) miles west. It is on our leases except where it crosses underneath
State Hwy 472. Market value of line and associated equipment is as follows:
$ 34,320 20,800' at $1.65/ft.
800 low pressure separator
250 meter run
350 meter
300 hill opening 4" valves ($150 ea)
700 separator controls and misc. equipment
$ 36,720 Total
EXHIBIT 10.10 COMPENSATION PLAN
NuTek, Inc. COMPENSATION PLAN
NuTek, Inc., for the purpose of providing corporate management with
compensation guidelines which will protect the shareholders "and the
corporation from excessive compensation payments while permitting the
corporation to attract and retain competent and loyal employees, hereby adopts
the following Compensation Plan.
INDEX
I. Definitions
II. Application, Interpretation, Amendment and Repeal
III. Administration
IV. Compensation Limitation
V. Compulsory (Contractual) Bonus Compensation
VI. Discretionary (Non-Contractual) Bonus Compensation
VII. Excluded Stock Option Plans
VIII. Compensation Paid in Property
IX. Deferred Compensation
X. Profit Sharing and Pension Plan Contributions
XI. Fringe Benefits
XII. Business Travel and Entertainment Expenses
ARTICLE I
DEFINITIONS
In the interpretation of this Compensation Plan, the following words and terms
shall have the meanings set forth unless the context clearly requires
otherwise:
1.1 "Board of Directors" shall mean the Board of Directors of NuTek,
Inc., a Nevada Corporation.
1.2 "Commission-Based Compensation" shall mean all remuneration and
compensation calculated as a percentage of sales, revenue, income or other
variable basis selected to measure performance.
1.3 "Compensation" shall mean remuneration/compensation paid by NuTek,
Inc. and its subsidiaries and its included affiliates. The term shall include
cash (whether paid as Commission-Based Compensation or Fixed-Base Compensation),
compensation paid in property, fixed deferred compensation, and compensation
in the form of stock options not excluded under
1
<PAGE>
Article VII, but shall exclude indeterminate deferred compensation, 401(k)
contributions, and ESOP contributions.
1.4 "Compensation Plan" shall mean this Compensation Plan, as amended.
1.5 "401(k) contributions" shall mean contributions by an Employer pursuant
to a plan adopted pursuant to section 401(k) of the Internal Revenue Code.
1.6 "Deferred Compensation" shall mean compensation payable with respect to
or earned or accrued in any employment year where payment of such compensation
is delayed to a subsequent time.
1.7 "Employee" shall mean any person who receives compensation from
NuTek, Inc. and/or any of its subsidiaries or included affiliates for
more than forty (40) hours of service in any calendar quarter. The term shall
include leased employees but shall exclude any person who serves only as a
member of the Board of Directors or as a member of the Advisory Panel or is an
independent contractor.
1.8 "Employer" shall mean NuTek, Inc. as defined in section 1.16
below.
1.9 "ESOP Contributions" shall mean contributions by an Employer pursuant to
an employee stock ownership plan as described in section 4975(e) (7) of the
Internal Revenue Code.
1.10 "Excluded Stock Option Plan" shall mean (a) non-cash deferred
compensation and (b) stock option plans adopted pursuant to Article VII of
this Compensation Plan.
1.11 "Fixed Deferred Compensation payable only in cash" shall mean deferred
compensation which NuTek, Inc. must pay in a fixed amount of cash.
1.12 "Fixed-Base Compensation" shall mean all periodic wages or salary, and
other time-based remuneration or compensation.
2
<PAGE>
1.13 "Full Time" shall mean permanent employment for a minimum forty (40)
hour work week, excluding probationary and part-time employees.
1.14 "Included Affiliates" shall mean joint ventures, partnerships, joint
operating entities, or similar non-subsidiary entities, where the affected
employees are compensated wholly or partly by NuTek, Inc. The
application of the term shall be determined with reference to the employee
under consideration; if the employee of the affiliate has received no
compensation from NuTek, Inc. during the calendar year then such
employee and his/her compensation shall not be within this Compensation Plan.
1.15 "Indeterminate compensation" shall mean compensation (a) payable in a
presently indeterminate amount based upon so-called "phantom" securities, (b)
or other variable base for future determination of the amount of the
compensation, provided that the recipient cannot receive the compensation
(whether on redemption, repurchase, or disposition) for a period of at least
five (5) years after the date of the award or until death, retirement or
involuntary termination, whichever shall first occur.
1.16 "NuTek, Inc." shall mean NuTek, Inc. and its subsidiaries and its
included affiliates, except for determination of "Board of Directors" in
Section 1.1 above.
1.17 "Total Direct Compensation" shall mean, for any employment year, the sum
of all compensation, compulsory bonus compensation not excluded under Article
V, discretionary bonus compensation not excluded under Article VI, compensation
paid in property, and the annualized present value of all long-term incentive
grants not excluded under Articles VII, IX, and X, and all payments of fringe
benefits and expenses not excluded under Articles XI and XII.
ARTICLE II
APPLICATION, INTERPRETATION, AMENDMENT AND REPEAL
2.1 This Compensation Plan shall be effective, upon approval by the Board of
Directors, for the balance of the calendar year 2000 and shall continue in
effect until the next meeting of stockholders, at which time it shall be
presented to the
3
<PAGE>
stockholders for approval or rejection. If rejected, this Plan shall terminate
immediately following the meeting at which such rejection occurs. If approved
it shall continue in effect without further stockholder approval until December
31, 2005. This Compensation Plan shall be resubmitted to the stockholders for
approval of its retention for a further five year term at the Annual Meeting
in 2005 and each five years thereafter for successive effective terms of five
years.
2.2 This Compensation Plan shall be applicable to all employees of
NuTek, Inc., including its subsidiaries and included affiliates and is
intended to limit the maximum compensation payable, while permitting the
corporation to attract and retain competent and loyal employees. Nothing
contained in this Compensation Plan is intended to limit the authority of the
Board of Directors and/or appropriate corporate management to negotiate and
establish compensation or the method, nature, or amount thereof, within such
maximum limitation or within the exclusions to the limitation; i.e., the
component methods of compensation, and the component amounts of compensation
within the limitation, shall be in the business judgment of the Board of
Directors.
2.3 This Compensation Plan may be amended at any time, and from time to time,
upon recommendation of a majority of the Board of Directors approved by a
majority vote of the stockholders. Amendments shall be submitted separately;
i.e., individually. Any such amendment shall be effective as of the date of
adoption by the stockholders.
2.4 If, when this Compensation Plan is resubmitted to the stockholders
pursuant to Paragraph 2.1, there are any amendments requiring approval under
Paragraph 2.3, the amendments shall be submitted separately from the Plan as
previously amended.
2.5 If the Board of Directors shall determine that this Compensation Plan, as
a whole, is too restrictive and is inhibiting, limiting or frustrating the
Company from attracting and/or retaining competent and loyal employees, then
the Board of Directors may direct that the Compensation Plan be submitted to
the stockholders for repeal. Any proposed repeal shall be effective as of the
date of. approval thereof by majority vote of the stockholders.
4
<PAGE>
ARTICLE III
ADMINISTRATION
3.1 The Board of Directors shall be responsible for administration of, and
compliance with, this Compensation Plan. The Board of Directors shall establish
such guidelines or policies, from time to time, to implement this Compensation
Plan and to provide oversight to assure compliance.
3.2 The Board of Directors may establish a Compensation Committee, consisting
of such directors, officers, stockholders, employees and/or consultants as the
Board of Directors may determine from time to time. Such Committee and the
members thereof shall serve at the pleasure of the Board of Directors and shall
receive such compensation, consistent with this Compensation Plan, as the Board
shall determine. If such a Compensation Committee is established, the Board of
Directors may delegate to such Committee all authority not otherwise restricted
to itself, subject to such oversight rules as the Board of Directors may
determine. The members of the Committee shall elect a Chairman and a Secretary
from the Committee membership and shall hold meetings upon such notice, at such
place or places, and at such times as the Committee shall determine from time
to time. A majority of the members of the Committee shall constitute a quorum
for the transaction of business. All resolutions or other action taken by the
Committee shall be by majority vote of the members present or by majority
written consent. The Committee may employ such counsel, advisors, consultants,
accountants and actuaries as may be required in administering this Compensation
Plan. The Committee may adopt such rules as it deems necessary, desirable or
appropriate. The Committee and the individual members thereof shall be
indemnified by NuTek, Inc. against any and all liabilities arising by
reason of any act, or failure to act, made in good faith pursuant to the
provisions of this Compensation Plan, including expenses reasonably incurred
in the defense of any claim relating thereto or in the settlement thereof.
5
<PAGE>
3.3 The Board of Directors shall itself specifically approve all employment
contracts, all bonus and incentive bonus plans, all commission schedules and
commission bonus schedules, and all compensation programs involving annual
compensation of One Hundred Thousand Dollars ($100,000) or more, although
authority to determine or negotiate or propose any such compensation may be
delegated to the Compensation Committee and to appropriate officers and
management employees.
3.4 The Board of Directors and/or the Compensation Committee may delegate
authority to approve employment contracts, bonus and incentive bonus plans,
commission schedules and commission bonus schedules, and other compensation
programs involving annual compensation of less than One Hundred thousand
Dollars ($100,000) to appropriate officers and management employees.
ARTICLE IV
COMPENSATION LIMITATION
4.1 No employee shall receive Total Direct Compensation for any year of
employment greater than twenty-five (25) times the wages paid to the lowest
paid full time employee, using the lowest hourly wage rate for a 40-hour week
for a 52-week year. Example: The lowest paid full time employee earns $6.72
per hour. For a 40-hour week, that is $268.80, which for a 52-week year is
$13,977.60. The limitation for Total Direct Compensation is $349,440,
calculated as 25 times $13,977.60.
4.2 No employee who receives fixed-base compensation in excess of twelve and
one-half (12.5) times the hourly wage rate paid to the lowest paid full time
employee shall also receive commission-based compensation in an amount which,
when combined with the fixed-base compensation, exceeds the restriction under
4.1 above.
4.3 Except as provided in 4.2 above, there shall be no limitation on
commission-based compensation payable to any employee of NuTek, Inc.
provided that the variable basis selected to measure the employee's performance
is reasonably related to such employee's responsibilities (ability to affect
such basis) and the commission calculation reasonably reflects such employee's
6
<PAGE>
contribution to the basis, and the commission rate is commercially reasonable.
4.4 The limitations imposed by Paragraphs 4.1 and 4.2 shall be increased for
non-U.S. based employees to the extent that the cost-of-living at the non-U.S.
base exceeds the equivalent cost in the United states.
ARTICLE V
COMPULSORY (CONTRACTUAL) BONUS COMPENSATION
5.1 Except for compulsory (i.e., contractually required) bonus plans within
the schedule provided in Paragraph 5.2, all compulsory bonus plans shall be
included in the calculation of Total Direct Compensation for purposes of
Paragraphs 4.1 and 4.2 and the compensation limitation imposed therein.
5.2 The Board of Directors may provide for compulsory bonuses to employees
otherwise limited under Paragraph 4.1 or 4.2 as a multiple of their fixed-base
income in accordance with a schedule based upon the pre-tax net earnings per
share provided that any such schedule does not exceed the following schedule:
Net Income Before Taxes Increase as a
Per Common Share Percent of Base Salary
----------------------- ----------------------
$.00 - $.10 5%
.11 - .20 12.5%
.21 - .30 22.5%
.31 - .40 35%
.41 - .50 50%
.51 - .60 67.5%
.61 - .70 87.5%
.71 - .80 100%
.81 - .90 125%
.91 - 1.00 150%
over $1.00 200% plus the permitted
in this schedule
7
<PAGE>
Example 1: The Net Income before Taxes per Common Share is $3.65. The
fixed-base compensation is $100,000. The bonus is 667.5% of the fixed-base
compensation (200% plus 200% plus 200% plus 67.5%) or $667,500 for a combined
compensation of $767,500 ($100,000 fixed plus $667,500 bonus).
Example 2: The Net Income before Taxes per Common Share is $1.29. The
fixed-base compensation is $200,000. The bonus is 222.5% of the fixed-base
compensation (200% plus 22.5%) or $445,000 for a coined compensation of
$645,000 ($200,000 fixed plus $445,000 bonus).
In the foregoing examples it is assumed that the fixed-base compensation is
within the limitation imposed by Paragraph 4.1. The compensation limitation of
Paragraph 4.1 is inapplicable to the bonus calculated under the schedule and
to the combined compensation because the bonus is within Paragraph 5.2.
5.3 The Board of Directors may provide compulsory (i.e., contractually
required) bonuses to employees who receive commission-based income which is not
subject to limitation under Paragraphs 4.1 or 4.2, provided that such bonuses
are pursuant to . a bonus program or schedule which is applicable to all such
commission-based compensation employees without discrimination and provided
that such bonus schedule is also commission-based compensation.
ARTICLE VI
DISCRETIONARY (NON-CONTRACTUAL) BONUS COMPENSATION
6.1 No employee who receives fixed-base compensation in excess of twelve and
one-half (12.5) times the hourly wage rate of the lowest paid full time
employee shall receive any discretionary bonus compensation, except as provided
in Paragraph 6.3, which, when combined with all fixed-base compensation and all
commission-based compensation, shall provide remuneration or compensation in
excess of twenty-five (25) times the hourly wage rate paid to the lowest paid
full-time employee.
6.2 No employee who receives commission-based income which is not
8
<PAGE>
subject to limitation under Paragraph 4.1 or 4.2 shall receive any bonus
except as provided in Paragraph 5.3 above.
6.3 The Board of Directors may provide for discretionary bonuses to eligible
employees otherwise limited under Paragraph 4.1 or 4.2, provided that such
bonuses are within the schedule provided in Paragraph 5.2 above.
ARTICLE VII
EXCLUDED STOCK OPTION PLANS
7.1 Except for stock option plans within the provisions of this Article VII,
all compensation paid pursuant to stock option plans shall be within the
limitation imposed in Article IV.
7.2 The Board of Directors may establish one or more stock option plans for
incentive compensation purposes. To be within the exclusion afforded by this
Article, any such plan must provide either:
7.2.a. An S & P indexed option plan with the following terms:
(i) no more than forty percent (40') of the shares subject to option
under the plan shall be optioned in anyone calendar year;
(ii) no option shall vest for a period of twenty-four months after grant
and the grantee must be an employee on the date of vesting (i.e., employment
continuity of twenty-four months);
(iii) the options granted shall have an exercise price which floats,
relating to the base price, indexed to the S & P 500 Index and the options
shall be subject to standard anti-dilution adjustments;
(iv) upon initial grant, the options shall have a minimum exercise price,
which shall be the base price, equal to the fair market value of the shares
determined as the average of the closing bid and asked prices on the
immediately prior trading day;
9
<PAGE>
(v) no option shall be exercisable during the first twenty-four (24) months
after the date of grant and any option shall be exercisable for a period of
three (3) years after the date of vesting;
(vi) a vested option shall be exercisable so long as the grantee shall
remain an employee, and in the event of death, termination of employment,
permanent disability, or retirement, shall be exercisable for a period of
ninety (90) days after such event, and if unexercised shall terminate;
(vii) the exercise price shall be established on the first day after the
twenty-four (24) month period (the date on which the option shall vest) by
multiplying the base price (fair market value on the day of grant) by one (1)
plus any percentage increase in the S & p 500 Index since the day of grant. No
decrease shall be recognized and the exercise price shall never be less than
the fair market value on the day of grant.
Example 1: On the day of grant, the fair market value of the
Nutek stock is $1.50 and the S & P 500 Index is 439.1. On the day when
the exercise price is fixed, the market price of the Nutek stock is
$2.50 and the S & P 500 Index is 543.2. The exercise price is $1.86, calculated
as $1.50 multiplied by 1.237, the increase in the S & P 500 Index plus 1. The
exercise price is less than the current Nutek stock market price.
Example 2: On the day of grant, the fair market value of the Nutek
stock is $1.50 and the S & p 500 Index is 439.1. On the day when the exercise
price is fixed, the market price of the Nutek stock is $1.75 and the S
& p 500 Index is 543.2. The exercise price is $1.86, calculated as $1.50
multiplied by 1.237, the percentage increase in the S & p 500 Index plus 1.
The exercise price is more than the current Nutek stock market price.
Example 3: On the day of grant, the fair market value of the Nutek
stock is $1.50 and the S & p 500 index is 439.1. On the day when the exercise
price is fixed, the S & p 500 Index is 430. The exercise price is $1.50 as no
decrease in the S & P 500 Index is recognized and no decrease below the
10
<PAGE>
fair market value on the day of grant is permitted.
7.2.b. A stock option plan, indexed to a performance measure, such as sales,
production, net income, or earnings per share, with the following terms:
(i) no more than forty percent (40') of the shares subject to option
under the plan shall be optioned in anyone calendar year;
(ii) the options granted shall have an exercise price which floats,
relating to the base price, inversely (reciprocally) indexed to the
performance measure selected;
(iii) upon initial grant, the options shall have a minimum exercise price,
which shall be the base price, equal to the fair market value of the shares
determined as the average of the closing bid and asked prices on the
immediately prior trading day;
(iv) no option shall be exercisable during the first twenty-four (24)
months after the date of grant and the grantee must be an employee on the
date of vesting (i.e., employment continuity for twenty-four months);
(v) the exercise price shall be established on the first day after the
twenty-four (24) month period (the date on which the option shall vest) by
multiplying the base price (fair market value on the day of grant) by one (1)
plus the inverse (reciprocal) percentage of improvement in the performance
measure selected since the day of grant.
Example 1: On the day of grant, the fair market value of the Nutek
stock is $1.50 and the selected index, "gross sales", is $18,000,000. On the
day when the exercise price is fixed, the market price of the Nutek
stock is $2.50 and the gross sales are $28,000,000. The increase in "gross
sales" is $10,000,000 or 55.5% improvement. The inverse is 44.5% and the
exercise price is $2.17, calculated as the inverse in the improvement (1-
55.5%) plus 1. The exercise price is less than the current Nutek
stock market price.
11
<PAGE>
Example 2: On the day of grant, the fair market value of the Nutek
stock is $1.50 and the selected index, "net income before taxes", is
$18,000,000. On the day when the exercise price is fixed, the market price of
the Nutek stock is $1.75 and the "net income before taxes" is
$19,000,000 or 5.5% improvement. The inverse is 94.5% and the exercise price
is $2.92, calculated as the inverse in the improvement (1-5.5%) plus 1. The
exercise price is greater than the current Nutek stock market price.
Example 3: On the day of grant, the fair market value of the Nutek
stock is $1.50. On the day when the exercise price is fixed, the improvement
in the selected index is greater than 100%. The exercise price is $1.50 as no
decrease below the fair market value on the day of grant is permitted.
ARTICLE VIII
COMPENSATION PAID IN PROPERTY
8.1 When compensation is paid in property, the value of such property for
calculation of Total Direct compensation shall be the fair market value of
such property, net of. all liens and encumbrances assumed by the transferee,
as of the date of transfer.
ARTICLE IX
DEFERRED COMPENSATION
9.1 The Board of Directors may provide for deferred compensation. However,
except as provided in Paragraph 9.2 all deferred compensation shall be included
in the calculation of Total Direct Compensation in the year in which the
payment is committed, without regard to its treatment for current accounting
or tax purposes, and not in the year in which paid.
9.2 The Board of Directors may provide for indeterminate deferred compensation
which is not included within the limitation imposed in Paragraphs 4.1 and 4.2
provided that such indeterminate deferred compensation:
12
<PAGE>
(i) does not vest without continued employment of at least twenty-four
(24) months after the date of grant;
(ii) will not be paid by the corporation prior to at least five (5) years
after the date of the award or until death, retirement or involuntary
termination, whichever shall first occur; and
(iii) is solely contingent on the ability of the corporation to make such
payments at the time due, without escrow, guarantee or surety thereof.
ARTICLE X
PROFIT SHARING AND PENSION PLAN CONTRIBUTIONS
10.1 Except as provided in this Article X, the current cost as paid or accrued
for any profit sharing or pension plan contributions shall be included to
determine compliance with the compensation limitation imposed by Article IV.
10.2 Defined contribution profit sharing and pension plan contributions
proportionate to compensation, where the plan is applicable to all employees
not covered by a collective bargaining agreement, if non-discriminatory, shall
be excluded from the calculation of Total Direct Compensation.
10.3 Contributions to 401(k) plans and ESOPs, where the plan is applicable to
all employees not covered by a collective bargaining agreement, if
non-discriminatory, shall be excluded from the calculation of Total Direct
Compensation.
ARTICLE XI
FRINGE BENEFITS
11.1 Except as provided in this Article XI, the current cost as paid or
accrued of any special compensation or fringe benefits shall be included to
determine compliance with the compensation limitation imposed by Article IV.
13
<PAGE>
11.2 Standard fringe benefits, generally available to all employees not
covered by a collective bargaining agreement, if nondiscriminatory, shall be
excluded from the calculation of Total Direct Compensation. Standard fringe
benefits shall include such items as sick pay, vacation pay, personal leave,
hospitalization/ medical/surgical/dental insurance, moving and relocation
expense reimbursement, child care, maternity leave and family leave.
11.3 Special fringe benefits, or so-called "executive perks", available only
to a specific employee, or to a limited number of employees, such as providing
a company car, reimbursing for personal car/boat/airplane expenses, providing
of or reimbursement of personal, spousal or family social club/sports club,
country club/golf club/health club dues and expenses, etc., providing of or
reimbursement of spousal and/or dependent's travel expense, providing of or
reimbursement of legal expenses where not covered by corporate indemnification,
and use of corporate property for personal purposes, shall be included in
Total Direct Compensation. However, this provision shall not include (1)
expenses caused by executive position such as home security, bodyguards, special
reinforced vehicles, etc., nor (2) expenses for trade/business association
membership or business club expenses excludable under Article XII or approved
business expenses under Article XII, which shall not be included. Similarly,
executive perks, consistent with local (foreign) general practice, provided to
foreign-based employees, shall not be included in Total Direct Compensation.
11.4 No fringe benefit paid or accrued pursuant to a plan approved by the
stockholders shall be included within Total Direct Compensation if such plan
according to its terms specifically excludes the benefits from the
calculation.
ARTICLE XII
BUSINESS TRAVEL AND ENTERTAINMENT EXPENSES
12.1 No non-accountable expense allowances shall be permitted.
12.2 The Board of Directors shall establish, from time to time, a corporate
policy for reimbursable travel and entertainment expenses. Such policy shall
establish appropriate limits and
14
<PAGE>
standards, generally available to all employees and. without discrimination in
favor of executives or more highly compensated employees.
12.3 The Board of Directors may approve expenses for, or related to,
trade/business association memberships and business club expenses for selected
employees, provided that such expenses are reasonably related to such
employees' responsibilities and intended to primarily benefit NuTek,
Inc. rather than the specific employee(s). Authority for approval of such
expenses, subject to specific guidelines adopted by the Board of Directors,
may be delegated to the Compensation Committee, if any.
15
<PAGE>
EXHIBIT 10.11 KEY EMPLOYEES INCENTIVE STOCK OPTION PLAN
NuTek, Inc.
KEY EMPLOYEES INCENTIVE STOCK OPTION PLAN
1. Purpose. The purpose of the Plan is to secure for the Corporation
and its stockholders the benefits which flow from providing employees of the
Corporation with the incentive inherent in common stock ownership. It is
generally recognized that stock option plans aid in retaining competent
executives and furnish a device to attract executives of exceptional ability
to the Corporation because of the opportunity offered to acquire a proprietary
interest in the business. The stock options granted under this S&P Index
Stock Option Plan are intended to qualify as incentive stock options within the
meaning of Internal Revenue Code Section 422A.
2. Amount of stock. The total number of shares of Common Stock to be
subject to options granted on and after January 1, 2000 pursuant to this Plan
shall not exceed 500,000 shares of the Corporation's Common Stock. This total
number of shares shall be subject to appropriate increase or decrease in the
event of a stock dividend upon, or a subdivision, split-up, combination or
reclassification of, the shares purchasable under such options. In the event
that options granted under this Plan shall lapse without being exercised in
whole or in part, other options may be granted covering the shares not
purchased under such lapsed options.
3. Stock option committee. The Board of Directors may, from time to
time, appoint a Stock Option Committee (hereinafter called the "Committee"),
to serve under this S&P Index Stock Option Plan. The Committee shall consist,
if possible, of disinterested persons as that term is defined in Section 16 of
the Securities and Exchange Act of 1934, as amended. In the absence of such a
committee, the entire Board of Directors shall serve as the Stock Option
Committee.
4. Eligibility and participation. Options may be granted pursuant to
the Plan to all employees of the Corporation including its subsidiaries and
included affiliates (hereinafter called "employees/consultants"). From time to
time the Committee shall select the employees/consultants to whom options may
be granted by the Board of Directors and shall determine the number of shares
to be converted by each option so granted. Future as well as present
employees/consultants (including officers, executives, managerial employees
and key consultants who are directors) shall be eligible to participate in this
Plan. Directors who are not officers, executives, managerial employees of, or
key consultants to, the Corporation or a subsidiary are not eligible to
participate in this Plan. No option may be granted under the Plan after January
1, 2000.
5. Option agreement. The terms and provisions of options granted
pursuant to this Plan shall be set forth in an agreement, herein called an
Option Agreement, between the Corporation and the employee receiving the same.
The Option may be in such form, not inconstant with the terms of this Plan, as
shall be approved by the Board of Directors.
-1-
<PAGE>
6. Price. The purchase price per share of Common Stock purchasable under
options granted pursuant to the Plan shall not be less than 100 percent of the
fair market value at the time the options are granted. The purchase price per
share of Common Stock purchasable under options granted pursuant to this Plan
to a person who owns more than ten percent (10%) of the voting power of the
Corporation's vesting stock shall not be less than 110 percent of the fair
market value of such shares, at the time the options are granted. For the
purposes of the preceding sentence (a) the employee/consultant shall be
considered as owning the stock owned directly or indirectly by or for himself,
the stock which the employee/consultant may purchase under outstanding options
and the stock owned, directly or indirectly, by or for his brothers and sisters
(whether of the whole or half blood), spouse, ancestors, and lineal descendants
and (b) stock owned directly or indirectly, by or for a corporation,
partnership, estate, or trust shall be considered as being owned proportionately
by or for its shareholders, partners, or beneficiaries. For all purposes of
this Plan, the fair market value of the Common Stock of the Corporation shall
be determined in good faith at the time of the grant of any determination, the
Stock Option Committee shall not take into account the affect of any
restrictions on the Common Stock other than restrictions which, by their terms,
will never lapse. The full purchase price of shares purchased shall be paid
upon exercise of the option. Under certain circumstances such purchase price
per share shall be subject to adjustment as referred to in Section 10 of this
Plan.
7. Option period. No option granted pursuant to this Plan shall be
exercisable after the expiration of five (5) years from the date the option is
first granted. The expiration date stated in the Option Agreement is
hereinafter called the Expiration Date.
8. Termination of employment. The Option Agreement shall proved that:
(a) If, after the vesting date but prior to the Expiration Date the
grantee shall for any reason whatever, other than (1) his authorized
retirement as defined in (b) below, or (2) his death, cease to be employed by
the Corporation or a subsidiary, any unexercised portions of the option
granted shall automatically terminate;
(b) If after the vesting date but prior to the Expiration Date the
grantee shall (1) retire upon or after reaching the age which at the time of
retirement is established as the normal retirement age fore employees of the
Corporation (such normal retirement age
-2-
<PAGE>
now being 62 years) or (2) with the written consent of the Corporation retire
prior to such age on account of physical or mental disability (such retirement
pursuant to (1) or (2) being deemed an "authorized retirement") any unexercised
portion of the option shall expire at the end of unexercised portion of the
option shall expire at the end of three (3) months after such authorized
retirement, and during such three months' period the grantee may exercise all
or any part of the then unexercised portion of the option; and
(c) If after the vesting date but prior to the Expiration Date the
employee/consultant shall die (at a time when he is an employee of the
Corporation, a subsidiary or an included affiliate or within three months
after his authorized retirement), the legal representatives of his estate or a
legatee shall have the privilege, for a period of six (6) months after his
death, of exercising all or any part of the then unexercised portion of the
option.
Nothing in (b) or (c) shall extend the time for exercising any option granted
pursuant to this S&P Index Stock Option Plan beyond the Expiration Date. In
no event shall any option exercisable before it vests and no option shall vest
unless the grantee is an employee at the end of the twenty-fourth month after
grant.
9. Assignability. The Option Agreement shall provide that the option
granted thereby shall not be transferable or assignable by the employee
otherwise than by will or by the laws of descent and distribution and during
the lifetime of the employee shall be exercisable only by him.
10. Adjustment in case of stock splits, stock dividends, etc. The Option
Agreement may contain such provisions as the Board of Directors may approve as
equitable concerning the effect upon the option granted thereby and upon the
per share or per unit option price, of (a) stock dividends upon, or
subdivision, split-ups, combinations or reclassifications of, the securities
purchasable under the option, or (b) proposals to merge or consolidate the
corporation or to sell all or substantially all of its assets, or to liquidate
or dissolve the Corporation.
11. Stock for investment. The Option Agreement shall provide that unless
the Common Stock to be issued shall have been registered the employee shall
upon each exercise of a part of all of the option granted represent and
warrant that his purchase of stock pursuant to such option is for investment
only, and not with a view to distribution involving a public offering. At any
time the Board of Directors of the Corporation may waive the requirement of
such a provision in any Option Agreement entered into any stock option plan of
the Corporation.
12. Amendment of the Plan. The Board of Directors of the Corporation
may from time to time alter, amend, suspend or discontinue the Plan and make
rules for its administration, except that the Board of Directors shall not
amend the Plan in any manner which would have the effect of preventing options
issued under the Plan from being "incentive stock options" as divided in
Section 422A of the Internal Revenue Code of 1986.
-3-
<PAGE>
13. Options discretionary. The granting of options under this S&P Index
Stock Option Plan shall be entirely discretionary with the Stock Option
Committee and nothing in this Plan shall be deemed to give any person any
right to participate in this Plan or to receive option hereunder.
14. Stockholder approval. The Plan will be submitted to the Common
stockholders of the Corporation at the Special Meeting of Stockholders to be
held on April 1, 2000, for approval by the holders of a majority of the
outstanding shares of Common Stock of the Corporation. If the Plan is not
approved by the holders of a majority of the outstanding shares of Common
Stock of the Corporation by June 1, 2000 then the Plan shall terminate and any
options granted hereunder shall be void and of no further force or effect.
-4-
<PAGE>
Exhibit 23.1 Consent from James E. Slayton, CPA
NuTek, Inc.
EXHIBIT #23 Consent of Experts and Counsel
James E. Slayton, CPA
3867 West Market Street
Suite 208
Akron, Ohio 44333
To Whom It May Concern: January 12, 2000
The firm of James E. Slayton, Certified Public Accountant consents to the
inclusion of my report of December 31, 1999, on the Financial Statements of
Nutek, Inc. from the date of January 1, 1998 through December 31, 1999, in any
filings that are necessary now or in the near future to be filed with the
U. S. Securities and Exchange Commission.
Professionally,
/s/ James E. Slayton
- -----------------------------
James Slayton, CPA
Ohio License ID #04-1-15582
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE BALANCE SHEET, THE STATEMENT OF OPERATIONS, AND THE
STATEMENT OF CASH FLOWS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 81,404
<SECURITIES> 0
<RECEIVABLES> 75,706
<ALLOWANCES> 0
<INVENTORY> 40,463
<CURRENT-ASSETS> 197,573
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 3,062,610
<CURRENT-LIABILITIES> 73,689
<BONDS> 0
0
793
<COMMON> 36,328
<OTHER-SE> 2,951,800
<TOTAL-LIABILITY-AND-EQUITY> 3,062,610
<SALES> 238,039
<TOTAL-REVENUES> 238,039
<CGS> 30,267
<TOTAL-COSTS> 534,838
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> (296,799)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (296,799)
<EPS-BASIC> (0.01)
<EPS-DILUTED> (0.01)
</TABLE>
