SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-SB
General Form For Registration of Securities of
Small Business Issuers under Section 12(b)
Or 12(g) of the Securities and Exchange Act of 1934
CYNTECH TECHNOLOGIES, INC.
(Name of Small Business Issuer in Its Charter)
UTAH 87-0443172
(State or other Jurisdiction of Incorporation) (IRS Employer
Identification No.)
4305 Derbyshire Trace
Conyers, Georgia 30094
(Address of Principal Executive Offices) (Zip Code)
(770) 760-8732
(Issuer's Telephone Number, Including Area Code) to be registered under Section
12(b) of the Act:
Exchange on Which
Title of Each Class Name of Each to be so Registered
Securities Each Class is to be registered
None None
Securities to be registered under Section 12(g) of the Act:
Common Stock, $0.001 par value, per share
(Title of Class)
Copy to:
Stephen Thomas, Esquire
Corporate General Counsel
416 Main Street, Suite 1012
Peoria, Illinois 61602
Telephone: (309) 637-8888
Facsimile: (309) 637-8838
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TABLE OF CONTENTS
Item Page
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PART I
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1. Business 4
2. Management's Discussion and Analysis 9
3. Description of Property 10
4. Security Ownership of Certain Beneficial Owners and Management 10
5. Directors and Executive Officers 11
6. Executive Compensation 12
7. Certain Relationships and Related Transactions 16
8. Description of Securities 17
PART II
1. Market Price of and Dividends on the Registrant's
Common Equity and Related Stockholder Matters 17
2. Legal Proceedings 18
3. Changes in and Disagreements With Accountants 18
4. Recent Sales of Unregistered Securities 18
5. Indemnification of Directors and Officers 20
6. Y2K Compliance Status 21
PART F/S
1. Financial Statements F-1
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PART III
Index to Exhibits:
2 Share Exchange Agreement
3(i). Articles of Incorporation, with amendments
3(ii).Bylaws
5 Legal Opinion of Stephen J. Thomas
10. Material Contracts:
a. Optima Investments, Inc. Agreement
b. Oxford International, Inc. Agreement
c. CorpFinance Financing Agreement
d. R. Frank Meyer Consulting Agreement
e. Laska & Associates, Inc. Consulting Agreement
f. Kit Bromley & Company, Inc. Agreement
g. The Challenge, Ltd. Agreement
h. California Business Intelligence, Inc. Agreement
i. Serengeti Products, Inc. & Engine Technologies, Inc. Agreement
j. Technology License Agreement - Cyntech Research & Engineering, Inc.
k. Engagement Agreement between Charles Tovey and Cyntech Technologies,
Inc.
23 Consent of Tanner+Co.
27 Financial Data Schedule
99. Proxy Statement
<PAGE>
PART I
Item 1. Business
Forward-looking Statements
This Registration Statement includes forward-looking statements within the
meaning of Section 21E of the Securities Exchange Act of 1934 (the "Exchange
Act"). These statements are based on management's beliefs and assumptions, and
on information currently available to management. Forward-looking statements
include statements in which words such as "expect," "anticipate," "intend,"
"plan," "believe," estimate," "consider," or similar expressions are used.
Forward-looking statements are not guarantees of future performance. They
involve risks, uncertainties and assumptions. The Company's future results and
stockholder values may differ materially from those expressed in these
forward-looking statements. Many of the factors that will determine these
results and values are beyond the Company's ability to control or predict. In
addition, the Company does not have any intention or obligation to update
forward-looking statements after the effectiveness of this Registration
Statement, even if new information, future events or other circumstances have
made them incorrect or misleading. For these statements, the Company claims the
protection of the safe harbor for forward-looking statements contained in
Section 21E of the Exchange Act.
History
Cyntech Technologies, Inc. (the "Company" or "Issuer") was organized under the
name "Blytheburg, Inc." on February 5, 1986. On March 24, 1988, it changed its
name to "Wasatch Fiber Group, Inc." On May 16, 1990, the Issuer entered into a
Merger Agreement with Carbon Fiber Products, Inc., a Utah Corporation("CFP") and
on December 17, 1992, changed its name to Carbon Fiber Products, Inc. Following
the mailing of a Proxy Statement to all stockholders of record, the Issuer
entered into an Exchange Agreement dated November 30, 1998, and as amended
December 22, 1998, pursuant to which the Issuer changed its name to Cyntech
Technologies, Inc. on December 24, 1998. Copies of the Proxy Statement and
Exchange Agreement are attached hereto and incorporated by reference.
General
Cyntech, a Utah corporation, a development stage company, was formed to take
advantage of the major problems of disposing of and recycling waste tires,
rubber products, carpeting, plastics, oils, and other hydrocarbon waste
products. Cyntech's primary focus is to develop chemical and petroleum recycling
facilities utilizing its licensed proprietary technology.
Cyntech will seek to apply chemical engineering technological solutions to the
recycling of waste tires, plastics, and carpet and rubber products into
marketable petrochemical fuel products. Cyntech and its management view this as
both economically sound and environmentally effective, although the technology
which Cyntech intends to use is unproven in a commercial operational plant
environment, is not yet operational, and has not been demonstrated to be
cost-effective, even if it works. Cyntech plans to build a plant in Mt. Belvieu,
Texas, to be operated by its wholly-owned subsidiary, Cyntech of Chambers
County, Inc. ("Cyntech Chambers").
The proprietary process utilized by Cyntech, known as ThermReTec(R), is based on
the general principals of "thermal vacuum distillation" and "thermal
depolymerization" processes, which involves the recapture of hydrocarbons from
the waste materials listed below. Cyntech Research & Engineering, Inc. ("Cyntech
Research"), an affiliate of the Company, has filed a patent application for the
proprietary process, and currently, is deemed to be a patent pending. From these
waste materials, which Cyntech calls "feed stock," Cyntech plans to produce
commercial quantities, in suitable quality for the marketplace, of the
following:
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1) Carbon black- to be gasified
2) Fuel gases and liquids
3) Liquid hydrocarbon - gas oil (medium and light viscosity)
4) Scrap steel
Cyntech's technology is designed to process, as its raw materials, scrap tires,
plastic, carpeting, and automobile fluff (the plastic and non-metal residue from
automobiles), which are presently taken to landfills. Such landfills are
becoming crowded and unable to process these materials. This is a major problem,
not only for landfills, but also for tire manufacturers and others seeking to
process such waste products.
For these reasons, Cyntech believes it will be able to receive its raw materials
at no cost and will, in fact, charge for accepting and the recycling of such
materials. The materials will then be "broken down" or distilled in a thermal
distillation process, which uses liquid condensation to remove and distill
valuable petroleum products without actually applying flame or burning rubber or
plastic products.
As presently contemplated, the "feed stock" waste products will be received by
the Company for a "dump" or "tipping" fee, which Cyntech estimates will cover
shredding, or preparation, costs for preparing these waste materials for
introduction into its plants' vacuum distillation and gasification equipment.
While this is the operational objective of Cyntech, there is no assurance that
Cyntech will be successful in these efforts.
Technology - Facility
Cyntech's licensed technology developments have been embodied in a patent
application, submitted to the U.S. Patent office on February 12, 1998, developed
by, and to be assigned to Cyntech Research and Engineering, Inc. ("Cyntech
Research"), Cyntech Research is an affiliate of the Company. Cyntech of Chambers
County, Inc. ("Cyntech Chambers") a wholly owned subsidiary of Cyntech acquired
in August, 1998, is scheduled to be the first operating entity, and on November
30, 1998 was granted an exclusive license to use the technology from Cyntech
Research in the United States. This internal arrangement requires Cyntech of
Chambers to Compensate Cyntech Research as follows: a $500,000 installation fee,
payable upon commencement of the initial phase of the first facility; and, an
annual licensing fee of seven percent (7%) of the gross revenues of Cyntech
Chambers.
Cyntech Chambers has informed the Company that it has performed substantially
all of the planning functions for the planned development and construction of a
chemical and recycling facility in Mt. Belvieu, Texas (the "Chambers facility").
In that connection, Cyntech Chambers has selected a general contractor, engaged
an engineering firm to complete the detailed engineering drawings for the
facility, and has selected a plant manger for the facility. In addition, Cyntech
Chambers has advised the Company that it has secured a long-term loan commitment
for financing of Phase I of the facility in the amount of $65,000,000, subject
to a number of final requirements; the Company has independently verified this
financing, and there can be no assurance that such financing will be closed.
Finally, the Company has been informed that Cyntech Chambers has obtained
certain contracts for the procurement of feedstock for the proposed facility and
the sale of the end products.
Cyntech plans to commence construction of the facility in the first quarter of
2000 and complete it in the first quarter 2001. However, these plans are subject
to Cyntech's ability to obtain substantial equity financing and the long-term
debt financing referred to above, of which there can be no assurance.
Both the Chambers facility, and other projected facilities, during Phase I, are
intended to operate three (3) reactors which will process "scrap" tires and
rubber. The rubber processing reactors are planned to process approximately 72
million pounds per year, per reactor. Phases II and III will add two, or more,
plastics' reactors, to process approximately 72 million pounds of plastics,
carpet and automobile fluff, per year, per reactor.
<PAGE>
Cyntech has not yet constructed a facility for processing scrap rubber or
plastics. Moreover, its technologies, in some parts, are commercially unproven
at this time, but many aspects of the plant design are drawn from standard
petrochemical process technologies in use worldwide today in refinery and
gasification operations on a larger scale. There is no assurance that the
technology will function properly; that a facility can be constructed to apply
such technology on an operational level; or that the plant(s) will operate
economically.
The engineering and construction firms, however, will issue corporate guarantees
that the plant will perform as designed and approximately 100% of the projected
outputs will be achieved.
Management's objective is to commence operations as soon as it has obtained the
equity capital necessary to fund final engineering, and to commence
construction.
Structure
The first processing facility is being developed and will be owned by Cyntech's
wholly owned subsidiary, Cyntech Chambers. This facility has been designed and
contractor and engineering firms have been selected. Cyntech Chambers will
utilize the licensed technology developed by Cyntech Research, which involves
"upstream" and "downstream" technology to enhance vacuum type distillation
reclamation processes, together with the refinement of distillate oils and fuel
gas for use with co-generation equipment and other applications.
Cyntech's management represents that a plant manager and contractor for "feed
stock" (i.e. raw material for refining), have been obtained. Additionally,
Cyntech's management represents that Cyntech has obtained a long term financing
commitment for the construction and development of the facility, in the amount
of $65,000,000 from an international lending consortium.
Marketing and Markets
Target markets for Cyntech's products consist of the following:
1. Fuel gas and liquids
2. Firms that will use distillate oil for blending as a fuel
source;
3. Firms desiring to blend such fuel for the marine diesel
market
4. Firms desiring to use distillate oil for co-generation of
electricity. In this regard, Cyntech anticipates using a
portion of the distillate to power its facility(s)
5. Firms which will use carbon black for steel production,
smelting, asphalt, paving, roofing, printing, paint
manufacture, tones and carbon fibers; and petrochemical
companies
6. Firms that desire to purchase the scrap steel end products
from Cyntech, such as steel manufactures for blending and
mini-mill operations.
There is assurance that sufficient long-term buyers and markets exist within the
economical transport boundaries of Chambers to sell products if they can be
successfully produced.
Cyntech believes it can sell the fuel, which it strips initially, to a refinery
in Mt. Belvieu, Texas. It also believes a steel plant in Houston will be a buyer
for scrap steel.
<PAGE>
Competition
There are numerous suppliers of the various products which Cyntech plans to
sell, including:
1. Gas oils
2. Carbon Black
3. Scrap steel
4. Fuel gases
However, Cyntech believes that it can produce these products more economically
because of low, or no raw material costs, and its unique gasification
technologies which give the company a potential superior market advantage.
Significant Transactions
Cyntech has entered into two significant contractual relationships, one with
Cyntech Chambers and one with its affiliate, Cyntech Research. The contract with
Cyntech Chambers provides that Chambers is obligated to compensate Cyntech after
each plant becomes operational, a monthly management fee of four percent (4%) of
the gross revenues of Chambers. Cyntech Research, an affiliate, has licensed its
ThermReTec(R) technology to Cyntech Chambers for an initial term of ten (10)
years from the date of payment of the initial fee, but not later than November
30, 1999, with two ten (10) years options to renew the licensing agreement.
Cyntech Research will be compensated for the use of such technology in the form
of a one-time fixed fee of $500,000.00 for phase I of each plant constructed,
and $250,000.00, per phase, for phases II and III of each plant, if and when the
plant is expanded, together with an annual licensing fee of seven percent (7%)
of total gross operating revenues.
Governmental Regulation
Cyntech will be operating in a highly regulated industry. Among others, the EPA,
various State Divisions of Oil and Gas, the Energy Commission, and various local
environmental regulatory agencies will monitor and govern the plant activity of
Cyntech once they become operational. Cyntech believes that it can operate
effectively under all environmental regulations worldwide, but plant operations
could be subject to close scrutiny.
Risk factors include, but are not limited to the following:
Cyntech and Cyntech Chambers are development stage companies, with no
significant revenues from product sales, and the companies have a limited
operating history.
The Company's capital requirements have been, and will continue to be
significant.
Cyntech Research & Engineering, Inc., an affiliate of the Company and a
development stage enterprise, applied for a patent for its proprietary
technology on February 12, 1998, with the final application filed on March 4,
1999. The patent application is currently classified as a patent pending;
however, the patent application has not been approved at this time.
The Company's prospects will be significantly affected by its ability to
successfully obtain long-term contracts with a limited number of major suppliers
of feed-stock, principally used tires and plastics, and sales of products and
end products to a few large customers.
The Company will operate in a growing industry, with many of the Company's
competitors and potential competitors may be significantly larger and have
significantly greater financial and management resources than the Company. The
Company expects that competition will intensify in the markets to be addressed
by the Company. The Company's current marketing efforts have focused primarily
on a few large companies.
<PAGE>
The Company believes that its continued success will depend to a significant
extent upon the retention of its present and designated management group,
including a number of independent consultants. The Company is currently working
on long-term management contracts for the current executive officers and a
number of consultants for the Company.
Item 2. Management's Discussion and Analysis
On December 22, 1998, Cyntech Technologies, Inc. ("Cyntech Utah"), formerly
Carbon Fiber Products, Inc., purchased Cyntech Technologies, Inc. (Nevada) and
Cyntech of Chambers County (the "Acquirees"). The stockholders of the Acquirees
received 25,900,000 shares of Cyntech Utah common stock. This business
combination has been accounted for as a recapitalization of Cyntech Utah, giving
effect to the acquisition of 100% of the outstanding common shares of the
Acquirees. Accordingly, the consolidated financial statements of Cyntech at July
31, 1999 and 1998 assumes the acquisition of Cyntech Utah by the Acquirees
occurred December 31, 1997 (date of inception). The surviving entity reflects
the assets and liabilities of Cyntech Utah and the Acquirees at their historical
book values.
Results of Operations
The statement of operations is that of the Cyntech Technologies, Inc. (Nevada)
and Cyntech Chambers, deemed to be in the development stage, from December 31,
1997 (date of inception) through July 31, 1998, and the year ended July 31,
1999.
For the period from inception (December 31, 1997) through July 31, 1999, the
Company generated no revenues from continuing operations, and had general and
administrative expenses of $3,683,000, other income of $30,000 and a net loss of
$3,653,000.
The Company estimates that construction of the first operating facility will be
completed and placed into service during the first quarter of 2001. After a
start-up period, estimated to take approximately one month, operating revenues
will begin on or before April 30, 2001. Management plans to begin hiring, and
training, management personnel and production employees during the third and
fourth quarters of 2000 and first quarter of 2001.
After 15 years, the golf shaft operations of the formerly Carbon Fiber Products,
Inc., were discontinued on or about July 31, 1999. Losses from discontinued
operations are summarized in Note 13, of the Notes to the Consolidated Financial
Statements. Accordingly, management believes that comparisons of this
discontinued operation for the fiscal year ended July 31, 1999 and prior years
would not be meaningful.
Liquidity and Capital Resources
At July 31, 1999, the Company had assets totaling $1,164,000, including prepaid
expenses of $1,035,000, other current assets of $95,000, and equipment, net of
accumulated depreciation, of $34,000; current liabilities in the amount of
$2,241,000; and stockholders' deficit in the amount of $1,077,000. Since
December 31, 1997(the date of inception), the Company has received $181,000 in
cash contributed as consideration for the issuance of shares of common stock,
$136,000 in cash contributed from related party notes payable, and $47,000 in
cash contributed from the proceeds of long-term debt.
To meet projected funding requirements the two years ending July 31, 2001, the
Company has engaged a non-related company to assist Cyntech Technologies, Inc.
in raising approximately $10,000,000 in equity through one or more private
placements. If the Company is unable to generate sufficient cash flows during
the construction and start-up period for the first plant, management intends to
explore all available alternatives for debt and/or equity financing, including
but not limited to private and public securities offerings.
<PAGE>
The Company has received a commitment for a construction and permanent
financing, in the amount of approximately $65,000,000, to build the first
commercial hydrocarbon recycling and recovery facility in Mount Belvieu
(Chambers County) Texas. After final engineering drawings are completed in
approximately 120 days, the company expects to close the construction loan
financing for the Chambers County project.
Item 3. Description of Property
The Company's executive offices occupy rented space, on a month-to-month basis,
at 4305 Derbyshire Trace, Conyers, Georgia. The Company utilizes this space
owned by R. Frank Meyer, for which the Company pays rent in the amount of $175
per month, and reimburses Mr. Meyer for utilities, telephone, repairs and
maintenance, and other normal operating costs.
Item 4. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth information as of July 31, 1999 with respect to
the beneficial ownership of the Company's securities by officers and directors,
individually and as a group. To the Company's knowledge on July 31, 1999, there
were no holders of more than 5% of the Company's Common Stock other than Messrs.
R. Frank Meyer, Homer Cutrubus, Phida Cutrubus and Michael Dumdie, Trustee.
Beneficial ownership includes stock as to which a person has sole or shared
voting or investment power and any shares of Common Stock, which the person has
the right to acquire within 60 days through the exercise of any option, warrant
or right.
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Title of Class Name and Address of Beneficial Owner Amount and Nature of Percent of
Beneficial Owner Class
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Common Stock TexOil Chemical Limited Partnership, 16,957,805 (1) 54.67%
4305 Derbyshire Trace, Conyers,
Georgia 30094
----------------- ---------------------------------------- -------------------------- -------------
Common Stock Michael Dumdie, Trustee, P.O. 2,302,673 (2) 7.62%
Box 888682, Atlanta, Georgia 30356
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Common Stock Homer Cutrubus and Phidia Cutrubus, 2,033,274 (3) 6.73%
895 West Riverdale Road, Ogden, Utah
84405
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Notes:
(1) TexOil Chemical Limited Partnership, LP, a Nevada Limited
Partnership, wholly owned by the immediate family members of R.
Frank Meyrer's, including his wife, two adult daughters and trusts
in the name of his two minor sons, for which Mrs. Meyer serves as
the trustee. R. Frank Meyer holds no direct ownership of TexOil
Chemical Limited Partnership, LP and disclaims beneficial
ownership. The above table excludes stock options granted to Mr.
R.F. Meyer.
(2) Michael Dumdie, a nephew of R. Frank Meyer, serves as the trustee
for a group of non-related shareholders.
(3) Homer and Phidia Cutrubus are brothers and hold their interests
individually and in two other partnerships, as noted below:
Homer Cutrubus 482,899 shares
Phidia Cutrubus 343,792 shares
DNS 362,490 shares
H&P Investments 844,093 shares
Item 5. Directors and Executive Officers.
The following table sets forth the name, age and position of each director and
executive officer of the Company as of the date hereof.
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Name Age Position
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R. Frank Meyer 56 Chairman of the Board, President, Chief
Executive Officer
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Brian Hass 38 Executive Vice President, Secretary, Director
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William Meyer 53 Treasurer, Director
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J. W. Feighner, Jr. 49 Nominated as a Director (nominated by the
Board of Directors, subject to election at
the next annual meeting of shareholders)
- ---------------------------------------------- -------------- ----------------------------------------------
Ike A. Yancy 52 Vice President - Feedstock Acquisition
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J.P. Herrin, P.E. 70 Vice President - Engineering
- ---------------------------------------------- -------------- ----------------------------------------------
Dr. D. Johnson, P.E. 68 Vice President - Research & Development
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<PAGE>
The principal occupation, title and business experience of the Company's
executive officers and directors during the last five years, including the names
and locations of employers, is indicated below:
R. Frank Meyer
R. Frank Meyer is the Chairman, Director, President and Chief Executive of
Cyntech Technologies, Inc. since December 22, 1998, based in Conyers, Georgia.
Prior to the merger of Carbon Fiber Products, Inc., he was Chairman, President
and Chief Executive Officer of Cyntech Technologies, Inc. (Nevada) from June16,
1998 until December 22, 1998. From 1987 until June 1998, Mr. Meyer was an
independent consultant, and held executive positions with a number of waste
recycling companies, in cooperation with other chemical, electrical, and power
engineers and scientists, primarily in the development of hydrocarbon recovery
technologies. He has worked for several companies over the years in developing
and applying chemical engineering technologies to solve the waste rubber and
plastics problem. Prior to his entrance into the recycling field, Mr. Meyer was
a contractor-developer, principally in the development and construction of
resort developments in the Caribbean and housing projects. Mr. Meyer holds a BA
degree in Industrial Management and a minor in Accounting from the University of
South Florida.
Brian Hass:
Mr. Hass is a Director and the Executive Vice President of Administrative
Services, based in Conyers, Georgia office. He is responsible for all
administrative functions for the company including staff personnel; plant
personnel; federal and state environmental compliance requirements; legal and
accounting; real estate management; Board of Directors administration; and
public and investors relations. Mr. Hass has been with the Cyntech Technologies,
Inc. (Nevada) since December 1997, and remained through the merger with Carbon
Fiber Products on December 22, 1998. He holds a Masters of Business
Administration (MBA) degree from Georgia State University.
William Meyer:
Mr. Meyer is a Director and Treasurer. Currently he is also a part-time Realtor
and real estate developer in Georgia, and has been on the Board since June 16,
1998. He was formerly a high school basketball coach and instructor, teaching
economics and government, in the State of Georgia for over 28 years. Mr. Meyer
has a BA degree in education and pre-law from the University of South Florida.
Ike Yancy:
Mr. Yancy is Vice President of Feedstock Acquistion. He joined the company in
April, 1999 to coordinate the acquisition of all waste feedstock for all U.S.
based plants. He has had extensive experience in the plastics industry, and has
worked with major companies, in key management positions, such as N.L.
Industries, Anzon America, and Maritz Performance Improvement Company. Mr. Yancy
was Vice President, Marketing, for Commander Aircraft Company in Oklahoma City,
Oklahoma before joining the Company. He holds a Bachelor of Arts Degree from the
University of Alabama.
J. William Feighner:
Mr. Feighner has been nominated to be Director of the Company, subject to
ratification by the shareholders at the next annual meeting. He is President of
Vista Craft, Inc. in Columbus, Georgia, a screen printing firms with major
clients and also President of Varsity Developers, a company that owns thirty-two
(32) shopping centers in the southeastern United States. Mr. Feighner holds a BS
degree in Industrial Management from Georgia Tech and a Master of Business
Administration from Tulane University.
<PAGE>
J.P. Herrin, P.E.:
Mr. Herrin is the Vice President - Engineering, based in Houston, Texas. He has
been associated with the company since December31, 1997 and has worked with Mr.
Meyer extensively for the past ten years on power generation applications using
the end products from waste tires and plastics. Mr. Herrin is also President of
J.P. Herrin & Associates, a power generation consulting engineering firm. He has
been responsible for the construction of twenty-six power generation plants. Mr.
Herrin holds a degree in Chemical Engineering from Oklahoma State University.
Dr. D. Johnson, P.E.:
Dr. Johnson is Vice President of Research and Development for the Company. He
has been associated with Cyntech since December, 1997 and has spent many years
working with R. Frank Meyer and other Cyntech management on many aspects of
plant design and engineering applications to convert certain licensed
hydrocarbon recovery technologies into practical utilization to produce various
end-products acceptable in the market place. He is responsible for all research
to develop new product applications for the Company such as methanol and MTBE,
diesel and gasoline production, and liquids.
Dr. Johnson was formerly Vice President Research and Development of American
Cynamid, and holds a Ph.D. in Chemical Engineering from the University of
Minnesota.
Item 6. Executive Compensation
Summary of Compensation Table
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Name and Principal Position Year Ended Salary ($) Bonus ($) Consulting Fees Stock Options
July 31, Compensation Granted
- ----------------------------- --------------- --------------- ------------------- ---------------------- ----------------------
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R. Frank Meyer, Chairman of 1999 $-0- $-0- $ 180,000 Note (1)
the Board, President and
CEO 1998 $-0- $-0- $ 105,000
- ----------------------------- --------------- --------------- ------------------- ---------------------- ----------------------
Brian Hass, Secretary and 1999 $-0- $-0- $ -0- Note (3)
Director
1998 $-0- $-0- $ -0-
- ----------------------------- --------------- --------------- ------------------- ---------------------- ----------------------
William F. Meyer, Treasurer 1999 $-0- $-0- $ -0- Note (4)
- - Director
1998 $-0- $-0- $ -0-
- ----------------------------- --------------- --------------- ------------------- ---------------------- ----------------------
Ike A. Yancy, Vice 1999 $-0- $-0- $ -0-
President Feedstock
Acquisition 1998 $-0- $-0- $ -0-
- ----------------------------- --------------- --------------- ------------------- ---------------------- ----------------------
</TABLE>
<PAGE>
Stock Options Granted:
1. R. Frank Meyer was granted options, during May of 1998, to purchase 5,000,000
shares of restricted common stock. The options are performance based, are
exercisable at the time the equity financing for the first plant is in place,
the construction and permanent financing debt is closed and the plant commences
construction. The options are exercisable at $.20 per share, for five (5) years
from the date of authorization by the Board of Directors, which was approved on
May 2, 1998, and will expire on December 22, 2003, unless exercised. Due to the
merger of the company on December 22, 1998, the rollback number of shares is
approximately 2,000,000 shares.
Issued shares will be restricted for twenty-four months from date of issuance.
As a member of the Board of Directors, Mr. Meyer has been granted additional
restricted options:
a) For the initial two-month period from June 16, 1998 to July 31, 1998,
16,000 shares have been granted. b) For the twelve-month period from August
1, 1998 to July 31, 1999, 96,000 shares have been granted.
Issued shares, are exercisable at $.25 per share, will be restricted for
twenty-four months from date of issuance, and will expire on July 31, 2000
and July 31, 2001.
In order for a Board member to have, an exercise, stock options while a sitting
member of the Board of Directors, a Board member must serve a minimum of twelve
consecutive months. The stock options are restricted for twenty-four months and
exercisable after the first twelve months of each year that the Board member
serves.
2. Laska & Associates, Inc., Management Consultants for the Company, were
granted, in the Engagement Agreement dated October 1, 1999, options to purchase
1,000,000 shares of restricted common stock, to vest at the rate of 250,000
shares per year, at $.20 per share, and will expire on December 2004, unless
exercised. Issued shares will be restricted for twenty-four months from date of
issuance.
3. William F. Meyer, as a member of the Board of Directors, has been granted the
following restricted options:
a) For the initial two-month period from June 16, 1998 to July 31, 1998,
16,000 shares have been granted. b) For the twelve-month period from August
1, 1998 to July 31, 1999, 96,000 shares have been granted.
Issued shares, are exercisable at $.25 per share, will be restricted for
twenty-four months from date of issuance, and will expire on July 31, 2000 and
July 31, 2001.
4. Brian Hass, as a member of the Board of Directors, has been granted the
following restricted options:
a) For the initial two-month period from June 16, 1998 to July 31, 1998,
16,000 shares have been granted. b) For the twelve-month period from August
1, 1998 to July 31, 1999, 96,000 shares have been granted.
Issued shares, are exercisable at $.25 per share, will be restricted for
twenty-four months from date of issuance, and will expire on July 31, 2000 and
July 31, 2001.
5. J.P. Herrin was granted options to purchase 230,000 shares of restricted
common stock. The options are exercisable at $.001 per share, and will expire on
December 22, 2000, unless exercised. Issued shares will be restricted for
twenty-four months from date of issuance.
<PAGE>
6. Dr. D. Johnson was granted options to purchase 230,000 shares of restricted
common stock. The options are exercisable at $.001 per share, and will expire on
December 22, 2000, unless exercised. Issued shares will be restricted for
twenty-four months from date of issuance.
7. Douglas Moore was granted options to purchase 100,000 shares of restricted
common stock, as compensation for past services rendered as Chief Executive
Officer of Carbon Fiber Products, Inc. The options become vested at the rate of
25,000 shares for each full year of service with the Company, are exercisable at
$.25 per share, and will expire on May 2, 2000, unless exercised. Issued shares
will be restricted for twenty-four months from date of issuance.
Item 7. Certain Relationships and Related Party Transactions
The Company has not entered into any transactions during the last two fiscal
years with any director, executive officer, director nominee, 5% or more
shareholder, nor has the Company entered into transactions with any member of
the immediate families of the foregoing persons (includes spouse, parents,
children, siblings, and in-laws) nor is any such transaction proposed, except as
follows:
1. The Company has entered into a consulting agreement with R. Frank Meyer (the
President and Chief Executive Officer of the Company), for which Mr. Meyer will
receive a minimum compensation in the amount of $12,000 per month, plus medical
reimbursements, office and other business expenses, for the period December 31,
1997 through December 31, 2007, or such time as the Mr. Meyer and Company enter
into an agreement to employ Mr. Meyer on a full time basis.
2. The Company has entered into a consulting agreement with Laska & Associates,
Inc. for management and business consulting services, for which the firm will
receive minimum compensation in the amount of $15,000 per month, plus expenses,
for the period December 31, 1997 through September 30, 1999, and the minimum
amount of $5,000 per month, plus expenses, for the period October 1, 1999
through December 2001.
3. On August 5, 1998, the Company acquired all development rights for the
Chambers County recycling facility from Tex-Line Limited Partners, LP, for $1
million, in exchange for 384,648 post split, shares of the company, with a
stated basis of $2.60 per share. The Company acquired all rights and interests
in the proposed facility, after the financing had been arranged, the sale of end
products locally was completed, site for the facility was identified, and
preliminary work on the air quality permit was commenced. Having fulfilled the
pre-acquisition requirements, Cyntech Chambers development rights were acquired
on July 31, 1998.
4. The Dumdie Financial Trust, is a closed trust for a number of non-related
shareholders of the Company's stock. Michael Dumdie, the Trustee for the Trust,
the nephew of R. Frank and William Meyer, is not an employee or an agent of the
Company.
5. Century Caribbean Limited Partnership, LP, TexOil Chemical LP, a Limited
partnership, for which R. Frank Meyer is a partner, as of July 31, 1999 loaned
$112, 000 to the Company, payable on demand, with interest at 9% per annum.
6. Cyntech Research & Engineering, Inc., a Georgia corporation, owns the patent
rights which have been licensed exclusively to the Company for use in the United
States, for minimum period of ten years. Cyntech Research & Engineering, Inc. is
an affiliated company, not owned by Cyntech Technologies, Inc., either directly
or indirectly. R. Frank Meyer is an officer, director and shareholder of Cyntech
Research & Engineering, Inc. There are other officers, directors and
shareholders of Cyntech Research that are also shareholders of the Company.
7. H&P Investments, a Utah general partnership, in which Homer and Phidia
Cutrubus are the Partners and are deemed to be beneficial owners of these
shares. DNS is a Utah general partnership, in which Homer Cutrubus is a general
partner and is deemed to be beneficial owner of these shares.
<PAGE>
Item 8. Description of Securities
The Company's authorized capital consists of 100,000,000 shares of Common Stock,
par value $.001 per share. Holders of shares of Common Stock are entitled to one
vote per share at all meetings of stockholders. Stockholders are not permitted
to cumulate votes in the election of directors. All shares of Common Stock are
equal to each other with respect to liquidation rights and dividend rights.
There are no preemptive rights to purchase any additional shares of Common
Stock. In the event of liquidation, dissolution or winding up of the Company,
holders of the Common Stock will be entitled to receive on a pro rata basis all
assets of the Company remaining after satisfaction of all liabilities. The
outstanding shares of Common Stock are duly and validly issued, fully paid and
non-assessable.
As of the date hereof, July 31, 1999, the Company has outstanding 30,227,817
shares of Common Stock.
Part II:
Item 1. Market Price of and Dividends on the Registrant's Common Equity and
Related Stockholder Matters
Market for Common Stock and Related Stockholder Matters:
There is currently a public trading market for the Company's Common Stock on the
OTC Bulletin Board.
There are no outstanding options or warrants to purchase, or securities
convertible into, shares of Common Stock, except as noted above.
As of the date hereof, there are 30,227,817 shares of Common Stock that could be
sold pursuant to Rule 144 under the Securities Act of 1933, as amended (the
"Securities Act") and the Company has not agreed to register any shares of
Common Stock under the Securities Act for sale by security holders.
The Company is not, and has not proposed to, publicly offer any shares of Common
Stock at this time.
Holders of Record
As of July 31, 1999, there were approximately 308 holders of record of the
Company's Common Stock, and the number of beneficial holders was approximately
312.
Dividends
The Company has never paid a cash dividend on its Common Stock, nor does the
Company anticipate paying cash dividends on its Common Stock in the immediate
future. It is the present policy of the Company not to pay cash dividends on the
Common Stock but to allocate to retained earnings, if any, to fund growth and
expansion. Under Utah law, a Company is prohibited from paying dividends if the
Company, as a result of paying such dividends, would not be able to pay its
debts as they come due, or if the Company's total liabilities and preferences to
preferred shareholders exceed total assets. Any payment of cash dividends of the
Common Stock in the future will be dependent upon the Company's financial
condition, results of operations, current and anticipated cash requirements,
plans for expansion, as well as other factors the Board of Directors deems
relevant.
Item 2. Legal Proceedings
As of the date hereof, the Company is not a party to any material pending legal
proceeding, and is not aware of any threatened legal proceeding.
<PAGE>
Item 3. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure
There has been no change in principal independent accountants or reported
disagreements on any matter of accounting principles or procedures or financial
statement disclosures during the Company's two most recent audited fiscal years.
Item 4. Recent Sales of Unregistered Securities
No securities that were not registered under the Securities Act have been issued
or sold by the Company within the past three years, except as described below.
1. Optima Investments, Inc., Houston, Texas.
Cyntech Technologies, Inc. (Nevada) entered into an Agreement on October 30,
1998, with Optima Investments, Inc. ("Optima") to raise $10,000,000 in equity
capital for the Company, after the Company became a public company. The original
agreement, plus an addendum, was entered into in January of 1999, required
Optima Investments, Inc. and its principal officers (Robert Pennington and
Harold Crumb), to provide a public vehicle for Cyntech Technologies, Inc.
(Nevada), and arrange $10,000,000 equity for the Company (post merger), in four
stages of $2,500,000 each.
Optima failed to perform the terms of the Agreement of October 30, 1998, and the
subsequent amendment, requiring funding Cyntech Technologies, Inc. for the
$10,000,000 or any part thereof by the required date of February 28, 1999. The
Company extended the funding completion date to March 31, 1999, and on March 31,
1998, notified Optima in writing that the Company was terminating the October,
1998 Agreement, due to Optima's failure to perform by raising the required funds
for the company.
Cyntech Technologies, Inc. paid $6,000 to Optima to complete the proposed
Section 504/506 Private Placement Memorandum (PPM) for $2,500,000, which was
never funded. Optima failed to complete the funding requirements for Cyntech, as
required in the October, 1998 Agreement.
In order to settle the contract agreement, Cyntech Technologies, Inc. agreed
Optima to retain 300,000 free trading shares of the Company's stock, as
compensation to release the Company and to sever any and all relationships with
Optima and its principals. The Settlement Agreement with Optima was executed on
May 1, 1999, in order to avoid a protracted legal engagement, which would
distract senior management time and efforts in moving the company forward.
Optima Investments, Inc. and its principals acknowledged in the Settlement
Agreement that the 300,000 free trading shares were not registered and could not
be sold in the open market until such shares were registered in accordance with
the rules and regulations of the Securities and Exchange Commission and, if
applicable, all State of Texas legal requirements.
The settlement is reflected in the company financial statements as compensation
for services rendered. The shares issued are for services rendered to Cyntech
Technologies, Inc. and the allocation of shares are taxable to Optima
Investments, Inc. Optima, and as of July 31, 1999, such shares have not been
sold or transferred.
2. Serengeti Products Company, Inc., Houston, Texas.
The Company, Cyntech Technologies, Inc. (Nevada), entered into a contract to
purchase 50% of the assets of Serengeti Products, Inc. and Engine Technologies,
Inc., both companies based in Houston, Texas. The original contract was modified
on February 19, 1999 by the Board of Directors, whereby the original contract
which called for 50% purchase in Stage 1, and the remaining 50% to be purchased
in 2-3 months based on revenue projections. Under the new Agreement, Cyntech
Technologies, Inc. will purchase 100% of both Serengeti products, Inc, Serengeti
International, Inc., and Engine Technologies, Inc. for $1,125,000, with $400,000
cash to be provided for working capital and the balance of the purchase price to
be $900,000 of Cyntech common stock with a stated value of $5.00 per share.
<PAGE>
In order to effect the first step of the acquisition, Cyntech's Board of
Directors authorized the issuance of 300,000 free trading shares to Serengeti
Products, Inc. Serengeti Products, Inc. subsequently sold the shares into the
market place, without the knowledge or consent of the Company or its senior
management. Subsequent to July 31, 1999, the Company agreed to allow the
proceeds from the sale shares sold, in the amount of approximately $76,000, will
be applied as a downpayment on the acquisition of the various companies noted
herein. Cyntech Technologies, Inc. will make a decision within the next
forty-five days if it will move forward and close on the proposed acquisition or
void the offer.
3. Oriental New Investments (ONI). Denver, Colorado.
The Board of Directors authorized the sale of 225,000 shares of the Company's
common stock in a private placement arrangement, with Optima Investments, Inc.
acting as an agent for Cyntech Technologies, Inc. These funds were utilized to
fund the Cyntech of Chambers County operations formerly based in Houston, Texas.
The company received $60,225.00 from ONI from the private placement.
4. Oxford International, Inc. Bethesda, Maryland.
The Board of Directors authorized the issuance of 400,000 free trading shares to
Oxford International, Inc. for the purpose of arranging equity financing using
restricted shares from one of the company's major shareholders in the amount of
$2,500,000. For various reasons, Oxford was unable to perform on the agreement
in a timely manner.
Oxford International was instrumental in arranging the $65,000,000 financing for
the Chambers County project in Texas. Thus, the Board of Directors agreed to a
settlement, with Oxford to retain the shares issued with a provision that the
shares could not be sold, since the shares were unregistered securities. As of
July 31, 1999, Oxford has not sold any shares to the public. The settlement
reflects a partial payment of a fee due under the Agreement with Oxford for the
placement of the plant financing in Texas, with the balance to be paid in cash
at closing with the lender in the future. This is considered to be a
compensatory payment.
Item 5. Indemnification of Directors and Officers
The Company's Certificate of Incorporation, as amended, provides that the
Company must, to the fullest extent permitted by the General Corporation Law of
the State of Utah, indemnify all persons whom it has the power to indemnify from
and against all expenses, liabilities or other matters. The Company's By-laws
further provide that the Company must indemnify its directors, officers,
employees and agents to the fullest extent permitted by the Utah General
Corporation Law and provides for the advancement of expenses incurred by such
persons in advance of final disposition of any civil or criminal action, suit or
proceeding, subject to repayment if it is ultimately determined that he or she
was not entitled to indemnification. The indemnification and advancement of
expenses provided in the By-laws are expressly deemed to not be exclusive of any
other rights to which a person seeking indemnification or advancement of
expenses may otherwise be entitled.
Item 6:
The Company has reviewed all of its computer related equipment, and has
determined that all of the Company's equipment are Y2K certified
<PAGE>
PART F/S
The following financial statements of Cyntech Technologies, Inc. are included in
this Part F/S:
1. Balance Sheets at July 31, 1998 and 1999
2. Statements of Consolidated Operations for the Year Ended July 31, 1999 and
the period from December 31, 1997 (date if inception) through July 31, 1998
3. Statements of Consolidated Shareholders' Deficit for the Year Ended July 31,
1999 and the period from December 31, 1997 (date if inception) through July 31,
1998
4. Statements of Consolidated Cash Flows for the Year Ended July 31, 1999 and
the period from December 31, 1997 (date if inception) through July 31, 1998
5. Notes to Consolidated Financial Statements
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities and Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Cyntech Technologies,Inc.
Date: November 8, 1999
By: /s/ R. Frank Meyer
-------------------------------
R. Frank Meyer, Chairman of the
Board, President and
Chief Executive Officer
By: /s/ William F. Meyer
-------------------------------
William F. Meyer, Director and
Treasurer
By: /s/ Brian Hass
-------------------------------
Brian Hass, Director and
Secretary
<PAGE>
INDEPENDENT AUDITOR'S REPORT
Tanner & Company
Salt Lake City, Utah
<PAGE>
CYNTECH TECHNOLOGIES, INC.
Consolidated Financial Statements
July 31, 1999 and 1998
<PAGE>
CYNTECH TECHNOLOGIES, INC.
(A Developmental Stage Company)
Index to Consolidated Financial Statements
- --------------------------------------------------------------------------------
Page
----
Independent Auditors' Report F-2
Consolidated balance sheet F-3
Consolidated statement of operations F-4
Consolidated statement of stockholders' deficit F-5
Consolidated statement of cash flows F-6
Notes to consolidated financial statements F-7
- --------------------------------------------------------------------------------
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
and Stockholders of
Cyntech Technologies, Inc.
We have audited the accompanying consolidated balance sheet of Cyntech
Technologies, Inc. and subsidiaries, (a developmental stage company), as of July
31, 1999 and 1998 and the related consolidated statements of operations,
stockholders' deficit and cash flows for the year ended July 31, 1999 and the
period December 31, 1997 (date of inception) to July 31, 1998. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Cyntech
Technologies, Inc. and subsidiaries, as of July 31, 1999 and 1998 and the
results of their operations and their cash flows for the year ended July 31,
1999 and the period December 31, 1997 (date of inception) to July 31, 1998, in
conformity with generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 3 to the
consolidated financial statements, the Company has a deficit in working capital,
a stockholders' deficit, and has incurred significant losses since inception.
These conditions raise substantial doubt about its ability to continue as a
going concern. Management's plans regarding those matters also are described in
Note 3. The consolidated financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
TANNER+CO.
Salt Lake City, Utah
October 1, 1999
F-2
<PAGE>
<TABLE>
<CAPTION>
CYNTECH TECHNOLOGIES, INC.
(A Developmental Stage Company)
Consolidated Balance Sheet
July 31,
- ----------------------------------------------------------------------------------------------------------
1999 1998
-----------------------------------
Assets
------
<S> <C> <C>
Current assets:
Cash $ 10,000 $ 11,000
Receivables, net 9,000 -
Prepaid expenses 1,035,000 -
Deposits 76,000 -
-----------------------------------
Total current assets 1,130,000 11,000
Property and equipment, net 34,000 43,000
-----------------------------------
Total assets $ 1,164,000 $ 54,000
-----------------------------------
- ----------------------------------------------------------------------------------------------------------
Liabilities and Stockholders' Deficit
-------------------------------------
Current liabilities:
Accounts payable $ 182,000 $ -
Accrued liabilities 686,000 199,000
Consulting fees payable 1,150,000 -
Related party notes payable 136,000 30,000
Current portion of long-term debt 87,000 -
-----------------------------------
Total current liabilities 2,241,000 229,000
-----------------------------------
Long-term debt - 40,000
-----------------------------------
Commitments and contingencies - -
Stockholders' deficit:
Preferred stock, $.001 par value, 5,000,000 shares
authorized, no shares issued and outstanding at
July 31, 1999 and 1998 - -
Common stock, $.001 par value 100,000,000 shares
authorized, 30,227,817 and 25,897,405 shares
issued and outstanding at July 31, 1999
and 1998, respectively 30,000 26,000
Additional paid-in capital 2,546,000 1,741,000
Accumulated deficit (3,653,000) (1,982,000)
-----------------------------------
Total stockholders' deficit (1,077,000) (215,000)
-----------------------------------
Total liabilities and stockholders' deficit $ 1,164,000 $ 54,000
-----------------------------------
- ----------------------------------------------------------------------------------------------------------
F-3
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CYNTECH TECHNOLOGIES, INC.
(A Developmental Stage Company)
Consolidated Statement of Operations
- ----------------------------------------------------------------------------------------------------------
December 31,
1997 (Date of
Year Ended Inception) to Cumulative
July 31, 1999 July 31, 1998 Amounts
-----------------------------------------------------
<S> <C> <C> <C>
Sales $ - $ - $ -
-----------------------------------------------------
General and administrative expenses 1,676,000 2,007,000 3,683,000
-----------------------------------------------------
Loss from operations (1,676,000) (2,007,000) (3,683,000)
Other income 5,000 25,000 30,000
-----------------------------------------------------
Loss before income taxes (1,671,000) (1,982,000) (3,653,000)
Income tax benefit - - -
-----------------------------------------------------
Net loss $ (1,671,000) $ (1,982,000) $ (3,653,000)
-----------------------------------------------------
Loss per share - basic and diluted $ (.06) $ (.45) $ (.19)
-----------------------------------------------------
Weighted average shares -
basic and diluted 28,174,000 4,386,000 19,434,000
-----------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
F-4
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CYNTECH TECHNOLOGIES, INC.
(A Developmental Stage Company)
Consolidated Statement of Stockholders' Deficit
December 31, 1997 (Date of Inception) to July 31, 1999
- ----------------------------------------------------------------------------------------------------------
Preferred Stock Common Stock Additional
----------------------------------------------- Paid-In Accumulated
Shares Amount Shares Amount Capital Deficit Total
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at
December 31, 1997
(date of inception) - $ - - $ - $ - $ - $ -
Issuance of common
stock for:
Cash - - 25,204,575 25,000 92,000 - 117,000
Services - - 692,830 1,000 1,649,000 - 1,650,000
Net loss - - - - - (1,982,000) (1,982,000)
-------------------------------------------------------------------------------------
Balance at
July 31, 1998 - - 25,897,405 26,000 1,741,000 (1,982,000) (215,000)
Issuance of common
stock for:
Cash - - 66,224 - 64,000 - 64,000
Services - - 864,188 1,000 885,000 - 886,000
Deposit - - 300,000 - 76,000 - 76,000
Acquisition of Carbon
Fiber Products, Inc.
(see note 1) - - 3,100,000 3,000 (247,000) - (244,000)
Issuance of common
stock options - - - - 27,000 - 27,000
Net loss - - - - - (1,671,000) (1,671,000)
-------------------------------------------------------------------------------------
Balance at
July 31, 1999 - $ - 30,227,817 $ 30,000 $ 2,546,000 $(3,653,000) $ (1,077,000)
-------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
F-5
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CYNTECH TECHNOLOGIES, INC.
(A Developmental Stage Company)
Consolidated Statement of Cash Flows
- ----------------------------------------------------------------------------------------------------------
December 31,
1997 (Date of
Year Ended Inception) to Cumulative
July 31, 1999 July 31, 1998 Amounts
---------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (1,671,000) $ (1,982,000) $ (3,653,000)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation 9,000 - 9,000
Stock compensation expense 885,000 1,650,000 2,535,000
Stock option expense 27,000 - 27,000
Increase in:
Receivables (2,000) - (2,000)
Prepaid consulting fees (1,035,000) - (1,035,000)
Increase in:
Accounts payable - - -
Accrued liabilities 459,000 199,000 658,000
Consulting fees payable 1,150,000 - 1,150,000
---------------------------------------------------
Net cash used in
operating activities (178,000) (133,000) (311,000)
---------------------------------------------------
Cash flows from investing activities-
purchase of property and equipment - (43,000) (43,000)
---------------------------------------------------
Cash flows from financing activities:
Increase in related party note payable 106,000 30,000 136,000
Proceeds from long-term debt 7,000 40,000 47,000
Issuance of common stock 64,000 117,000 181,000
---------------------------------------------------
Net cash provided by
financing activities 177,000 187,000 364,000
---------------------------------------------------
Net (decrease) increase in cash (1,000) 11,000 10,000
Cash, beginning of period 11,000 - -
---------------------------------------------------
Cash, end of period $ 10,000 $ 11,000 $ 10,000
---------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
F-6
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
CYNTECH TECHNOLOGIES, INC.
(A Developmental Stage Company)
Notes to Consolidated financial statements
July 31, 1999
- --------------------------------------------------------------------------------
1. Organization and Presentation
On December 22, 1998, Cyntech Technologies, Inc. (formerly Carbon Fiber
Products, Inc.) (CTI) purchased Cyntech Technologies - Nevada (CTI-Nev) and
Cynetch of Chambers County (the Acquirees) (collectively the Company). The terms
of the agreement provide that the Acquirees will be wholly-owned subsidiaries of
CTI, and the stockholders of the Acquirees received 25,900,000 shares of CTI
common stock.
The consolidated financial statements at July 31, 1999 and 1998 assumes the
acquisition of CTI by the Acquirees occurred December 31, 1997 (date of
inception). Because the shares issued in the acquisition of the Acquirees
represent control of the total shares of CTI's common stock issued and
outstanding immediately following the acquisition, the Acquirees are deemed for
financial reporting purposes to have acquired CTI in a reverse acquisition. The
business combination has been accounted for as a recapitalization of CTI giving
effect to the acquisition of 100% of the outstanding common shares of the
Acquirees The surviving entity reflects the assets and liabilities of CTI and
the Acquirees at their historical book value. The issued common stock is that of
CTI and the accumulated deficit and the statement of operations is that of the
Acquirees from December 31, 1997 (date of inception) through July 31, 1998 and
the year ended July 31, 1999 and that of CTI from December 23, 1998 through July
31, 1999. Separate breakout of operations for CTI have been presented in
footnote #13 as the amounts reflect only the discontinued operations of Carbon
Fiber Products, Inc.
2. Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of the Company, and
its consolidated subsidiaries. All significant intercompany balances and
transactions have been eliminated.
Development Stage Company
The Company is considered a development stage Company as defined in SFAS No. 7.
The Company has, at the present time, not paid any dividends and any dividends
that may be paid in the future will depend upon the financial requirements of
the Company and other relevant factors.
- --------------------------------------------------------------------------------
F-7
<PAGE>
CYNTECH TECHNOLOGIES, INC.
(A Developmental Stage Company)
Notes to Consolidated Financial Statements
Continued
- --------------------------------------------------------------------------------
2. Summary of Significant Accounting Policies Continued
Concentration of Credit Risk
The Company maintains its cash in bank deposit accounts which, at times, may
exceed federally insured limits. The Company has not experienced any losses in
such accounts and believes it is not exposed to any significant credit risk on
cash and cash equivalents.
Cash and Cash Equivalents
For purposes of the statement of cash flows, cash includes all cash and
investments with original maturities to the Company of three months or less.
Prepaid Expenses and Consulting Fees
During the year ended July 31, 1999, the Company entered into consulting
agreements which require payments totaling $1,150,000. At July 31, 1999,
$1,035,000 of these fees are considered prepaid based upon management's estimate
of the completion of services received by the Company. Under the terms of the
agreement, the Company was required to pay the $1,150,000 price due July 31,
1999.
Deposits
Deposits consist of unrefundable amounts paid towards the option to acquire a
future interest in another unrelated entity. The option expires December 15,
1999.
Property and Equipment
Property and equipment are recorded at cost less accumulated depreciation.
Depreciation on property and equipment are determined using the straight-line
method over the estimated useful lives of the assets. Expenditures for
maintenance and repairs are expensed when incurred and betterments are
capitalized. Gains and losses on sale of property and equipment are reflected in
operations.
Revenue Recognition
Revenue is recognized upon shipment of product or performance of services.
Income Taxes
Deferred income taxes are provided in amounts sufficient to give effect to
temporary differences between financial and tax reporting.
- --------------------------------------------------------------------------------
F-8
<PAGE>
CYNTECH TECHNOLOGIES, INC.
(A Developmental Stage Company)
Notes to Consolidated Financial Statements
Continued
- --------------------------------------------------------------------------------
2. Summary of Significant Accounting Policies Continued
Loss Per Share
The computation of basic loss per common share is based on the weighted average
number of shares outstanding during the period.
The computation of diluted loss per common share is based on the weighted
average number of shares outstanding during the period plus the common stock
equivalents which would arise from the exercise of stock options and warrants
outstanding using the treasury stock method and the average market price per
share during the period. Common stock equivalents are not included in the
diluted loss per share calculation when their effect is antidilutive.
Use of Estimates in Financial Statements
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements.
Actual results could differ from those estimates.
3. Going Concern
The accompanying consolidated financial statements of Cyntech Technologies, Inc.
and subsidiaries, have been prepared on a going- concern basis, which
contemplates profitable operations and the satisfaction of liabilities in the
normal course of business. There are uncertainties that raise substantial doubt
about the ability of the Company to continue as a going concern. As shown in the
statement of operations, the Company has had no revenues from operations and has
reported net losses since inception and has a stockholder's deficit of
$1,077,000.
The Company's continuation as a going concern is dependent upon its ability to
satisfactorily meet its debt obligations, secure adequate new financing and
generate sufficient cash flows from operations to meet its obligations. The
financial statements do not include any adjustments that might result from the
outcome of these uncertainties.
Management has entered into a plan where it is pursuing other financing and
searching for additional business opportunities. It is not known if the Company
will be successful.
- --------------------------------------------------------------------------------
F-9
<PAGE>
CYNTECH TECHNOLOGIES, INC.
(A Developmental Stage Company)
Notes to Consolidated Financial Statements
Continued
- --------------------------------------------------------------------------------
4. Property and Equipment
Property and equipment consists of the following:
July 31,
-----------------------------------
1999 1998
-----------------------------------
Computer equipment and fixtures $ 13,000 $ 13,000
Job site trailer 30,000 30,000
-----------------------------------
43,000 43,000
Less accumulated depreciation
and amortization (9,000) -
-----------------------------------
$ 34,000 $ 43,000
-----------------------------------
5. Long-Term Debt
Long-term debt consists of the following:
July 31,
-----------------------------------
1999 1998
-----------------------------------
Unsecured non-interest bearing
note payable to an individual due
in full on January 20, 2000 $ 15,000 $ 15,000
Unsecured non-interest bearing
note payable to an individual due
in full on December 31, 1999
25,000 25,000
- --------------------------------------------------------------------------------
F-10
<PAGE>
CYNTECH TECHNOLOGIES, INC.
(A Developmental Stage Company)
Notes to Consolidated Financial Statements
Continued
- --------------------------------------------------------------------------------
5. Long-Term Debt Continued
Unsecured non-interest bearing
note payable to a Company due in
full on December 31, 1999 7,000 -
Unsecured note payable to a
shareholder, of the Company
bearing interest at prime + 2%,
due on demand 40,000 -
-----------------------------------
87,000 40,000
Less current portion (87,000) -
-----------------------------------
$ - $ 40,000
-----------------------------------
6. Income Taxes
The benefit for income taxes is different from amounts which would be provided
by applying the statutory federal income tax rate to loss before benefit for
income taxes for the following reasons:
Year December 31,
Ended 1997 (Date of
July 31, Inception) to Cumulative
1999 July 31, 1998 Amounts
-------------------------------------------------
Federal income tax benefit
at statutory rate $ 568,000 $ 674,000 $ 1,242,000
Change in valuation
allowance (568,000) (674,000) (1,242,000)
-------------------------------------------------
$ - $ - $ -
-------------------------------------------------
- --------------------------------------------------------------------------------
F-11
<PAGE>
CYNTECH TECHNOLOGIES, INC.
(A Developmental Stage Company)
Notes to Consolidated Financial Statements
Continued
- --------------------------------------------------------------------------------
6. Income Taxes Continued
Deferred tax assets (liabilities) consist of the following:
July 31,
-----------------------------------
1999 1998
-----------------------------------
Net operating loss carryforward $ 1,242,000 $ 674,000
Valuation allowance (1,242,000) (674,000)
-----------------------------------
$ - $ -
-----------------------------------
At July 31, 1999, the Company has net operating loss carryforwards available to
offset future taxable income of approximately $3,600,000, which will begin to
expire in 2018. The utilization of the net operating loss carryforward is
dependent upon the tax laws in effect at the time the net operating loss
carryforwards can be utilized. The Tax Reform Act of 1986 significantly limits
the annual amount that can be utilized for certain of these carryforwards as a
result of a change in ownership.
7. Supplemental Cash Flow Disclosure
Actual amounts paid for interest and income taxes are as follows:
December 31,
Year 1997 (Date of
Ended Inception) to Cumulative
July 31, 1999 July 31, 1998 Amounts
-----------------------------------------------------
Interest $ 2,000 $ 1,000 $ 3,000
-----------------------------------------------------
Income taxes $ - $ - $ -
-----------------------------------------------------
- --------------------------------------------------------------------------------
F-12
<PAGE>
CYNTECH TECHNOLOGIES, INC.
(A Developmental Stage Company)
Notes to Consolidated Financial Statements
Continued
- --------------------------------------------------------------------------------
7. Supplemental Cash Flow Disclosure Continued
During the year ended July 31, 1999:
o The Company purchased all of the outstanding common stock of Carbon Fiber
Products, Inc. in a reverse acquisition transaction. The Company issued
3,100,000 shares of common stock and recorded net liabilities from the
acquisition of $243,000.
o The Company made a deposit for the option to purchase an interest in
another company by issuing 300,000 shares of common stock and increasing an
asset by $76,000.
8. Stock Options
Information regarding stock options is summarized below:
Range of
Number of Exercise
Options Prices
-----------------------------------
Outstanding at December 31,
1997 (date of inception) - $ -
Granted 3,508,000 .001 - .25
-----------------------------------
Outstanding at July 31, 1998 3,508,000 .001 - .25
Granted 388,000 .25
-----------------------------------
Outstanding at July 31, 1999 3,896,000 $ .001 - .25
-----------------------------------
9. Stock-Based Compensation
The Company has adopted the disclosure only provisions of Statement of Financial
Accounting Standards (SFAS) No. 123, Accounting for Stock-Based Compensation.
Accordingly, no compensation cost has been recognized in the financial
statements for common stock equivalents issued to employees at or above the
market price of the stock on the date of the grant. Had compensation cost for
the Company's stock options been determined based on the fair value at the grant
date for awards, consistent with the provisions of SFAS no. 123 the Company's
loss and loss per share would be as follows:
- --------------------------------------------------------------------------------
F-13
<PAGE>
CYNTECH TECHNOLOGIES, INC.
(A Developmental Stage Company)
Notes to Consolidated Financial Statements
Continued
- --------------------------------------------------------------------------------
9. Stock-Based Compensation Continued
December 31,
1997 (Date of
Year Ended Inception) to
July 31, 1999 July 31, 1998
-----------------------------------
Net loss - as reported $ (1,671,000) $ (1,982,000)
Net loss - pro forma $ (1,678,000) $ (2,021,000)
Loss per share - as reported $ (.06) $ (.45)
Loss per share - pro forma $ (.06) $ (.46)
-----------------------------------
The fair value of each option grant is estimated on the date of grant using the
Black-Scholes option pricing model with the following assumptions:
Expected dividend yield $ -
Expected stock price volatility -
Risk-free interest rate 5%
Expected life of options 2 to 6 years
-----------------
The weighted average fair value of options granted during 1999 and 1998 was $.03
each period.
The following table summarizes information about stock options outstanding at
July 31, 1999.
Options Outstanding Options Exercisable
------------------------------------------------------------------
Weighted
Average
Number Remaining Weighted Number Weighted
Range of Outstanding Contractual Average Exercisable Average
Exercise at Life Exercise at Exercise
Prices 7/31/99 (Years) Price 7/31/99 Price
- --------------------------------------------------------------------------------
$ .001 460,000 1.4 $ .001 460,000 $ .001
.20 - .25 3,436,000 2.4 .21 2,861,000 .21
- --------------------------------------------------------------------------------
$ .001 - .25 3,896,000 2.3 $ .18 3,321,000 $ .18
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
F-14
<PAGE>
CYNTECH TECHNOLOGIES, INC.
(A Developmental Stage Company)
Notes to Consolidated Financial Statements
Continued
- --------------------------------------------------------------------------------
10. Related Party Transactions
During the year ended July 31, 1999:
o The Company had unsecured notes payable due to a shareholder and entities
owned by a shareholder totaling $136,000. Each note has a stated interest
rate of 9% and is payable on demand.
o During the year, the Company had consulting expenses of approximately
$414,000 to shareholders of the Company.
During the period from December 31, 1997 (date of inception) to July 31, 1998:
o The Company had a unsecured note payable due to a shareholder totaling
$30,000. The note had a stated interest rate of 9% and is payable on
demand. During July 31, 1998, interest expense of approximately $1,000 was
recognized on obligations due to the shareholder.
o The Company purchased fixed assets totaling approximately $43,000 from a
shareholder.
o During the year, the Company had consulting expense of approximately
$242,000 to shareholders of the Company.
11. Commitments and Contingencies
Licensing Agreement
During 1999, the Company entered into a license agreement, which grants the
Company the exclusive right to certain technologies developed by another
company. Under the agreement, the Company is obligated to pay $500,000 for each
plant site selection, preliminary engineering, plant permitting, public
hearings, meetings with government officials, and final engineering done by this
company; another $250,000 for phase II of each plant and another $250,000 for
phase III, of each plant. In addition the Company shall pay a monthly license
fee of 7% of gross income to the company for each plant. During the year ended
July 31, 1999 there were no payments required under this agreement. An
officer/shareholder of the Company is a shareholder in the company with whom the
licensing agreement is with.
- --------------------------------------------------------------------------------
F-15
<PAGE>
CYNTECH TECHNOLOGIES, INC.
(A Developmental Stage Company)
Notes to Consolidated Financial Statements
Continued
- --------------------------------------------------------------------------------
11. Commitments and Contingencies Continued
Consulting Agreements
The Company has a consulting agreement with an officer/shareholder, which
requires annual payments of $144,000 and reimbursable costs of $18,000 a year
for office and vehicle lease. The agreement expires on December 31, 2007.
The Company has a consulting agreement with a company, which requires annual
payments of $63,000. The Company was also granted 1,000,000 stock options which
expire December 31, 2004. The agreement expires on September 30, 2002.
The Company has a consulting agreement with a shareholder, which requires annual
payments of $12,000. The agreement expires on December 31, 2007.
Contingencies
The Company may become or is subject to investigations, claims or lawsuits
ensuing out of the conduct of its business. The Company is currently not aware
of any such item which it believes could have a material affect of its financial
position.
12. Fair Value of Financial Instruments
None of the Company's debt instruments are held for trading purposes. The
Company estimates that the fair value of all financial instruments at July 31,
1999, does not differ materially from the aggregate carrying values of its
financial instruments recorded in the accompanying balance sheet. The estimated
fair value amounts have been determined by the Company using available market
information and appropriate valuation methodologies. Considerable judgement is
necessarily required in the interpreting of market data to develop the estimates
of fair value, and, accordingly, the estimates are not necessarily indicative of
the amounts that the Company could realize in a current market exchange.
13. Discontinued Operations of Carbon Fiber Products, Inc.
As a result of the reverse acquisition (see note 1), the business activity of
CTI was changed. The discontinued operations of Carbon Fiber Products, Inc.
resulted in a net loss of $1,139,000 and $1,112,000 for the year end July 31,
1998 and the period from August 1, 1998 to December 22, 1998, respectively.
- --------------------------------------------------------------------------------
F-16
<PAGE>
Exhibit 2
EXCHANGE AGREEMENT
<PAGE>
EXCHANGE AGREEMENT
Between
CARBON FIBER PRODUCTS, INC.,
CYNTECH TECHNOLOGIES, INC.
And
THE SHAREHOLDERS OF CYNTECH TECHNOLOGIES, INC.
Dated November 30, 1998
As Amended on
December 22, 1998
<PAGE>
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
Articles Page
ARTICLE I REPRESENTATIONS, COVENANTS, AND
WARRANTIES OF CYNTECH TECHNOLOGIES, INC.
1.01 Organization.......................................1
1.02 Capitalization.....................................2
1.03 Subsidiaries and Predecessor Corporations..........2
1.04 Financial Statements...............................2
1.05 Information........................................2
1.06 Options and Warrants...............................3
1.07 Absence of Certain Changes or Events...............3
1.08 Title and Related Matters..........................4
1.09 Litigation and Proceedings.........................4
1.10 Contracts..........................................4
1.11 Material Contract Defaults.........................5
1.12 No Conflict With Other Instruments.................5
1.13 Governmental Authorizations........................5
1.14 Compliance With Laws and Regulations...............5
1.15 Insurance..........................................5
1.16 Approval of Agreement..............................5
1.17 Material Transactions or Affiliations..............6
1.18 Labor Relations....................................6
1.19 Cyntech Schedules..................................6
ARTICLE 11 REPRESENTATIONS, COVENANTS AND WARRANTIES
OF CYNTECH SHAREHOLDERS
2.01 Ownership of Cyntech Shares........................7
2.02 Knowledge of Representations.......................8
ARTICLE III REPRESENTATIONS. COVENANTS, AND
WARRANTIES OF CARBON FIBER PRODUCTS, INC.
3.01 Organization ......................................8
3.02 Capitalization.....................................8
3.03 Subsidiaries.......................................8
3.04 Financial Statements...............................8
3.05 Information........................................9
3.06 Options and Warrants...............................9
3.07 Absence of Certain Changes or Events...............9
3.08 Title and Related Matters.........................10
ii
Articles Page
3.09 Litigation and Proceedings........................11
3.10 Contracts.........................................11
3.11 Material Contract Defaults........................11
3.11 No Conflict With Other Instruments................11
3.12 Governmental Authorizations.......................12
3.13 Compliance With Laws and Regulations..............12
3.14 Insurance.........................................12
3.15 Approval of Agreement.............................12
3.16 Continuity of Business Enterprises................12
3.17 Material Transactions or Affiliations.............12
3.18 Employment Matters................................12
3.19 Carbon Fiber Schedules............................12
ARTICLE IV PLAN OF EXCHANGE
4.01 The Exchange......................................14
4.02 Anti-Dilution.....................................14
4.03 Appointment of New Directors......................14
4.04 Closing...........................................14
4.05 Closing Events....................................15
4.06 Termination.......................................15
ARTICLE V SPECIAL COVENANTS AND REPRESENTATIONS
5.01 Stockholder Meeting of Carbon Fiber ..............16
5.02 Additional Covenants and Representations of CTI...16
5.03 Access to Properties and Records..................17
5.04 Delivery of Books and Records.....................17
5.05 Special Covenants and Representations
Regarding the Exchanged Carbon Fiber Stock........17
5.06 Third Party Consents and Certificates.............17
5.07 Actions Prior to Closing..........................17
5.08 Sales Under Rules 144 or 145, If Applicable.......18
5.09 Indemnification...................................19
ARTICLE VI CONDITIONS PRECEDENT TO OBLIGATIONS
OF CARBON FIBER PRODUCTS. INC.
6.01 Accuracy of Representations.......................19
6.02 Officer's Certificates............................20
6.03 No Material Adverse Change........................20
6.04 Good Standing.....................................20
iii
<PAGE>
Articles Page
6.05 Officer and Director Questionnaires...............20
6.06 Other Items.......................................20
ARTICLE VII CONDITIONS PRECEDENT TO OBLIGATIONS OF
CYNTECH AND THE CYNTECH SHAREHOLDERS
7.01 Accuracy of Representation........................21
7.02 Stockholder Approval..............................21
7.03 Officer's Certificate.............................21
7.04 No Material Adverse Change........................21
7.05 Good Standing.....................................21
7.06 Other Items.......................................21
ARTICLE VIII MISCELLANEOUS
8.01 GoverningLaw......................................22
8.02 Notices...........................................22
8.03 Attomeys'Fees.....................................22
8.04 Confidentiality...................................22
8.05 Schedules;Knowledge...............................23
8.06 Third Party Beneficiaries.........................23
8.07 Entire Agreement..................................23
8.08 Survival;Termination..............................23
8.09 Counterparts......................................23
8.10 Amendment or Waiver...............................23
EXHIBITS
Exhibit "A" Letter of Representation
iv
<PAGE>
EXCHANGE AGREENIENT
THIS EXCHANGE AGREEMENT (hereinafter referred to as this "Agreement'),
is entered into as of this 30th day of November, 1998, by and among Carbon Fiber
Products, Inc., a Utah corporation (hereinafter referred to as "CFP"), Cyntech
Technologies, Inc., a Nevada corporation (hereinafter referred to as "CTI"), and
those persons identified on Schedule A attached hereto, who are all of the
shareholders of CTI (hereinafter referred to as the "CTI Shareholders"), upon
the following premises:
Premises
This Agreement provides for the acquisition by CFP of all of the issued
and outstanding shares of CTI solely in exchange for voting shares of CFP, on
the terms and conditions hereinafter provided, all for the purpose of effecting
a so-called `tax-free' reorganization pursuant to Sections 368(a)(l)(B) of the
Internal Revenue Code of 1954, as amended.
Agreement
NOW THEREFORE, on the stated premises and for and in consideration of
the mutual covenants and agreements hereinafter set forth and the mutual
benefits to the parties to be derived herefrom. it is hereby agreed as follows:
ARTICLE I
REPRESENTATIONS. COVENANTS, AND WARRANTIES OF CTI
As an inducement to, and to obtain the reliance of, CFP, CTI makes the
following representations and warranties, as modified by the CTI Schedules (as
hereinafter defined), which CTI represents as accurate and complete:
Section 1.01 Organization. CTI is a corporation duly organized, validly
existing and in goodstanding under the laws of the state of Nevada. CTI has the
corporate power and is duly authorized, qualified, franchise, and licensed under
all applicable laws, regulations, ordinances, and orders of public authorities
to own all of its properties and assets and to carry on its business in all
material respects as it is now being conducted, including qualification to do
business as a foreign corporation in the states in which the character and
location of the assets owned by it or the nature of the business transacted by
it requires qualification. Included in the CTI Schedules are complete and
correct copies of the articles of incorporation, as amended, and bylaws of CTI
as in effect on the date hereof The execution and delivery of this Agreement
does not, and the consummation of the transactions contemplated by this
Agreement in accordance with the terms hereof will not, violate any provision of
CTI's articles of incorporation or bylaws. CTI has taken all action required by
laws, its articles of Incorporation, its bylaws, or otherwise to authorize the
execution and delivery of this Agreement. CTI has full power, authority, and
legal right and has taken all action required by law, its certificate of
incorporation, bylaws, and otherwise to consummate the transactions herein
contemplated.
Section 1.02 . Capitalization. The authorized capitalization of CTI
consists of 50.000,000. shares of Voting Class Common Stock, par value $0.001
per share, of which a total of 47,334,210 shares are issued and outstanding: and
25,000,000 shares of Voting Class B Common Stock, par value $0.001 per share of
which 20,000,000 shares are issued and outstanding. All issued and outstanding
<PAGE>
shares are legally issued, fully paid, and non-assemble and not issued in
violation of the pre-emptive or other rights of any person.
Section 1.03 Subsidiaries and Predecessor Corporations. CTI has one
subsidiary, Cyntech of Chambers County, Inc., a Texas corporation ("CCCI"). CCCI
is owned 100% by CTI. Except for CCCI, CTI does not have any subsidiaries and
does not own, beneficially or of record, any shares of any other corporation.
Section 1.04 Financial Statements.
(a) Included in the CTI Schedules are the following financial
statements (the "financial statements"):
Unaudited balance sheet as of August 31, 1998, together with an
unaudited income statement for the period from inception through August 31,
1998.
(b) All such financial statements have been prepared in accordance with
generally accepted accounting. principles. The CTI balance sheet presents
fairly as of its date the financial condition of CTI. CTI did not have, as
of the date of such balance sheet, except as and to the extent reflected
or reserved against therein, any liabilities or obligations (absolute or
contingent) which should be reflected in a balance sheet or the notes
thereto, prepared in accordance with generally accepted accounting
principles, and all assets reflected therein are properly reported and
present fairly the value of the assets of CTI in accordance with generally
accepted accounting principles. The financial statements reflect fairly
the information required to be set forth therein by generally accepted
accounting principles.
(c) CTI has filed all state, federal, and local income tax returns
required to be filed by it from inception to the date hereof. Included in
the CTI Schedules are true and correct copies of the federal income tax
returns of CTI filed in the past three fiscal years. None of such federal
income tax returns have been examined by the Internal Revenue Service.
Each of such income tax returns reflects the taxes due for the period
covered thereby, except for amounts which, in the aggregate, are
immaterial.
(d) CTI does not owe any unpaid federal, state, county, local. or other
taxes (including any deficiencies, interest, or penalties) through August
31. 1998, for which CTI may be liable in its own right or as a transferee
of the assets of or as a successor to, any other corporation or entity.
Furthermore, except as accruing in the normal course of business, CTI does
not own any accrued and unpaid taxes to date of this Agreement.
(e) The books and records, financial and otherwise, of CTI are in all
material respects complete and correct and have been maintained in
accordance with good business and accounting practices.
(f) CTI has good and marketable title to its assets and, except as set
forth in the CTI Schedules or the financial statements of CTI or the notes
thereto, has no material contingent liabilities, direct or indirect,
matured or unmatured.
Section 1.05 Information. The information concerning CTI set forth in
this Agreement and in the CTI Schedules is complete and accurate in all material
respects and does not contain any untrue statement of a material fact or omit to
2
<PAGE>
state a material fact required it to make the statements made, in light of the
circumstances under which they were made, not misleading.
Section 1.06 Options or Warrants. Except as set forth in the CTI
Schedules, there are no existing options, warrants, calls, or commitments of any
character relating to the authorized and] unissued CTI common stock, except
options, warrants, calls or commitments, if any, to which CTI is not a party and
by which it is not bound.
Section 1.07 Absence of Certain Changes or Events. Except as set forth
in this Agreement or the CTI Schedules, Since August 31, 1998:
(a) there has not been (i) any material adverse change in the business,
operations, properties, assets, or condition of CTI; or (ii) any damage,
destruction, or loss to CTI (whether or not covered by insurance)
materially and adversely affecting the business, operations, properties,
assets, or condition of CTI, (except as set forth in the CTI schedules);
(b) Except as set forth in the CTI Schedules, CTI has not (i) amended
its certificate of incorporation or bylaws; (ii) declared or made, or
agreed to declare or make, any payment of dividends or distributions of
any assets of any kind whatsoever to stockholders or purchased or
redeemed, or agreed to purchase or redeem, any of its capital stock; (iii)
waived any rights of value which in the aggregate are extraordinary or
material considering the business of CTI; (iv) made any material change in
its method of management, operation, or accounting; (v) entered into any
other material transaction; (vi) made any accrual or arrangement for
payment of bonuses or special compensation of any kind or any severance or
termination pay to any present or former officer or employee; (vii)
increased the rate of compensation payable or to become payable by it to
any of its officers or directors or any of its employees whose monthly
compensation exceeds $1,000; or (viii) made any increase in any profit
sharing, bonus, deferred compensation, insurance, pension, retirement, or
other employee benefit plan, payment or arrangement made to, for, or with
its officers, directors, or employees:
(c) Except as set forth in the CTI Schedules. CTI has not (i) borrowed
or agreed to borrow any funds or incurred, or become subject to, any
material obligation or liability (absolute or contingent) except
liabilities incurred in the ordinary course of business: (ii) paid any
material obligation or liability (absolute or contingent) other than
current liabilities reflected in or shown on the most recent CTI balance
sheet, and current liabilities incurred since that date in the ordinary
course of business: (iii) sold or transferred, or agreed to sell or
transfer, any of its assets, properties, or rights (except assets,
properties, or rights not used or useful in it's business which, in the
aggregate have a value of less than $1,000), or cancelled, or agreed to
cancel, any debts or claims (except debts or claims which in the aggregate
are of a value of less than $1,000); (iv) made or permitted any amendment
or termination of any contract, agreement, or license to which it is a
party if such amendment or termination is material, considering the
business of CTI; or (v) issued, delivered, or agreed to issue or deliver
any stock, bonds or other corporate securities including debentures
(whether authorized and unissued or held as treasury stock); and
(d) to the best knowledge of CTI, CTI has not become subject to any law
or regulation which materially and adversely affects, or in the future may
adversely affect, the business, operations, properties, assets, or
condition of CTI.
3
<PAGE>
Section 1.08 Title and Related Matters. Except as set forth in the CTI
schedules, CTI has good and marketable title to all of its properties,
inventory, interests in properties, and assets, real and personal, which are
reflected in the most recent CTI balance sheet or acquired after that date
(except properties, interests in properties, and assets sold or otherwise
disposed of since such date in the ordinary course of business), free and clear
of all liens, pledges, charges, or encumbrances except (a) statutory liens or
claims not yet delinquent; (b) such imperfections of title and easements as do
not and will not materially detract from or interfere with the present or
proposed use of the properties subject thereto or affected thereby or otherwise
materially impair present business operations on such properties; and (c) as
described in the CTI Schedules. Except as set forth in the CTI Schedules, CTI
owns free and clear of any liens, claims, encumbrances, royalty interests, or
other restrictions or limitations of any nature whatsoever, any and all products
it is currently manufacturing, including the underlying technology and data, and
all procedures, techniques, marketing plans, business plans, methods of
management, or other information utilized in connection with CTI's business.
Except as set forth in the CTI Schedules, no third party has any right to, and
CTI has not received any notice of infringement of or conflict with asserted
rights of others with respect to any product, technology, data, trade secrets,
know-how, proprietary techniques, trademarks, service marks, trade names, or
copyrights which, singly or in the aggregate, if the subject of an unfavorable
decision, ruling, or finding, would have a materially adverse affect on the
business, operations, financial condition, income, or business prospects of CTI
or any material portion of its properties, assets, or rights.
Section 1.09 Litigation and Proceedings. Except as set forth in the CTI
Schedules, there are no actions, suits, proceedings, or investigations pending
or, to the knowledge of CTI after reasonable investigation, threatened by or
against CTI or affecting CTI or its properties, at law or in equity, before any
court or other governmental agency or instrumentality, domestic or foreign, or
before any arbitrator of any kind. CTI does not have any knowledge of any
default on its part with respect to any judgment, order, writ, injunction,
decree, award, rule, or regulation of any court, arbitrator, or governmental
agency or instrumentality or of any circumstances which, after reasonable
investigation, would result in the discovery of such a default.
Section 1.10 Contracts.
(a) Except as included or described in the CTI Schedules, there are no,
material contracts, agreements, franchises, license agreements, or other
commitments to which CTI is a party or by which it or any of its assets,
products, technology, or properties are bound:
(b) All contracts, agreements, franchises, license agreements, and
other commitments to which CTI is a party or by which its properties are
bound and which are material to the operations of CTI taken as a whole are
valid and enforceable by CTI in all respects, except as limited by
bankruptcy and insolvency laws and by other laws affecting the rights of
creditors generally:
(c) CTI is not a party to or bound by. and the properties of CTI are
not subject to, any contract, agreement, other commitment or instrument:
any charter or other corporate restriction; or any judgment, order, writ,
injunction, decree, or award which materially and adversely affects, or in
the future may (as far as CTI can now foresee) materially and adversely
affect, the business, operations, properties, assets, or condition of CTI:
and
4
<PAGE>
(d) Except as included or described in the CTI Schedules or reflected
in the most recent CTI balance sheet, CTI is not a Party to any oral or
written (i) contract for the employment of any-officer or employee which
is not terminable on 30 days or less notice: (ii) profit sharing. bonus,
deferred compensation, stock option, severance pay, pension benefit or
retirement plan, agreement, or arrangement covered by Title IV of the
Employee Retirement Income Security Act, as amended; (iii) agreement,
contract, or indenture relating to the borrowing of money; (iv) guaranty
of any obligation, other than one on which CTI is a primary obligor, for
the borrowing of money or otherwise, excluding endorsements made for
collection and other guaranties of obligations, which. in the aggregate do
not exceed more than one year or providing for payments in excess of
$1,000 in the aggregate; (vi) collective bargaining agreement; (vii)
agreement with any present or former officer or director of CTI; or (viii)
contract, agreement, or other commitment involving payments by it of more
than $1,000 in the aggregate.
Section 1.11 Material Contract Defaults. CTI is not in default in any
material respect under the terms of any outstanding contract, agreement, lease,
or other commitment which is material to the business, operations, properties,
assets, or condition of CTI and there is no event of default in any material
respect under any such contract, agreement, lease, or other commitment in
respect of which CTI has not taken adequate steps to prevent such a default from
occurring.
Section 1.12 No Conflict With Other Instruments. The execution of this
Agreement and the consummation of the transactions contemplated by this
Agreement will not result in, the breach of any term or provision of, or
constitute an event of default under, any material indenture, mortgage, deed of
trust, or other material contract, agreement, or instrument to which CTI is a
party or to which any of its properties or operations ire subject.
Section 1.13 Governmental Authorizations. Except as set forth in the
CTI Schedules, CTI has all licenses, franchises, permits, and other governmental
authorizations that are legally required to enable it to conduct its business in
all material respects as conducted on the date hereof. Except for compliance
with federal and state securities and corporation laws, as hereinafter provided,
no authorization, approval, consent, or order of. or registration, declaration,
or filing with, any court or other governmental body is required in connection
with the execution and delivery by CTI of this Agreement and the consummation by
CTI of the transactions contemplated hereby.
Section 1.14 Compliance with Laws and Regulations. Except as set forth
in the CTI Schedules, CTI has complied with all applicable statutes and
regulations of any federal, state, or other governmental entity or agency
thereof, except to the extent that noncompliance would not materially and affect
the business, operations, properties, assets, or condition of CTI or except to
the extent that noncompliance would not result in the incurrence of any material
liability for CTI.
Section 1.15 Insurance. All the insurable properties of CTI are insured
in their full replacement value against all risks customarily insured against by
persons operating similar properties in localities where such properties are
located and under valid and enforceable policies by insurers of recognized
responsibility. Such policy or policies containing substantially equivalent
coverage will be outstanding on the date of consummation (if the transactions
contemplated by this Agreement.
Section 1. 16 Approval of Agreement. The board of directors of CTI has
authorized the execution and delivery of this Agreement by CTI has approved the
transactions contemplated hereby, and approved the submission of this Agreement
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and the transactions contemplated hereby to the shareholders of CTI for their
approval with the recommendation that the reorganization be accepted.
Section 1.17 Material Transactions or Affiliations. Set forth in the
CTI Schedules is a description of every material contract, agreement, or
arrangement between CTI and any predecessor and any person who was at the time
of such contract, agreement, or arrangement an officer, director, or person
owning of record, or known by CTI to own beneficially, 10% or more of the issued
and outstanding common stock of CTI and which is to be performed in whole or in
part after the date hereof or which was entered into not more than three years
prior to the date hereof. In all of such transactions, the amount paid or
received, whether in cash, in services, or in kind, is, had been during the full
term thereof, and is required to be during the unexpired portion of the term
thereof, no less favorable to CTI than terms available from otherwise unrelated
parties in arm's length transactions. Except as disclosed in the CTI Schedules
or otherwise disclosed herein, no officer, director, or 10%o shareholder of CTI
has, or has had since inception of CTI, any interest, direct or indirect, in any
material transaction with CTI. There are no commitments by CTI, whether written
or oral, to lend any funds to, borrow any money from, or enter into any other
material transaction with, any such affiliated person.
Section 1.18 Labor Relations. CTI has not had a work stoppage resulting
from labor problems. To the knowledge of CTI. no union or other collective
bargaining organization is organizing or attempting to organize any employee of
CTI.
Section 1.19 CTI Schedules. CTI has delivered to CFP, or will deliver
within five (5) business days from the date of execution of this Agreement, the
following schedules, which are collectively referred to as the "CTI Schedules"
and which consist of separate schedules dated as of the date of execution of
this Agreement and instruments and data as of such date, all certified by the
chief executive officer of CTI as complete, true, and correct:
(a) a schedule containing complete and correct copies of the
certificate of incorporation, as amended, and bylaws of CTI in effect as
of the date of this Agreement;
(b) a schedule containing the financial statements of CTI identified in
paragraph 1.04(c);
(c) a schedule containing the federal income tax returns of CTI
identified in paragraph 1.04(c):
(d) a schedule containing a list indicating the name and address of
each shareholder of CTI together with the number of shares owned by him or
her;
(e) a schedule containing a description of all real property owned by
CTI, together with a description of every mortgage, deed of trust, pledge,
lien, agreement, encumbrance, claim, or equity interest of any nature
whatsoever in such real property:
(f) a schedule containing true and correct copies of all contracts,
agreements, or other instruments to which CTI is a party or by which it or
its properties are bound, together with a description of all contracts
leases, agreements, and other instruments, whether or not deemed material,
including oral agreements, to which CTI is a party or by which it or its
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properties are bound, specifically including all contracts, agreements, or
arrangements referred to in section 1.17;
(g) copies of all licenses, permits, and other governmental
authorizations (or requests or applications therefor) pursuant to which
CTI carries on or proposes to carry on its business (except those which,
in the aggregate, are immaterial to the present or proposed business of
CTI):
(h) a schedule listing the accounts receivable and notes and other
obligations receivable of CTI as of October I, 1998, or that arose
thereafter other than in the ordinary course of business of CTI,
indicating the debtor and amount, and classifying the accounts to show in
reasonable detail the length of time, if any, overdue, and stating the
nature and amount of any refunds, set offs, reimbursements, discounts, or
other adjustments which are in the aggregate material and due to or
claimed by such creditor;
(i) a schedule listing the accounts payable and notes and other
obligations payable of CTI as of October 31. 1998, or that arose
thereafter other than in the ordinary course of the business of CTI,
indicating the creditor and amount, classifying the accounts to show in
reasonable detail the length of time, if any, overdue, and stating the
nature arid amount of any refunds, setoffs, reimbursements, discounts, or
other adjustments, which in the aggregate are material and due or payable
to CTI respecting such obligations;
(j) a schedule setting forth a description of any material adverse
change in the business, operations, property, inventory, assets, or
condition of CTI since October 31, 1998, required to be provided pursuant
to section 1.07 hereof;
(k) a schedule containing a copy of the board of directors' and
shareholders' minutes of CTI since inception: and
(1) a schedule setting forth any other information, together with any
required copies of documents, required to be disclosed in the CTI
Schedules by sections l.0l through 1.18.
CTI shall cause the CTI Schedules and the instruments and data
delivered to CFP hereunder to be updated after the date hereof up to and
including the Closing Date.
ARTICLE 11
REPRESENTATIONS, COVENANTS. AND WARRANTIES
OF CTI SHAREHOLDERS
As in inducement to, and to obtain reliance of CFP, the CTI
Shareholders represent and warrant as follows:
Section 2.01 Ownership of CTI Shares. Each CTI shareholder hereby
represents and warrants with respect to itself that it is the legal and
beneficial owner of the number of CTI shares set forth opposite its name at the
foot of this agreement, free and clear of any claims, charges, equities, liens,
security interests, and encumbrances whatsoever, and each such shareholder has
full right, power, and authority to transfer, assign, convey, and deliver its
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CTI shares; and delivery of such shares tit the closing will convey to CFP good
and marketable title to such shares free and clear of an claims, charges,
equities, liens, security interests, and encumbrances whatsoever.
Section 2.02 Knowledge of Representations. To their best knowledge and
belief, the representations of CTI in Article 1, above, are true, accurate and
complete.
ARTICLE III
REPRESENTATIOLNS. COVENANTS, AND WARRANTIES OF CFP
As an inducement to, and to obtain the reliance of CTI and the CTI
Shareholders, CFP represents and warrants as follows:
Section 3.01 Organization. CFP is a corporation duly organized, validly
existing, and in good standing under the laws of the state of Utah, and has the
corporate power and is duly authorized, qualified, franchised, and licensed
under all applicable laws, regulations, ordinances, and orders of public
authorities to own all of its properties and assets and to carry on its business
in all material respects as it is now being conducted, and there is no
jurisdiction in which it is not qualified in which the character and location of
the assets owned by it or the nature of the business transacted by it requires
qualification. Included in the CFP Schedules (as hereinafter defined) are
complete and correct copies of the articles of incorporation and bylaws of CFP
as in effect on the date hereof. The execution and delivery of this Agreement
does not, and the consummation of the transactions contemplated hereby will not,
violate any provision of CFP's articles of incorporation or bylaws. Except as
set forth in Section 5.01 below, CFP has taken all action required by law, its
articles of incorporation, its bylaws, or otherwise to authorize the execution
and delivery of this Agreement, and CFP has full power, authority, and legal
right and has taken all action required by law, its articles of incorporation,
bylaws, or otherwise to consummate the transactions hereby contemplated.
Section 3.02 Capitalization. CFP's authorized capitalization of
100,000,000 shares of common stock, par value $.001, of which a total of
51,312,153 shares are either issued, or will be issued at Closing: and 5,000,000
shares of preferred stock, par value $0.001, none of which are outstanding.
Immediately following a reverse split described in Section 5.01, CFP will have a
total of 3,100.000 shares issued and outstanding immediately prior to the
reorganization. All issued and outstanding shares at Closing, will be, legally
issued, fully paid, and non-assessable and not issued in violation of the
pre-emptive or other rights of any person.
Section 3.03 Subsidiaries. CFP has one wholly-owned subsidiary, Novus
Cart Company ("Novus"), a Utah corporation. Prior to the closing. shares of
Novus will be transferred for good and valuable consideration to a third party.
Except for Novus, CFP does not have any subsidiaries and does not own,
beneficially or of record, any shares of any other corporation.
Section 3.04 Financial Statements.
(a) Included in the CFP Schedules are the following financial
statements (the "financial statements"):
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Unaudited balance sheets as of July 31, 1998 and September 30, 1998,
and unaudited income statements for the period from August 1, 1997 through
July 31, 1998, and the two months ended September 30, 1998, and an
unaudited pro forma balance sheet as of the Closing Date.
(b) All such financial statements have been prepared in accordance with
generally accepted accounting principles consistently applied throughout
the periods involved. The CFP balance sheets present fairly as of their
respective dates the financial condition of CFP. CFP did not have as of
the date of any such CFP balance sheet, except as and to the extent
reflected or reserved against therein, any liabilities or obligations
(absolute or contingent) which should be reflected in a balance sheet or
the notes thereto prepared in accordance with generally accepted
accounting principles, and all assets reflected therein are properly
reported anti present fairly the value of the assets of CFP, in accordance
with generally accepted accounting principles. The financial statements
reflect fairly the information required to be set forth therein by
generally accepted accounting principles.
(c) Except as set forth in the CFP schedules, CFP has no liabilities
with respect to the payment of any federal, state, county, local, or other
taxes (including any deficiencies, interest, or penalties), except for
taxes accrued but not yet due and payable.
(d) Except as set forth in the CFP schedules, CFP has filed all state,
federal, of local income tax returns required to be filed by it from
inception to the date hereof. Included in the CFP Schedules are true and
correct copies of the federal income tax returns of for the past three
fiscal years. None of such federal income tax returns have been examined
by the Internal Revenue Service. Each of such income tax returns reflects
the taxes due for the period covered Thereby, except for amounts which in
the aggregate, are immaterial.
(e) Except as set forth in the CFP schedules, the books and records,
financial and otherwise, of CFP are in all material respects complete and
correct and have been maintained in accordance with good business and
accounting practices.
(f) Except as set forth in the CFP schedules, CFP has good and
marketable title to its assets and, except as set forth in the CFP
Schedules or the Financial Statements of CFP or the notes thereto, has no
material contingent liabilities, direct or indirect, matured or unmatured.
Section 3.05 Information. The information concerning CFP set forth in
this Agreement and the CFP Schedules is complete and accurate in all material
respects and does not contain any untrue statement of a material fact or omit to
state a material fact required to make the statements made, in light of the
circumstances under which they were made, not misleading.
Section 3.06 Options or Warrants. There are no existing options,
warrants, calls, or commitments of any character relating to authorized and
unissued stock of CFP, except options, warrants, calls, or commitments, if any,
to which CFP is not a party and by which it is not bound.
Section 3.07 Absence or Certain Changes or Events. Except as described
herein or in the CFP Schedules, since the date of the most recent CFP balance
sheet:
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(a) there has not been (i) any material adverse change in the business,
operations, properties, assets, or condition of CFP (whether or not
covered by insurance) materially and adversely affecting the business,
operations, properties, assets, or condition of CFP (except as set forth
in the CFP schedules);
(b) Except as set forth in the CFP schedules, CFP has not (i) amended
its articles of incorporation or bylaws; (ii) declared or made, or agreed
to declare or make any payment of dividends or distributions of any assets
of any kind whatsoever to stockholder, or purchased or redeemed, or agreed
to purchase or redeem, any of its-capital stock; (iii) waived any rights
of value which in the aggregate are extraordinary or material considering
the business of CFP; (iv) made any material change in its method of
management, operation, or accounting: (v) entered into any other material
transactions; (vi) made any accrual or arrangement for or payment of
bonuses or special compensation of any kind or any severance or
termination pay to any present or former officer or employee; (vii)
increased the rate of compensation payable or to become payable by it to
any of its officers or directors or any of its employees whose monthly
compensation exceeds $1,000; or (viii) made any increase in any profit
sharing, bonus, deferred compensation, insurance, pension, retirement, or
other employee benefit plan, payment, or arrangement, made to, for, or
with its officers, directors, or employees.
(c) Except as set forth in the CFP schedules, CFP has not (i) granted
or agreed to grant any options, warrants, or other rights for its stocks,
bonds, or other corporate securities calling for the issuance thereof:
(ii) borrowed or agreed to borrow any funds or incurred, or become subject
to, any material obligation or liability (absolute or contingent) except
liabilities incurred in the ordinary course of business: (iii) paid or
agreed to pay any material obligation or liability (absolute or
contingent) other than current liabilities reflected in or shown on the
most recent CFP balance sheet and current liabilities incurred since that
date in the ordinary course of business and professional and other fees
and expenses incurred in connection with the preparation of this,
Agreement and the consummation of the transactions contemplated hereby;
(iv) sold or transferred or agreed to sell or transfer any of its assets,
property or rights (except assets property or rights not used or useful in
its business which, in the aggregate have a value of less than $ 1,000),
or cancelled, or agreed to cancel, any debts or claims (except debts or
claims which in the aggregate are of a value of less than $1.000): (v)
made or permitted any amendment or termination of any contract agreement
or license to which it is a party if such amendment or termination is
material, considering the business of CFP, or (vi) issued, delivered, or
agreed to, issue or deliver any stock, bonds, or other corporate
securities including debentures (whether authorized and unissued or held
as treasury stock), except in connection with this Agreement; and
(d) to the best knowledge of CFP, it has not become subject to any law
or regulation which materially and adversely affects, or in the future may
adversely affect, the business, operations, properties, assets, or
condition of CFP.
Section 3.08 Title and Related Matters. Except as set forth in the CFP
schedules, CFP has good and marketable title to all of its properties, interest
in properties, and assets, real and personal, which are reflected in the CFP
balance sheet or acquired after that date (except properties, interest in
properties, and assets sold or otherwise disposed of since such date in the
ordinary course of business), free and clear of all liens, pledges, charges, or
encumbrances except (a) statutory liens or claims not yet delinquent: (b) such
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imperfections of title and casements as do not and will not materially detract
from or interfere with the present or proposed use of the properties subject
thereto or affected thereby or otherwise materially impair present business
operations on such properties; and (c) as described in the CFP Schedules.
Section 3.09 Litigation and Proceedings. There am no actions, suits, or
proceedings pending or, to the knowledge of CFP, threatened by or against or
affecting CFP, at law or in equity, before any court or other governmental
agency or instrumentality, domestic or foreign, or before any arbitrator of any
kind. CFP does not have any knowledge of any default on its part with respect to
any judgment, order, writs, injunction, decree, award, rule, or regulation of
any court, arbitrator, or Governmental agency or instrumentality.
Section 3.10 Contracts.
(a) Except as included or described in the CFP Schedules, there are no
material contracts, agreements, franchises, license agreements, or other
commitments to which CTI is a party or by which it or any of its assets,
products, technology, or Properties are bound;
(b) All contracts, agreements, franchises, license agreements, and
other commitments to which CFP is a party or by which its properties are
bound and which are material to the operations of CFP taken as a whole are
valid and enforceable by CFP in all respects, except as limited by
bankruptcy and insolvency laws and by other laws affecting the rights of
creditors generally:
(c) CFP is not a party to or bound by, and the properties of CFP are
not subject to, any contract, agreement, other commitment or instrument;
any charter or other corporate restriction, or any judgment, order, writ,
injunction, decree, or award which materially and adversely affects, or in
the future may (as far as CFP can now foresee) materially and adversely
affect, the business, operations, properties, assets, or condition of CFP;
and
(d) Except as included or described in the CFP Schedules or reflected
in the most recent CFP balance sheet. CFP is not a party to any oral or
written (i) contract for the employment of any officer or employee which
is not terminable on 30 days or less notice; (ii) profit sharing, bonus,
deferred compensation, stock option, severance pay, pension benefit or
retirement plan, agreement, or arrangement covered by Title IV of the
Employee Retirement Income Security Act, as amended; (iii) agreement,
contract, or indenture relating to the borrowing of money: (iv) guaranty
of any obligation, other than one on which CFP is a primary obligor, for
the borrowing of money or otherwise, excluding endorsements made for
collection and other guaranties of obligations, which, in the aggregate do
not exceed more than one year or providing for payments in excess of $
1,000 in the aggregate: (vi) collective bargaining agreement; (vii)
agreement with any present or former officer or director of CFP: or (viii)
contracts agreement, or other commitment involving payments by it of more
than $1,000 in the aggregate.
Section 3.11 Material Contract Defaults. CFP is not in default in any
material respect under the terms of any outstanding contract, agreement, lease,
or other commitment which is material to the business, operations, properties,
assets, or condition of CF and there is no event of default in any material
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respect under any such contract, agreement, lease, or other commitment in
respect of which CFP has not taken adequate steps to prevent such a default from
occurring.
Section 3.12 No Conflict With Other Instruments. The consummation of
the transactions contemplated by this Agreement will not result in the breach of
any term or provision of, or constitute a default under, any indenture,
mortgage, deed of trust, or other material agreement or instrument to which CFP
is a party or to which it or any of its assets or operations are subject.
Section 3. 13 Governmental Authorizations. CFP has all licenses,
franchises, permits, and other government authorizations, that are legally
required to enable it to conduct its business operations in all material
respects as conducted on the date hereof. Except for compliance with federal and
state securities or corporation laws, as hereinafter provided, no authorization,
approval, consent, or order of, or registration, declaration, or filing with,
any court or other governmental body is required in connection with the
execution and delivery by CFP of this Agreement and the consummation by CFP of
the transactions contemplated hereby.
Section 3.14 Compliance With Laws and Regulations. To the best of its
knowledge, CFP has complied with all applicable statutes and regulations of any
federal, state, or other applicable governmental entity or agency thereof,
except to the extent that noncompliance would not materially and adversely
affect the business operations, properties, assets, or conditions of CFP or
except to the extent that noncompliance would not result in the incurrence of
any material liability.
Section 3.15 Insurance. CFP owns no insurable properties and carries no
casualty or liability insurance.
Section 3.16 Approval of Agreement. The board of directors of CFP has
authorized the execution and delivery of this Agreement by CFP and has approved
this Agreement and the transactions contemplated hereby.
Section 3.17 Continuity of Business Enterprises. CFP has no commitment
or present intention to liquidate CTI or sell or otherwise dispose of a material
portion of CTI's business or assets following the consummation of the
transactions contemplated hereby.
Section 3.18 Material Transactions of Affiliations. Except as disclosed
herein and in the CFP Schedules, there exists no material contract, agreement,
or arrangement between CFP and any person who was at the time of such contract,
agreement, or arrangement an officer, director, or person owning of record or
known by CFP to own beneficially, 10% or more of the issued and outstanding
common stock of CFP and which is to be performed in whole or in part after the
date hereof or was entered into not more than three years prior to the date
hereof. Neither any officer, director, nor 10% shareholder of CFP has, or has
had during the last preceding full fiscal year, any known interest in any
material transaction with CFP which was material to the business of CFP. CFP has
no commitment, whether written or oral, to lend any funds to, borrow any money
from, or enter into any other material transaction with any such affiliated
person.
Section 3.19 Employment Matters. CFP currently has five (5) employees
other than its Executive officiers.
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Section 3.20 CFP Schedules. CFP has delivered to CTI, or will deliver
within five (5) business days from the date of execution of this Agreement, the
following schedules, which are collectively referred to as the "CFP Schedules,"
which are dated the date of this Agreement, all certified by an officer to be
complete, true, and accurate:
(a) a schedule containing complete and correct copies of the
certificate of incorporation, as amended, and bylaws of CFP in effect as
of the date of this Agreement;
(b) a schedule containing the financial statements of CFP identified in
paragraph 3.04(c):
(c) a schedule containing the federal income tax returns of CFP
identified in paragraph 3.04(c);
(d) a schedule containing a list indicating the name and address of
each shareholder of CFP together with the number of shares owned by him or
her;
(e) a schedule containing a description of all real property owned by
CFP, together with a description of every mortgage, deed of trust, pledge,
lien, agreement, encumbrance, claim, or equity interest of any nature
whatsoever in such real property;
(f) a schedule containing true and correct copies of all contracts,
agreements, or other instruments to which CFP is a party or by which it or
its properties are bound, together with a description of all contracts,
leases, agreements, and other instruments, whether or not deemed material,
including oral agreements, to which CFP is a party or by which it or its
properties are bound, specifically including all contracts, agreements, or
arrangements referred to in section 1.17;
(g) copies of all licenses, permits, and other governmental
authorizations (or requests or applications therefor) pursuant to which
CFP carries on or proposes to carry on its business (except those which,
in the aggregate, are immaterial to the present or proposed business of
CFP).
(h) a schedule listing the accounts receivable and notes and other
obligations receivable of CFP as of October 31. 1998, or that arose
thereafter other than in the ordinary course of business of CFP,
indicating the debtor and amount, and classifying the accounts to show in
reasonable detail the length of time, if any, overdue, and stating the
nature and amount of any refunds, set offs, reimbursements, discounts, or
other adjustments which are in the aggregate material and due to or
claimed by such creditor;
(i) a schedule listing the accounts payable and notes and other
obligations payable of CFP as of October 31, 1998, or that arose
thereafter other than in the ordinary course of the business of CFP,
indicating the creditor and amount, classifying the accounts to show in
reasonable detail the length of time, if any, overdue, and stating the
nature and amount of any refunds, setoffs, reimbursements, discounts, or
other adjustments, which in the aggregate are material and due or payable
to CFP respecting such obligations;
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(j) a schedule setting forth a description of any material adverse
change in the business, operations, property, inventory, assets, or
condition of CFP since September 30, 1998, required to be provided
pursuant to section 1.07 hereof;
(k) a schedule containing a copy of the board of directors' and
shareholders' minutes of CFP since inception; and
(1) a schedule setting forth any other information, together with any
required copies of documents, required to be disclosed in the CFP
Schedules by sections 3.01 through 3.18.
CFP shall cause the CFP Schedules and the instruments and data
delivered to CTI hereunder to be updated after the date hereof up to and
including the Closing Date.
ARTICLE IV
PLAN OF EXCHANGE
Section 4.01 The Exchange. On the terms and subject to the conditions
set forth in this Agreement, on the Closing Date (as defined in Section 4.04),
each of the CT1 Shareholders hereby agrees to assign, transfer, and deliver to
CFP, free and cleat of all liens, pledges, encumbrances, charges, restrictions,
or known claims of any kind, nature, or description, the number of shares of
common stock of CTI set after his signature at the foot of this Agreement, in
the aggregate constituting all of the issued and outstanding shares of common
stock of CTI, and CFP agrees to acquire such shares on such date by issuing and
delivering in exchange therefor solely shares of CFP restricted common stock,
par value $0.001, in the amount of .3346424 post-split shares of CFP for each
outstanding shareof CTI, or an aggregate amount of 25,900,000 shares of CFP
common stock, or approximately 89.31% of the 25,900,000 shares of CFP common
stock to be issued and outstanding on the Closing Elate (the "Exchanged CFP
Stock.") At the Closing. each of the CTI Shareholders shall, on surrender of his
certificate or certificates representing such CTI shares to the registrar and
transfer agent, be entitled to receive a certificate or certificates evidencing
shares of the Exchanged CFP Stock as provided herein Upon the consummation of
the transaction contemplated herein, all shares of capital stock of CTI shall be
held by CFP.
Section 4.02 Anti-Dilution. The number of shares of Exchanged CFP Stock
shall be appropriately adjusted to take into account any other stock split,
stock dividend, reverse stock split, recapitalization, or similar change in the
CFP common stock, par value $0.001, which may occur between the date of the
execution of this Agreement and the date of delivery of such shares. In
addition, the shares of common stock to be held by the CFP shareholders shall
not be diluted more than provided in Section 5.02(c).
Section 4.03 Appointment or New Directors. In connection with the
Closing of the transactions contemplated by this Agreement, the existing
directors of CFP shall resign, seriatim, and shall appoint R. Frank Meyer and
the other designees of CTI as directors to fill the vacancies created thereby,
to serve until the next annual stockholders' meeting of CFP and their successors
shall have been elected and qualified.
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Section 4.04 Closing. The closing (`Closing') of the transactions
contemplated by this Agreement shall be on a date and at such time as the
parties may agree ("Closing Date"), within the ten-day period commencing with
the last to occur of the following: the CFP shareholders' meeting or such date
as may be prescribed by any federal or state regulatory agency or authority
prior to which the transactions contemplated hereby may not be effectuated. Such
Closing shall lake place at a mutually agreeable time and place.
Section 4.05 Closing Events. At the Closing. each of the respective
parties hereto shall execute. Acknowledge, and deliver (or shall cause to be
executed. acknowledged, and delivered) any and all certificates, opinions,
financial statements, schedules, agreements, resolutions, rulings, or other
instruments required by this Agreement to be so delivered at or prior to the
Closing, together with such other items as may be reasonably requested by the
parties hereto and their respective legal counsel in order to effectuate or
evidence the transactions contemplated hereby.
Section 4.06 Termination.
(a) This Agreement may be terminated by the board of directors of
either CFP or CTI at any time prior to the Closing Date if:
(i) there shall be any actual or threatened action or proceeding before
any court or any governmental body which shall seek to restrain, prohibit,
or invalidate the transactions contemplated by this Agreement and which,
in the judgment of such board of directors, made in good faith and based
on the advice of its legal counsel, makes it inadvisable to proceed with
the exchange contemplated by this Agreement;
(ii ) any of the transactions contemplated hereby are disapproved by
any regulatory authority whose approval is required to consummate such
transactions or in the judgment of such board of directors, made in good
faith and based on the advice of counsel, there is substantial likelihood
that any such approval will not be obtained or will be obtained only on a
condition or conditions which would be unduly burdensome, making it
inadvisable to proceed with the exchange; or
(iii) there shall have been any change after the date of the latest
balance sheets of CFP and CTI respectively, in the assets, properties
business, or financial condition of CFP or CTI, which could have a
materially adverse affect on the value of the business of CFP or CTI
respectively, except any changes disclosed in the CFP or CTI Schedules, as
the case may be, and the transactions herein contemplated.
In the event of termination pursuant to this paragraph (a) of section 4.06, no
obligation, right, or liability shall arise hereunder, and each party shall bear
all of the expenses incurred by it in connection with the negotiation, drafting,
and execution of this Agreement and the transactions herein contemplated.
(b) This Agreement may be terminated at any time prior to the Closing
by action of the board of directors of CFP if CTI shall fail to comply in
any material respect with any of its covenants or agreements contained in
this Agreement or if any of the representations or warranties of CTI
contained herein shall be inaccurate in any material respect. If this
Agreement is terminated pursuant to this paragraph (b) of section 4.06
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this Agreement shall be of no further force or effect, and no obligation,
right, or liability shall arise hereunder, except that CTI shall bear its
own costs as well as the costs incurred by CFP in connection with the
negotiation, preparation, and execution of this Agreement.
(c) This Agreement and the Plan of Exchange may be terminated at any
time prior to the Closing by action of the board of directors of CTI if
CFP shall fail to comply in any material respect with any of its covenants
or agreements contained in this Agreement or if any of the representations
or warranties of CFP contained herein shall be inaccurate in any material
respect. If this Agreement is terminated pursuant to this paragraph (c) of
section 4.06, this Agreement shall be of no further force or effect, and
no obligation, right, or liability shall arise hereunder, except that CFP
shall bear its own costs as well as the costs of CTI incurred in
connection with the negotiation, preparation, and execution of this
Agreement.
ARTICLE V
SPECLAL COVENANTS AND REPRESENTATIONS
Section 5.01 Stockholder Meeting of CFP. As soon as practicable
following the execution of this Agreement, and prior to the Closing, CFP shall
call a special meeting of its shareholders to approve the following proposals:
(a) the authorization and approval of this Agreement and the
transactions contemplated thereby.
(b) the election of R. Frank Meyer and the designees of CTI, as
directors of CFP;
(c) the amendment to the articles of incorporation of CFP to change its
name to "Cyntech Technologies. Inc." or such name as may be deemed
appropriate;
(d) the recapitalization or reverse split of the issued and outstanding
shares of CFP, so that the 51,312,153 shares issued and outstanding as of
the Closing Date, will be consolidated, or reverse split on a 1for
16.552307 basis, resulting in a total of 3,100,000 shares issued and
outstanding; and
(e) to take such other actions as the directors may determine are
appropriate.
Section 5.02 Additional Covenants and Representations of CTI.
(a) CTI represents and warrants that it has received a loan commitment
from CorpFinance, a Canadian banking firm, to provide to CTI, or its
successor corporation, $43 million in financing necessary to build,
establish and operate CTI's proposed recovery plant, as described in CTI's
business plan as of the end of August 1998. CTI acknowledges and
understands that CFP has relied on CTI's representations that such loan
commitment is in place.
(b) CTI represents and warrants that it has received a performance
guarantee from KTI Fish, an engineering firm that will be engaged to
design and build the recovery plant, pursuant to a letter from KTI fish
dated October 18. 1998. CTI represents and warrants that it will be able
to design, build and establish the recovery plant at the cost and in the
16
<PAGE>
timeframe set forth in CTI's business plan, and consistent with the
referenced letter from KTI Fish.
(c) CTI represents and warrants that immediately upon closing, CTI (or
its successor company) will initiate efforts to complete necessary
documents to immediately undertake a private placement of the securities
of the successor company in compliance with applicable exemptions from the
registration requirements under state and federal securities laws. CTI
intends to raise up to $10 million dollars in the private offering, but
will, in no event raise less than $5 million. CTI further represents that
$5 million is sufficient capital to secure the financing referenced in
subparagraph (a) above. CTI hereby covenants that for a period of thirty
(30) months from the date of closing. CTI will not issue shares of common
stock which will result in dilution to the current CFP shareholders and
the CTI and other shareholders, on a pro rata basis, of more than 20%
(i.e., the surviving corporation will not issue any more than 6,000,000
shares and the interest held by current CFP shareholders will not be
reduced below 8.333%.) Any dilution to CFP shareholders shall be pro rata
in proportion to the interest held by any such CFP stockholder. CTI
covenants and agrees that (i) the failure to raise a minimum of $5 million
in equity capital consistent with the terms set forth above; or (ii) any
dilution which exceeds the above provision, shall constitute a material
breach of this Agreement, and that such action shall be appropriate for
injunctive relief by the CFP shareholders (as other remedies will probably
be inadequate).
Section 5.03 Access to Properties and Records. CFP and CTI will each
afford to the officers and authorized representatives of the other full access
to the properties, books, and records of CFP or CTI as the case may be, in order
that each may have full opportunity to make such reasonable investigation as it
shall desire to make of the affairs of the other, and each will furnish the
other with such additional financial and operating data and other information as
to the business and properties of CFP or CTI, as the case may be, as the other
shall from time to time reasonably request.
Section 5.04 Delivery of Books and Records. At the Closing. CFP shall
deliver to CTI the originals of the corporate minute books, books of account,
contracts, records, and all other- books or documents of CFP now in the
possession of CFP or its representatives.
Section 5.05 Special Covenants and Representations Regarding the
Exchanged CFP Stock. The consummation of this Agreement and the transactions
herein contemplated, including the issuance of the Exchanged Stock to the
shareholders of CTI as contemplated hereby, constitutes the offer, and sale of
securities under the Securities Act and applicable state statutes. Such
transaction shall be consummated in reliance on exemptions from the registration
and prospectus delivery requirements of such statutes which depend, inter alia,
upon the circumstances under which the CTI shareholders acquire such securities.
In connection with reliance upon exemptions from the registration and prospectus
delivery requirements for such transactions, at the Closing. CTI shall cause to
be delivered, and the shareholders shall deliver to CFP, letters of
representation in the form attached hereto as Exhibit `A."
Section 5.06 Third Party Consents and Certificates. CFP and CTI agree
to cooperate with each other in order to obtain any required third party
consents to this Agreement and the transactions herein and therein contemplated.
17
<PAGE>
Section 5.07 Actions Prior to Closing.
(a) From and after the date of this Agreement until the Closing Date
and except as set forth in the CFP or CTI Schedules or as permitted or
contemplated by this Agreement, CFP and CTI respectively, will each:
(i) carry on its business in substantially the same manner as it has
heretofore:
(ii) maintain and keep its properties in states of good repair and
condition as at present, except for depreciation due to ordinary wear and tear
and damage due to casualty;
(iii) maintain in full force and effect insurance comparable in amount
and it; scope of coverage to that now maintained by it;
(iv) perform in all material respects all of its obligation under
material contracts, leases, and instruments relating to or affecting its assets,
properties, and business.
(v) use its best efforts to maintain and preserve its business
organization intact, to retain its key employees, and to maintain its
relationship with its material suppliers and customers; and
(vi) fully comply with and perform in all material respects all
obligations and duties imposed on it by all federal and state laws and all
rules, regulations, and orders imposed by federal or state governmental
authorities.
(b) From and after the date of this Agreement until the Closing Date,
neither CFP nor CTI will:
(i) make any change in their articles of incorporation or bylaws,
except as provided herein:
(ii) take any action described in section 1.07 in the case of CTI, or
in section 3.07, in the case of CFP (all except as permitted therein or as
disclosed in the applicable party's schedules): or
(iii) enter into or amend any contract, agreement, or other instrument
of any of the types described in such party's schedules, except that a party may
enter into or amend any, contract, agreements or other instrument in the
ordinary course of business involving the sale of goods or services.
Section 5.08 Sales Under Rules 144 or 145. If Applicable.
(a) CFP will use its best efforts to at all times comply with the
reporting requirements of the Securities Exchange Act of 1934, as amended (the
18
<PAGE>
`Exchange Act"), including timely filing all periodic reports required under the
provisions of the Exchange Act and the rules and regulations promulgated
thereunder.
(b) Upon being informed in writing by any person holding restricted
stock of CFP as of the date of this Agreement that such person intends to sell
any shares under Rule 144 or Rule 145 promulgated under the Securities Act
(including any rule adopted in substitution or replacement thereof, CFP will
certify in writing to such person that it has filed all of the reports required
to be filed by it under the Exchange Act to enable such person to sell such
person's restricted stock under Rule 144 or 145, as may be applicable in the
circumstances, or will inform such person in writing that it has not filed any
such report or reports.
(c) If any certificate representing any such restricted stock is
presented, to CFP's transfer agent for registration of transfer in connection
with any sale theretofore made under Rule 144 or 145, provided such certificate
is duly endorsed for transfer by the appropriate person(s) or accompanied by a
separate stock power duly executed by the appropriate person(s) in each case
with reasonable assurances that such endorsements are genuine and effective, and
is accompanied by an opinion of counsel satisfactory to CFP and its counsel that
such transfer has complied with the requirements of Rule 144 or 145, as the
cases may be, CFP will promptly instruct its transfer agent to register such
transfer and to issue one or more new certificates representing such shares to
the transferee and. if appropriate under the provisions of Rule 144 or 145, as
the case may be, free of any stop transfer order or restrictive legend. The
provisions of this Section 4.07 shall survive the Closing and the consummation
of the transactions contemplated by this Agreement.
Section 5.09 Indemnification.
(a) CTI hereby agrees to indemnify CFP and each of the officers. agents
and directors of CFP as of the date of execution of this Agreement against any
loss, liability, claim, damage, or expense, (including. but not limited to, any
and all expense whatsoever reasonably incurred in investigating, preparing, or
defending against any litigation, commenced or threatened, or any claim
whatsoever), to which it or they may become subject arising out of or based on
any inaccuracy appearing in or misrepresentation made under Article I of this
Agreement. The indemnification provided for in this paragraph shall survive the
Closing and consummation of the transactions contemplated hereby and termination
of this Agreement.
(b) CFP hereby agrees to indemnify CTI and each of the offices, agents
and directors of CTI as of the date of execution of this Agreement against any
loss, liability, claim, damage, or expense (including, but not limited to, any
and all expense whatsoever reasonably incurred in investigating, preparing, or
defending against any litigation, commenced or threatened, or any claim
whatsoever), to which it or they may become subject arising out of or based on
any inaccuracy appearing in or misrepresentation made under Article III, of this
Agreement. The indemnification provided for in this paragraph shall survive the
Closing and consummation of the transactions contemplated hereby and termination
of this Agreement.
19
<PAGE>
ARTICLE VI
CONDITIONS PRECEDENT TO OBLIGATIONS OF CFP
The obligations of CFP under this Agreement are subject to the
satisfaction, at or before the Closing Date, of the following conditions:
Section 6.01 Accuracy of Representations. The representations and
warranties made by CTI and the CTI Shareholders in this Agreement were true when
made and shall be true at the Closing Date with the same force and effect as if
such representations and warranties were made at and as of the Closing Date
(except for changes therein permitted by this Agreement), and CTI and the CTI
Shareholders shall have performed or complied with all covenants and conditions
required by this Agreement to be performed or complied with by CTI and the CTI
Shareholders prior to or at the Closing. CFP shall be furnished with a
certificate, signed by a duly authorized officer of CTI and dated the Closing
Date, to the foregoing effect.
Section 6.02 Officer's Certificates. CFP shall have been furnished with
a certificate dated the Closing Date and signed by a duly authorized officer of
CTI to the effect that no litigation, proceeding, investigation, or inquiry is
pending or, to the best knowledge of CTI threatened, which might result in an
action to enjoin or prevent the consummation of the transactions contemplated by
this Agreement, or, to the extent not disclosed in the CTI Schedules, by or
against CTI which might result in any material adverse change in any of the
assets, properties, business, or operations of CTI.
Section 6.03 No Material Adverse Change. Prior to the Closing Date,
there shall not have occurred any material adverse change in the financial
condition, business, or operations of CTI nor shall any event have occurred
which, with the lapse of time or the giving of notice, may cause or create any
material adverse change in the financial condition, business, or operations of
CTI.
Section 6.04 Good Standing. CFP shall have received a certificate of
good standing from the Secretary of State of the state of Nevada or other
appropriate office, dated as of a date within ten days prior to the Closing Date
certifying that CTI is in good standing as a corporation in the state of Nevada
and has filed all tax returns required to have been filed by it to date and has
paid all taxes reported as due thereon.
Section 6.05 Officer and Director Questionnaires. CFP shall have
received officer and director questionnaires completed and signed by each
executive officer and director of CTI in form and substance reasonably
satisfactory to CFP and its counsel which shall contain information for use by
CFP in reporting the transaction contemplated hereby to applicable state and
federal securities regulatory agencies.
Section 6.06 Other Items.
(a) CFP shall have received uniform commercial code certificates from
the appropriate state of local authority or agency for each county and state in
which any personal property of CTI with a value in excess $1,000 is situated,
dated as of the Closing Date, to the effect that there are no liens on such
personal property, other than those disclosed in the CTI Schedules.
20
<PAGE>
(b) CFP shall have received a shareholders list of CTI containing the
name, address, and number of shares held by each CTI shareholder as of the date
of Closing certified by an executive officer of CTI as being true, complete, and
accurate.
(c) CFP shall have received such further documents, certificates, or
instruments relating to the transact ions contemplated hereby as CFP may
reasonably request.
ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS OF CTI
AND THE CTI SHAREHOLDERS
The obligations of CTI and the CTI Shareholders under this Agreement
are subject to the satisfaction, at or before the Closing Date, of the following
conditions:
Section 7.01 Accuracy of Representations. The representations and
warranties made by CFP in this Agreement were true when made and shall be true
as of the Closing Date (except for changes therein permitted by this Agreement)
with the same force and effect as if such representations and warranties were
made at and as of the Closing Date, and CFP shall have performed and complied
with all covenants and conditions required by this Agreement to be performed or
complied with by CFP prior to or at the Closing. CTI shall have been furnished
with a certificate, signed by a duly authorized executive officer of CFP and
dated the Closing Date, to the foregoing effect.
Section 7.02 Stockholder Approval. The stockholders of CFP shall have
approved this Agreement, the transactions contemplated hereby, and the other
matters described in Section 5.01.
Section 7.03 Officer's Certificate. CTI shall have been furnished with
a certificate dated the Closing Date and signed by a duly authorized executive
officer of CFP to the effect that no litigation, Proceeding, investigation, or
inquiry is pending or, to the best knowledge of CFP threatened, which might
result in an action to enjoin or prevent the consummation of the transactions
contemplated by this Agreement.
Section 7.04 No Material Adverse Change. Prior to the Closing Date.
there shall not have occurred any material adverse change in the financial
condition, business, or operations of CFP nor shall any event have occurred
which, with the lapse of time or the giving of notice, may cause or create any
material adverse change in the financial condition, business, or operations of
CFP.
Section 7.05 Good Standing. CTI shall have received a certificate of
good standing from the Secretary of State of the state of Utah or other
appropriate office, dated as of a date within ten days prior to the Closing Date
certifying that CFP is in good standing as a corporation in the state of Utah
and has filed all tax returns required to have been filed by it to date and has
paid all taxes reported as due thereon.
Section 7.06 Other Items.
(a) CTI shall have received a shareholders list of CFP, current at
least ten (10) days prior to Closing, containing the name, address and number of
shares held by each such CFP Shareholder certified by an executive officer of
CFP as being true, complete and accurate.
21
<PAGE>
(b) CTI shall have received such further documents, certificates, or
instruments relating to the transactions contemplated hereby as CTI may
reasonably request.
ARTICLE VIII
MISCELLANEOUS
Section 8.01 Governing Law. This Agreement shall be governed by,
enforced, and construed under and in accordance with the laws of the United
States of America and, with respect to matters of state law, with the laws of
Utah.
Section 8.02 Notices. Any notices or other communications required or
permitted hereunder shall be sufficiently given if personally delivered to it or
sent by registered mail or certified mail, postage prepaid, or by prepaid
telegram addressed as follows:
If to CFP, to: Carbon Fiber Products, Inc.
895 West Riverdale Road
Ogden, Utah 84405
With copies to: James C. Lewis, Esq.
Lewis Law Offices
10 West 100 South, #600
Salt Lake City, UT 84101
If to CTI, to: Cyntech Technologies, Inc.
8301 Westglenn Drive, Suite 210-C
Houston, Texas 77013
With copies to: Ben Barkley, Esq.
Kilpatrick & Stockton, LLP
Suite 2800
1110 Peachtree Street
Atlanta. Georgia 30309-5430
or such other addresses as shall be furnished in writing by any party in the
manner for giving notices hereunder, and any such notice or communication shall
be deemed to have been given as of the date so delivered, mailed, or
telegraphed.
Section 8.03 Attorney's Fees. In the event that any party institutes
any action or suit to enforce this Agreement or to secure relief from any
default hereunder or breach hereof, the breaching party or parties shall
reimburse the nonbreaching party or parties for all costs, including reasonable
attorneys' fees, incurred in connection therewith and in enforcing or collecting
any judgment rendered therein.
Section 8.04 Confidentiality. Each party here to agrees with the other
parties that, unless and until the transactions contemplated by this Agreement
have been consummated, it and its representatives will hold in strict confidence
all data and information obtained with respect to another party or any
22
<PAGE>
subsidiary thereof from any representative officer, director, or employee, or
from any books or records or from personal inspection, or such other party, and
shall not use such data or information or disclose the same to others, except
(i) to the extent such data or information is published, is a matter of public
knowledge, or is required by law to be published; and (ii) to the extent that
such data or information must be used or disclosed in order to consummate the
transactions contemplated by this Agreement.
Section 8.05 Schedules: Knowledge. Each party is presumed to have full
knowledge of all information set forth in the other party's schedules delivered
pursuant to this Agreement.
Section 8.06 Third Party Beneficiaries. This contract is solely between
CFP and CTI, and. except as specifically provided, no director, officer,
stockholder, employee, agent, independent contractor, or any other person or
entity shall be deemed to be a third party beneficiary of this Agreement.
Section 8.07 Entire Agreement. This Agreement represents the entire
agreement between the parties relating to the subject matter hereof, including
This Agreement alone fully and completely expresses the agreement of the parties
relating to the subject matter hereof. There are no other courses of dealing,
understandings, agreements, representations, or warranties, written or oral,
except as set forth herein.
Section 8.08 Survival: Termination. The representations, warranties,
and covenants of the respective parties shall survive the Closing Date and the
consummation of the transactions herein contemplated.
Section 8.09 Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original and all of which taken
together shall be but a single instrument.
Section 8.10 Amendment or Waiver. Every right and remedy provided
herein shall be cumulative with every other right and remedy, whether conferred
herein, at law, or in equity, and may be enforced concurrently herewith, and no
waiver by any party of the performance of any obligation by the other shall be
construed as a waiver of the same or any other default then, theretofore, or
thereafter occurring or existing. At any time prior to the Closing Date, this
Agreement may be amended by a writing signed by all parties hereto, with respect
to any of terms contained herein, and any term or condition of this Agreement
may be waived or the time for performance hereof may be extended by a writings
signed by the party or parties for whose benefit the provision is intended.
23
<PAGE>
IN WITNESS WHEREOF, the corporate parties hereto have caused this
Agreement to be executed by their respective officers, hereunto duly authorized,
as of the date first above written.
CARBON FIBER PRODUCTS, INC.
ATTEST
__________________________ By_____/s/ J. D. Moore____________
Secretary or Assistant Secretary Douglas Moore
CYNTECH TECHNOLOGIES, INC.
ATTEST:
___/s/____________________ By:______/s/ F. Meyers____________
Secretary or Assistant R. Frank Meyer, President
24
<PAGE>
CYNTECH SHAREHOLDERS:
/s/ /s/
- ------------------------------ -------------------------------
John L. Laska & Kayron M. Laska Lester D. Mallory, Jr.
JTWROS
/s/ /s/
- ------------------------------ -------------------------------
William McMillan & Pat McMillan Joseph Lamb
JTWROS
/s/ /s/
- ------------------------------ -------------------------------
Yong Guo & Ting Y. Sun, JTWROS Nini Johnson
/s/ /s/
- ----------------------------- -------------------------------
Joey Clayton McWilliams Leo Tillier
/s/ /s/
- ------------------------------ -------------------------------
Bill Feighner, on behalf of self and as Jack Pezold
Custodian for Gordon and Barnet Feighner
(children)
/s/ /s/
- ------------------------------ -------------------------------
Allen Esthay Neva P. Loner
- ------------------------------ -------------------------------
Thomas K. Dumbie & Kathleen J. Dumdie, Robert L. Wood
JTWROS
/s/
- ------------------------------ -------------------------------
James P. Quinn Charles Tovey
/s/
- ------------------------------ -------------------------------
William & Patti Swoboda Robert Herring
/s/
- ------------------------------
Rhonda Lynn Goerlitz
<PAGE>
Cyntech Shareholders
Page 2
TexOil Chemical Limited Partnership. LP Macro Energy Services Limited
Partnership, LP
By___/s/_______________________ By_/s/_________________________
Jack Cole, Managing General Partner Michael J. Sibick
Managing General Partner
The Dumdie Financial Trust LMCB Financial Services. Inc.
By____/s/______________________ By _/s/________________________
Michael Dumdie, Trustee
Mission Engineering Tex-Line Limited Partnership, L.P.
By__/s/________________________ By___/s/_______________________
Lester D. Mallory, Jr.,
Managing General Partner
/s/
- -------------------------------
Michael Dumdie
<PAGE>
SCHEDULE A TO
EXCHANGE AGREEMENT
BETWEEN CARBON FIBER PRODUCTS, INC. AND
CYNTECH TECHNOLOGIES, INC.
CYNTECH SHAREHOLDERS
<TABLE>
<CAPTION>
CTI Shareholder Number of CTI Converted to Number
Shares Held of Shares of CFP
- ----------------------------------------- --------------------------------------- ------------------------
<S> <C> <C>
1. TexOil Chemical Limited 57,000,000 (37,000,000 21,924,958
Partnership Class A; 20,000,000 Class B)
2. Macro Energy Services Limited 2,000,000 769,297
Partnership
3. Laska, John L. & Kayron M. 400,000 153,859
4. Mallory, Lester D. Jr. 100,000 38,465
5. McMillan, William & Pat 20,000 7,693
6. Lamb, Joseph 10,000 3,846
7. Guo, Yong & Sun, Ting Y. 1,000 385
8. Johnson, Nini 1,500 577
9. McWilliams, Joey Clayton 1,000 385
10. Tillier, Leo 1,000 385
11. LMCD Financial Services 50,000 19,232
12. Feighner, Bill, on behalf of self 51,500 19,809
and as custodian for Gordon and
Barnet Feighner (children)
13. Mission Engineering 500,000 192,324
14. Pezold, Jack 62,500 24,041
15. Esthay, Allen 24,405 9,387
16. Loner, Neva P. 120 46
17. Tex-Line Limited Partnership, LP 1,000,000 384,648
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
18. Dumdie, Thomas K.& 1,750 673
Kathleen J. Dumdie
19. Quinn, James P. 1,500 577
20. Wood, Robert L. 500 192
21. Swoboda, William & Patti 500 192
22. Herring, Robert 30,000 11,539
23. Goerlitz, Rhonda Lynn 3,000 1,154
24. Tovey, Charles 87,500 33,657
25. The Dumdie Financial 5,986,435 2,302,673
Trust/Michael Dumdie - Trustee
Total: 67,334,210 25,900,000
</TABLE>
CERTIFICATION
R. Frank Meyer, President of Cyntech Technologies, Inc. ("CTI"), hereby
certifies that the foregoing list of shareholders, and the conversion into
shares of Carbon Fiber Products in accordance with the Exchange Agreement, is
complete and accurate.
____/s/ R. Meyer_______
R. Frank Meyer, President
Exhibit 3(i)
ARTICLES OF INCORPORATION
With Amendments
<PAGE>
State of Utah 11.9037
Department of Commerce
Division of Corporations and Commercial Code
I Hereby certify that the forgoing has been filed And approved on the 17th. Day
of December, 1992 In the office of this division and hereby issue this
certificate thereof.
Examiner CB Date: 12-17-92
/s/ Gary R. Hansen
(seal) Gary R Hansen
Division Director
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
OF
WASATCH FIBER GROUP,INC.
Pursuant to the provisions of section 16-10a-l006 of the Utah Revised Business
corporation Act, Wasatch Fiber Group, Inc., a Utah corporation, hereinafter
referred to as the "Corporation, hereby adopts the following Articles of
Amendment to its Articles of Incorporation:
FIRST: The name of the corporation is Wasatch Fiber Group, Inc.
SECOND: Article I of the Articles of Incorporation which reads "The
name of the corporation shall be: Wasatch Fiber Group, Inc.," shall be amended
to read "The name of the corporation shall be: Carbon Fiber Products, Inc."
THIRD: By executing these Articles of Amendment to the Articles of
Incorporation, the president and secretary of the corporation do hereby certify
that an December 10, 1992, the foregoing amendment to the Articles of
Incorporation of Wasatch Fiber Group, Inc., was authorized and approved pursuant
to section 16-10a-1003 of the Utah Revised Business Corporation Act, by the
consent of the Corporation's shareholders. The number of issued and outstanding
shares entitled to vote on the foregoing amendment to the Articles of
Incorporation was 7,118,656, of which 4,727,350 shares voted for and 4,950
shares voted against the foregoing amendment to the Articles of Incorporation.
No other class of shares was entitled to vote thereon as a class.
Dated this 10th day of December, 1992
/s/ Kurt Moore
----------------------------
Kurt Moore, President
/s/ Elliott Taylor
----------------------------
Elliott N. Taylor, Secretary
<PAGE>
STATE OF UTAH )
:
COUNTY OF WEBER )
On this 10th day of December, 1992, personally appeared before me, the
undersigned, a notary public, Kurt Moore and Elliott N. Taylor, who being by me
first duly sworn, declare that they are the president and secretary,
respectively, of the above-named corporation, that they signed the foregoing
Articles of Amendment to the Articles of Incorporation, and that the statements
contained therein are true.
WITNESS MY HAND AND OFFICIAL SEAL.
/S/ Kellie A. Nay
-------------------
Notary Public
Residing in Weber County, Utah
My Commission Expires: June 26,93 (seal)
<PAGE>
ARTICLES OF AMENDMENT TO
THE ARTICLES OF INCORPORATION OF
BLYTHBURG, INC.
Pursuant to the provisions of Section 16-10-57 of the Utah Business Corporation
Act, the Undersigned Corporation hereby adopts the following Articles of
Amendment to its Articles of Incorporation:
FIRST: The name of the Corporation is Blythburg, Inc.
SECOND: The following amendment to the articles of incorporation was
duly adopted by a majority of the shareholders of the Corporation on March 18,
1988, in accordance with Section 16-10-138 of the Utah Business Corporation Act:
Article I of the articles of incorporation pertaining to the name of
Blythburg, Inc. is hereby amended by striking the existing Article I and
inserting in lieu thereof a new Article I, set forth in its entirety as follows:
ARTICLE-I
The name of the Corporation is Wasatch Fiber Group, Inc.
THIRD: The designation and number of outstanding shares of each class
entitled to vote thereon as a class are as follows:
CLASS NUMBER OF SHARES
----- ----------------
Common 16,000,000
FOURTH: The number of shares voted for the amendment to Article I was
9,058,000 with 0 opposing and 0 abstaining.
FIFTH: The issued and outstanding common stock of Blythburg, Inc. will
be reverse split 10-to-1.
SIXTH: The number of shares voted for the amendment was 9,058,000 with
0 opposing and 0 abstaining.
SEVENTH: An amendment limiting the liability, of the directors was
adopted by a majority of the shareholders as follows:
A director of the Corporation shall have no personal liability to the
Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, except (i) for any breach of a directors
duty of loyalty to the Corporation or its shareholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct
<PAGE>
or a knowing violation of law, (iii) for actions under section 16-10-44
of the Utah Business Corporation Act, or (iv) for any transaction from
which a director derived an improper personal benefit.
EIGHTH: The number of shares voted for the amendment was 9,058,000 with
0 opposing and 0 abstaining.
NINTH: This amendment does provide forexchange, reclassification, or
cancellation of issued shares.
TENTH: This amendment does change the amount of stated capital of the
corporation.
IN WITNESS WHEREOF, the foregoing Articles of Amendment to the Articles
of Incorporation of Blythburg, Inc. have been executed this 23 day of March
1988.
ATTEST: Blythburg, Inc. Inc.
/s/ Bruce C. Decker /s/ Robert C. Richins
- -------------------------- ----------------------------
Bruce C. Decker, Secretary Robert C. Richins, President
STATE OF UTAH )
:ss
COUNTY OF WEBER )
On March 23, 1988, before me, the undersigned, a notary Public in and for the
county and state, personally appeared Robert C. Richins and Bruce C. Decker,
who, being by me duly sworn, did state, each for himself, that he, Robert C.
Richins, is the president, and that he, Bruce C. Decker, is the secretary, of
Blythburg, Inc., a Utah corporation, and that the foregoing Articles of
Amendment to the Articles of Incorporation of Blythburg, Inc. were signed on
behalf of such corporation by authority of a resolution of its board of
directors and that the statements contained therein are true.
WITNESS my hand and official seal.
/s/ F. Thurston
- ---------------
Notary Public
Residing in Weber County, UT
My Commission Expires:
9-2-89
<PAGE>
ARTICLES OF INCORPORATION
OF
BLYTHBURG, INC.
The undersigned incorporators being natural persons eighteen years of
age or more and desiring to form a body corporate under the laws of the state or
Utah do hereby sign, verify, and deliver in duplicate to the Division of
Corporations of the state of Utah these Articles of Incorporation for the
above-named corporation (hereinafter the 'Corporation'):
ARTICLE I
NAME
The name of the corporation shall be:
Blythburg, Inc.
ARTICLE II
PERIOD OF DURATION
The Corporation shall continue in existence perpetually unless sooner
dissolved according to law.
ARTICLE III
PURPOSES AND POWERS
The Corporation is organized for the following purpose or purposes.
Section 1. To seek, investigate, acquire interests in, and dispose of
business opportunities, ventures. Enterprises, or assets; to own and operate any
enterprise whatsoever; to acquire, hold, and dispose of real or personal
property of any kind or nature, tangible or intangible; and generally to do any
act convenient to the foregoing.
Section 2. To engage in any lawful act or activity for which
corporations may be organized under the laws of the state or Utah.
1
<PAGE>
ARTICLE IV
AUTHORIZED SHARES
The total number of shares of all classes of stock which this
Corporation shall have authority to issue is 105,000,000 shares: consisting of
5,000,000 shares of preferred stock, par value $0.001 per share (hereinafter the
"referred Stock"), and 100,000,000 shares of common stock, par value $O.001 Per
share (hereinafter the "Common Stock").
ARTICLE V
CLASSES OF STOCK
A statement of the designations and the powers, preferences and rights,
and the qualifications, limitations or restrictions thereof, or the shares of
stock or each class which the Corporation shall be authorized to issue is as
follows:
(a) Preferred stock. Shares of Preferred Stock may be issued from time
to time in one or more series as may from time to time be determined by
the board of directors. Each series shall be distinctly designated as
to distinguish the shares thereof from all of other series or classes.
All shares of any one series of the Preferred Stock shall be alike in
every particular. The rights or each such series and qualifications,
limitations or restriction thereof, if any, may differ from those of
any and all other series at any time outstanding subject to the
limitations set forth in this paragraph (a) and subparagraph (ii) of
Paragraph (c) of this article V. No series of Preferred Stock shall be
entitled to vote as a class or otherwise on matters voted upon by the
shareholders of the Corporation, except for those matters in which the
consent or the holders of the Preferred Stock is specifically required
by the provisions of the Utah Business Corporation Act, as amended.
With respect to dividends, all shares of Preferred Stock shall have a
preference over the Common Stock, be cumulative and be participating
with the Common Stock. All shares or the class of preferred Stock shall
be subject to redemption by the Corporation, subject to the authority
hereby expressly granted to the board of directors to waive or reject
by resolution or resolutions adopted prior to the issuance of any
shares of each particular series or Preferred Stock the right of the
Corporation to redeem the shares or Preferred Stock included in such
series. Subject to the provisions of this paragraph (a) and the
provisions of subparagraph (ii) of paragraph (c) of this article V, the
board of directors of this Corporation is hereby expressly granted
authority to fix by resolution or resolutions adopted prior to the
issuance of any shares or each particular series of Preferred Stock,
the designation and the rights, qualifications, limitations, and
restrictions thereof, if any, of such series, set forth below:
(i) The distinctive designation of and the number of
shares of Preferred Stock which shall constitute the series,
which number may be increased (except as otherwise fixed by
the board of directors) or decreased (but not below the number
or shares thereof outstanding) from time co lime by action of
the board or directors;
2
<PAGE>
(ii) The rate and times at which dividends on shares
of the series shall be paid;
(iii) The right, if any, of the holders of the shares
of the same series to convert the same into, or exchange the
same for, any other class or classes of stock of this
Corporation and the terms and conditions of such conversion or
exchange;
(iv) Whether shares of the series shall be subject to
redemption, and the redemption price or prices, including,
without limitation, a redemption price or prices payable in
shares of the Common Stock, cash or other property and the
time and times at which, and the terms and conditions upon
which, shares of the series may be redeemed;
(v) The rights, if any, of the holders of the shares
of the series upon voluntary or involuntary liquidation,
merger, consolidation, distribution or sale of assets,
dissolution, or winding up of this Corporation; and
(vi) The terms of the sinking fund or redemption or purchase
account, if any, to be provided for shares of the series.
(b) Common Stock. The Common Stock shall be non-assessable and
shall not have cumulative voting rights or pre-emptive rights. In
addition, the Common Stock shall have the following powers,
preferences, rights, qualifications, limitations, and restrictions:
(i) After the requirements with respect to
preferential dividends of Preferred Stock (fixed in accordance
with the provisions of paragraph (a) of this article V), if
any, shall have been met and after this Corporation shall
comply with the requirements, if any, with respect to the
setting aside of funds as sinking funds or redemption or
purchase accounts (fixed in accordance with provisions of
paragraph (a) of this article V) and subject further to any
other conditions which may be fixed in accordance with the
provisions of paragraph (a) of this article V, then. but not
otherwise, the holders or Common Stock shall be entitled to
receive such dividends, if any, as may be declared from time
to time by the board of directors;
(ii) After distribution in full of the preferential
amount (fixed in accordance with the provisions of paragraph
(a) of this article V), if any, to be distributed to the
holders of Preferred Stock in the event of a voluntary or
involuntary liquidation, distribution or sale of assets, or
dissolution or winding up of this Corporation, the holders of
the Common a Stock shall be entitled to receive all of the
remaining assets of this Corporation, tangible and intangible,
of whatever kind available for distribution to stockholders,
ratably in proportion to the number of shares of Common Stock
held by each; and
(iii) Except as may otherwise be required by law or
these Articles or Incorporation, each holder of Common Stock
shall have one vote in respect to each share of Common Stock
3
<PAGE>
held by such holder on each matter voted upon by the
shareholders; no shareholder shall be entitled to cumulate his
votes for the election of directors or for any other reason.
(c) Other Provisions,
(i)The relative powers, preferences, and rights of
each series of Preferred Stock in relation to the powers,
preferences, and rights of each other series of Preferred
Stock shall, in each case, be fixed from time to time by the
board of directors in the resolution or resolutions adopted
pursuant to authority granted in paragraph (a) of this article
V. and the consent of the holders of any class of stock or any
series of Preferred Stock as are from time to time outstanding
shall not be required for the issuance by the board of
directors of any other series of Preferred Stock whether the
powers, preferences, and rights of such other series shall be
fixed by the board of directors as senior to or on a parity
with the powers, preferences, and rights of such outstanding
class or series.
(ii) No holder of any of the shares of any class or
series of stock or of other securities of the Corporation
shall have any pre-emptive right to purchase or subscribe for
any unissued stock of any class or series or other unissued
securities of the Corporation,and any such unissued stock,
series of stock, or other securities may be issued and
disposed of pursuant to resolution of the board of directors
to such persons, firms, and others, and upon such terms as may
be deemed advisable by the board of directors in its sole
discretion.
ARTICLE VI
TRANSACTIONS WITH INTERESTED DIRECTORS
No contract or other transaction between the Corporation and any other firm
or corporation shall be affected by the fact that a director or officer of the
Corporation has an interest in, or is a director or officer of such firm or
other corporation. Any officer or director, individually or with others, may be
a party to, or may have an interest in, any transaction of the Corporation or
any transaction in which the Corporation is a party or has an interest. Each
person who is now or may become an officer or director of the Corporation is
hereby relieved from liability that he might otherwise incur in the event such
officer or director contracts with the Corporation individually or on behalf of
another corporation or entity in which he may have an interest; provided, that
such officer or director acts in good faith.
ARTICLE Vll
INDEMNIFICATION OF OFFICERS, DIRECTORS AND OTHERS
The Corporation may indemnify each director, officer, employee, or agent of
the Corporation and their respective heirs, administrators, and executors,
against all liabilities and expenses reasonably incurred in connection with any
action, suit, or proceeding to which he may be made a party by reason of his
4
<PAGE>
being or having been a director, officer, employee, or agent of the Corporation,
to the full extent permitted by the laws of the state or Utah now existing or as
such laws may hereafter be amended.
ARTICLE VIII
AMENDMENTS
The Corporation reserves the right to amend, alter, change, or repea1
all or any portion of the provisions contained in these Articles of
Incorporation from time to time in accordance with the laws of the state of
Utah, and all rights conferred upon stockholders herein are granted subject to
this reservation.
ARTICLE IX
ADOPTION AND AMENDMENT OF BYLAWS
The initial bylaws of the Corporation shall be adopted by its board of
directors. The power to alter, amend, or repeal the bylaws or adopt new bylaws
shall be vested in the board of directors, but the shareholders of the
Corporation may also alter, amend, or repeat the bylaws or adopt new bylaws. The
bylaws may contain any provisions for the regulation and management of the
affairs of the Corporation not inconsistent with law or these Articles of
Incorporation.
ARTICLE X
REGISTERED OFFICE AND REGISTERED AGENT
The address of the Corporation's registered office in the state of Utah
is 200 West 33rd Street, Ogden, Utah, 84401. The name of its initial registered
agent at such registered office is Paul Hurst. Either the registered office or
the registered agent may be changed in the manner provided by law.
ARTICLE XI
INITIAL BOARD OF DIRECTORS
The governing board of the Corporation shall be known as the board of
directors and the number of directors comprising the board or directors shall be
fixed by the bylaws of the Corporation, provided that the number of directors
shall not be less than three.
5
<PAGE>
The names and addresses of the members of the initial board of
directors, which shall be three in number and shall serve until the first annual
meeting of shareholders and until their successors are elected and shall
qualify, are as follows:
NAME ADDRESS
---- -------
Paul Hurst 200 West 33rd. Street
Ogden, Utah 84401
N.Thomas Steele 543 25th. Street
Ogden, Utah 84401
Robert Lang 550 24th. Street
Ogden, Utah 84401
ARTICLE XII
COMMENCING BUSINESS
The Corporation will not commence business until consideration of the
value of at least $1,000 has been received for the issuance of shares.
ARTICLE XIII
INCORPORATORS
The name and address of each of the incorporators signing these Articles of
Incorporation are as follows:
Paul Hurst 200 West 33rd. Street
Ogden, Utah 84401
N.Thomas Steele 543 25th. Street
Ogden, Utah 84401
Robert Lang 550 24th. Street
Ogden, Utah 84401
6
<PAGE>
We, the undersigned, being each of the incorporators of the
Corporation, herein before named, do make and file these Articles of
Incorporation, hereby declaring that the facts herein are true.
DATED this 31st day of January 1986.
/s/ Paul Hurst
--------------
Paul Hurst
/s/ N. Thomas Steele
--------------------
N. Thomas Steel
/s/ Robert Lang
---------------
Robert Lang
STATE OF UTAH )
:ss
COUNTY OF SALT LAKE )
On this 31st day of January, 1986, before me, a notary public, personally
appeared Paul Hurst, N. Thomas Steele, and Robert Lang, who upon being first
duly sworn, severally acknowledged to me that they executed the foregoing
Articles of Incorporation.
/s/ T. Thurston
---------------
Notary Public
Residing in Weber County
My commission expires:
9-29-89
7
Exhibit 3(ii)
BYLAWS
<PAGE>
B Y L A W S
0 F
CARBON FIBER PRODUCTS, INC.
A UTAH CORPORATION
1993
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
ARTICLE 1 OFFICES
<S> <C> <C>
Section 1,1 Business Offices..................... 1
Section 1,2 Registered Office.................... 1
ARTICLE 2 SHAREHOLDERS
Section 2,2 Annual Shareholder Meeting........... 1
Section 2,2 Special Shareholder Meetings.... 1
Section 2,3 Place of Shareholder Meetings... 2
Section 2,4 Notice of Shareholder Meeting... 2
Section 2,5 Fixing of Record Date................ 3
Section 2,6 Shareholder List..................... 4
Section 2,7 Shareholder Quorum & Voting
Requirements......................... 5
Section 2,8 Proxies.............................. 5
Section 2,9 Voting of Shares..................... 6
Section 2,10 Corporation's Acceptance of
Votes................................ 6
Section 2,11 Informal Action by Shareholders 8
Section 2,12 Waiver of Notice..................... 9
Section 2,13 Voting for Directors................. 9
Section 2,14 Rights of Shareholders to
Inspect Corporate Records............ 9
Section 2,15 Furnishing Financial Statements
to a Shareholder..................... 11
Section 2,16 Information Respecting Shares... 11
ARTICLE 3 BOARD OF DIRECTORS
Section 3,1 General Powers.................... 12
Section 3,2 Number, Tenure and Qualifications
of Directors.................... 12
Section 3,3 Regular Meetings of the Board
of Directors.................... 12
Section 3,4 Special Meetings of the Board
of Directors.................... 12
Section 3,5 Notice and Waiver of Notice
of Special Director Meetings.. 12
Section 3,6 Quorum of Directors............... 13
Section 3,7 Manner of Acting.................. 13
Section 3,8 Director Action Without a
Meeting........................... 14
Section 3,9 Resignation of Directors......... 14
Section 3,10 Removal of Directors.............. 14
Section 3,11 Board of Director Vacancies... 15
Section 3,12 Director Compensation............. 16
Section 3,13 Director Committees............... 16
Section 3,14 Director's Rights to Inspect
Corporate Records................. 16
1
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ARTICLE 4 EXECUTIVE COMMITTEE AND OTHER COMMITTEES
<S> <C> <C>
Section 4,1 Creation of Committees.............. 17
Section 4,2 Approval of Committees and
Members .. 18
Section 4,3 Required Procedures............ 18
Section 4,4 Authority......................... 18
Section 4,5 Authority of Executive Committee .. 18
Section 4,6 Compensation....................... 18
ARTICLE 5 OFFICERS
Section 5,1 Officers............................ 18
Section 5,2 Appointment and Term of Office 19
Section 5,3 Removal of Officers................. 19
Section 5,4 The Chairman of the Board........... 19
Section 5,5 Chief Executive Officer............. 19
Section 5,6 President........................... 20
Section 5,7 Vice Presidents..................... 20
Section 5,8 Secretary........................... 20
Section 5,9 Treasurer........................... 21
Section 5,10 Assistant Secretaries and
Assistant Treasurers................ 21
Section 5,11 Salaries............................ 22
ARTICLE 6 INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES,
FIDUCIARIES, AND AGENTS
Section 6,1 Indemnification of Directors.. 22
Section 6,2 Advance of Expenses for
Directors........................... 23
Section 6,3 Indemnification o f Officers,
Employees, Fiduciaries, & Agents.. 23
Section 6,4 Insurance........................... 23
ARTICLE 7 EXECUTION OF INSTRUMENTS, BORROWING OF MONEY AND
DEPOSITS OF CORPORATE FUNDS
Section 7,1 Execution of Instruments............ 24
Section 7,2 Loans............................... 24
Section 7,3 Deposits............................ 24
Section 7,4 Checks, Drafts, Etc................. 24
Section 7,5 Bonds and Debentures................ 25
Section 7,6 Sale, Transfer, Etc., of
Securities.......................... 25
Section 7,7 Proxies............................. 25
ARTICLE 8 CERTIFICATES FOR SHARES AND THEIR TRANSFER
Section 8,1 Certificates for Shares............. 25
Section 8,2 Shares without Certificates......... 26
Section 8,3 Registration of Transfer of
Shares.............................. 27
Section 8,4 Restrictions on Transfer of
Shares Permitted.................... 27
Section 8,5 Acquisition of Shares............... 28
II
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ARTICLE 9 DISTRIBUTIONS
<S> <C> <C>
Section 9,1 Distributions....................... 29
ARTICLE 10 CORPORATE SEAL
Section 10,1 Corporate Seal...................... 29
ARTICLE 11 FISCAL YEAR
Section ll,l Fiscal Year......................... 29
ARTICLE 12 AMENDMENTS
Section 12,1 Amendments.......................... 29
III
</TABLE>
<PAGE>
BYLAWS
OF
CARBON FIBER PRODUCTS, INC.
ARTICLE I OFFICES
Section 1,1 Business Offices
The principal office of Carbon Fiber Products, Inc.(the "Corporation)shall be
located at any place either within or outside the State of Utah, as designated
in the Corporation's Articles of Incorporation or the Corporation's most recent
annual report on file with the Utah Division of Corporations and Commercial Code
(the "Division") providing such information. The Corporation may have such other
offices, either within or outside the State of Utah as the Board of Directors
may designate or as the business of the Corporation may require from time to
time. The Corporation shall maintain at its principal office a copy of those
records specified in Section 2,14 of Article II of these Bylaws.
(16-10a-102(24))*
Section 1,2 Registered Office
The registered office of the Corporation required by the Utah Revised Business
Corporation Act shall be located within the State of Utah. The address of the
registered office may be changed from time to time. (16-10a-501 and 16-10a-502)
ARTICLE 2 SHAREHOLDERS
Section 2,1 Annual Shareholder Meeting An annual meeting of the shareholders
shall be held each year on _____________________, at the hour of 10:00 a.m., or
on the date, at the time, and at the place, fixed by the Board of' Directors.
The annual meeting shall be held for the purpose of electing directors and for
the transaction of such other business as may come before the meeting.
(16-10a-701)
Section 2,2 Special Shareholder Meetings
Special meetings of the shareholders may be called, for any purposes described
in the notice of the meeting, by the Chairman of the Board of Directors, the
President, or by at least two members of the Board of Directors and shall be
called by the President at the request of the shareholders) of not less than
one-tenth of all outstanding votes of the Corporation entitled to be cast on any
issue at the meeting. (16-10a-702)
Citations in parentheses are to Utah Code Annotated. These citations
are for reference only and shall only and shall not constitute a part of these
bylaws.
1
<PAGE>
Section 2,3 Place of Shareholder Meetings
The Board of Directors may designate any place, either within or outside the
State of Utah, as the place for any annual meeting of the shareholders. The
chairman of the Board of Directors, the President, the Board of Directors or
shareholder(s) authorized by these Bylaws to request a meeting, as the case my
be, may designate any place, wither within or outside the State of Utah, as the
place for any special meeting of the shareholders called by such person or
group. If no designation is made regarding the place of the meeting, the meeting
shall be held at the principal office of the Corporation. (16-10a-701(2) and
16-10a-701(3))
Section 2,4 Notice of Shareholder Meeting
(a) Required Notice Written notice stating 'the place, day, and hour of any
annual or special shareholder meeting shall be delivered not less than ten (10)
nor more than sixty (60) days before the date of the meeting, either personally
or by mail, be or at the direction of the person or group calling the meeting,
to each shareholder of record entitled to vote at such meeting, and to any other
shareholder entitled by the Utah Revised Business Corporation Act or the
Corporation's Articles of Incorporation to receive notice of the meeting. Notice
shall be deemed to be effective when mailed.
(b) Notice Not Required Notice shall not be required to be given to any
Shareholder to whom:
(1) A notice of two consecutive annual meetings, and all
notices of meetings or of the taking of action by
written consent without a meeting during the period
between the two consecutive annual meetings, have
been mailed, addressed to the shareholder at the
shareholder's address as shown on the records of the
Corporation, and have been returned undeliverable; or
(2) At least two payments, if sent by first class mail,
of dividends or interest on securities during a
twelve month period, have been mailed, addressed to
the shareholder at the shareholder's address as shown
on the records of the Corporation, and have been
returned undeliverable.
If a shareholder to whom notice is not required to be given delivers to the
Corporation a written notice setting forth the shareholder's current address, or
if another address for the shareholder is otherwise made known to the
Corporation, the requirement that notice be given to the shareholder is
reinstated.
(16-10a-103 and 16-10a-705)
2
<PAGE>
(c) Adjourned Meeting If any shareholder meeting is adjourned to a
different date, time, or place, notice need not he given of the new date, time
or place, if the new date, time , or place is announced at the meeting before
adjournment. However,if the adjournment is for more than (30) days, or if after
the adjournment a new record date for the adjournment meeting is or must be
fixed (see Section 2,5 of these Bylaws), then notice must be given pursuant to
the requirements of paragraph (a) of this section 2,4 to shareholders of record
who are entitled to vote at the meeting. (16-10-705(4))
(d) Contents of Notice Notice of any special meeting of the shareholders
shall include a description of the purpose or purposes for which the meeting is
called. Except as provided in this Section 2,4(d), in the Articles of
Incorporation, or in the Utah Revised Business Corporation Act, notice of an
annual meeting of the shareholders need not include a description of the purpose
or purposes for which the meeting is called. (16-10-705(2)(3))
(e) Waiver of Notice of Meeting Any shareholder may waive notice of a
meeting by a written signed by the shareholder which is delivered to the
Corporation (either before or after the date and time stated in the notice as
the date or time when any action will occur or has occurred) for inclusion in
the minutes or filing with the Corporation's records. (16-10a-706)
(f) Effect of Attendance at Meeting A shareholder's attendance at a
meeting:
(1) Waives objection to lack of notice or defective
notice of the meeting, unless the shareholder at the
beginning of the meeting objects to holding the
meeting or transacting business at the meeting; and
(2) Waives objection to consideration of a particular
matter at the meeting that is not within the purpose
or purposes described in the meeting notice, unless
the shareholder objects to considering the matter
when it is presented. (16-10a-706)
Section 2,5 Fixing of Record Date
For the purpose of determining the shareholders of any voting group entitled to
notice of or to vote at any meeting of the shareholders, or the shareholders
entitled to take action without a meeting or to demand a special meeting, or the
shareholders entitled to receive payment of any distribution or dividend, or in
order to make a determination of the shareholders for any other proper purpose,
the Board of Directors may fix in advance a date as the record date. Such record
date shall not be more than seventy (70) days prior to the date on which the
particular action, requiring such determination of the shareholders, is to be
taken. If no record date is so fixed by the Board of Director, the record date
shall be at the close of business on the following dates:
3
<PAGE>
(a) Annual and Special Meetings With respect to an annual meeting of the
shareholders or any special meeting of the shareholders called by the chairman
of the Board of Directors or the shareholder(s) authorized by these bylaws to
request a meeting, the day before the first notice is delivered to shareholders.
(16-10a-707(2))
(b) Meeting Demanded by Shareholders With respect to a special shareholder
meeting demanded by the shareholders, the earliest date of any of the demands
pursuant to which the meeting is called, or sixty (60) days prior to the date
the first of the written demands is received by the Corporation, whichever is
later.
(16-101-704(6))
(c) Action Without a Meeting With respect to actions taken in writing
without a meeting (pursuant to Section 2,11 of these Bylaws), the date the first
shareholder delivers to the Corporation a signed written consent upon which the
action is taken. (16-10a-704(6))
(d) Distributions With respect to a distribution to the shareholders (other
than one involving a repurchase or reacquisition of shares), on the date the
Board of Directors authorized the distribution. (16-10a-601(2))
(e) Share Dividend With respect to the payment of a share dividend, on the
date the Board of Directors authorizes the shares dividend.
When a determination of the shareholders entitled to vote at any meeting of the
shareholders has been made as provided in this section, such determination shall
apply to any adjournment thereof unless the Board of Directors fixes a new
record date, which it must do if the meeting is adjourned to a date more than
one hundred twenty (120) days after the date fixed for the original meeting.
(16-10a-707)
Section 2,6 Shareholder List The secretary shall make a complete record of the
shareholders entitled to vote at each meeting of shareholders, arranged in
alphabetical order within each class or series, with the address of and the of
shares held by each. If voting groups exist (see Section 2,7 of these Bylaws),
the list must be arranged by voting group, and within each voting group by class
or series of shares. The shareholder list must be available for inspection by
any shareholder, beginning on the earlier of ten (10) days before the meeting
for which the list was prepared or two (2) business days after notice of the
meeting is given and continuing through the meeting and any adjournments. The
list shall be available at the Corporation's principal office or at a place
identified in the notice of the meeting in the city where the meeting is to be
held.
4
<PAGE>
A shareholder, his agent, or attorney is entitled on written demand to inspect
and , subject to the requirements of Section 2, 14 of these Bylaws, to inspect
and copy the list during regular business hours and during the period it is
available for inspection. The Corporation shall maintain the shareholder list in
written form or in another form capable of conversation into written form within
a reasonable time. (16-10A-720)
Section 2,7 Shareholders Quorum and Voting Requirements
(a) Quorum Unless the Articles of Incorporation of the Corporation of the
Utah Revised Business Corporation Act provide otherwise, a majority of the votes
entitled to be cast on the matter by the voting group constitutes a quorum of
that voting group for action on that matter. (16-10a-725(l))
(b) Single Voting Group If the Articles of Incorporation of the Utah
Revised Business Corporation Act provide for voting by single voting group on a
matter, action on that matter is taken when voted upon that voting group.
(16-10a-726(l))
(c) Voting Groups Shares entitled to vote as a separate voting group may
take action on a matter at a meeting only if a quorum of those shares exists
with respect to that matter. ( 1 6 - l0a-725(l)) If the Articles of
Incorporation or the Utah Revised Business Corporation Act provide for voting by
two or more voting groups on a matter, action on that matter is taken only when
voted upon by each of those voting groups counted separately. One voting group
may vote on a matter even though another voting group entitled to vote on the
matter has not voted. (16-10a-726(2))
(d) Effect of Representation Once a share is represented for any purpose at
a meeting, including the purpose of determining that a quorum exists, it is
deemed present for quorum purposes for the remainder of the meeting and for any
adjournment of that meeting, unless a new record date is or must be set for that
adjourned meeting. (16-10a-725(2))
(e) Approval of Actions If a quorum exists, action on a matter (other than
election of directors) by a voting group is approved if the votes cast within
the voting group favoring the action exceed the votes cast opposing the action,
unless the Articles of Incorporation, a Bylaw adopted by the shareholders
pursuant to the Utah Revised Business Corporation Act, or the Utah Revised
Business Corporation Act require a greater number of affirmative votes.
(16-10a-725(3))
Section 2,8 Proxies At all meetings of the shareholders, a shareholder may vote
in person or by a proxy executed in any lawful manner. Such proxy shall be filed
with the Corporation before or at the time of the meeting. No proxy shall be
valid after eleven months from the date of its execution unless otherwise
provided in the proxy. (16-10a-722)
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Section 2,9 Voting of Shares
(a) Votes per Share Unless otherwise provided in the Articles of
Incorporation, each outstanding share entitled to vote shall be entitled to one
vote, and each fractional share shall be entitled to a corresponding fractional
vote, upon each matter submitted to a vote at a meeting of shareholders.
(16-10a-721(l))
(b) Restriction on Shares Held by Controlled Corporation Except as provided
by specific court order, no shares of the Corporation held by another
corporation, if a majority of the shares entitled to vote for the election of
directors of such other corporation are held by the Corporation, shall be voted
at any meeting of the Corporation or counted in determining the total number of
outstanding shares at any given time for purposes of any meeting. However, the
power of the Corporation to vote any shares, including its own shares, held by
it in a fiduciary capacity is not hereby limited. (16-10a-721(2),(3))
(c) Redeemable Shares Redeemable shares are not entitled to be voted after
notice of redemption is mailed to the holders thereof and a sum sufficient to
redeem the shares has been deposited with a bank, trust company, or other
financial institution under an irrevocable obligation to pay the holders the
redemption price on surrender of the shares. (16-10a-721(4)
Section 2,10 Corporation's Acceptance of Votes
(a) Corresponding Name If the name signed on a vote, consent, waiver, proxy
appointment, or proxy appointment revocation corresponds to the name of a
shareholder, the Corporation, if acting in good faith, is entitled to accept the
vote, consent, waiver, proxy appointment, or proxy appointment revocation and
give it effect as the act of the shareholder. (16-10a-724(l))
(b) Name does not Correspond If the name signed on a vote, consent, waiver,
proxy appointment, or proxy appointment revocation does not correspond to the
name of a shareholder, the Corporation, if acting in good faith, is nevertheless
entitled to accept the vote, consent, waiver, proxy appointment, or proxy
appointment revocation and give it effect as the act of the shareholder if:
(1) the shareholder is an entity as defined in the Utah
Revised Business Corporation Act and the name signed
purports to be that of an officer or agent of the
entity;
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(2) the name signed purports to be that of an
administrator, executor, guardian, or conservator
representing the shareholder and, if the Corporation
has been presented with respect to the vote, consent,
waiver, proxy appointment, or proxy appointment
revocation;
(3) the name signed purports to be that of a receiver or
trustee in bankruptcy of the shareholder and, if the
Corporation requests, evidence of this status
acceptable to the Corporation has been presented with
respect to the vote, consent, waiver, proxy
appointment, or proxy appointment revocation;
(4) the name signed purports to be that of a pledgee,
beneficial owner, or attorney-in-fact of the
shareholder and, of the Corporation requests,
evidence acceptable to the Corporation of the
signatory's authority to sign for the shareholder
has been presented with respect to the vote,
consent, waiver, proxy appointment, or proxy
appointment revocation;
(5) two or more persons are the shareholder as cotenants
or fiduciaries and the name signed purpose to be the
name of at least one of the cotenants or fiduciaries
and the person signing appears to be acting on behalf
of all the cotenants or fiduciaries; or
(6) the acceptance of the vote, consent, waiver, proxy
appointment, or proxy appointment revocation is
other-wise proper under rules established by the
Corporation that are not inconsistent with the
provisions of this Section 2,10. (16-10a-724(2))
(c) Shares owned by Two or More Persons If shares of the Corporation are
registered in the names of two or more persons, or if two or more persons have
the same fiduciary relationship respecting the same shares, unless the secretary
is given written notice to the contrary and furnished with a copy of the
instrument creating the relationship, their acts with respect to voting shall
have the following effect:
(1) If only one votes, the act binds all;
(2) if more than one vote, the act of the majority so
voting binds all;
(3) if more than one vote, but the vote is evenly split
on any particular matter, each faction may vote the
securities in question proportionately; and
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<PAGE>
(4) if the instrument so filed or the registration of the
shares shows that any tenancy is held in unequal
interests, a majority or even split for the purpose
of this Section 2,10 shall be a majority or even
split in interest. (16-10a-724(3))
(d) Rejection The Corporation is entitled to reject a vote, consent,
waiver, proxy appointment, or proxy appointment revocation if the secretary or
other officer or agent authorized to tabulate votes, acting in good faith, has
reasonable basis for doubt about the validity of the signature on it or about
the signatory's authority to sign for the shareholder. (16-10a-724(4))
(e) No Liability The Corporation and its officer or agent who accepts or
rejects a vote, consent, waiver, proxy appointment, or proxy appointment
revocation in good faith and in accordance with the standards of this Section
2,10 are not liable in damages to the shareholder for the consequences of the
acceptance or rejection. (16-10a-724(5))
Section 2,11 Informal Action by Shareholders
(a) Written Consent Unless otherwise provided in the Articles of
Incorporation, an action which may he taken at any annual or special meeting of
shareholders may be taken without a meeting and without prior notice if one or
more consents in writing, setting forth the action so taken, are signed by the
holders of outstanding shares having not less than the minimum number of votes
necessary to authorize or take the action at a meeting at which all shares
entitled to vote thereon were present and voted. (16-10a-704(l))
(b) Notice Requirements Unless written consents of all shareholders
entitled to vote have been obtained, the Corporation shall give notice of any
shareholder approval without a meeting at least ten (10) days before the
consummation of the action authorized by the approval to;
(1) those shareholders entitled to vote who have not
consented in writing; and
(2) those shareholders not entitled to vote and to whom
the Utah Revised Business Corporation act requires
notice be given.
Such notice shall contain or be accompanied by the same material that would have
been required if a formal meeting had been called to consider the action.
(16-10a-794(2))
8
<PAGE>
(c) Revocation Any shareholder giving a written consent, or the
shareholders' proxyholder, or a transferee of the shares or a personal
representative of the shareholder or their respective proxyholder, may revoke
the consent by a signed writing described the action and stating that the
shareholder's prior consent is revoked, if the writing is received by the,
Corporation prior to the effectiveness of the action. (16-10a-7O4(3))
(d) Effective Date Action taken pursuant to this Section 2,11 is not
effective unless all written consents on which the Corporation relies for the
taking of action are received by the Corporation within a sixty (60) day period
and are not revoked. Action thus taken is effective as of the date the last
written consent necessary to effect the action is received by the Corporation,
unless all the written consents necessary to effect the action specify a later
date as the effective date of action. If the Corporation has received written
consents signed by all shareholders entitled to vote with respect to the action,
the effective date of the action may be any date that is specified in all the
written consent as the effective date of the action. The writing may be received
by the Corporation by electronically transmitted facsimile or other form of
communication providing the Corporation with a complete copy thereof, including
a copy of the signature. (16-10a-704(4))
(e) Election of Directors Notwithstanding Subsection (a) of this Section
2,11, directors may not be elected by written consent except by unanimous
written consent of all shares entitled to vote for the election of directors.
(16-10a-704(5))
(f) Effect of Action Without a Meeting Action taken under this Section 2,11
has the same effect as action taken at a meeting of shareholders and may be so
described in any document.
(16-10a-704(7))
Section 2,12 Waiver of Notice A shareholder may waive any notice required by the
Utah Revised Business Corporation Act, the Corporation's Article of
Incorporation or these Bylaws. Such a waiver may be made before or after the
date and time stated in the notice as the date or time when any action will
occur or has occurred. Such a waiver must be in a writing signed by the
shareholder and must be delivered to the Corporation for inclusion in the
minutes of a meeting of the shareholders or in the Corporation's records.
(16-10a-706(l))
Section 2,13 Voting for Directors At each election, of directors, unless
otherwise provided in the Articles of Incorporation or the Utah Revised Business
Corporation Act, every shareholder entitled to vote at the election has the
right to vote, in person or by proxy, all of the votes to which the
shareholder's shares are entitled for as many persons as there are directors to
be election and for whose election the shareholder has the right to vote.
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<PAGE>
Unless otherwise provided in the Articles of Incorporation or the Utah Revised
Business Corporation Act, directors are elected by a plurality of the votes cast
by the shares entitled to be voted in the election, at a meeting at which a
quorum is present.
(16-10a-728)
Section 2,l4 Rights of Shareholders to Inspect Corporate Records
(a) Minutes and Accounting Records The Corporation shall keep, as permanent
records, minutes of all meetings of its shareholders and Board of Directors, a
record of all actions taken by its shareholders or Board of Directors without a
meeting, a record of all actions taken on behalf of the Corporation by a
committee of the Board of Directors in place of the Board of Directors, and a
record of all waivers of notices of meetings of its shareholders, meetings of
the Board of Directors, or any meeting of committees of the Board of Directors.
The Corporation shall maintain appropriate accounting records.
(16-10a-1601(l)(2))
(b) Absolute Inspection Rights If a shareholder gives the Corporation
written notice of the shareholder's demand at least five (5) business days
before the date on which the shareholder wishes to inspect and copy, a
shareholder (or the shareholder's agent or attorney) has the right to inspect
and copy, during regular business hours, any of the following records, all of
which the Corporation is required to keep at its principal office:
(1) The Corporation's Articles of Incorporation
currently in effect;
(2) the Corporation's Bylaws currently in effect;
(3) the minutes of all shareholders,' meetings, and
records of all action taken by shareholders without a
meeting, for the past three years;
(4) all written communications within the past three
years to shareholders as a group or to the holders of
any class or series of shares as a group;
(5) a list of the names and business addresses of the
Corporation's current officers and directors;
(6) the Corporation's most recent annual report
delivered to the Division; and
(7) all financial statements prepared for periods ending
during the last three years that a shareholder could
request pursuant to Section 16-10a-1605 of the Utah
Revised Business Corporation Act. (16-10a-1601(5) and
16-10a-1602(l))
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<PAGE>
(c) Conditional Inspection Rights If a shareholder gives the
Corporation a written demand made in good faith and for a proper purpose at
least five business days before the date on which the shareholder wishes to
inspect and copy, the shareholder describes with reasonable particularity the
shareholder's purpose and the records the shareholder desires to inspect, and
the records are directly connected with the shareholder's purpose, the
shareholder (or the shareholder's agent or attorney) is entitled to inspect and
copy, during regular business hours at a reasonable location specified by the
Corporation, any of the following records of the Corporation:
(1) Excerpts from:
(i) Minutesof any meeting of the Board of
Directors, records of any action of a
committee of the Board of Directors while
acting on behalf of the Corporation in
place of the Board of Directors;
(ii) minutes of any meeting of the shareholders;
(iii) records of action taken by the shareholders
with a meeting; and
(iv) waivers of notices of any meeting of
theshareholders, of any meeting of the Board
of Directors, or of any meeting of a
committee of the
Board of Directors;
(2) accounting records of the Corporation; and
(3) the record of the Corporation's shareholders
referred to in Section 16-10a-1601(3) of the Utah
Revised Business Corporation Act. (16-10a-1602(2))
(d) Copy Costs The right to copy records includes, if
reasonable, the right to receive copies made by photographic, xerographic, or
other means. The Corporation may impose reasonable charge, payable in advance,
covering the costs of labor and material, for copies of any documents provided
to a shareholder. The charge may- not exceed the estimated cost of production or
reproduction of the records. (16-10a-1603)
(e) Shareholder Includes Beneficial Owner For purposes of this
Section 2,14, the term "shareholder" shall include a beneficial owner whose
shares are held in a voting trust and any other beneficial owner who establishes
beneficial ownership.
(16-10a-1602(4)(b))
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<PAGE>
Section 2,15 Furnishing Financial Statements to a Shareholder Upon the written
request of any shareholder, the Corporation shall mail to the shareholder its
most recent annual or quarterly financial statements showing in reasonable
detail its assets and liabilities and the results of its operations.
(16-10a-1605)
Section 2,16 Information Respecting Shares Upon the written request of any
shareholder, the Corporation, at its own expense, shall mail to the shareholder
information respecting the designations, preferences, limitations, and relative
rights applicable to each class of shares, the variations determined for each
series, and the authority of the Board of Directors to determine variations for
any existing or future class or series. The Corporation may comply by mailing
the shareholder a copy of its Articles of Incorporation containing such
information. (16-10a-1606)
ARTICLE 3 BOARD OF DIRECTORS
Section 3,1 General Powers
All corporate powers shall be exercised by or under the authority of, and the
business and affairs of the Corporation shall be managed under the direction of,
the Board of Directors, subject to any limitation set forth in the Articles of
Incorporation or in any agreement authorized in Section 16-10a-732 of the Utah
Revised Business Corporation Act. (16-10a-801)
Section 3,2 Number, Tenure and Qualifications of Directors
(a) Number The number of directors of the Corporation shall be not less
than three (3) not more than nine (9). See 16- lOa-803(l) for the number of
required directors. The number of directors may be fixed or changed within the
range specified in this Section 3,2 by the shareholders or the Board of
Directors, but no decrease may shorten the term of any incumbent director. (16-
lOa-803(l),(2))
(b) Tenure Each director shall hold office until the next annual meeting of
shareholders or until removed. However, if a director's term expires, the
director shall continue to serve until the director's successor shall have been
elected and qualified, or until there is a decrease in the number of directors.
16-10a-805)
(c) Qualifications Directors need not be residents of
the State of Utah or shareholders of the Corporation unless the
Articles of Incorporation so prescribe. (16-10a-802)
Section 3,3 Meetings of the Board of Directors A regular meeting, of the Board
of Directors shall be held without other notice than provided by this Section
3,3 immediately after, and at the same place as, the annual meeting of
shareholders. The Board of Directors may provide, by resolution, the time and
place for the holding of additional regular meetings without other notice than
such resolution.
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<PAGE>
Section 3,4 Special Meetings of the Board of Directors Special meeting of the
Board of Directors may be called by or at the request of the president, any two
(2) vice presidents or any two (2) directors, who may fix any place, either
within or outside the State of Utah, as the place for holding the meeting.
Section 3,5 Notice and Waiver of Notice of Special Director
Meetings
(a) Notice Unless the Articles of Incorporation provide for a longer
or shorter period, special meetings of the Board of Directors must be preceded
by at least two (2) days notice, either orally or in writing, of the date, time,
and place of the meeting. Written notice may be delivered by hand delivery,
mail, telegram,, facsimile or telex. (16-10a-822(2))
(b) Effective Date Oral notice of any meeting of the Board of
Directors shall be deemed to be effective when received. Written notice of any
meeting of the Board of Directors shall be deemed to be effective: (1) if hand
delivered, when received by the director; (2) if mailed, when deposited in the
mail, addressed to the director at his business address, with postage thereon
prepaid; (3)if given by telegram, when the telegram is delivered to the
telegraph company, (4) if by facsimile or telex, when the facsimile or telex is
sent to the director.
(c) Waiver of Notice A director may waive notice of any meeting. Except as
provided in this Section 3,5, the waiver must be in writing and signed by the
director entitled to the notice. The waiver shall be delivered to the
Corporation for filing with the corporate records, but delivery and filing are
not conditions to its effectiveness. (16-10a-823(l))
(d) Effect of Attendance The attendance of a director at a meeting shall
constitute a waiver of notice of such meeting, except when a director attends a
meeting for the express purpose of objecting to the transaction of any business
and at the beginning of the meeting, or promptly upon arrival, the director
objects to holding the meeting or transacting business at the meeting because of
lack of notice or defective notice, and does not thereafter vote for or assent
to action taken at the meeting. (16-10a-823(2))
Section 3,6 Quorum of Directors
A majority of the number of directors prescribed by resolution (or if no number
is prescribed, the number in office immediately before the meeting begins) shall
constitute a quorum for the transaction of business at any meeting of the Board
of Directors, unless the Articles of Incorporation require a greater number.
(16-10a-824(l))
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Section 3,7 Manner of Acting
(a) Acting by Majority If a quorum is present when a vote is taken, the
affirmative vote of a majority of directors is present is the act of the Board
of Directors, unless the Corporation's Articles of Incorporation or the Utah
Revised Business Corporation Act require the vote of a greater number of
directors. The Chairman of the Board shall vote only if needed to break a tie
among the other directors. (16-10a-824(3))
(b) Telephonic Meetings Unless the Articles of Incorporation provide
otherwise, any or all directors may participate in a regular or special meeting
by, or conduct the meeting through the use of, any means of communication by
which all directors participating may simultaneously hear each other during the
meeting. A director participating in a meeting my this means is deemed to be
present in person at the meeting.
(16-10a-820(2))
(c) Effect of Presence at Meeting A director who is present at a meeting
of the Board of Directors when corporate action is taken is considered to have
assented to the action taken, unless:
(1) The director objects at the beginning of the meeting,
or promptly upon arrival, to holding it or
transacting business at the meeting;
(2) the director contemporaneously requests his dissent
or abstention as to any specific action to be entered
into the minutes of the meeting; or
(3) the director causes written notice of a dissent or
abstention as to any specific action to be received
by the presiding officer of the meeting before its
adjournment of the meeting. (16-10a-824(4))
(d) Right of Dissent or Abstention The right of dissent or abstention as to
a specific action is not available to a director who votes in favor of the
action taken. (16-10a-824(5))
Section 3,8 Director Action Without a Meeting Unless the Articles of
Incorporation or the Utah Revised Business Corporation Act provide otherwise,
any action required or permitted to be taken by the Board of Directors at a
meeting may be taken without a meeting if all the directors consent to the
action in writing. Action taken under this Section 3,8 at the time the last
director signs a writing describing the action taken, unless, prior to that
time, any director and received by the secretary.
14
<PAGE>
Action under this Section 3,8 is effective when the last director signs the
consent, unless the Board of Directors establishes a different effective date.
Action taken under this Section 3,8 has the same effect as action taken at a
meeting of directors an may be described as such in any document. (16-10a-821)
Section 3,9 Resignation of Directors A director may resign at any time by giving
a written notice of resignation to the Corporation. A resignation of a director
is effective when the notice is received by the Corporation unless the notice
specifies a later effective date. A director who resigns may deliver a statement
of his resignation pursuant to Section 16- l0a-1608 of the Utah Revised Business
Corporation to the Division for filing. (16-10a-807)
Section 3,10 Removal of Directors
The shareholders may remove one or more directors at a meeting called for that
purpose if notice has been given that the meeting is for the purpose of such
removal. The removal may only be with cause. If a director is elected by a
voting group of shareholders, only the shareholders of that voting group may
participate in the vote to remove the director. If cumulative voting is in
effect, a director may not be removed if the number of votes sufficient to elect
the director under cumulative voting is voted against the director's removal. If
cumulative voting is not in effect, a director may be removed only if the number
of votes cast to remove the director exceeds the number of votes cast against
the removal of the director. (16-10a-808)
Section 3,11 Board of Director Vacancies;
(a) Vacancies Unless the Articles of incorporation provide otherwise,
if a vacancy occurs on the Board of Directors, including a vacancy resulting
from an increase in the number of directors:
(1) The shareholders my fill the vacancy;
(2) the Board of Directors may fill the vacancy; or
(3) if the directors remaining in office constitute fewer
than a quorum of the board, they may fill the vacancy
by the affirmative vote of a majority of all the
directors remaining in office. (16-10a-810(l))
(b) Rights of Voting Groups Unless the Articles of Incorporation provide
otherwise, if the vacant office was held by a director elected by a voting group
of shareholders:
(1) If one or more directors were elected by the same
voting group, only they are entitled to vote to fill
the vacancy if it is filled by the directors; and
15
<PAGE>
(2) only the holders of shares of that voting group are
entitled to vote to fill the vacancy if it is filled
by the shareholders. (16-10a-810(2))
(c) Election of Director Prior to Vacancy A vacancy that will occur at a
specific later date, because of a resignation effective at a later date, may be
filled before the vacancy occurs, but the new director may not take office until
the vacancy occurs.
(16-10a-810(3))
(d) Effect of Expiration of Terms If a director's term expires, the
director shall continue to serve until the director's successor is elected and
qualified or until there is a decrease in the number of directors. The term of a
director elected to fill a vacancy at the next shareholders' meeting at which
directors are elected. (16-10a-805(5))
Section 3,12 Directors Compensation
Unless otherwise provided in the Articles of Incorporation, by resolution of the
Board of Directors, each director shall be paid his expenses, if any, of
attendance at each meeting of the Board of Directors, and may be paid a stated
salary as a director or a fixed sum for attendance at each meeting of the Board
of Directors or both, or other compensation as may be determined by the Board of
Directors. No such payment shall preclude any director from serving the
Corporation in any capacity and receiving compensation therefor.
Section 3,13 Director Committees
Committees of the Board of Directors may be established in accordance with
Article 4 of these Bylaws.
Section 3,14 Directors Rights to Inspect Corporate Records
(a) Absolute Inspection Rights If a director gives the Corporation written
notice of the director's demand at least five business days before the date on
which the director wishes to inspect and copy, the director (or the director's
agent or attorney) has the right to inspect and copy, during regular business
hours, any of the following records, all of which the Corporation is required to
keep at its principal office:
(1) The Corporation's Articles of Incorporation
currently in effect;
(2) the Corporation's Bylaws currently in effect;
(3) the minutes of all shareholders" meetings, and
records of all action taken by shareholders without a
meeting, for the past three years.
16
<PAGE>
(4) all written communications within the past three
years to shareholders as a group or to the holders of
any class or series of shares as a group;
(5) a list of the names and business addresses of the
Corporation's current officers and directors;
(6) the Corporation's most recent annual report
delivered to the Division; and
(7) all financial statements prepared for periods ending
during the last three years that a shareholder could
request. (16-10a-1601(5) and 16-10a-l602(l))
(b) Conditional Inspection Rights In addition, if a director gives the
Corporation a written demand made in good faith and for a proper purpose at
least five business days before the date on which the director wishes to inspect
and copy, the director describes with reasonable particularity the director's
purpose and the records the director desires to inspect, and the records are
directly connected with the director's purpose, the director (or the director's
agent or attorney) is entitled to inspect and copy, during regular business
hours at a reasonable location specified by the Corporation, any of the
following records of the Corporation:
(1) Excerpts from:
(i)Minutes of any meeting of the Board of Directors,
records of any action of a committee of the Board of
Directors on behalf of the Corporation in place of
the Board of Directors;
ii)Minutes of any meeting of the shareholders;
(iii) records of action taken by the Shareholders
without a meeting; and
(iv) waivers of notice of any meeting of the
shareholders, of any meeting of the Board of
Directors, or of any meeting of a committee of the
Board of Directors;
(2) accounting records of the Corporation; and
(3) the records of the Corporation's Shareholders
referred to in Section 16-10a-1601(3) of the Utah
Revised Business Corporation Act. (16-10a-1602(2))
(d) Copy Costs The right to copy records includes, if reasonable, the right
to receive copies made by photographic, xerographic, or other means. The
Corporation may impose a reasonable charge, payable in advance, covering the
costs of labor and material, for copies of any documents provided to the
director.
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The charge may not exceed the estimated cost of production or
reproduction of the records. (16-10a-1603)
ARTICLE 4 EXECUTIVE COMMITTEE AND OTHER COMMITTEES
Section 4,1 Creation of Committees
Unless the Articles of Incorporation provide otherwise, the Board of Directors
may create an Executive Committee and such other committees as it may deem
appropriate and appoint members of the Board of Directors to serve on such
committees. Each committee must have two (2) or more members, one of the members
shall be the Chairman of the Board, if there be such an officer, and one shall
be the President of the Corporation. (16-10a-825(l))
Section 4,2 Approval of Committees and Members The creation of a committee and
appointment of members to it must be approved by the greater of:
(a) A majority of all the directors in office when the action
is taken; or
(b) the number of directors required by the Articles of Incorporation
to take such action, or if not specified in the Articles of Incorporaticn the
number required by Section 3,7 of these Bylaws to take action. (16-10a-825(2))
Section 4,3 Required Procedures Section 3,4 through 3,10 of these Bylaws, which
govern procedures applicable to the Board of Directors, also apply to committees
and their members.
(16-1Oa-825(3))
Section 4,4 Authority Unless limited by the Articles of Incorporation, each
committee may exercise those aspects of the authority of the Board of Directors
which the Board of Directors confers upon such committee in the resolution
creating the committee. (16-10a-825(4))
Section 4,5 Authority of Executive Committee The Executive Committee shall have,
any may exercise all powers of the Board of Directors with respect to the
management of the business and affairs of the Corporation during the intervals
between the meeting of the Board of Directors. Provided, however, the Executive
Committee shall not have the power to fill vacancies on the Board of Directors
or to amend these Bylaws.
Section 4,6 Compensation Unless otherwise provided in the Articles of
Incorporation, the Board of Directors may provide for the payment of a fixed sum
and/or expenses of attendance to any member of a committee for attendance at
each meeting of such committee. Provided, however, no such payments shall be
made to committee members who are salaried employees of the Corporation.
18
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ARTICLE 5 OFFICERS
Section 5,1 Officers The officers of the Corporation shall be a President, one
or more Vice Presidents, a Secretary, and a Treasurer, each, of whom shall be
appointed by the Board of Directors. The Board of Directors may appoint, but
shall not be required to appoint, a Chairman of the Board and a Chief Executive
officer. Such other officers and assistant officers; as may be deemed necessary,
including any vice presidents, may he appointed by the Board of Directors. If
specifically authorized by the Board of Directors, an officer may appoint one or
more officers or assistant officers. The same individual may simultaneously hold
more than one office in the Corporation. (16-10a-830)
Section 5,2 Appointment and Term of Office The officers of the Corporation shall
be appointed by the Board of Directors for such term as is determined by the
Board of Directors. If no term is specified, each officer shall hold office
until the officer resigns, dies, is removed in the manner provided in Section
4,3 of these Bylaws, or until the first meeting of the directors held after the
next annual meeting of the shareholders. If the appointment of officers shall
not be made at such meetings, such appointment shall be made as soon thereafter
as is convenient. Each officer shall hold office until his successor shal1 have
been duly appointed. The designation of a specified term does not grant to the
officer any contract rights, an the Board of Directors may remove the officer at
any time prior to the end of such term.
(16-10a-832)
Section 5,3 Removal of Officers Any officer or agent may be removed by the Board
of Directors at any time, with cause. Such removal shall be without prejudice to
the contract rights, if any, of the person so removed. Appointment of an officer
or agent shall not of itself create contract rights. (16-10a-832)
Section 5,4 The Chairman of the Board The Chairman of the Board, if there be
such an officer, shall have the following powers and duties;
(a) To preside at all meetings of the shareholders of the
Corporation;
(b) to preside at all meetings of the Board of Directors;
(c) to be a member of the Executive Committee, if any,
(16-10a-831)
Section 5,5 Chief Executive Officer The Chief Executive Officer, if there be
such an officer, shall be the principal executive officer of the Corporation
and, subject to the control of the Board of Directors, in general, shall
supervise and control all
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<PAGE>
of the business and affairs of the Corporation. If no Chairman of the Board has
been appointed, or in his absence, the Chief Executive Officer shall, when
present, preside at all meetings of the shareholders and of the Board of
Directors. The Chief Executive Officer may sign, with the secretary or any other
proper officer of the Corporation authorized by the Board of Directors,
certificates for shares of the Corporation, the issuance of which shall have
been authorized by a resolution of the Board of Directors, and deeds, mortgages,
bonds, contracts, or other instruments, expressly delegated by the Board of
Directors or by these Bylaws 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 Chief Executive Officer and
such other duties as may be prescribed by the Board of Directors from time to
time. (16-10a-831)
Section 5,6 President The president shall be an executive officer of the
Corporation, and, if there be no Chief Executive Officer, shall be the principal
executive officer of the Corporation and, subject to the Control of the Board of
Directors, in general, shall supervise and control all of the business and
affairs of the Corporation. In the absence of the chief Executive Officer, and
when so acting, shall have all the powers of and be subject to all the
restrictions upon the Chief Executive Officer. In the absence of the Chairman of
the Board and the Chief Executive officer, the president shall, when present,
preside at all meetings of the shareholders and of the Board of Directors. The
president may sign, with the secretary or any other proper officer of the
Corporation authorized by the Board of Directors, certificates for shares of the
Corporation, the issuance of which shall have been authorized by a resolution of
the Board of Directors, and deeds, mortgages, bonds, contracts, or other
instruments, except in cases where the signing and execution thereof shall be
expressly delegated by the Board of Directors or by these Bylaws 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 Board of
Directors from time to time. (16-10a-831)
Section 5,7 Vice Presidents In the absence of the president or in the event of
his death, inability, or refusal to act, the vice president (or in the event
there by more than one vice president, the vice presidents in the order
designated at the time of their election, or in the absence of any designation,
then in the order of appointment) shall 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. If there is no vice president, then the
treasurer shall perform such duties of the president. Any vice president may
sign, with the secretary or an assistant secretary, certificates for shares of
the Corporation the issuance of which have been authorized by resolution of the
Board of Directors; and shall perform such other duties as from time to
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<PAGE>
time may be assigned to him or her by the president or by the Board
of Directors. (16-10a-831)
Section 5,8 Secretary The secretary shall:
(a) Keep the minutes of the proceedings from the shareholders and of
the Board of Directors and the other records and information of the Corporation
required to be kept, in one or more books provided for that purpose;
(b) see that all the notices are duly given in accordance
with the provisions of these bylaws or as required by law;
(c) be custodian of the corporate records and of any seal of
the Corporation
(d) when requested or required, authenticate any records of
the Corporation;
(e) keep a register of the post office address of each shareholder
which shall be furnished to the secretary by such shareholder;
(f) sign with the president, or a vice president, certificates for
shares of the Corporation, the issuance of which shall have been authorized by
resolution of the Board of Directors;
(g) have general charge of the stock transfer books of the Corporation;
and
(h) 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 or her by the
president or by the Board of Directors. (16-10a-830 and 16-10a-831)
Section 5,9 Treasurer The treasurer shall:
(a) Have charge and custody of and be responsible for all
funds and securities of the Corporation;
(b) 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 depositaries as
shall be selected by the Board of Directors; and
(c) 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 or
her by the president or by the Board of Directors. (16-10a-831)
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If required by the Board of Directors, the treasurer shall give a bond for the
faithful discharge of his or her duties in such sum and with such surety or
sureties as the Board of Directors shall determine.
Section 5,10 Assistant Secretaries and Assistant Treasurers The assistant
secretaries, when authorized by the Board of Directors, may sign, with the
president or a vice president, certificates for shares of the Corporation, the
issuance of which shall have been authorized by a resolution of the Board of
Directors. The assistant treasurer shall, if required by the Board of Directors,
give bonds for the faithful discharge of their duties in such sums and with such
sureties as secretaries and assistant treasurers, in general, shall perform such
duties as shall be assigned to them by the secretary or the treasurer,
respectively, or by the president or the Board of Directors. (16-10a-831)
Section 5,11 Salaries The salaries of the officers shall be fixed from time to
time by the Board of Directors.
ARTICLE 6 INDEMNIFICATION OF DIRECTORS,
OFFICERS, EMPLOYEES, FIDUCIARIES, AND AGENT
Section 6,1 Indemnification of Directors Un1ess otherwise provided in the
Articles of Incorporation, the Corporation shall indemnify and individual made a
party to a proceeding because the individual is or was a director of the
Corporation against liability incurred in the proceeding. Provided, however, the
Corporation shall only indemnify an individual if it has authorized
indemnification in accordance with Section 16-10a-906(4) of the Utah Revised
Business Corporation Act and determination has been made in accordance with the
procedures set forth in Section 16-10a-906(2) of the Utah Revised Business
Corporation Act that indemnification is in accordance with the following
requirements:
(a) Standard of Conduct The Corporation shall determine
that:
(1) The individuals conduct was in food faith;
(2) the individual reasonably believed that his or her
conduct was in, or not opposed to, the Corporation's
best interests; and
(3) in the case of any criminal proceeding, the
individual had no reasonable cause to believe that
his or her conduct was unlawful. (16-10a-902(l))
(b) No Indemnification in Certain Circumstances The Corporation shall not
indemnify an individual under this Section 6,1:
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(1) In connection with a proceeding by or in the right
of the Corporation in which the individual was
adjudged liable to the Corporation; or
(2) in connection with any other proceeding charging that
the individual derived an improper personal benefit,
whether or not involving action in the individual's
official capacity, in which proceeding he or she was
adjudged liable on the basis that he or she derived
an improper personal benefit.
(16-10a-902(4))
(c) Indemnification in Derivative Actions Limited
Indemnification permitted under this Section 6,1 in connection with a proceeding
by or in the right of the Corporation is limited to reasonable expenses incurred
in connection with the proceeding. (16-10a-902(5))
Section 6,2 Advance of Expenses for Directors If,in accordance with the
procedures of Section 16-10a-906(2) of the Utah Revised Business Corporation
Act, a determination is made that the individual has met the requirements set
forth in Subsections (a), (b) and (c) below, and if, in accordance with the
procedures and standards set forth in Section 16-10a-906(4) of the Utah Revised
Business Corporation Act, an authorization of payment is made, then, unless
otherwise provided in the Articles of Incorporation, the Corporation may pay for
or reimburse, in advance of final disposition of the proceeding, the reasonable
expenses incurred by an individual who is a party to a proceeding because he or
she is or was a director of the Corporation.
(a) Written Affirmation The individual shall furnish to the Corporation a
written affirmation of the individuals good faith belief that the individual has
met the standard of conduct described in Section 6,1 of these bylaws.
(b) Written Undertaking The individual shall furnish to the Corporation a
written undertaking, executed personally or on the individuals behalf, to repay
the advance if it is ultimately determined that, the individual did not meet the
standard of conduct (which undertaking must be an unlimited general obligation
of the individual but need not be secured and may be accepted without reference
to financial ability to make repayment).
(c) Factual Determination A determination is made that the facts then known
to those making the determination would not preclude indemnification under
Section 6,l of these Bylaws or part 9 of the Utah Revised Business Corporation
Act. (16-10a-904)
Section 6,3 Indemnification of Officers, Employees, Fiduciaries,
And Agents.
Unless otherwise provided in the Articles of Incorporation,
the Corporation shall indemnify and advance expenses to any individual made a
party to a proceeding because the individual is or was an officer, employee,
fiduciary, or agent of
23
<PAGE>
the Corporation to the same extent as to an individual made a party
to a proceeding because the individual is or was a director of the
Corporation, or to a greater extent, if not inconsistent with
public polity, if provided for general or specific action of the
Board of Directors. (16-10a-907)
Section 6,4 Insurance The Corporation may purchase and maintain liability
insurance on behalf of a person who is or was a director, officer, employee,
fiduciary, or agent, of the Corporation, or who, while serving as a director,
officer, employee, fiduciary, or agent of the Corporation, is or was serving at
the request of the Corporation as a director, officer, partner, trustee,
employee, fiduciary, or agent of another foreign or domestic corporation of
other person, or of an employee benefit plan, against liability asserted against
or incurred by him or her in that capacity or arising from his or her status as
a, director, officer, employee, fiduciary, or agent, whether or not the
Corporation would have power to indemnify him or her against the same liability
under Sections 16-1Oa-902, 16-10a-903, or 16-10a-907 of the Utah Revised
Business Corporation Act. Insurance may be procured from any insurance company
designated by the Board of Directors, whether the insurance company is formed
under the laws of the State of Utah or any other jurisdiction of the United
States or elsewhere, including any insurance company in which the Corporation
has an equity or any other interest through stock ownership or otherwise.
(16-10-908)
ARTICLE 7 EXECUTION OF INSTRUMENTS, BORROWING OF MONEY
AND DEPOSIT OF CORPORATE FUNDS
Section 7,1 Execution of Instruments Subject to any limitation contained in the
Articles of Incorporation or in these Bylaws, the Chief Executive Officer,
President or any Vice President may, in the name and on behalf of the
corporation, execute and deliver any contract or other instrument authorized in
writing by the Board of Directors. The Board of Directors may, subject to any
limitation contained in the Articles of Incorporation or in these Bylaws,
authorize in writing any officer or agent to execute and deliver any contract or
other instrument in the name and on behalf of the corporation; any such
authorization may be general or confined to specific instances.
Section 7,2 Loans No loan or advance shall be
contracted on behalf of the corporation, no negotiable paper or other evidence
of its obligation under any loan or advance shall be issued in its name, and no
property of the corporation shall be mortgaged, pledged, hypothecated,
transferred, or conveyed as security for the payment of any loan, advance,
indebtedness, or liability of the corporation, unless and except as authorized
by the Board of Directors. Any such authorization may be general or confined to
specific instances.
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Section 7.3 Deposits All monies of the corporation not otherwise employed shall
be deposited from time to time to its credit in such banks or trust companies or
with such bankers or other depositories as the Board of Directors may select, or
as from time to time may be selected by any officer or agent authorized to do so
by the Board of Directors.
Section 7,4 Checks, Drafts, Etc. All notes, drafts, acceptances, checks,
endorsements, and, subject to the provisions of these Bylaws, evidences of
indebtedness of the corporation shall be signed by such officer or officers or
such agent to agents of the corporation and in such manner as the Board of
Directors from time to time may determine. Endorsements for deposits to the
credit of the corporation in any of its duly authorized depositories shall be in
such manner as the Board of Directors from time to time may determine.
Section 7,5 Bonds and Debentures Every bond or debenture issued by the
corporation shall be evidenced by an appropriate instrument which shall be
signed by the Chief Executive Officer, President, or a Vice President and by the
Secretary. There such bond or debenture is authenticated with the manual
signature of an authorized officer of the corporation or other trustee
designated by the indenture of trust or other agreement under which such
security is issued, the signature of any of the corporation's officers named
thereon may be a facsimile. In case any officer who signed, or whose facsimile
signature has been used on any such bond or debenture, shall cease to be an
officer of the corporation for any reason before the same has been delivered by
the Corporation, such bond or debenture may nevertheless be adopted by the
corporation and issued and delivered as though the person who signed it or whose
facsimile signature has been used thereon had not ceased to be such officer.
Section 7,6 Sale, Transfer, etc, of Securities
Sales, transfers, endorsements, and assignments of shares of stocks, bonds, and
other securities owned by or standing in the name of the corporation and the
execution and delivery on behalf of the corporation of any and all instruments
in writing incident to any such sale, transfer, endorsement, or assignment,
shall be effected by the Chief Executive Officer, President, any Vice President,
or by any officer or agent, thereunto authorized by the Board of Directors.
Section 7 ,7 Proxies Proxies to vote with respect to shares of stock of other
corporations used by or standing in the name of the corporation shall be
executed and delivered on behalf of the corporation by the Chief Executive
Officer, President, and Vice President, or by any officer or agent thereunto
authorized by the Board of Directors.
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<PAGE>
ARTICLE 8 CERTIFICATES FOR SHARES
AND THEIR TRANSFER
Section 8,1 Certificates for Shares
(a) Content Certificates representing shares of the Corporation shall, at a
minimum, state on their face the name of the Corporation and that the
Corporation is organized under the laws of the State of Utah; the name of the
person to whom issued; and the number and class of shares and the designation of
the series, if any, the certificate represents; and be in such form as is
determined by, the Board of Directors. Such certificates shall be signed by the
president or a vice president and by the secretary or an assistant secretary and
may be sealed with the corporate seal or a facsimile thereof. The signatures of
the officers may be facsimiles if the certificate is countersigned by a transfer
agent, or registered by a registrar, other than the Corporation itself or an
employee of the Corporation. Each certificate for shares shall be consecutively
numbered or otherwise identified. The certificates may contain any other
information the Corporation considers necessary or appropriate. (16-10a-625)
(b) Legend as to Class or Series If the Corporation is authorized to issue
different classes of shares or different series within a class, the
designations, preferences, limitations, and relative rights applicable to each
class, the variations in preferences, limitations, and relative rights
determined for each series, and the authority of the Board of Directors to
determine variations for any existing or future class or series must be
summarized on the front or back of each certificate. Alternatively, each
certificate may state conspicuously on its from or back that the Corporation
will furnish the shareholder this information on request in writing and without
charge. (16-10a-625)
(c) Shareholder List The name and address of the person to whom the shares
represented are issued, with the number of shares and date of issue, shall be
entered on the stock transfer books of the Corporation.
(d) Transferring Shares All certificates surrendered to the Corporation
for transfer shall be cancelled and no new certificate shall be issued until the
former certificate for a like number of shares shall have been surrendered and
canceled, 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 Board of Directors may prescribe.
Section 8,2 Shares without Certificates
(a) Issuing Shares Without Certificates Unless the Articles of Incorporation
provide otherwise, the Board of Directors may authorize the issuance of some or
all of the shares of any or all classes or series without certificates. The
authorization does shares already represented by certificates until they
26
<PAGE>
are surrendered to the Corporation.
(b) Information Statement Required Within a reasonable time after the
issuance or transfer of shares without certificates, the Corporation shall send
the shareholder a written statement containing, at a minimum, the name of the
Corporation and that it is organized under the laws of the State of Utah; the
name of the person to whom issued; and the number and class of shares and the
designation of the series, if any, of the issued shares. If the Corporation is
authorized to issued different classes of shares or different series within a
class, the written statement shall describe the designations, preferences,
limitations, and relative rights determined for each series, and the authority
of the Board of Directors to determine variations for any existing or future
class or series. (16-10a-626)
Section 8,3 Registration of Transfer of Shares Registration of the transfer of
shares of the Corporation shall be made only on the stock transfer books of the
Corporation. In order to register a transfer, the record owner shall surrender
the shares to the Corporation for cancellation, properly endorsed by the
appropriate person or persons with reasonable assurances that the endorsements
are genuine and effective. Unless the Corporation has established a procedure by
which a beneficial owner of shares held by a nominee is to be recognized by the
Corporation as the owner, the person in whose name shares stand on the books of
the Corporation shall be deemed by the Corporation to be the owner thereof for
all purposes.
Section 8,4 Registrations on Transfer of Shares Registration of the transfer of
shares of the Corporation shall be made only on the stock transfer books of the
Corporation. In order to register a transfer, the record owner shall surrender
the shares to the Corporation for cancellation, properly endorsed by the
appropriate person or persons with reasonable assurances that the endorsements
are genuine and effective. Unless the Corporation has established a procedure by
which a beneficial owner of shares held by a nominee is to be recognized by the
Corporation as the owner, the person in whose name shares stand on the books of
the Corporation shall be deemed by the Corporation to hie the owner Thereof for
all purposes.
Section 8,4 Restrictions on Transfer of Shares Permitted The Board of Directors
or the shareholders may impose restrictions on the transfer or registration of
transfer of shares (including any security convertible into, or carrying a right
to subscribe for or acquire shares) A restriction does not affect shares issued
before the restriction was adopted unless the holders of the shares are parties
to the restriction agreement or voted in favor of the restriction or otherwise
consented to the restriction.
(a) A restriction on the transfer or registration of transfer of shares may
be authorized:
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(1) To maintain the Corporation's status when it is
dependent on the number or identity of its
shareholders;
(2) to preserve entitlement, benefits, or exemptions
under federal, state, or local laws; and
(3) for any other reasonable purpose
(b) A restriction on the transfer or registration of transfer of shares
may:
(1) Obligate the shareholder first to offer the
Corporation or other persons, separately,
consecutively, or simultaneously, an opportunity to
acquire the restricted shares;
(2) obligate the Corporation or other persons,
separately, consecutively, or simultaneously, to
acquire the restricted shares;
(3) require, as a condition to a transfer or
registration, that any one or more persons, including
the Corporation or any of its shareholders, approve
the transfer or registration is not manifestly
unreasonable; or
(4) prohibit the transfer or the registration of transfer
of the restricted shares to designated persons or
classes of persons, if the prohibition is not
manifestly unreasonable.
A restriction on the transfer or registration of transfer of shares is valid and
enforceable against the holder or a transferee of the holder if the restriction
is authorized by this Section 8,4 and its existence is noted conspicuously on
the front or back of the certificate, or if the restriction is contained in the
information statement required by Section 6,2 of these Bylaws with regard to
shares issued without certificates. Unless so noted, a restriction is not
enforceable against a person without knowledge of the restriction. (16-10a-627)
Section 8,5 Acquisition of Shares The Corporation may acquire its own shares,
and unless, otherwise provided in the Articles of Incorporation, the shares so
acquired constitute authorized but unissued shares.
If the Articles of Incorporation prohibit the reissuance acquired shares,
the number of authorized shares shall be reduced by the number of shares
acquired, effective upon amendment of the Articles of Incorporation, which
amendment shall be adopted by the shareholders or the Board of Directors without
shareholder action. Appropriate Articles of Amendment must be delivered to the
Division and must set forth:
28
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(a) The name of the Corporation;
(b) the reduction in the number of authorized shares,
itemized by class and series;
(c) the total number of authorized shares, itemized by class and
series, remaining after reduction of the shares; and
(d) a statement that the amendment was adopted by the Board of
Directors without shareholder action and that shareholder action was not
required if such be the case. (16-10a-631)
ARTICLE 9 DISTRIBUTIONS
Section 9,1 Distributions The Board of Directors may authorize, and the
Corporation may make, distributions (including dividends on its outstanding
shares) in the manner and upon the terms and conditions provided by law and in
the Articles of Incorporation.
ARTICLE 10 -CORPORATE SEAL
Section 10,1 Corporate Seal The Board of Directors may provide a corporate seal
which may be circular in form and have inscribed thereon any designation
including the name of the Corporation, Utah as the state of incorporation, and
the words "Corporate Seal."
ARTICLE 11 FISCAL YEAR
Section ll,l Fiscal Year The fiscal year of the Corporation shall be fixed by
resolution of the Board of Directors.
ARTICLE 12 AMENDMENTS
Section 12,1 Amendments The Corporation's Board of Directors may amend these
Bylaws, except to the extent that the Articles of Incorporation, these Bylaws,
or the Utah Revised Business Corporation Act reserve this power exclusively to
the shareholder
in whole or part.
If authorized by the Articles of Incorporation, the shareholders may adopt,
amend, or repeal a Bylaw that fixes a greater quorum or voting requirement for
shareholders, or voting groups of shareholders, than is required by the Utah
Revised Business Corporation Act. Any such action shall, comply with the
provisions of the Utah Revised Business Corporation Act.
29
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The Corporation's shareholders may amend or repeal the Corporation's Bylaws even
though the Bylaws may also be amended or repealed by the Corporation's Board of
Directors.
(16-10a-1020 to 16-1Oa-1022)
ADOPTED this _____day of _______________________, 1999
- -------------------------------------------------------------------------------
<PAGE>
<PAGE>
AMENDMENT
TO ARTICLES OF INCORPORATION
OF
CARBON FIBER PRODUCTS, Inc.
(changed herein to "CYNTECH TECHNOLOGIES, INC.")
In accordance with Section 16-10a-l003, et.seq. of the Utah Business Act,
as amended. Carbon Fiber Products. Inc. (the "corporation"), a Utah corporation,
does hereby adopt the following amendments (the- "Amenidments") to the Articles
of incorporation.
1. The Articles of Incorporation of the Corporation are hereby amended
by deleting Article I inits entirety and inserting the following in lieu
thereof:
ARTICLE I
NAME
The name of the Corporation hereby created shall be:
CYNTECH TECHNOLOGIES, INC.
2. Except as specifically provided herein, the provisions of the
Corporation's Articles of Incorporation shall remain unamended and shall
continue in full force and effect.
3. By execution of these Articles of Amendment to the Articles of
Incorporation, the President and Secretary of the Corporation do hereby certify
that the foregoing Amendment to the Articles of Incorporation was adopted as an
Amendment to the Articles of Incorporation of the Corporation by the
shareholders of said Corporation at a special meeting of the shareholders of the
Corporation held on December 22, 1998. As of December 4, 1998, the record date
for such meeting, there was a total of 32,387,153 shares of the Corporation's
common stock issued and outstanding of which 26,615,037 shares voted for the
adoption of the foregoing Amendment to the Articles of Incorporation, and 5,000
shares were voted against the Amendment.
IN WITNESS WHEREOF, the foregoing Articles of Amendment to the Articles of
Incorporation of Carbon Fiber Products, Inc. have been executed this day _22_day
of December, 1998.
CARBON FIBER PRODUCTS, INC.
Attest:
_____/s/ Charles R. Tovey___________ By:_______/s/ R. Frank Meyers_______
Charles R. Tovey, Interim Secretary R. Frank Meyer, President
<PAGE>
STATE OF UTAH )
:ss
COUNTY OF WEBER )
On this ___22_____ day of December, 1998, personally appeared before me R. Frank
Meyer and Charles R. Tovey, who being by me duly sworn did say that they are the
president and secretary, respectively, of Carbon Fiber Products, Inc., and that
they are the persons who executed the foregoing Articles of Amendment to the
Articles of Incorporation for and on behalf of Carbon Fiber Proucts,Inc.,and
that the statements contained therein are true.
WITNESS MY HAND AND OFFICIAL SEAL
____/s/ Lamae Hunwick____
NOTARY PUBLIC
Law Offices of
STEPHEN J. THOMAS
416 Main Street
Suite 1012
Peoria, IL 61602
309.637.8888
309.637.8838
October 8, 1999
Cyntech Technologies, Inc.
4305 Derbyshire Trace, SE
Conyers, Georgia 30094
RE: Auditor's Request for Opinion re: Pending Claims
Gentlemen:
As counsel to Cyntech Technologies, Inc., a Utah corporation (the
"Company"), we have assisted in the preparation of a Registration Statement on
Form 10-SB (the "Registration Statement") to be filed with the Securities and
Exchange Commission under the Securities Act of 1933, as amended. This letter is
written in response to your inquiry of September 14, 1999.
In response to this inquiry, we have examined all documents provided
by the Company which might be relevant to the subject of your inquiry. In all
examinations of documents, instruments and other papers, we have assumed the
genuineness of all signatures on original and certified documents and the
conformity with original and certified documents of all copies submitted to us
as conformed, photostatic or other copies. As to matters of fact which have not
been independently established, we have relied upon representations of officers
of the Company.
Based upon the information made available to us at this time, it is our
opinion that, as of July 1, 1998 and July 1, 1999, there are no pending or
threatened litigation claims or assessments against the Company exceeding
$5,000.00.
Further, based upon the information made available to us at this time,
it is our opinion that, as of July 1, 1998 and July 1, 1999, there are no
unasserted claims or assessments pending against the Company.
We hereby expressly consent to the inclusion of this opinion as an
exhibit to the Registration Statement. In giving this consent, we do not hereby
admit that we come within the category of persons whose consent is required
under Section 7 of the Securities Act of 1933, as amended, or the rules and
regulations thereunder.
Very truly yours,
Stephen J. Thomas
SETTLEMENT AGREEMENT AND RELEASE
This SETTLEMENT AND RELEASE (the "Agrcement) is entered into
as of May 1, 1999, by and between Optima Investments, Inc., a Texas
corporation ("Optima'), its agents, predecessors, successors and
assigns, and any affiliates thereof (collectively referred to herein as
"Optima') and Cyntech Technologies, Inc., a Utah corporation formerly
known as Carbon Fiber Products, Inc., its agents, predecessors,
successors and assigns; and any affiliates thereof (including, but not
limited to any corporation or business entity containing the name
"Cyntech or any variation in spelling thereof) (collectively referred
to herein as "CYNT")
RECITALS.
WHEREAS, CYNT engaged Optima to assist CYNT in structuring and
completing a transaction under agreements, including that certain
agreement dated October 30, 1998 and a subsequent addendum; and,
WHEREAS, as compensation for the services provided by Optima,
CYNT agreed to cause CYNT to issue shares of CYNT Common Stock, $0.001
par value ("CYNT" Common Stock to Optima; and,
WHEREAS, subsequent disputes have arisen among the parties
hereto as to the value of the services provided by Optima; and,
WHEREAS, the parties hereto have reached certain agreements to
resolve the disputes among them, with respect to the foregoing matters.
NOW THEREFORE, for and in consideration of the mutual
covenants and promises set forth herein and for other good and valuable
consideration, the receipt and sufficiency of which is hereby
acknowledged, it is hereby agreed as follows:
1. Payment for Services. Optima acknowledges and agrees to
accept and retain 300,000 shares of CYNT Common Stock (the "Optima
Shares") in full satisfaction of all services provided by Optima to
CYNT. Optima agrees that Optima has previously received and paid par
value for 500,000 shares of CYNT Common Stock, and Optima further
agrees to transfer 200,000 of said 500,000 shares to CYNT (or the
market value thereof), pursuant to CYNT instructions. Thus Optima will
be left with 300,000 shares as payment as set forth herein.
2. Termination of Prior Agreements and Issuances. Optima and
CYNT hereby agree and acknowledge that any and all prior agreements by
and between Optima and CYNT shall terminate in all respects, including
any and all performance and payment obligations or obligations to
transfer or privately place of CYNT Common Stock. Optima hereby agrees
that any and all other agreements for the issuance of CYNT Common Stock
to Optima are canceled and shall be of no force and effect.
<PAGE>
3. Settlement
a. Optima agrees to accept and retain 300,000 shares
previously transferred to Optima via certificate number 3734, issued on
or about January 28, 1999 in the amount of 500,000 shares, and replaced
by certificate number 3775 in the amount of 500,000 shares registered
to CEDE and company issued on February 18, 1999
b. Optima agrees to return 1,400,000 shares of restricted
stock issued to Optima via certificate number 3735, issued on or about
January 28, 1999, to CYNT.
c. Optima agrees to cancellation of agreements pursuant to the
3,500,000 shares to be received by Optima and related directly to the
facilitation of private placement investors on behalf of CYNT.
d. Optima agrees to notify any and all transferees of any
portion of the 300,000 shares and that the shares are subject to
registration in the future. Optima further agrees that it is
responsible to register such sham at its expense. Optima further agrees
to assist with the notification to the entity referred as "ONI"
regarding the following stock certificates received by 'ONI' from CYNT.
Certificate 3803 for 50,000 shares of CYNT issued March 22, 1999,
certificate number 3804 for 30,000 shares of CYNT issued March 22,
1999, and certificate number 3826 for 95,000
shares of CYNTissued March 29,1999.
e. CYNT agrees, upon execution of agreement to send a letter
to DTC, CEDE, Merrill Lynch, and/or any other agency which is a direct
party to the clearing and/or trading of the certificates in order to
advise these parties that any and all disputes between Optima and CYNT
have been resolved.
4. Relationship To Company Optima acknowledges and agrees that Optima
shall have no authority to represent CYNT or hold itself out as a
representative of CYNT, including in connection with any offering of CYNT
Common Stock. Optima shall not acknowledge or disclose any business
relationship with CYNT, except as may be required by law.
5. CYNT Non-circumvention. CYNT agrees that it shall not, under any
circumstances, contact, negotiate, discuss, or enter into or perform any
existing or contemplated agreements with any parties, individuals or entities
introduced to CYNT by or through Optima, or any Optima representative:
provided however that said non-circumvention shall not apply to "ONI" Ron
Sparkman.
6.Representations and Warranties.
a. Optima represents and warrants as follows; (i) it has the full
right, power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby without obtaining any
further consents or approvals from, or the taking of any other actions
with respect to, an third parties. (ii) this Agreement,
2
<PAGE>
when executed and delivered by the parties hereto, will constitute the
valid and binding agreement of it, enforceable against it in accordance
with its terms.
b. CYNT represents and warrants as follows: (i) it has the full right,
power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby without obtaining any
further consents or approvals from, or the taking of any other actions
with respect to, any third parties. (ii) this Agreement, when executed
and delivered by the parties hereto, will constitute the valid and
binding agreement of it, enforceable against it in accordance with its
terms.
7. Mutual Release. In consideration of the representations and warranties
of Optima and CYNT contained herein, Optima and CYNT hereby jointly and
mutually release, acquit, and forever discharge each other, and their
respective officers, directors, shareholders, partners, employees,
servants, agents, representatives, attorneys, accountants, subsidiaries,
predecessors, successors, trusts, corporations, or other entities in any
manner affiliated or connected therewith, from any and all claims, demands,
damages, causes or action or suits of any kind or nature, known or unknown,
that they jointly or severally, may have had at time or have as of the date
hereof or which might subsequently accrue, arise for or out of , or be in
any manner connected with, directly or indirectly any and all services
provided by Optima to CYNT, and any related event, occurrence, act of
omission or condition occurring or existing on or prior to the date hereof,
excluding the provisions of 8 below.
8. Indemnification.
a: Mutual Indemnification CYNT and Optima agree to indemnify
each other and their affiliates from any actions, claims,
demands, damages, causes of actions or suits of any kind or
nature, known or unknown, which arises, or might arise out of
this agreement or any other prior agreement between the parties,
except as provided in this section.
b. Indemnification by Optima Optima further agrees to indemnify
CYNT and its affiliates from any action, claims, demands,
damages, causes of actions, or suits of any nature, known or
unknown, which arises or might arise out of the transfer of
common stock of CYNT to third parties by Optima, specifically
including, but not limited to the third parties which an the
subject of paragraph 3(d) hereof Furthermore, Optima hereby
indemnifies and holds harmless CYNT from any action, claims,
demands, damages, causes, or suits of any kind or nature, known
or unknown brought by or asserted by Ahmad Alyasin (or his
associates, affiliates, successors or assigns) which arise or
might arise regarding any agreements between Optima and CYNT.
9. Authority of Optima Optima represents and warrants that it has authority
to execute this agreement, and to consent to the termination of all prior
agreements by and between Optima and CYNT, and the cancellation of any and
all prior agreements for the issuance of CYNT Common Stock to Optima as
provided in section 2 of this agreement.
3
<PAGE>
10. Authority of CTNY. CYNT represents and warrants that it
has the authority to execute this Agreement, and to consent to the
terminations of all prior agreements by and between Optima and CYNT,
and the cancellation of any and all prior agreements for the issuance
of CYNT Common Stock to Optima as provided in Section 2 of this
Agreement
11. Confidentialily, The parties to this Agreement agree that
the terms of this Agreement shall remain confidential and shall not be
disclosed to any person who is not an
officer or director of any of the parties to this Agreement, except as
may be required by applicable law, subpoena, or order of court,
provided, however, if any governmental entity or court requests
disclosure, the party of whom disclosure is requested shall notify the
other party in writing within a reasonable time to allow the contesting
party an opportunity to oppose such disclosure.
12. Miscellaneous,
1. This Agreement shall be governed by, construed under
and enforced in accordance with the laws of the State of
Texas.
2. This Agreement contains the entire agreement and
understanding among the parties relating to the subject
matter of this Agreement and supersedes any
negotiations and agreements between the parties hereto
concerning the same subject matter, except as expressly
provided or allowed under the terms of this Agreement.
3. The execution and delivery of this Agreement and all
transactions contemplated hereby, including the, transfer
for the Optima Shares as provided above, have been duly
authorized by all requisite action on the part of the
parties.
4. This Agreement may be executed in one or more
counterparts, each of which shall be an original, but all
of which together shall constitute one and the same
instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
effective as of the date first above written.
OPTIMA INVESTMENTS, INC.
By: __/s/________________
Robert Pennington, CEO
CYNTECH TECHNOLOGIES, INC
By: __/s/_______________
R. Frank Meyer, President
4
OXFORD
International ix
May 16, 1998
Mr. Frank Meyer
Cyntech of Chambers County, Inc.
Managing General Partner
Cyntech of Chambers, LLP
4305 Derbyshire Trace,
Conyers, Georgia 30094
VIA FACSIMILE:. 770-760-7789
Dear Mr. Meyer:
Oxford International, Inc., on behalf of its shareholders is
pleased to be given the mandate to fulfill the financing
requirements of your Cyntech of Chambers County project.
In this regard, we have provided below a "Transaction Outline"
which describes how we propose to structure and provide
construction financing as well as long term take out financing for
the project.
<TABLE>
<CAPTION>
TRANSACTION OUTLINE
<S> <C>
BORROWER: Cyntech of Chambers County, Inc.
GUARANTOR: AIG & KTI Fish and Mannesman KTI Damag.
LENDER: Corpfinance International Limited ("CFI")
FINANCIAL AGENT: Corpfinance International Limited Inc.
DESIGN ENGINEER: KTI Fish, Inc.
TURNKEY GENFRAL
CONTRACTOR: KTI Fish, Inc.
CIVIL WORKS: KTI Fish, Inc.
</TABLE>
Oxford Intemational, Inc.
7979 Old Georgetown Road - Eighth Floor - Bethesda. Maryland 20814
301-654-1980 - fax 303-654-8931- toll free 1-800-308-1898
web pagw http: //www,oxfordint.com - e-mail [email protected]
<PAGE>
Mr. Frank Meyer
May 26, 1998
Page 2
<TABLE>
<CAPTION>
<S> <C>
CONSTRUCTION
BOND: Yet to be determined by General Contractor.
CONTRACT BOND: (AIG) American international Group
GENERAL PARTNER: Cyntech of Chambers County, Inc.
GOV'T GUARANTEE: (USRDB) U.S. Rural Development Bond, if available,
MANAGER/OPERATOR: Baker Energy, Inc., Houston, TX
Independent Consultants to Corpfinance and Oxford International:
INTENDED AUDIT
ENGINEER: Yet to be determined by Corpfinance,
CONSULTI`NG
ENGINEER: Yet to be determined by Corpfinance.
INSURANCE
CONSULTANT: Intech Risk Management Ltd.
LEGAL COUNSEL,
BORROWER: Kilpatrick & Stockton, LLC, Atlanta, GA
LEGAL COUNSEL
LENDER: Yet to be determined by Corpfinance.
</TABLE>
PURPOSE. To provide construction and development
of long term take out financing as
described below;
a) Construction Loan A Construction
financing of an amount up to
$43,000,000 for development and
activities for the fulfillment
of existing business plan for
Cyntech Technologies for
hydrocarbon facilities.
a) To provide a source of take out
financing up to $43,000,000.
<PAGE>
Mr. Frank Meyer
May 26, 1999
Page 3
AMOUNT: The amount of the facility both
Construction and Term will be the lesser
of the two amounts derived from the
following calculations:
i. 70% of Qualifying Project Costs
as per Designer- Build/Project
Cost Schedule ($43,000,000) or
75% of appraised value of
property or any amount otherwise
accepted by the American
International Group or otherwise
guaranteed;
ii Based on the yield upon Closing
on the 10 year US Teasuries for
similar period, such that the
Project's pro forma financial
projections will demonstrate a
minimum Debt Service Coverage as
outlined in Affirmative Covenant
No. 2.
TERM: An approximate period of 10 years as
follows:
a) Construction - The Construction
Period shall not exceed a
maximum of 24 months from
financial closing,
b) Term - The Term loan will have a
term of 20 years.
AMORTIZATION: Construction - Not applicable
Term Up to 25 years (est)
INTEREST RATE: 1) Construction Loan
Construction Loan, Interest Rate
will be calculated three
business days prior to each
construction draw and fixed at
the rate determined on the mid
market yield on US Treasury Bond
for a term similar to the
aggregate term of this financing
plus approximately 1.75-2.25
plus insurance premium (1.0-1.5)
basis points compounded and
payable monthly in arrears.
2) Term Loan
A fixed rate equal to the
weighted average of the
Construction Loan Interest Rate
compounded and payable monthly
in arrears.
<PAGE>
Mr. Frank Meyer
May 26, 1998
Page 4
AVAILABILITY: 1) Construction Loan
Upon compliance with all
conditions precedent including
receipt of the Borrower's
construction budget and
operating pro forma for each
year of the term, in form
satisfactory to the Lender and
receipt by the lender of all
Security, the Construction Loan
will be advanced into a
Construction Escrow Account in
accordance with a fixed monthly
funding schedule established
prior to closing. Drawdown frorn
the Construction escrow account
will be, made monthly, based on
a work-in-place,
cost-to-complete formula
determined from construction
budgets provided and subject to
applicable lien holdback in
accordance with the laws
governing the State construction
industry and the construction
contract.
2) Term Loan
Upon satisfaction of all
Conditions Precedent to
conversion and compliance with
all other conditions of the Loan
Agreement, including and not
being limited to substantial
completion as defined, all
permits, licenses and approvals
for operations having been
received, appropriate
representations and warranties
having been provided and no
events of default having
occurred.
ESCROW FUNDS Funds in the Construction Escrow Account
and the Maintenance Reserve Account, as
applicable, will be held in escrow and
controlled by the Lender, and may be
invested in term deposits by the Lender
in short term securities issued by the
Federal, State or Municipal Governments
acceptable to the Lender. (All accrue to
Project)
REPAYMENT: 1. Construction Loan
No later than 24 months from
initial drawdown. Interest only
to be paid during the
Construction Period.
<PAGE>
Mr, Frank Meyer
May 26, 1998
Page 5
2. Term Loan
The Term Loan shall be repaid by away of
equal blended monthly payments of
principal and interest based on full
amortization over the Term at the Term
Loan Interest Rate.
PREPAYMENT: During both Construction and Term no
prepayment is permitted except on a make
whole basis.
SECURITY: Assignment of all the units of the
Borrower.
A debenture from Borrower in the amount
of $43 million, providing a registered
first fixed and floating charge on all
assets of the project, including all
relevant easements and assignment of all
contracts.
Assignment of a financial bond for
$43,000,000 issued by AIG in favor of the
Lender,
Assignment of all Turnkey fixed price
Construction Contracts between the
General Contractor and the Borrower,
including:
i. Assignment of 100% Performance
and 50% Labor and Material Bonds
issued in respect of the General
Contractor under the
Construction Contract naming the
Lender and the General
Contractor as dual obligees
under such bonds or satisfactory
corporate guarantees,
ii Assignment of all major
subcontracts issued by
subcontractors to the General
Contractor:
iii. Assignment of any and all
warranties issued of equipment
and/or service supplies;
iv Assignment of all proceeds of
builders risk construction
insurance to cover the
replacement value of the
facility and equipment,
liability insurance, business
interruption insurance for a
minimum period of 12 months,
wrap-up liability insurance,
delayed income insurance, all
naming both Lender, Borrower and
General Contractor as named
insured,
The guarantee and postponement of claim
of Cyntech and AIG for a liability amount
yet to be determined by the assignment of
all
<PAGE>
Mr. Frank Meyer
May 26, 1998
Page 6
units in Cvntech LLP related to any and
all cost overruns of the Project.
Assignment of all permits and government
regulatory licenses and approvals
including, but not limited to, use
authorization, both with the Federal
Government and state, in their respective
jurisdictions.
Assignment of all construction,
equipment, consulting and engineering
contracts relating to the Project,
Assignment of all material management and
operating agreements,
An undertaking by the Borrower and
Guarantors to provide sufficient funds to
cover cost overruns if the result of
Change Orders or if otherwise,
Assignment of all Escrow Accounts.
Assignment of all shares in the General
Partnership (Cyntech.)
CONDITIONS PRECEDENT: Key Man Insurance on the lives
of all principals,
Prior to advancing funds under the
Construction or Term portion of this
facility the Borrower and Guarantors
shall provide in form acceptable to the
Lender the following:
1. Construction Loan (Financial
Closing) Satisfactory evidence,
in form and content, of the
enforceability of the Security
contemplated, including but not
being limited to the following:
The Lender's Counsel's Legal opinion will
address:
a) Financing bond is issued in a
form acceptable to the Lender
b) Water Use Agreement from the
Federal Government,
c) The fixed-price construction
contract:
d) All insurance and bonding
contracts:
e) All other material contracts:
<PAGE>
Mr. Frank Meyer
May 26, 1998
Page 7
f) Evidence that all regulatory,
municipal, governmental
approvals, licenses and permits
required to start construction
and operate the complex within
the Project have been received
by the Borrower;
g.) The key contracts, including
necessary amendments and other
support agreements, shall have
been executed and assigned to
the Lender and arrangements made
for appropriate filing and
recording of security
documentation in each
Jurisdiction where necessary.
The Borrower shall provide to the
Lender's Legal Counsel for the purposes
of the legal opinion to be provided to
the Lender:
a) Certificate to the effect that
there are not threatening or
pending regulatory court
proceedings or outstanding liens
affecting or likely to adversely
affect the Borrower/Guarantors,
that no Event of Default exists
and that all representations,
and warranties included in the
Loan documents made by the
Borrower are true and correct,
b) Copies of the contracting
documents and by-laws of the
Borrower and the Guarantors.
c) Incumbency certificates and
certified resolutions of the
Borrower, the Guarantors as the
case may be, authorizing the
Credit Facility, shall have been
executed and delivered to the
Lender.
d) Assignment of all Company
Interests in Cyntech in favor of
the Lender assigned and
subordinated to the Lender,
e) Certificate that the property
and the facility is free and
clear of all encumbrances,
except permitted encumbrances.
f) Certificate conforming
compliance with all covenants in
all documentation and
agreements,
g) Certificate that all applicable
project contracts are in full
force and effect.
<PAGE>
Mr. Frank Meyer
May 26, 1998
Page 8
h) Certificate that no material
adverse change in business or
financial affairs of the
Borrower/Guarantors have
occurred.
i) Certificate of fact executed by
a senior officer of the Borrower
and Guarantors confirming
certain other matters as
determined by the Borrower and
the Lender's Legal Counsel
j) No opinion as to the validity
and enforceability of other
agreements or permitting
sufficiency shall be provided.
The Independent Engineer's Report will
address:
a.) Evidence of receipt of all
environmental approvals for the
project.
b) Phase one environmental site
assessment.
c) Project can be built within
budget.
The Independent Consultant
a.) An initial independent
consulting report provided prior
to Financial Closing, addressing
all aspects of the project
including but not being limited
to operations and performance,
the accuracy of the cash flow
and debt service ability of the
Project, as contemplated in
Affirmative Covenant No. 2, and
the adequacy of the maintenance
program and the maintenance
reserve in relation to plan
during the Term of the loan.
b) At Conversion Closing an
independent consulting and
engineer's report, evidencing
satisfactory construction,
completion and commissioning of
the facility including the
analysis attesting to the
commissioning and ability of the
facility to provide the Debt
Service as contemplated in
Affirmative Covenant No. 2.
<PAGE>
Mr, Frank Meyer
May 26, 1998
Page 9
The Independent Insurance Consultant's
Report will address and confirm:
a) Evidence that all insurance and
bonds, as determined to be
necessary as detailed in the
Insurance Consultant's pre
construction report, are in full
force and effect and are not
subject to cancellation without
prior written consent of the
Lender and that the Borrower has
hypothecated and assigned the
proceeds from such insurance to
the Lender.
The Borrower will provide:
a) Evidence that a financial bond
from AIG Insurance Company
acceptable to the Lender will be
in place, such bond will pay
outstanding loan plans
make-whole cost upon financial
default by the Borrower.
b) Financial Closing Date pro forma
financial statements for a
period equal to the term of the
Credit Facility certified by the
Borrower, reviewed by an
acceptable to the Independent
Consultant demonstrating a Debt
Service Coverage as stipulated
within this document.
c) Project cost budget developed,
received and approved.
d) A current valuation of the
facility to be in a form
satisfactory to the Lender,
indicating a value of the
facility of not less than the
aggregate of all costs
associated with construction of
the facility.
e) Loan advance schedule.
f) Review of Project Cost Budget by
Audit Engineer to confirm that a
maximum of $43,000,000 of
qualifying project costs have
been funded by way of the
Construction Loan.
g) Detailed opening balance sheet
of the Borrower and Guarantors
in a form satisfactory to the
Lender reflecting the equity
investment in the Borrower.
<PAGE>
Mr. Frank Meyer
May 26, 1998
Page 10
h) Evidence that the Borrower will
maintain working capital at all
times at 1.7 subject to
adjustment.
i) Evidence that the Borrower will
create in the first year of
operation a maintenance fund of
an amount to be determined
during due diligence, to be
acceptable to the Consulting
Engineer, and such fund is to be
credited an equal amount
annually.
j) All fees and expenses of the
Lender's counsel, the
Independent Engineer, the
Insurance Consultant,
Independent Consultant, others
as appropriate, which are
outstanding as at Financial
Closing, shall have been paid or
provided for.
k) Other conditions precedent to
Financial Closing, as determined
to be appropriate and agreed
between the Borrower/Guarantors
and the Lender shall have been
met.
2) Term Loan
On the basis of Conditions Precedent to
the Construction Loan have been met as at
the date of closing of the Construction
Loan, the following Conditions Precedent
will be required for conversion to the
Term Loan,
a) Any additional security and
documentation contemplated to be
provided at the time of
Conversion.
b) Satisfactory receipt of legal
opinion from the Lender's Legal
Counsel, specifically in respect
of:
i. Any permits, licenses or
approval for operation
which were not received
and reviewed at the time
of closing of the
Construction Loan,
ii Title to any property of
the project as
applicable which was not
reviewed at the time of
closing of the
Construction loan,
<PAGE>
Mr. Frank Meyer
May 26, 1998
Page 11
iii. Assignment and
registration of any
security provided after
the time of closing of
the Construction Loan.
c) Receipt of a certificate
executed by the Borrower and
Guarantors certifying that no
condition of default of the Loan
Agreement has occurred and is
continuing and that all
representations and warranties
made in respect of the Loan
agreement remain true and
correct.
d) Receipt of a certificate form
the Borrower/Guarantors that the
project is free and clear of all
liens, except for permitted
encumbrances.
e) Receipt of the Commissioning
Report prepared by the
Independent Consultant,
supported by the General
Contractor, accompanied by the
certificate of substantial
completion issued by Independent
Engineer and addressing the
project's ability to service the
loan. If the project is deemed
unable to service its total
amount of the term loan, the
principal amount of the term
loan may be reduced, such that
the project can service such
reduced principal amount in
accordance with the Debt Service
Coverage set out in Affirmative
Covenant No. 2,
f) Evidence that the Borrower has
entered into an Operating and
Maintenance contract with Baker
Energy, Inc. of Houston, Texas.
9) Evidence that the project has
met the Financial Bonding
Companies (AIG) criteria and
that the Financial Enhancement
instrument is in full force and
effect.
h) Receipt of certificate from the
Borrower that all project costs
have been paid accompanied by
the Statutory Declaration filed
by the General Contractor at the
time of substantial completion
of the Project.
i) Evidence that the insurance
required for on-going operation
is in full force and effect.
<PAGE>
Mr. Frank Meyer
May 26, 1998
Page 12
j) Delivery of a certificate from
the Borrower that all contracts
required for the on-going
operation of the project are in
full force and effect.
k) Delivery of any and all permits,
licenses and approvals for
operation which were not
provided and reviewed at the
time of closing of the
Construction Loan,
AFFIRMATIVE For the term of the facility, the
COVENANTS,- Borrower/Guarantors agree, to provide the
following in form acceptable to the
Lender:
1. a) Debt Service Coverage
will be as follows-
Debt service coverage
of the project is to
be maintained at a
minimum of 1.40:1 at
all times during the
term of the facility.
b) Debt Service Coverage
will be calculated as
follows:
Operating Cash flow
divided by the sum of
the payments of
principal and interest
on the Term Loan.
c) Debt Service Coverage
will be calculated on
a 12 month moving
average.
2. The Operating Budget will be
reviewed by the Independent
Consultant Engineer to the
satisfaction of the Lender,
3. Maintain the subject premises
and conduct operations in an
efficient and professional
manner.
4. Maintain an annual Maintenance
Reserve by contributing an
amount to be determined during
due diligence each year as per
financial projections, such
reserve to be an amount reviewed
and agreed to be acceptable by
the Consulting Engineer.
5. An undertakingang by the
Borrower/Guarantors to provide
additional project equity equal
to any shortfall in Construction
Interest reserve shown in
Construction Budget and
Financial Forecasts.
<PAGE>
Mr. Frank Meyer
May 26, 1998
Page 13
6. An undertaking by the
Borrower/Guarator to cover costs
overruns and the cost of change
orders.
7. Maintain Insurance in a form,
and substance satisfactory to
the Lender.
8. Maintain adequate books and
records in accordance with GAAP
(specific book for the project).
9. Comply with environmental laws
and regulations.
10. Give notice to the Lender of any
litigation or claim dispute with
Government authority or Labor
dispute against the project,
Borrower and/or Guarantor that
would adversely affect the
project.
NEGATIVE For the term of the facility the Borrower
COVENANTS: /Guarantor agree to provide in form
acceptable to the Lender, acting
reasonably, the usual negative covenants
for a transaction of this nature, such
covenants will confirm that without the
consent of the Lender, the
Borrower/Guarantor will not:
1. Dispose of the assets over which
the Lender has charge (the
Assets)
2. Grant any charges on the Assets
other than charges applicable to
permitted encumbrances,
3. Pay distributions out of cash
flow of the project unless all
requirements of this facility
have been met,
4. Amend any material contracts
relating to Assets
5. Allow a change in ownership of
the Company and/or change in
Guarantors, except with the
approval of the Lender for
unreasonably withheld.
6. Permit a change in the nature of
the business or purpose for
which the Assets are used.
<PAGE>
Mr. Frank Meyer
May 26, 1998
Page 14
REPORTING For the term of the Facility the
COVENANTS- Borrower/Guarantors shall:
1. Provide a detailed progress
report during construction at
least quarterly.
2. Provide annual audited financial
statement of the Borrower and
the Guarantors including
operating statistics and a
financial presentation of the
project together with an
analysis of the financial
results of the project compared
to the annual budget and closing
date pro forma, within 120 days
of year end.
3. Provide half yearly interim
financial statements of the
Borrower as well as operational
and financial statements for the
Project within 60 days of period
end.
4. Provide a quarterly non-default
during the course of the loan,
calculated on a 12 month rolling
average executed by the
Borrower.
5. An annual report from a third
party consultant on the
operation and maintenance of the
facility.
6. One month prior to each year
end, provide an annual budget
for the next fiscal year.
7. Provide any other information as
may be reasonably requested from
time to time.
For disbursement of construction funds,
the following must be provided:
a) Soft costs must be supported by
summary with a report from the
Borrower and applicable invoices
attached. (Requirement for
invoices may be waived at the
Lender's discretion).
b) Report from the General
Contractor showing costs
incurred to date and costs to
complete.
c) Cash collateral (balance of
loan) must exceed cost to
complete, accounts payable and
holdbacks.
<PAGE>
Mr. Frank Meyer
May 26, 1998
Page 15
d) Certificate from General
Contractor in a form acceptable
to the Lender's consultant that
all work in place is in
accordance with approved plans
and specifications,
e.) An independent consulting
engineer's report monitoring
construction draws against plan
during the construction period.
f) Report on percentage completion
versus projected completion.
g) Satisfactory title search.
h) Applicable holdbacks equal to
10% on acceptable construction
practices will be withheld. Such
holdbacks may be released if
replaced by Letters of Credit
issued by a financial
institution acceptable to the
Lender.
i) Disbursement will be subject to
review of approved certificates
and/or the Project by the
Lender's independent consulting
engineer.
j) With each draw the Borrower and
the General Contractor will
advise, and the independent
engineer's report will confirm,
that the undraw or unutilized
amount of the credit facility is
adequate to complete
construction as contemplated.
EVENTS OF Usual events of default and normal cure
DEFAULT periods shall apply.
REPRESENTATIONS
& WARRANTIES Usual representations and warranties as
agreed between the Borrower and the
Lender shall apply.
OTHER The Borrower/Guarantors and the Lender
agree that fees and costs, including but
not being limited to viewing of assets,
bonding, legal fees. appraisal and survey
costs, independent engineer, incurred in
completing or attempting to complete this
financing are for the account of the
Borrower.
<PAGE>
Mr. Frank Meyer
May 26, 1998
Page 16
FEES: Fees with respect to this transaction are
as follows.
A Commitment Fee and Syndication Fee yet
to be determined will be earned at the
date of provision by Corpfinance, and
acceptance by the Borrower, of a
commitment in respect of the facility and
is payable at the date of Closing. The
fee is expected not to exceed 3%.
Independent Consultant and Engineer's fee
will be paid directly by the Borrower.
The afore Transaction Outline is for discussion purposes only. It does not
constitute an offer or commitment, nor does it contain any representation or
warranty on the part of Corpfinance International Limited that it may
eventually commit to provide funds. It serves as an engagement agreement
prepared with the benefit data provided to date, on the understanding that
the facility will be constructed subject to terms of a fixed price
construction contract in a form acceptable to the Lender, subject to the
herein contained funding terms.
If the terms and conditions herein are acceptable to you, we ask that you
sign and return the attached copy of this letter. Upon receipt, Corpfinance
will proceed to provide you with a commitment substantially upon the terms
contained herein. Our Commitment will set forth in greater detail the terms
and conditions of the proposed financing.
Yours truly,
OXFORD INTERNATIONAL, INC.
/s/ G Dutcher
Gregory C. Dutcher
President
Accepted at Conyers, Georgia this 10th day of June 1998
Acknowledged by __/s/___________________________
Cyntech of Chambers County, Inc.
Corpfinance International Limited
4 King Street, Suite 1200, Toronto, Ontario M5H 1B6
(416) 364-6191, Fax: (416) 364-1012
June 11, 1999
Mr. Frank Meyer
Cyntech of Chambers County, Inc.
Managing General Partner
Cyntech of Chambers, LLP
4305 Derbyshire Track
Conyers, Georgia 30094
Dear Mr. Meyer:
Corpfinance International Limited is pleased to be given the exclusive
mandate to fulfil the financing requirements of your Cyntech hydrocarbon
reclamation and conversion system project.
In this regard, we have provided below a "Transaction Outline" which
describes how we propose to structure and provide construction financing as well
as long term take out financing for the project.
TRANSACTION OUTLINE
BORROWER: Cyntech of Chamber County, LLP
GUARANTOR: Cyntech Technologies, Inc.
LENDER: Corpfinance International Limited ("CFI")
DESIGN
ENGINEER: Cumming Cockburn Limited
<PAGE>
TURNKEY GENERAL
CONTRACTOR: KTI Fish
CIVIL
WORKS: Yet to be determined
MANAGER/
OPERATOR: Baker Energy
HYDROCARBON
PURCHASER: Yet to be determined
FEED STOCK
SUPPLIER: Yet to be determined
Independent Consultants to Corpfinance International Limited
- ------------------------------------------------------------
AUDIT
ENGINEER: Yet to be determined
CONSULTING
ENGINEER: Yet to be determined
INSURANCE
CONSULTANT: Intech Risk Management Ltd.
LEGAL COUNSEL,
BORROWER: Kilpatrick & Stockton, LLC
LEGAL COUNSEL,
LENDER: Yet to be determined
PURPOSE: To provide construction and long term take out
financing as described below:
A) CONSTRUCTION LOAN
A Construction financing of an amount up to
$65,000,000 for a hydrocarbon reclamation and
conversion facility which will be situated in
Chambers County, Houston, Texas, having a
value of approximately $74,750,000 upon
completion.
B) TERM LOAN
To provide a source of construction take out
financing up to $65,000,000.
STRUCTURE: The Borrower, a limited partnership, will use the
proceeds of the loan to fund the construction of a
hydrocarbon facility.
As Guarantor, Cyntech Technologies will
secure its guarantee with a first charge
security interest on all of its assets,
including assignment of all interests held in
the Borrower.
Cyntech Technologies has, to date, expended
$3,500,000 on the project, which expenses
will be captured and incorporated into the
project costs.
AMOUNT: The amount of the facility both Construction and Term
will be the lesser of the two amounts derived from
the following calculations:
i) 85% of Qualifying Project Costs as per
Design-Build/Project Cost Schedule;
ii) Based on the yield upon Closing on the
10-year US Treasury, such that the Project's
pro forma financial projections will
demonstrate a minimum Debt Service Coverage
as outlined in Affirmative Covenant No. 2.
TERM: An approximate period of 10 years as follows:
A) Construction - The Construction period shall
not exceed a maximum of 18 months from
financial closing;
B) Term - The Term loan will have a term of 10
years.
AMORTIZATION: Construction - Not applicable.
Term - Up to 10 years.
INTEREST
RATE: 1) Construction Loan:
Construction Loan, Interest Rate will be
calculated three business days prior to each
construction draw and fixed at the rate
determined on the mid market yield on US
Treasury Bond for a term similar to the
aggregate term of this financing plus
approximately 2.25 plus insurance premium
(estimated at 1.0-1.5) basis points
compounded and payable monthly in arrears;
2) Term Loan:
A fixed rate equal to the weighted average of
the Construction Loan Interest Rate
compounded and payable monthly in arrears.
AVAILABILITY: 1) Construction Loan:
Upon compliance with all conditions precedent
including receipt of the Borrower's
construction budget and operating pro forma
for each year of the term, in form
satisfactory to the Lender and receipt by the
Lender of all Security, the Construction Loan
will be advanced into a Construction Escrow
Account in accordance with a fixed monthly
funding schedule established prior to
closing. Drawdown from the Construction
escrow account will be made monthly, based on
a work-in-place, cost-to-complete formula
determined from construction budgets provided
and subject to applicable lien holdback in
accordance with the laws governing the State
construction industry and the construction
contract.
2) Term Loan:
Upon satisfaction of all Conditions Precedent
to conversion and compliance with all other
conditions of the Loan Agreement, including
and not being limited to substantial
completion as defined, all permits, licences
and approvals for operations having been
received, appropriate representations and
warranties having been provided and no events
of default having occurred.
ESCROW FUNDS: Funds in the Construction Escrow Account and
the Maintenance Reserve Account, as applicable, will
be held in escrow and controlled by the Lender, and
may be invested in term deposits by the Lender in:
short term securities issued by the Federal, State or
Municipal Governments acceptable to the Lender. (All
accrue to project.)
REPAYMENT: 1) Construction Loan:
No later than 18 months from initial
drawdown. Interest only to be paid during the
Construction Period.
2) Term Loan
The Term Loan shall be repaid by way of equal
blended monthly payments of principal and
interest based on full amortization over the
Term at the Term Loan Interest Rate.
PREPAYMENT: During both Construction and Term no prepayment is
permitted except on a make whole basis.
SECURITY: Assignment of all of the shares of the Borrower.
A debenture from the Borrower in the amount of $43
million, providing a registered first fixed and
floating charge on all the assets of the project,
including all relevant easements and assignment of
all contracts.
Assignment of a financial bond for $65,000,000 issued
by an acceptable party in favour of the Lender for
the term of the loan. Such bond is to offset the
price risks of the commodity plus cost and supply of
feedstock.
Assignment of Turnkey fixed price Construction
Contracts between the General Contractor and the
Borrower, including:
(i) Assignment of 100% Performance and 50%
Labour and Material Bonds issued in respect
of the General Contractor under the
Construction Contract, naming the Lender
and the General Contractor as dual obligees
under such bonds or satisfactory corporate
guarantees;
(ii) Assignment of all major subcontracts issued
by subcontractors to the General
Contractor;
(iii) Assignment of any and all warranties issued
of equipment and/or service supplies;
(iv) Assignment of all proceeds of builders risk
construction insurance to cover the
replacement value of the facility and
equipment, liability insurance, business
interruption insurance for a minimum period
of 12 months, wrap-up liability insurance,
delayed income insurance, all naming both
Lender, Borrower and General Contractor as
named insureds;
The guarantee and postponement of claim of Cyntech
for a liability amount yet to be determined by the
assignment of all units in Cyntech LLP related to any
and all cost overruns of the Project.
Assignment of all permits and governmental regulatory
licences and approvals including, but not being
limited to, use authorization, both with the Federal
Government and State, in their respective
jurisdictions.
Assignment of all construction, equipment, consulting
and engineering contracts relating to the Project;
Assignment of all material management and operating
agreements;
Assignment of take or pay contracts from the
hydrocarbon purchaser;
An undertaking by the Borrower and Guarantors to
provide sufficient funds to cover cost overruns if
the result of Change Orders or if otherwise;
Assignment of contracts from the feedstock supplier;
Assignment of all Escrow Accounts;
Assignment of all shares in the General Partnership
(Cyntech).
CONDITIONS
PRECEDENT: Key Man Insurance on the lives of all principals.
Prior to advancing funds under the Construction or
Term portion of this facility the Borrower and
Guarantors shall provide in form acceptable to the
Lender the following:
1) Construction Loan (Financial Closing):
Satisfactory evidence, in form and content,
of the enforceability of the Security
contemplated, including but not being limited
to the following:
The Lender's Counsel's Legal Opinion will
address:
(a) Financial bond is issued in a form
acceptable to the Lender;
(b) Assignment of feed stock supplier;
(c) Assignment of hydrocarbon
purchaser;
(d) The turnkey construction contract;
(e) All insurance and bonding
contracts;
(f) All other material contracts;
(g) Evidence that all regulatory,
municipal, governmental approvals,
licences and permits required to
start construction and operate the
complex within the Project have
been received by the Borrower;
(h) The key contracts, including
necessary amendments and other
support agreements, shall have been
executed and assigned to the Lender
and arrangements made for
appropriate filings and recording
of security documentation in each
jurisdiction where necessary.
The Borrower shall provide to the Lender's
Legal Counsel for the purposes of the legal
opinion to be provided to the Lender:
(a) Certificate to the effect that
there are no threatening or pending
regulatory court proceedings or
outstanding liens affecting or
likely to adversely affect the
Borrower/Guarantors, that no Event
of Default exists and that all
representations and warranties
included in the Loan documents made
by the Borrower are true and
correct.
(b) Copies of the constating documents
and by-laws of the Borrower and the
Guarantors.
(c) Incumbency certificates and
certified resolutions of the
Borrower, the Guarantors, as the
case may be, authorizing the Credit
Facility, shall have been executed
and delivered to the Lender.
(d) Assignment of all interests in
Cyntech of Chambers County, LLP to
the Lender.
(e) Certificate that the property and
the facility are free and clear of
all encumbrances, except permitted
encumbrances.
(f) Certificate confirming compliance
with all covenants in all
documentation and agreements.
(g) Certificate that all applicable
project contracts are in full force
and effect.
(h) Certificate that no material
adverse change in the business or
financial affairs of the
Borrower/Guarantors has occurred.
(i) Certificate of fact executed by a
senior officer of the Borrower and
Guarantors confirming certain other
matters as determined by the
Borrower and the Lender's Legal
Counsel.
(j) No opinion as to the validity and
enforceability of other key
agreements or permitting
sufficiency shall be provided.
The Independent Engineer's Report will
address:
(a) Evidence of receipt of all
environmental approvals for the
project.
(b) Phase one environmental site
assessment.
(d) Project can be built within budget.
The Independent Consultant:
(a) An initial independent consulting
report provided prior to Financial
Closing, addressing all aspects of
the project including but not being
limited to operations and
performance, the accuracy of the
cash flow and debt service ability
of the Project, as contemplated in
Affirmative Covenant No. 2, and the
adequacy of the maintenance program
and the maintenance reserve in
relation to plan during the Term of
the loan;
(b) At Conversion Closing an
independent consulting and
engineer's report, evidencing
satisfactory construction,
completion and commissioning of the
facility including the analysis
attesting to the commissioning and
ability of the facility to provide
the Debt Service as contemplated in
Affirmative Covenant No. 2.
The Independent Insurance Consultant's
Report will address and confirm:
(a) Evidence that all insurance and
Bonds, as determined to be
necessary as detailed in the
Insurance Consultant's
pre-construction report, are in
full force and effect and are not
subject to cancellation without
prior written consent of the Lender
and that the Borrower has
hypothecated and assigned the
proceeds from such insurance to the
Lender.
The Borrower will provide:
(a) Evidence that a financial bond from
AIG Insurance Company acceptable to
the Lender will be in place, such
bond will pay outstanding loan plus
make-whole cost upon financial
default by the Borrower.
(b) Evidence that feedstock contracts
are sufficient to match projected
cashflows.
(c) Financial Closing date proforma
financial statements for a period
equal to the term of the Credit
Facility certified by the Borrower,
reviewed by and acceptable to the
Independent Consultant,
demonstrating a Debt Service
Coverage as stipulated within this
document.
(d) Evidence that hydrocarbon contracts
are in a sufficient amount to meet
cash flow projections.
(e) Project cost budget developed,
received and approved.
(f) A current valuation of the facility
to be in a form satisfactory to the
Lender, indicating a value of the
facility of not less than the
aggregate of all costs associated
with construction of the facility.
(g) Loan advance schedules.
(h) Review of Project Cost budget by
Audit Engineer to confirm that a
maximum of up to $74,500,000 of
qualifying project costs have been
funded by way of the Construction
Loan.
(i) Detailed opening balance sheet of
the Borrower and Guarantors in a
form satisfactory to the Lender
reflecting the equity investment in
the Borrower.
(j) Evidence that the Borrower will
maintain working capital at all
times equal to (yet to be
determined), subject to adjustment.
(k) Evidence that the Borrower will
create in the first year of
operation a maintenance reserve
fund of an amount to be determined
during due diligence, to be
acceptable to the Consulting
Engineer, and such fund is to be
credited an equal amount annually.
(l) All fees and expenses of
the Lender's counsel, the
Independent Engineer, the
Insurance consultant, the
Independent Consultant and
others as appropriate,
which are outstanding as at
Financial Closing, shall
have been paid or
provided for.
(m) Other conditions precedent to
Financial Closing, as determined to
be appropriate and agreed between
the Borrower/Guarantors and the
Lender shall have been met.
2) Term Loan:
On the basis of Conditions Precedent
to the Construction Loan having been
met as at the date of the closing of
the Construction Loan, the following
Conditions Precedent will be
required for conversion to the Term
loan:
(a) Any additional security and
documentation contemplated to be
provided at the time of Conversion.
(b) Satisfactory receipt of legal
opinion from the Lender's Legal
Counsel, specifically in respect
of:
(i) Any permits, licences or
approvals for operation
which were not received and
reviewed at the time of
closing of the Construction
Loan;
(ii) Title to any property of
the project as applicable
which was not reviewed at
the time of closing of the
Construction Loan;
(iii) Assignment and registration
of any security provided
after the time of closing
of the Construction Loan.
(c) Receipt of a certificate executed
by the Borrower and Guarantors
certifying that no condition of
default of the Loan Agreement has
occurred and is continuing and that
all representations and warranties
made in respect of the Loan
Agreement remain true and correct.
(d) Receipt of a certificate from the
Borrower/Guarantors that the
project is free and clear of all
liens except for permitted
encumbrances.
(e) Receipt of the Commissioning Report
prepared by the Independent
Engineer, supported by the General
Contractor, accompanied by the
certificate of substantial
completion issued by Independent
Engineer and addressing the
project's ability to service the
loan. If the project is deemed
unable to service its total amount
of the term loan, the principal
amount of the term loan may be
reduced, such that the project can
service such reduced principal
amount in accordance with the Debt
Service Coverage set out in
Affirmative Covenant No. 2.
(f) Evidence that the Borrower has
entered into an Operating and
Maintenance contract with Baker
Energy, Inc. of Houston, Texas.
(g) Evidence that the project has met
the Financial Bonding Companies
criteria and that the Financial
Enhancement Instrument is in full
force and effect.
(h) Receipt of a certificate from the
Borrower that all project costs
have been paid accompanied by the
Statutory Declaration filed by the
General Contractor at the time of
substantial completion of the
Project.
(i) Evidence that the insurance
required for on-going operation is
in full force and effect.
(j) Delivery of a certificate from the
Borrower that all contracts
required for the on-going operation
of the project are in full force
and effect.
(k) Delivery of any and all permits,
licences and approvals for
operation which were not provided
and reviewed at the time of closing
of the Construction Loan.
AFFIRMATIVE
COVENANTS: For the term of the facility, the Borrower/Guarantors
agree to provide the following in a form acceptable
to the Lender:
(1) (a) Debt Service Coverage will be as follows:
Debt service coverage of the project is to be
maintained at a minimum of 1.50:1 at all
times during the term of the facility.
(b) Debt Service Coverage shall be
calculated as follows:
Operating Cash Flow divided by the sum of the
payments of principal and interest on the
Term Loan.
(c) Debt Service coverage will be
calculated on a 12 month moving
average.
(2) The operating budget will be reviewed by the
Independent Consulting Engineer to the
satisfaction of the Lender.
(3) Maintain the subject premises and conduct
operations in an efficient and professional
manner.
(4) Maintain an annual Maintenance Reserve by
contributing an amount to be determined
during due diligence each year as per
financial projections, such reserve to be an
amount reviewed and agreed to be acceptable
by the Consulting Engineer.
(5) An undertaking by the Borrower/Guarantors to
provide additional project equity equal to
any shortfall in Construction Interest
reserve shown in Construction Budget and
Financial Forecasts.
(6) An undertaking by the Borrower/Guarantors to
cover cost overruns and the cost of change
orders.
(7) Maintain Insurance in a form and substance
satisfactory to the Lender.
(8) Maintain adequate books and records in
accordance with GAAP (specific book for the
project).
(9) Comply with environmental laws and
regulations.
(10) Give notice to the Lender of any litigation
or claim dispute with Government authority or
Labour dispute against the project , Borrower
and/or Guarantor that would adversely affect
the project.
NEGATIVE
COVENANTS: For the term of the facility the Borrower/Guarantors
agree to provide in form acceptable to the Lender,
acting reasonably, the usual negative covenants for a
transaction of this nature, such covenants will
confirm that without the consent of the Lender, the
Borrower/Guarantors will not:
(1) Dispose of the assets over which the Lender
has charge (the Assets).
(2) Grant any charges on the Assets other than
charges applicable to permitted encumbrances.
(3) Pay distributions out of cash flow of the
project unless all requirements of this
facility have been met.
(4) Amend any material contracts relating to the
Assets.
(5) Allow a change in ownership of the Company
and/or change in Guarantors, except with the
approval of the Lender not unreasonably
withheld.
(6) Permit a change in the nature of the business
or purpose for which the Assets are used.
REPORTING
COVENANTS: For the term of the Facility, the Borrower/Guarantors
shall:
(1) Provide a detailed progress report during
construction at least quarterly.
(2) Provide annual audited financial statements
of the Borrower and the Guarantors including
operating statistics and a financial
presentation of the project together with an
analysis of the financial results of the
project compared to the annual budget and
closing date pro forma, within 120 days of
year end.
(3) Provide half yearly interim financial
statements of the Borrower as well as
operational statistics and financial
statements for the Project within 60 days of
period end.
(4) Provide a quarterly non-default declaration
during the course of the loan, calculated on
a 12 month rolling average, executed by the
Borrower.
(5) An annual report from a third party
consultant on the operation and maintenance
of the facility.
(6) One month prior to each year end, provide an
annual budget for the next fiscal year.
(7) Provide any other information as may be
reasonably requested from time to time.
DISBURSEMENT
CONDITIONS/
REPORTING
REQUIREMENTS: For disbursement of construction funds, the following
must be provided:
(a) Soft costs must be supported by summary with
a report from the Borrower and applicable
invoices attached. (Requirement for invoices
may be waived at the Lender's discretion).
(b) Report from the General Contractor showing
costs incurred to date and costs to complete.
(c) Cash collateral (balance of loan) must exceed
cost to complete, accounts payable and
holdbacks.
(d) Certificate from General Contractor in a form
acceptable to the Lender's consultant that
all work in place is in accordance with
approved plans and specifications.
(e) An independent consulting engineer's report
monitoring construction draws against plan
during the construction period.
(f) Report on percentage completion versus
projected completion.
(g) Satisfactory title search.
(h) Applicable holdbacks equal to 10% on
acceptable construction practices will be
withheld. Such holdbacks may be released if
replaced by Letters of Credit issued by a
financial institution acceptable to the
Lender.
(i) Disbursement will be subject to review of
approved certificates and/or the Project by
the Lender's independent consulting engineer.
(j) With each draw the Borrower and the General
Contractor will advise, and the independent
engineer's report will confirm, that the
undrawn or unutilized amount of the credit
facility is adequate to complete construction
as contemplated.
EVENTS OF
DEFAULT: Usual events of default and normal cure periods shall
apply.
REPRESENTATIONS
& WARRANTIES: Usual representations and warranties as agreed
between the Borrower and the Lender shall apply.
OTHER: The Borrower/Guarantors and the Lender agree that
fees and costs, including but not being limited to
viewing of assets, bonding, legal fees, appraisal and
survey costs, independent engineer, incurred in
completing or attempting to complete this financing
are for the account of the Borrower.
FEES: Fees with respect to this transaction are as follows:
A Due Diligence Fee of $25,000 shall be earned and
payable upon acceptance of this paper.
A Commitment Fee and Syndication Fee of approximately
3% will be earned at the date of provision by
Corpfinance, and acceptance by the Borrower, of a
commitment in respect of the facility and is payable
at the date of Closing.
The Independent Consultant, Engineer and Surety fees
will be paid directly by the Borrower.
The afore Transaction Outline is for discussion purposes only. It does
not constitute an offer or commitment, nor does it contain any representation or
warranty on the part of Corpfinance International Limited that it may eventually
commit to provide funds. It serves as an engagement agreement prepared with the
benefit of data provided to date, on the understanding that the facility will be
constructed subject to terms of a fixed price construction contract in a form
acceptable to the Lender, subject to the herein contained funding terms.
<PAGE>
If the terms and conditions herein are acceptable to you, we ask that
you sign and return the attached copy of this letter. Upon receipt, Corpfinance
will proceed to provide you with a commitment substantially upon the terms
contained herein. Our Commitment will set forth in greater detail the terms and
conditions of the proposed financing.
Yours truly,
/s/
Chris J. Ball
Vice President
Accepted at __________, __________
this day of , 1999
----------- -------------------------
Acknowledged by /s/
-----------------------------------
Cyntech of Chambers County, Inc.
Engagement Agreement
between
R. Frank Meyer and Cyntech Technologies, Inc.
This Engagement Agreement ("Agreement"), entered into on this 5th day of
January, 1998, will document any or all prior verbal or written agreements
entered into by and among Cyntech Technologies, Inc. (Nevada) and all
affiliates, including, parent companies, subsidiaries, successors, affiliates,
assign(s), designees and legatees ("Cyntech" or "Client"), excluding Cyntech
Research & Engineering, Inc. and Cyntech of Chambers County, Inc. for all
periods prior to January 5, 1998; and R. Frank Meyer and/or any assign(s) (the
"Consultant" or "Meyer")
Cyntech hereby retains Consultant as the chief consultant and advisor to the
Board of Directors of Cyntech, for the ten-year period ending December 31, 2007,
at which time this Agreement will automatically convert to a month to month
basis. The Agreement will remain in effect until December 31, 2007 or such
additional time period until Cyntech or the Consultant provides a 60-day written
notice of its intent to terminate this Agreement to the other party.
The Consultant will work directly for and under the control and supervision of
the Chairman of the Board of Cyntech Technologies, Inc., unless agreed otherwise
to in writing by Cyntech and Consultant. Consultant will have overall
responsibility for managing all research and development, plant construction and
operations of Cyntech, subject to the direction and oversight of the Chairman of
the Board of Directors. Subject to the authority and control retained by
Chairman of the Board, Consultant shall provide management advisory services, in
exchange for the fees set forth in this Agreement.
In performing its obligations under this Agreement, Consultant shall use his
best efforts to:
1) devote so much of his time as is reasonably necessary to
perform the assigned duties and obligations, as set forth in
this Agreement;
2) manage the research and development, plant construction and
operations of Cyntech in a businesslike manner;
3) periodically report to and consult with Chairman of the
Board, and the Board of Directors and/or other designated
individuals or committees of the Board; and, attend Board
meetings as required.
4) act in good faith and with reasonable diligence.
As a consultant to Cyntech, R. Frank Meyer will not be liable to Cyntech, its
subsidiaries and affiliates for monetary damages due to breach of fiduciary
duty, unless the breach is a result of gross negligence, willful misconduct, or
illegal actions of the Consultant. Cyntech shall indemnify and hold Consultant
harmless from and against all losses, damages costs and expenses including legal
fees resulting from Consultant's involvement in the operation and management of
Cyntech.
Fees for such services performed by Consultant will be paid by Cyntech, at the
rate of $200.00 per hour, and all reasonable travel and office expenses, which
may be increased from time to time based on written notice to and approval by
the Board of Directors of Cyntech, for the actual time spent or minimum hours,
whichever is greater, plus all reasonable out-of-pocket costs. Cyntech agree to
engage Consultant for a minimum of 60 hours per month, beginning January 5,
1998, through the end of this agreement (a minimum of 720 hours per calendar
year), for each month this Agreement remains in effect. Payments will be due and
payable on the fifth business day of the following month. Past due amounts
1
<PAGE>
during Cyntech's development phase which may be deferred and other amounts due
thereafter, whether billed or not, will be subject to interest at the maximum
rate permitted, based on the laws of the State of Georgia.
If the Consultant is discharged from this Agreement, prior to the expiration
date 1) for any reason except gross negligence, or other willful misconduct or
illegal acts; or 2) is unable to work by reason of death or complete and total
disability of R. Frank Meyer; or 3) resigns as a Consultant to Cyntech because
of significant changes in Cyntech's management policy which is unacceptable to
the Consultant, or because of significant changes in Cyntech's management
personnel which is not acceptable to the Consultant, the Consultant will be paid
by Cyntech, including any successors, at the minimum rate of $150,000 per annum,
commencing with date of such discharge, death, disability or resignation through
December 31, 2007, instead of at the minimum rate, as determined in the
preceding paragraph. If Consultant accepts a full time position with the
Company, this Agreement shall become null and void upon the execution of any
such employment agreementIn addition, Consultant shall have the following
reimbursements as part of this Agreement:
(1). Consultant will be authorized the reimbursement of up to two
(2) vehicles whose total base lease cost monthly shall not
exceed $1,000. One additional automobile will be authorized
for a staff member not to exceed $250.00 per month.
(2). All repairs, maintenance, damage repairs, insurance, tag,
taxes, and licenses, and other vehicle related requirements.
(3). Office rent reimbursement up to $500.00 per month. If
Consultant's residence is utilized, the same rent allocation
is authorized.
(4). If the company is unable to provide full medical and dental
coverage, Consultant will be entitled to reimbursement for
himself and his entire family living at home and all children
under the age of 26.
If any term or provision of this Agreement or the application thereof to any
person or circumstance shall, to any extent, be invalid or unenforceable, the
remainder of the Agreement shall continue in full force and effect with respect
to any other existing or subsequent breach thereof.
This Agreement shall inure to the benefit of and shall be binding upon the
successors of the parties hereto. This Agreement shall be binding on any person,
corporation, partnership, or other entity succeeding to the ownership and/or
operation of Cyntech in any manner whatsoever including by operation of law. All
rights and remedies of either party hereunder are cumulative and are in addition
to and shall not exclude any other right or remedy allowed by law. All rights
and remedies may be exercised concurrently.
This Agreement and the performance hereunder shall be construed in accordance
with the laws of the State of Georgia. If any action, special proceedings, or
other proceedings that may be brought arising of, in connection with, or by
2
<PAGE>
reason of this agreement, the laws of the State of Georgia shall be applicable
and shall govern to the exclusion of the law of any other forum.
This instrument contains the entire Agreement between the parties. It may not be
changed orally, but only by writing agreement, signed by the party against whom
enforcement of any waiver, change, modification or discharge is sought.
In witness whereof, the parties hereto, through their authorized signatories,
have executed this Agreement in multiple counterparts and have set their hands
to same, intending to be legally bound thereby, as of the date and year above
written.
Client: Consultant:
Cyntech Technologies, Inc. R. Frank Meyer
and Successors and/or Assigns and Successors and/or Assigns
_______/S/_____________________ _____________/S/____________
Attested to and approved by Board of
Directors on January 4, 1998 by
Resolution No: CTI-1-001
Brian Hass- Secretary
3
Engagement Agreement between Cyntech Technologies, Inc. and Laska & Associates,
Inc.
This Engagement Agreement ("Agreement"), entered into on this 1st day of
October, 1999, will document all prior verbal and the written agreement dated
December 31, 1997, entered into by and among Cyntech Technologies, Inc.
(Nevada), Cyntech Technologies, Inc. (Utah) and all affiliates, including,
parent companies, subsidiaries, successors, affiliates, assign(s), designees and
legatees ("Cyntech" or "Client"), excluding Cyntech Research & Engineering,
Inc.; and Laska & Associates, Inc. (Georgia) and/or any successors and assign(s)
(the "Consultant" or "Laska")
Cyntech hereby retains Laska & Associates, Inc. as a general management advisor
and consultant to Cyntech, for the twenty-one month period from December 31,
1997 and ended on September 30, 1999, and for the three-year period ending
September 30, 2002, at which time this Agreement will automatically convert to a
month to month basis. The Agreement will remain in effect until July 31, 2002 or
such additional time period until as a new agreement becomes effective or Meyer,
Cyntech or the Consultant provides a 60-day written notice of its intent to
terminate this Agreement to the other party.
The Consultant will work directly for and under the control and supervision of
R. Frank Meyer, the President, founder and currently majority shareholder of
Cyntech, unless agreed to in writing by Meyer, Cyntech and Consultant.
Consultant will work on projects assigned by Meyer, as a general management
advisor and consultant. Subject to the authority and control retained by
Cyntech, Consultant shall provide management advisory services, in exchange for
the fees set forth in this Agreement.
Consultant will assist Cyntech with assigned projects, including general
management advisory and consultation services, including providing assistance in
the review and/or preparation of the following: 1) Perform assigned projects,
based on written or verbal assignments, to assist with financial planning models
and forecasted financial statements, based solely on the information submitted
by the Company and/or obtained by or from Meyer and/or Cyntech, and other
assignments for one or more proposed hydrocarbon reclamation and conversion
(waste tire, rubber & plastics recovery) facilities; 2) Perform assigned
projects, based on written or verbal assignments, to assist with financial
planning models and forecasted financial statements, based solely on the
information submitted by the Company and/or obtained by or from Meyer and/or
Cyntech, for one or more co-generation plants; and 3) Perform other assigned
projects and functions deemed necessary to the success of Cyntech and its
subsidiaries and affiliates as Laska and Meyer or Cyntech may agree upon from
time to time (based solely on the information submitted by the Company and/or
obtained by or from Meyer and/or Cyntech).
All reports prepared will be 1) intended for internal use, 2) prepared on plain
paper, and 3) financial statements, if any, will not be accompanied by an
accountant's report, and not presented in any way to be construed as being
audited, reviewed or compiled by the Consultant. Nothing in this document shall
be construed as the consultant is acting in the capacity as an independent
Certified Public Accountant.
1
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Engagement Agreement between Cyntech Technologies, Inc. and Laska & Associates,
Inc.
Meyer and/or Cyntech will assume full responsibility for issuing all reports,
including business plans and actual, prospective, pro forma and/or forecasted
unaudited and/or audited financial statements, including all related
assumptions, notes, accounting policies and disclosures, based on presenting
information that is solely the representation of Meyer and/or Cyntech. The
Consultant will not examine financial statements, assumptions or other
supporting data, and will not express an opinion or provide any other form of
assurance on the financial statements, assumptions other supporting data. Should
Cyntech, and/or any subsidiary and/or affiliate seek to become listed for public
trading, Meyer and/or Cyntech will be responsible for all information
incorporated in the documents filed with the Securities and Exchange Commission
and all other reporting agencies, including, but not limited to: 1) Historical
and prospective unaudited and audited financial statements and related notes and
disclosures; 2) All other applicable filings with the Securities and Exchange
Commission and others; 3) Federal and state income tax returns; 4) Business
plans; and, 5) Any other reports and filings.
Laska & Associates, Inc. can not and will not undertake to perform services as
an independent Certified Public Accountant, including, but not limited to: 1)
compilation services; 2) expression of an opinion; or 3) provide assurance on
the accuracy of such historical and/or prospective reports, fillings and/or
audited or unaudited financial statements.
In performing its obligations under this Agreement, Consultant shall use its
best efforts to: 1) devote so much of the time of its principal consultant or
employees or other consultants as is reasonably necessary to perform the
assigned duties and obligations, as set forth in this Agreement; 2) manage and
perform the assigned projects in a businesslike manner; 3) periodically report
to and consult with Meyer and/or other designated individuals; and, 4) act in
good faith and with reasonable diligence.
As a consultant to Cyntech, Laska & Associates, Inc., including its principal
consultant John L. Laska, will not be liable to Meyer and/or Cyntech, its
subsidiaries and affiliates for monetary damages due to breach of fiduciary
duty, unless the breach is a result of gross negligence, willful misconduct or
illegal actions of the Consultant or its employees or other consultants engaged
by the Consultant. Meyer and/or Cyntech shall indemnify and hold Consultant and
its officers, directors, employees, independent contractors and shareholders
harmless from and against all losses, damages costs and expenses including legal
fees resulting from Consultant's involvement in the operation and management of
Cyntech. Nothing in this document shall be construed as the consultant is acting
in the capacity as an independent Certified Public Accountant.
Cyntech and Meyer acknowledge that, as long as this Agreement remains in effect,
that John L. Laska cannot and will not serve in any capacity as a director,
officer or employee of Cyntech, without the express written consent of the
Consultant and John L. Laska, in the form of a written agreement, including but
not limited to a Modification to this Engagement Agreement and an Employment
Agreement.
Fees for such services performed by Laska & Associates, Inc. will be paid by
Cyntech Technologies, Inc. (Nevada), Cyntech Technologies, Inc. (Utah) and all
parent companies, subsidiaries, successors, affiliates, assign(s), designees and
legatees and/or Meyer, at the rate of $150.00 per hour, and all reasonable auto,
travel and office expenses, which may be increased from time to time based on
written notice to Meyer and/or Cyntech, for the actual time spent or minimum
hours, whichever is greater, plus all reasonable out-of-pocket costs. Cyntech
agrees to engage Consultant for 100 hours per month (a total of 2,100 hours for
the period ended September 30, 1999) beginning January 1, 1998 through September
30, 1999; and, a minimum of 35 hours per month (a minimum of 420 hours per
fiscal year) beginning October 1, 1999 through the end of this agreement, for
each month this Agreement remains in effect. Payments will be due and payable on
the fifth business day of the following month. Past due amounts during Cyntech's
development phase which may be deferred and other amounts due thereafter,
whether billed or not, will be subject to interest at the maximum rate
permitted, based on the laws of the State of Georgia.
If the Consultant, including its principal consultant John L. Laska, is
discharged from this Agreement, prior to the expiration date 1) for any reason
except gross negligence, other willful misconduct or illegal acts; or 2) is
unable to work by reason of disability of John L. Laska; or 3) resigns as a
Consultant to Cyntech because of significant changes in Cyntech's management
policy which is unacceptable to the Consultant or because of significant changes
in Cyntech's management personnel which are not acceptable to the Consultant,
the Consultant will be paid by Cyntech and/or Meyer, including any successors,
at the minimum rate of $60,000 per annum, commencing with date of such
discharge, disability or resignation through September 30, 2002, instead of at
the minimum rate, as determined in the preceding paragraph.
2
<PAGE>
Engagement Agreement between Cyntech Technologies, Inc. and Laska & Associates,
Inc.
During the term of this agreement, Laska & Associates, Inc., is hereby granted
stock options, as a consultant to Cyntech, to purchase a minimum 1,000,000 (one
million) shares of the common stock of Cyntech. The options will vest at the
rate of 25% per year, or 250,000 per year, retroactive to December 31, 1997, the
date of the prior Agreement, and will expire on December 31, 2004, unless
exercised. The price of the shares shall be, the greater of the price of such
shares, on December 31, 1997, the date of the original Agreement, or the date of
a merger or acquisition by a new parent corporation, equal to the book value per
share, the lowest bid price during the subsequent 8 month period for registered
publicly traded shares, if any, or the same price per share and on the same
general terms as the founder(s) received for purchasing original issue shares.
If any term or provision of this Agreement or the application thereof to any
person or circumstance shall, to any extent, be invalid or unenforceable, the
remainder of the Agreement shall continue in full force and effect with respect
to any other existing or subsequent breach thereof.
This Agreement shall inure to the benefit of and shall be binding upon the
successors of the parties hereto. This Agreement shall be binding on any person,
corporation, partnership, or other entity succeeding to the ownership and/or
operation of Cyntech in any manner whatsoever including by operation of law. All
rights and remedies of either party hereunder are cumulative and are in addition
to and shall not exclude any other right or remedy allowed by law. All rights
and remedies may be exercised concurrently.
This Agreement and the performance hereunder shall be construed in accordance
with the laws of the State of Georgia. If any action, special proceedings, or
other proceedings that may be brought arising of, in connection with, or by
reason of this agreement, the laws of the State of Georgia shall be applicable
and shall govern to the exclusion of the law of any other forum.
This instrument contains the entire Agreement between the parties. It may not be
changed orally, but only by written agreement, signed by the party against whom
enforcement of any waiver, change, modification or discharge is sought. In
witness whereof, the parties hereto, through their authorized signatories, have
executed this Agreement in multiple counterparts and have set their hands to
same, intending to be legally bound thereby, as of the date and year above
written.
Client: Cyntech Technologies, Inc. Consultant:Laska & Associates, Inc.
and Successors and/or Assigns and Successors and/or Assigns
Laska & Associates, Inc.
/s/ R. Frank Meyer By: /s/ John L. Laska
- ------------------------------- -------------------------------
Authorized Agent: R. Frank Meyer Authorized Agent: John L. Laska,
3
Page 1 of 8 Inclusive
ENGAGEMENT AGREMENT
By and Between Kit Bromley & Company, Inc.
(Business Development); and,
Cyntech Technologies, Inc.
THIS ENGAGEMENT AGREEMENT (hereinafter referred to as "Agreement") is
entered into on this 3rd day of April, 1999 by and between Cyntech Technologies,
Inc., a corporation promulgated under the laws of the State of UTAH, and all
Subsidiaries, Successors, Affiliates, Designees, Legatees, and Assign(s), whose
primary place of business is 4305 Derbyshire Trace SE, Conyers, GA 30094-4258
(hereinafter referred to as "CLIENT") and Kit Bromley & Company, Inc. and/or
Assign(s), (hereinafter referred to as "CONSULTANT").
1. INFORMATION RE: CLIENT
CLIENT's address is: 4305 Derbyshire Trace SE,
Conyers, GA 30094-4258
CLIENT's telephone number is: Office: (770) 762-8732
CLIENT's Electronic Mail Account is: [email protected]
CLIENT's authorized Agent(s): R. Frank Meyer, CEO
2. SERVICES TO BE PROVIDED BY CONSULTANT
CLIENT retains CONSULTANT to provide business development services
regarding CLIENT, expressly Cyntech Technologies, Inc. as follows: (1) Initial
Independent Due Diligence Compilation and Review; (2) Compilation of certain
business development documents including (i) High Level Comprehensive Business
Plan as related directly to CLIENT's initial core operations, including (1)
feasibility study; (2) capital requirement study; (3) pro-forma cash flow
statements; (4) pro-forma income statements; (5) pro-forma balance sheet; (6)
Executive Summary; (7) Synopsis of Operations; (8) Current and Past Financial
Statements to be provided by CLIENT; and, (ii) Perform those functions deemed
necessary to the success of the aforementioned duties and agreed upon in writing
by the Parties. Those documents and related work product referenced in Section
2(i) above shall be provided one (1) original to CLIENT in both print copy and
on floppy disk tandem upon completion of said services aforementioned.
3. COOPERATION OF CLIENT
CLIENT understands that CONSULTANT cannot work effectively on CLIENT's
behalf without CLIENT cooperation and lack of cooperation may result in higher
fees, time delays, and possibly termination of this agreement. CLIENT agrees to
(a) Provide CONSULTANT with an address and telephone number(s) at which all
authorized Agents of CLIENT can be reached, and immediately inform CONSULTANT of
all changes; (B) Notify CONSULTANT immediately if CLIENT receives or comes into
possession of material information or knowledge of any material omissions or
material errors in connection with the operations of CLIENT or the Securities
Offering or bridge financing aforementioned in section two (2); (c) Promptly
provide all documentation and information as requested by CONSULTANT; (d) Make
all related parties available for telephone and office consultations and/or
inquires as well as other related activities; (e) Promptly advise CONSULTANT of
all events or changes of circumstances which may effect CLIENT's material
standing; (f) Do all things reasonably necessary for the preparation,
expedition, and execution of this matter; (g) Be truthful with CONSULTANT; (h)
Pay CONSULTANT on time.
4. RATE OF CONSULTING FEES
CLIENT agrees to pay a flat, previously agreed rate for business
development services and activities (as further defined in Section 2
hereinabove) spent on this matter by CONSULTANT. CONSULTANT's rate is $60,000.00
for such services performed as referenced in Section 2 above. It is understood
that time is of the essence in this undertaking. Usual office hours are 10:00AM
PST to 6:00PM PST on weekdays except for holidays.
INITIALS_______, _____________ DATE INITIALS________, ________ DATE
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Page 2 of 8 Inclusive
Payment of fees shall be as follows:
1. The sum of $300,000USD to be paid to and received by CONSULTANT no
later than the 15th of April, 1998;
2. The sum of $300,000USD to be paid to and received by CONSULTANT no
later than the 15th of May, 1998;
Said retainer sum referenced hereinabove is to be paid to and received by
CONSULTANT from CLIENT immediately upon receipt of the aforesaid funds by CLIENT
or directly from the established escrow account established for the purpose of
collecting such funds. Client hereby stipulates to the express utilization of an
escrow account of mutual approval for the purpose of receiving and disbursing
all funds raised for the benefit of CLIENT during the term of this Agreement. If
CLIENT shall become materially delinquent in excess of seven (7) calendar days
in any payment hereinabove, all services shall cease and the full retainer shall
become due and payable to CONSULTANT immediately. Further, upon material
delinquency in payment for services rendered By CONSULTANT for the benefit of
CLIENT, CONSULTANT may pursue all injunctive relief necessary and CLIENT hereby
expressly waives the posting of any or all bond inherent to such relief, for the
sole purpose of collecting such fees. This rate set forth above covers general
office work, conferences, research, telephone calls and for any other tasks
associated with the above referenced matter. CLIENT agrees to arrange and pay
for on a timely and expeditious manner, at CONSULTANT's prudent request, all
necessary travel and lodging arrangements, round trip basis (ie., from portal to
portal) in connection with the above referenced matter. CLIENT hereby
acknowledges that CONSULTANT, as a courtesy and in good faith and trust, shall
initiate said services referenced hereinabove prior to the receipt of any funds,
and that CONSULTANT shall bear certain economic and monetary risk on behalf of
CLIENT.
5. COSTS AND EXPENSES
In addition to paying Consultant's fee as defined in Section 4 of this
Agreement, CLIENT shall reimburse CONSULTANT for any and all extraordinary costs
and expenses Consultant may incur that is agreed by CLIENT to be outside the
context of general office work covered by Section 4 above. These extraordinary
other costs and expenses are to be confirmed and when possible, in writing, with
all necessary proof provided, prior to CLIENT disbursing the funds in a prudent
and timely manner. CLIENT shall be obligated to pay only those expenses that are
incurred with CLIENT's consent and/ or implied consent, All promotional
activities, entertainment expenses, legal fees, deposits, engagement and/or
commitment fees, and all other costs and expenses to be disbursed on behalf of
CLIENT for CLIENT's benefit shall be disbursed directly by CLIENT in a prudent
and timely manner or if CONSULTANT is to advance such costs, at the sole
discretion of CONSULTANT, CLIENT shall reimburse CONSULTANT for such costs upon
request by CONSULTANT. CONSULTANT shall have no obligation to advance any sums
for costs. Further, CLIENT agrees to retain and/or engage any or all additional
legal and accountancy counsel referred by CONSULTANT for matters being
undertaken by CONSULTANT for the benefit of CLIENT. CLIENT recognizes that if
s/he fails to provide funds for costs when requested by CONSULTANT, actions
necessary or helpful to CLIENT's matter may not be taken.
6. STATEMENTS AND LIABILITY FOR CHARGES
CONSULTANT shall submit statements if any outstanding balances exist,
to CLIENT indicating the current status of the account and such balances due and
payable to CONSULTANT for services rendered. CLIENT should review these
statements carefully. If CLIENT does not notify CONSULTANT within forty-eight
(48) hours of CLIENT's receipt of the statements of any objections CLIENT may
have to the statement, CONSULTANT will assume that CLIENT approves of the
services rendered and charges. In reliance on that implied approval, CONSULTANT
will continue to render services pursuant to the terms of this Agreement
provided that a method of resolving all outstanding balances to be paid to
CONSULTANT is agreed to solely by CONSULTANT prior to the re-initiation of said
services.
All additional fees in excess of retainer are to be paid on the first
and the fifteenth of every month in respective amounts. CLIENT is liable to
CONSULTANT for all actual services rendered and costs associated therewith at
the time services are rendered or costs are incurred. CLIENT shall pay
CONSULTANT's statements as indicated on the statement received. CLIENT shall pay
statement in full each billing statement.
7. DELINQUENCY OF STATEMENTS
The statements are due and payable immediately upon receipt unless
other specific written arrangements have been made. If any charges are not paid
as required by billing statement, they will be considered delinquent. In such
event, CLIENT shall pay a late payment charge equal to one percent (1%) of the
fees and costs in arrears for each month in which any of the fees remain unpaid.
This late payment charge is intended as liquidated damages for failure to pay
fees when due, and represents from time fees are withheld plus reasonable
administrative costs of collecting and accounting for unpaid fees. CLIENT
understands and acknowledges that separate calculation of actual damages for
each instance of late payment would be extremely difficult and impractical, and
further acknowledges that the foregoing provision for liquidated damages is
reasonable under the circumstances existing as of the date of this Agreement.
In the event that CONSULTANT is required to enforce the terms of this
Agreement or if same must be referred to a collection agency for collection, the
prevailing party shall also receive reimbursement for attorney's fees and court
costs expended.
8. DISCHARGE AND WITHDRAWAL
CLIENT may discharge CONSULTANT at any time for the following: felony
conviction, bankruptcy, material unremedied breach of the terms and conditions
of this Agreement, breach of fiduciary duty, or any proven unlawful or unethical
activities, provided that final payment for any outstanding balances are
received in full with written notice of termination.
CONSULTANT may not withdraw without CLIENT's consent unless CLIENT
materially breaches the terms of this Agreement, CLIENT's failure to pay
CONSULTANT fees, CLIENT's refusal to cooperate with CONSULTANT or to follow
CONSULTANTs advice or requests on any material matter, or any other CLIENT
INITIALS_______, _____________ DATE INITIALS________, ________ DATE
<PAGE>
Page 3 of 8 Inclusive
action, in action, or caused circumstance by CLIENT that would render
CONSULTANT's services unlawful or unethical, felony conviction or indictment,
bankruptcy, any proven unlawful or unethical activities by CLIENT. Furthermore,
upon CONSULTANT's withdrawal for Good Cause, CLIENT shall forfeit any or all
remaining retainer balance, or if any future retainer payments have not come due
at the time of CONSULTANT's withdrawal for Good Cause, such retainer payments
shall immediately become due, payable, and immediately forfeited by CLIENT to
CONSULTANT.
9. INDEMNIFICATION
The CLIENT agrees to indemnify and hold harmless CONSULTANT, and his
affiliates, agents, subsidiaries, successors, predecessors, legatees, designees,
representatives, employees, and assigns from and against any and all Losses of
CLIENT, directly or indirectly, as a result of, or based upon or arising from
(i) any inaccuracy in or breach of non-performance of any of the
representations, warranties, covenants, or agreements made by the CLIENT in or
pursuant to this Agreement, or (ii) any other matter as to which the CLIENT in
other provisions of this Agreement has agreed to indemnify CONSULTANT.
The CLIENT agrees to indemnify, defend, and hold harmless the
CONSULTANT , including but not limited to, the following: (i) any Tax payable by
or on behalf of the CLIENT or any of its Affiliates, (ii) any deficiencies in
any Tax payable by or on behalf of the CLIENT or any of its Affiliates arising
from any audit by any taxing agency or authority, (iii) Taxes of any member of a
consolidated or combined tax group of which the CLIENT or any of its Affiliates
is, or was at any time, a member, for which CONSULTANT is jointly or severally
liable as a result of inclusion in such group, (iv) any claim or demand for
reimbursement or indemnification resulting from any transfer by the CLIENT of
any Tax benefits or credits to any other Person, and (v) any Tax liabilities
arising out of the transfer of the Shares.
The CLIENT shall have the responsibility for, and the right to control,
at the CLIENT's expense, the audit (and disposition thereof) of any Tax Return
and to participate in and approve the disposition of the audit of any tax return
if such audit or disposition thereof could give rise to a claim for
indemnification hereunder. CONSULTANT shall have the right directly or through
its designated representatives, to review in advance and comment upon a
submissions made in the course of audits or appeals thereof to any Governmental
Entity and to approve the disposition of any audit adjustment with respect to
such periods if such disposition will or might reasonably be expected to result
in an increase in Taxes of the CLIENT as to which CONSULTANT is jointly or
severally liable as a result of inclusion in such group. Any party seeking
indemnification with respect to any Loss shall give notice to the party required
to provide indemnity hereunder ( the "Indemnifying Party").
If any claim, demand, or liability is asserted against any third party
against an Indemnified Party, the Indemnifying Party shall upon written request
of the Indemnified Party, defend any actions or proceedings brought against the
Indemnified Party in respect of matters embraced by the indemnity, but the
Indemnified Party shall have the right to conduct and control the defense,
compromise or settlement of any Indemnifiable Claim if the Indemnified Party
chooses to do so, on behalf of and for the account and risk of the Indemnifying
Party who shall be bound by the result so obtained to the extent provided
herein. If, after a request to defend any action or proceeding, the Indemnifying
Party neglects to defend the Indemnified Party, a recovery against the latter
suffered by it in good faith, is conclusive in its favor against the
Indemnifying Party, provided however that, if the Indemnifying Party has not
received reasonable notice of the action or proceeding against the Indemnified
Party, or is not allowed to control its defense, judgment against the
Indemnified Party is only presumptive evidence against the Indemnifying Party.
Each Party hereto, to the extent that it is or becomes an Indemnifying Party,
hereby stipulates that a judgment against an Indemnified Party shall be
conclusive against the Indemnifying Party. The parties shall cooperate in the
defense of all third party claims, which may give rise to Indemnifiable Claims
hereunder. In connection with the defense of any claim, each party shall make
available to the party controlling such defense, any books, records or other
documents within its control that are reasonably requested in the course of such
defense and necessary or appropriate for such defense.
This Section 9 shall survive any termination of this Agreement. This
indemnification shall further survive the termination and term of this Agreement
and shall remain in effect for a period of the late of (i) two years after the
termination or term of this Agreement or (ii) such time as CONSULTANT believes,
in the exercise of reasonable discretion, that the risk of Losses to the
CONSULTANT hereunder is not material to CONSULTANT (the "Indemnification
Period"). Any matter as to which a claim has been asserted by notice to the
other party that is pending or unresolved by the end of any applicable
limitation period shall continue to be covered by this Section 10
notwithstanding any applicable statute of limitations (which the parties hereby
waive) until such matter is finally terminated or otherwise resolved by the
parties under this Agreement or by a court of competent jurisdiction and any
amounts payable hereunder are finally determined and paid. The CLIENT agrees to
notify CONSULTANT of any liabilities, claims or misrepresentations, breaches or
other matters covered by this Section 9 upon discovery or receipt of notice
thereof ( other than from CONSULTANT ). This Section 9 shall not be deemed to
preclude or otherwise limit in any way the exercise of any other rights or
pursuit of other remedies for the breach of this Agreement or with respect to
any misrepresentation.
10. COVENANTS, REPRESENTATIONS, AND WARRANTIES OF CLIENT AND PRINCIPALS
10.01. CLIENT and its PRINCIPALS hereby jointly covenant, represent and
warrant to and with the CLIENT, the fulfillment and accuracy of each covenant,
representation and warranty hereinbelow, and further agree and covenant that
each such covenant, representation, and warranty is a condition precedent to
CLIENT's obligations pursuant to this Agreement, and further that all such
covenants, representations, and warranties shall survive the execution of the
Agreement. CLIENT and its PRINCIPALS hereby covenant, represent, and warrant:
(a) CLIENT is a Corporation, duly organized, validly existing, and in
good standing under the laws of the State of Colorado, has all necessary powers
to own its properties and to carry on its business as now owned and operated by
it and is duly qualified to conduct business in the State of Colorado, and is in
the process of obtaining good standing in all other jurisdictions where its
business requires it to be so qualified and in good standing.
INITIALS_______, _____________ DATE INITIALS________, ________ DATE
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Page 4 of 8 Inclusive
(b) The persons signing this Agreement as its PRINCIPALS own, whether
of record. or beneficially, directly or indirectly, a majority of the common
stock, voting rights, and equitable interest in the CLIENT.
(c) The CLIENT has no subsidiaries.
(d) The CLIENT is not a registered and reporting COMPANY under the
Exchange Act.
(e) The execution and delivery of this Agreement, the issuance of the
Shares by the CLIENT to CONSULTANT and the compliance by the CLIENT with all the
provisions of this Agreement (i) are within the corporate power and authority of
the CLIENT, (ii) do not require the approval or consent of any stockholders of
the CLIENT, and (iii) have been authorized by all requisite proceedings on the
part of the CLIENT. Assuming due execution and delivery of this Agreement by
CLIENT, this Agreement is a valid, legal, and binding obligation of CLIENT
enforceable in accordance with its terms except (a) only as the CLIENT's
obligations may be affected by bankruptcy, insolvency, reorganization or similar
laws, or by equitable principles relating to or limiting creditors' rights
generally, and (b) that the remedies of specific performance, injunction, and
other forms of equitable relief are subject to certain tests of equity
jurisdiction, equitable defenses, and the discretion of the court before which
any proceeding therefore may be brought.
(g) The total outstanding obligations of the CLIENT do not exceed the
sum of $1,000,000.00 owed to various creditors, and other operating expenses.
(h) The CLIENT does not have any accounts payable except as
specifically set forth herein.
(i) The CLIENT does not have any material liabilities, whether accrued,
contingent or otherwise, and whither due or to become due, probable of assertion
or not, except liabilities that are reflected or disclosed herein.
(j) Except as otherwise set forth herein or previously disclosed to
CONSULTANT, there are no Orders or Actions pending, or, to the best knowledge of
the CLIENT, threatened, against or affecting the CLIENT or any of its properties
or assets that individually or when aggregated with one or more other Orders or
Actions has or might reasonably be expected to have a material adverse effect on
the business, on the CLIENT's ability to perform under this Agreement, or any
aspect of the transactions contemplated by this Agreement. Except as otherwise
set forth herein, there are no matters for which the CLIENT has received any
notice, claim or assertion, or, to the best knowledge of the CLIENT, which
otherwise has been threatened or is reasonably expected to be threatened or
initiated, against or affecting the CLIENT or any director, officer, employee,
agent, or representative of the CLIENT or any other Person, nor to the best
knowledge of the CLIENT is there any reasonable basis therefore.
(k) Minute Books. The minute books of the CLIENT accurately reflect all
actions and proceedings taken to date by the respective shareholders, boards of
directors and committees of the CLIENT, and such minute books contain true and
complete copies of the charter documents of the CLIENT and all related
amendments. the stock record books of the CLIENT reflect accurately all
transactions in the capital stock of the CLIENT.
(l) Accounting Records. The CLIENT has records that accurately and
validly reflect their respective transactions, and accounting controls
sufficient to insure that such transactions are executed in accordance with
management's general or specific authorization.
(m) Insurance. True copies of all insurance policies of the CLIENT have
been made available for review by, or delivered to, CONSULTANT.
(n) Permits. To the best knowledge of the CLIENT, the CLIENT holds all
Permits that are required by a Governmental Entity to permit it to conduct
business as now conducted, and all such Permits are valid and in full force and
effect and will remain so upon consummation of the transactions contemplated by
this Agreement. No suspension, cancellation, or termination of any such Permits
is threatened or imminent.
(o) Compliance with Law. To the best knowledge of the CLIENT, the
CLIENT is organized and has conducted business in accordance with applicable
Laws, and the forms, procedures and practices of the CLIENT are in compliance
with all applicable Laws, in all material respects.
(p) Accuracy of Information. To the best knowledge of the CLIENT, none
of the information supplied or to be supplied on behalf of the CLIENT (i) to any
Person for inclusion in any document or application filed with any Governmental
Entity having jurisdiction over or in connection this Agreement; or (ii) to
CLIENT, its agents or representatives in connection with this Agreement or
negotiations leading up to this Agreement did contain, or at the respective time
such information was delivered, will contain any untrue statement of material
fact, or omitted or will omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. If any such
information at any time subsequent to delivery and prior to the execution of
this Agreement becomes untrue or misleading, in any material respect, the CLIENT
will promptly notify CONSULTANT in writing of such fact and reason for such
change.
11. CONFLICTS OF INTEREST
CLIENT hereby acknowledges that CONSULTANT may have material
relationships with NASD member Broker/Dealers or other entities and may have and
hold current NASD licenses through and by certain NASD member firms independent
INITIALS_______, _____________ DATE INITIALS________, ________ DATE
<PAGE>
Page 5 of 8 Inclusive
of CONSULTANT's outside business activities; which is not represented to be by
and through such NASD member. CLIENT further acknowledges that services
performed herein are independent of said NASD members as outside business
practices and as such, shall be disclosed as required by regulatory authorities
and CLIENT herein waives all potential conflicts of interests arising from said
services, this Agreement, or material relationships herein described or with any
other entity past, current, or future that may or may not be in direct
competition or conflict with CLIENT.
12. NON-EXCLUSIVITY BY CONSULTANT / EXCLUSIVITY BY CLIENT
CLIENT hereby acknowledges that CONSULTANT may have material
relationships with other CLIENTs as Retainors for similar services past,
currently, or in the future. CLIENT hereby waives all rights to exclusive
representation by CONSULTANT unless otherwise agreed by the parties in writing.
CLIENT hereby agrees that CLIENT shall be exclusive to CONSULTANT with regards
to the services performed pursuant to Section 2 hereof, in whole or in part, for
a period of sixty (60) months following the execution of this Agreement, at the
annual rate expressly referenced in Section 4 of this Agreement. In the event
that Section 4 is modified or amended at a later date, the original,
non-modified, non-amended Section 4 hereunder shall be utilized solely for
reference under this Section 13 hereof. In the event that CLIENT desire to
utilize a third party for such services referenced in Section 2 hereunder,
CLIENT must obtain express prior written consent from CONSULTANT prior to
engaging any third party for said services.
13. GOVERNING LAW
This Agreement shall be interpreted and governed by applicable
commercial and civil law of the State of California. In the event that any Party
hereto be domiciled in a jurisdiction other than the State of California, that
certain Party hereby waives all rights and privileges under such jurisdiction
and further stipulates solely to the State of California for jurisdiction of
prevailing law.
14. CHOICE OF LAW; BINDING ARBITRATION AS EXCLUSIVE REMEDY
Should a dispute or controversy arise relating in any way to this
Agreement, or to the rights and responsibilities set forth hereunder, the
CONSULTANT and the CLIENT shall make a reasonable attempt to settle the matter
amicably between themselves. Notwithstanding remedy(s) referenced in Section 4
hereinabove, failing such settlement, any action to enforce or interpret this
Agreement, or to resolve disputes between the CONSULTANT and the CLIENT shall be
settled by binding arbitration in the State of California, in accordance with
the rules of the American Arbitration Association. Any such Arbitration shall
take place in Los Angeles, California, and shall be conducted by a single
arbitrator.
The decision of the Arbitrator shall be final and binding. Either party
may commence arbitration by sending a written demand for arbitration to the
other parties. Such demand shall set forth the nature of the matter to be
resolved by arbitration. The substantive law of the State of California shall be
applied by the Arbitrator to the resolution of the dispute. The prevailing party
shall be entitled to reimbursement of attorney fees, costs, and expenses
incurred in connection with the arbitration.
All decisions of the Arbitrator shall be final, binding, and conclusive
on all parties. The Arbitrator shall award to the prevailing party, or parties,
attorney fees, costs, and expenses incurred in connection with the arbitration,
unless the arbitrator, in its reasonable discretion, determines such an award to
be unjust. Any award rendered by the Arbitrator, including an award of costs and
attorney's fees, may be enforced in any court having jurisdiction over the
person against whom the award is rendered. Judgment may be entered upon any such
decision in accordance with applicable law in any court having jurisdiction
thereof. The Arbitrator (if permitted under applicable law), or such court, may
issue a writ of execution to enforce the Arbitrator's decision.
REGARDING SUCH ARBITRATION, THE PARTIES UNDERSTAND THE FOLLOWING:
- the parties are waiving their right to a jury trial and their right
to seek remedies available in court proceedings;
- pre-arbitration discovery is generally more limited than and
different from court proceedings;
- the arbitrator's award is not required to include factual findings or
legal reasoning; and,
- any party's right to appeal or to seek modification of the award is
strictly limited and the award is final and binding on the parties.
15. REMEDIES CUMULATIVE
All rights and remedies of either party hereunder are cumulative and
are in addition to and shall not exclude any other right or remedy allowed by
law. All rights and remedies may be exercised concurrently.
16. NON-DISCLOSURE AND NON-CIRCUMVENTION
The Parties hereto agree to abide by and adhere to the principles of
non-disclosure, non-circumvention, and ethical business practices, and each
further agrees not to disclose the nature or extent of the transactions or
INITIALS_______, _____________ DATE INITIALS________, ________ DATE
<PAGE>
Page 6 of 8 Inclusive
business opportunities involved, so that the confidentiality and proprietary
nature of the information obtained by all parties shall be maintained for a
period of Five (5) years unless otherwise waived in writing by CLIENT. Upon
material breach of this Section 17 by CLIENT, CONSULTANT may pursue all
injunctive relief necessary and CLIENT hereby waives the posting of any or all
bond inherent to such relief, for the sole purpose of preventing any further
breach.
17. MUTUAL FIDELITY
Each of the Parties hereto shall deal with the other Parties hereto in
all matters relating to the above services with the fullest degree of fiduciary
responsibility to each other to this Agreement. Each party shall give all
material information, documents, and contracts (or copies thereof) as
necessitates to the above-mentioned matter.
18. COUNTERPARTS
This Agreement may be executed in any number of counterparts, each of
which is considered to be an original, but all of which together are one and the
same document. Any changes, handwritten or otherwise, must be signed by all
signatories, or successor(s) or assign(s) thereto.
19. CAPTIONS
The captions appearing in this agreement have been inserted for
reference only and as a matter of convenience no way define, limit, or enlarge
the scope or meaning of this Agreement or any provision thereof.
20. NOTICES
All notices, demands, requests and other communications under this
Agreement shall be in writing, shall be considered to have been given and
received if delivered by certified mail return receipt requested, postage
prepaid, or by overnight courier to the following addresses:
If to CONSULTANT: Kit Bromley & Company, Inc.
Business Development
25876 The Old Road Suite 240
Valencia, CA 91381
If to CLIENT: Cyntech Technologies, Inc. and Successors
4305 Derbyshire Trace SE
Conyers, GA 30094-4258
Attention: R. Frank Meyer, CEO
21. INUREMENT
This Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective heirs, legatees, designees, successors, and
permitted assigns.
22. WAIVER
No waiver of any terms or conditions of this Agreement shall be binding
or effective for any purpose unless expressed in writing and executed by the
party consenting the waiver.
23. ENTIRE AGREEMENT
The provisions described herein are the entire Agreement between the
parties and supersede all previous communications, representations, and
agreements whether verbal or written between the parties regarding the subject
matter hereof.
24. SUCCESSORS AND ASSIGNS
This agreement shall be binding upon the successor and assigns of each
of the parties.
25. GENDER, TENSE, ETC,
Whenever the masculine, feminine or neuter genders are use herein, as
required by the specific context or particular circumstance, they shall include
each of the other genders as appropriate. Whenever the singular or plural
numbers are used, they shall be deemed to be the other as required. Wherever the
past or present tense is utilized in this Agreement and the context or
circumstances require another interpretation, the present shall include the past
and the future, the future shall include the present, and the past shall include
the present.
INITIALS_______, _____________ DATE INITIALS________, ________ DATE
<PAGE>
Page 7 of 8 Inclusive
26. SPECIFIC PERFORMANCE; SEVERABILITY
CLIENT hereby acknowledges and agrees that irreparable damage would
occur in the event any of the provisions of this Agreement were not performed
CLIENT in accordance with their specific terms or were otherwise breached and
that such damage would not be compensable in money damages and that it would be
extremely difficult or impracticable to measure the resultant damages. It is
expressly agreed by CLIENT that CONSULTANT shall be entitled to an injunction or
injunctions to prevent breaches of the provisions of this Agreement and to
enforce specifically the terms and provisions hereof, in addition to any other
remedy to which CONSULTANT may be entitled at law or equity, and CLIENT that is
pursued for breach of this Agreement expressly waives any defense that a remedy
in damages would be adequate and expressly waives any requirement in an action
for specific performance for the posting of a bond by CONSULTANT, the party
bringing such action. Should any part of this Agreement be declared or held
invalid for any reason, such invalidity shall not affect the validity of the
remainder of the agreement, which shall continue in full force and effect.
Further, the Parties hereby agree to immediately adopt, in writing, a substitute
provision designed to implement the Parties original intent herein, while fully
complying with the rule, statute, or ruling under which the previous provision
was stricken or unenforceable.
27. DISPOSITION OF INTELLECTUAL PROPERTY
All work product produced by CONSULTANT hereunder shall remain the sole
property of CONSULTANT and all rights of ownership shall be exclusive and sole
to CONSULTANT. All work product referenced herein may not be reproduced,
disseminated, quoted, replicated, published, or transmitted in whole or in part
and all rights are reserved expressly and solely by CONSULTANT for such work
product. Said work product may be copyrighted or seek similar intellectual
property protection afforded to CONSULTANT under this express provision.
28. TELEFAX ACCEPTANCE
In the interest of saving time, this Agreement, any extensions or
modifications or supporting documentation shall be deemed to be an original if
executed and accepted or compliance therewith by telefax. AN EXECUTED TELEFAX
COPY OF THIS AGREEMENT IS A LEGALLY BINDING AGREEMENT. Said copy of originating
telefax is to be mailed or via courier to the receiving party within seventy two
(72) hours from the time of transmission.
IN WITNESS WHEREOF, the Parties hereto, through their authorized
signatories, have executed this Agreement in multiple counterparts and have set
their hands to same, intending to be legally bound thereby, as of the day and
year above written.
<TABLE>
<CAPTION>
<S> <C>
CONSULTANT: Kit Bromley & Company, Inc. CLIENT: Cyntech Technologies, Inc.
and Successors and/or Assigns Successors and/or Assigns
_______________/s/__________________ _____________/s/_________________
Authorized Agent: Kit Bromley, Managing Director Authorized Agent: R. Frank Meyer, CEO
</TABLE>
INITIALS_______, _____________ DATE INITIALS________, ________ DATE
<PAGE>
EXHIBIT "A"
Page 1 of 5 Inclusive
NON-CIRCUMVENTION, CONFIDENTIALITY &
NONDISCLOSURE AGREEMENT
This Non-circumvention, Confidentiality & Nondisclosure Agreement (hereinafter,
the "Agreement") is made this 15th day of July 1999, by and among, Kit Bromley &
Co., Inc.; Christopher S. Bromley, jointly and severally, located at 25876 The
Old Road Suite 240; Valencia, CA 91381 and :
Company Name and Address
1. Centech Technology Group, Inc.: 4305 Derbyshire Place; Conyers, GA 30094
Regarding any potential business transactions or relationships.
Whereas, the parties are mutually desirous of exploring and/or transacting
various business transactions in cooperation with one another for their mutual
benefit and, whereas the parties recognize that in order to explore the
possibility of entering into various business transactions it may be necessary
to share with one another confidential and proprietary information. The parties
therefore agree and understand that the disclosure of any proprietary or
confidential information with one another shall not constitute a waver of trade
secret status for any such information. It is further agreed that neither party
will use, for its own benefit or the benefit of any third party, the
confidential or proprietary information supplied to it by the other party, or
learned by it in the course of dealing with the other party. Such information
may be used only with the written authorization of the other party, and only
within the scope of that authorization.
Both parties agree to keep the confidential or proprietary information of the
other party, whether such information is discovered or disclosed, as strictly
confidential and secret. Neither party shall have the power or authority to
reveal the confidential or proprietary information of the other without specific
written authorization signed by the other party. Neither party shall have the
power or authority to wave the protected or trade secret status of the
confidential or proprietary information of the other party.
The parties hereby acknowledge, and intend to establish by this agreement, a
fiduciary relationship which is limited to the mutual nondisclosure, and
non-use, of the confidential, proprietary, or sensitive information which they
may disclose to one another or which might otherwise be learned by the parties
through there dealings with one another.
The parties understand and agree that the confidential and proprietary
information of each of them includes the names of their customers, investors,
financiers, suppliers, and persons or entities which are in privity of contract
with a party to this agreement. The parties further understand and agree that
the confidential and proprietary information of each of them includes the names
Initials:1._______2._______
<PAGE>
EXHIBIT "A"
Page 2 of 5 Inclusive
of persons and entities which are their prospective; customers, investors,
financiers, suppliers, and persons or entities which are in the process of
negotiating contracts with a party to this agreement, when such prospective
relationship is known or disclosed to the other party.
The parties understand and agree that each of them has spent considerable time
effort and expense in developing their respective industry contacts, including,
but not limited to, contacts which are of assistance in investor relations,
finance, customer relations, marketing, and distribution. The parties therefore
agree that for purposes of this agreement, the names and identities of any such
contacts shall be considered confidential and proprietary information, which
shall not be used or disclosed by the other party.
Each party hereby agrees that it will take all reasonable steps necessary to
protect from disclosure the trade secrets or confidential or proprietary
information of the other party.
The parties further agree to abide by the following additional terms and
conditions set forth below:
1. This Agreement is to confirm that each of the named signatories separately
and individually, hereby agree that he/she/they will not make any contact with
or deal with any person, company, partnership, joint venture, trust,
association, or any employee, agency, officer, director, shareholder,
beneficiary, or partner thereof introduced by another of the signatories
separately or jointly without specific and agreed to permission in writing of
the introducing signatory or signatories.
2. This Agreement is for five (5) years from the date above and is to be applied
to any and all transactions entertained by the signatories including subsequent,
follow-up, repeat or re-negotiated transactions, as well as to the initial
transaction regardless of the success of the project. The signatories hereby
confirm that identities of any person, company, partnership, joint venture,
trust, association, or any employee, agent, officer, director, shareholder,
beneficiary, or partner thereof are currently and in the future the property of
the introducing signatory or signatories and shall remain so for the duration of
this Agreement.
Notwithstanding the five (5) year duration of this Agreement, neither
party shall have the power or authority to disclose at any time the trade
secrets of the other party. Neither party shall disclose the trade secrets of
the other bother during the course of this Agreement and following the
expiration of this Agreement.
3. The parties agree that they will protect and not disclose either directly or
indirectly, any confidential information disclosed by the other without the
prior express, written consent of the furnishing party. For the purpose of this
agreement, "CONFIDENTIAL INFORMATION" shall include, but is not limited to any
and all disclosures made by each to the other concerning facts; figures;
contracts; contacts; names or availability of buyers or sellers or names of
Initials:1._______2._______
<PAGE>
EXHIBIT "A"
Page 3 of 5 Inclusive
agents of available buyers or sellers, descriptions, addresses, employees'
names, telephone, telex, and/or facsimile numbers, or other means of access
thereto; bank information, codes, or references; borrowers and lenders; and
businesses, trusts, corporations, groups, individuals, partners, brokers, and/or
any such other information either directly or indirectly introduced or made
known by any party hereto. Such confidential information is the property and the
business secrets of the party who provides, introduces or makes known such
confidential information to the other party. The signatories agree that they
will not in any manner solicit or accept any business from sources that are made
known to them by another party without the express permission of the party who
made the source available.
4. In the event of a violation or alleged violation of this Agreement, either
party hereto may bring suit in a court of competent jurisdiction to determine
the existence of a violation, enjoin a violation, or to recover damages,
including all court costs, expert witness fees and reasonable attorneys' fees.
5. It is also understood that a signatory cannot be considered or adjudged to be
in violation of this Agreement when the alleged violation is involuntary due to
situations beyond his/her/their control; some evident examples being acts of
God, civil disturbances, theft or prior provable knowledge or possession of
information regarding business activities.
6. This document shall be considered to include not only the parties hereto, but
their division(s), subsidiary(ies), officer(s), director(s), employee(s),
consultant(s), principal(s), agent(s), associate(s), business relation(s),
personal representative(s), family member(s), assignee(s), heir(s) and all other
persons or other entities wherever the context requires and admits.
7. The signatories of this document agree that no effort shall be made to
circumvent this Agreement or the agreed to terms hereof in an effort to gain
fees, commissions, remunerations to benefit one or more of the signatories of
this Agreement while excluding equal or agreed to benefit to any other of the
signatories of this document.
8. It is understood that this Agreement is a reciprocal bi-lateral agreement
between the signatories concerning their privileged information and contracts.
9. Full disclosure of business dealings and arrangements or agreements or fees,
commissions, remunerations or considerations between introduced parties and one
or more of the signatories shall be understood and adhered to as a principal of
this Agreement.
10. Each party hereto acknowledges that the other has other interests and
business, and that association is a non-exclusive association, and only related
to the commerce herein.
Initials:1._______2._______
<PAGE>
EXHIBIT "A"
Page 4 of 5 Inclusive
11. This Agreement together with any Exhibit(s) attached hereto, incorporated
herein or referenced, contains the entire Agreement of the parties hereto and no
prior written or oral negotiations, representations, inducements, promises, or
agreements between them regarding the subject of this Agreement not embodied
herein shall be of any force or effect. No express or implied warranties,
covenants, or representations have been made concerning the subject matter of
this Agreement unless expressly stated herein.
12. This Agreement may not be superseded and none of the terms of this Agreement
can be waived or modified except by an express written agreement signed by all
parties hereto. Any oral representations or modifications concerning this
Agreement shall be of no force and effect unless contained in a subsequent
written modification signed by all parties.
13. This Agreement shall be construed and regulated and its validity and effect
shall be determined by the laws and regulations of the State of California,
County of Los Angeles. Any Party hereto residing or domiciled in any foreign or
alien jurisdiction outside of the agreed upon venue of competent jurisdiction
hereinabove hereby expressly waives any and all right to venue of competent
jurisdiction within such foreign or alien venue of domicile or residence.
14. The failure of any party to enforce any provision of this Agreement shall
not be construed as waiver of any such provision, nor prevent such party
thereafter from enforcing such provision or any other provision of this
Agreement. The rights and remedies granted all parties herein are cumulative and
the election of one shall not constitute a waiver of such party's rights to
assert all other legal remedies available under the circumstances.
15. The captions, subject, section, and paragraph headings in this Agreement are
included for convenience and reference and do not form a part hereof and do not
in any way codify, interpret or construe the intent of the parties or affect the
construction or interpretations of any provision of this Agreement.
16. The original of this Agreement and one or more copies hereof have been
prepared and may be signed as duplicate originals, and each of the parties
hereto may retain an originally signed copy hereof. Each duplicate original
shall be deemed an original instrument as against any party who has signed it.
17. If the copy of this Agreement executed by the parties is a facsimile, it
shall be deemed the original Agreement, binding and enforceable, until such time
that "hard" originals are executed in the presence of the contracting parties.
This contract is being transacted and executed via facsimile with the full
acknowledgment and agreement of the parties.
Initials:1._______2._______
<PAGE>
EXHIBIT "A"
Page 5 of 5 Inclusive
18. If any clause or provision of this Agreement is struck down or found to be
unenforceable by a court of competent jurisdiction, then the same shall be
severed from the Agreement, and the remainder of this Agreement shall remain in
full force and effect.
19. The parties hereby agree that if at the time that any party to this
agreement discloses confidential or proprietary information, which is
within the prior knowledge of the party to whom the disclosure is made,
then the party to whom the disclosure is made shall immediately notify
the disclosing party of its prior knowledge of that information and
shall immediately produce documentation, or such evidence as is
available, of such prior knowledge.
Agreed and accepted as of the date above.
1. Kit Bromley & Co., Inc.
By: ___/s/________________________________ Date: July 15, 1999
Name: Christopher S. Bromley Title: Managing Director
2. Company: Centech Technology Group, Inc.
By: __/s/_________________________________ Date: July 15, 1999
Name: R. Frank Meyer Title: President
Consulting Agreement
THIS AGREEMENT (hereinafter referred to as "Agreement") is entered into
on this 9th day of March 1999 by and between Cyntech Technologies, Inc., a
corporation promulgated under the laws of the State of UTAH, and all
Subsidiaries, Successors, Affiliates, Designees, Legatees, and Assign(s), whose
primary place of business is 4305 Derbyshire Trace SE, Conyers, GA 30094-4258
(hereinafter referred to as "COMPANY") and The Challenge, LTD., Inc. and/or
Assign(s), (hereinafter referred to as ""CHALLENGE"").
SERVICES TO BE PROVIDED BY "CHALLENGE"
COMPANY retains "CHALLENGE" to provide marketing, distribution, and
strategic development agency and representation services within the following
regions: as follows: Latin American nations.
COOPERATION OF COMPANY
COMPANY understands that "CHALLENGE" cannot work effectively on
COMPANY's behalf without COMPANY cooperation and lack of cooperation may result
in higher fees, time delays, and possibly termination of this agreement. COMPANY
agrees to (a) Provide "CHALLENGE" with an address and telephone number(s) at
which all authorized Agents of COMPANY can be reached, and immediately inform
"CHALLENGE" of all changes; (B) Notify "CHALLENGE" immediately if COMPANY
receives or comes into possession of material information or knowledge of any
material omissions or material errors in connection with the operations of
COMPANY or the Securities Offering or bridge financing aforementioned in section
two (2); (c) Promptly provide all documentation and information as requested by
"CHALLENGE"; (d) Make all related parties available for telephone and office
consultations and/or inquires as well as other related activities; (e) Promptly
advise "CHALLENGE" of all events or changes of circumstances which may effect
COMPANY's material standing; (f) Do all things reasonably necessary for the
preparation, expedition, and execution of this matter; (g) Be truthful with
"CHALLENGE"; (h) Pay "CHALLENGE" on time.
RATE OF CONSULTING FEES
COMPANY agrees to pay a flat, previously agreed rate for business
development services and activities (as further defined in Section 2
hereinabove) spent on this matter by "CHALLENGE". "CHALLENGE"'s rate is
$350,000.00 for such services performed as referenced in Section 2 above. It is
understood that time is of the essence in this undertaking. Usual office hours
are 10:00AM PST to 6:00PM PST on weekdays except for holidays.
Payment of fees shall be as follows:
1. The sum of $150,000USD to be paid to and received by "CHALLENGE" no
later than the 15th of March, 1999;
2. The sum of $100,000USD to be paid to and received by "CHALLENGE" no
later than the 15th of April, 1999;
3. The sum of $100,000USD to be paid to and received by "CHALLENGE" no
later than the 15th of May, 1999;
If COMPANY shall become materially delinquent in excess of seven (7)
calendar days in any payment hereinabove, all services shall cease and the full
retainer shall become due and payable to "CHALLENGE" immediately. Further, upon
material delinquency in payment for services rendered By "CHALLENGE" for the
benefit of COMPANY, "CHALLENGE" may pursue all injunctive relief necessary and
COMPANY hereby expressly waives the posting of any or all bond inherent to such
relief, for the sole purpose of collecting such fees. This rate set forth above
covers general office work, conferences, research, telephone calls and for any
other tasks associated with the above referenced matter. COMPANY agrees to
arrange and pay for on a timely and expeditious manner, at "CHALLENGE"'s prudent
request, all necessary travel and lodging arrangements, round trip basis (ie.,
from portal to portal) in connection with the above referenced matter. COMPANY
hereby acknowledges that "CHALLENGE", as a courtesy and in good faith and trust,
shall initiate said services referenced hereinabove prior to the receipt of any
funds, and that "CHALLENGE" shall bear certain economic and monetary risk on
behalf of COMPANY.
COSTS AND EXPENSES
In addition to paying "CHALLENGE"'s fee as defined in Section 4 of this
Agreement, COMPANY shall reimburse "CHALLENGE" for any and all extraordinary
costs and expenses "CHALLENGE" may incur that is agreed by COMPANY to be outside
the context of general office work covered by Section 4 above. These
extraordinary other costs and expenses are to be confirmed and when possible, in
writing, with all necessary proof provided, prior to COMPANY disbursing the
funds in a prudent and timely manner. COMPANY shall be obligated to pay only
those expenses that are incurred with COMPANY's consent and/ or implied consent,
All promotional activities, entertainment expenses, legal fees, deposits,
engagement and/or commitment fees, and all other costs and expenses to be
disbursed on behalf of COMPANY for COMPANY's benefit shall be disbursed directly
by COMPANY in a prudent and timely manner or if "CHALLENGE" is to advance such
costs, at the sole discretion of "CHALLENGE", COMPANY shall reimburse
"CHALLENGE" for such costs upon request by "CHALLENGE". "CHALLENGE" shall have
no obligation to advance any sums for costs. Further, COMPANY agrees to retain
and/or engage any or all additional legal and accountancy counsel referred by
<PAGE>
"CHALLENGE" for matters being undertaken by "CHALLENGE" for the benefit of
COMPANY. COMPANY recognizes that if s/he fails to provide funds for costs when
requested by "CHALLENGE", actions necessary or helpful to COMPANY's matter may
not be taken.
STATEMENTS AND LIABILITY FOR CHARGES
"CHALLENGE" shall submit statements if any outstanding balances exist,
to COMPANY indicating the current status of the account and such balances due
and payable to "CHALLENGE" for services rendered. COMPANY should review these
statements carefully. If COMPANY does not notify "CHALLENGE" within forty-eight
(48) hours of COMPANY's receipt of the statements of any objections COMPANY may
have to the statement, "CHALLENGE" will assume that COMPANY approves of the
services rendered and charges. In reliance on that implied approval, "CHALLENGE"
will continue to render services pursuant to the terms of this Agreement
provided that a method of resolving all outstanding balances to be paid to
"CHALLENGE" is agreed to solely by "CHALLENGE" prior to the re-initiation of
said services.
All additional fees in excess of retainer are to be paid on the first
and the fifteenth of every month in respective amounts. COMPANY is liable to
"CHALLENGE" for all actual services rendered and costs associated therewith at
the time services are rendered or costs are incurred. COMPANY shall pay
"CHALLENGE"'s statements as indicated on the statement received. COMPANY shall
pay statement in full each billing statement.
DELINQUENCY OF STATEMENTS
The statements are due and payable immediately upon receipt unless
other specific written arrangements have been made. If any charges are not paid
as required by billing statement, they will be considered delinquent. In such
event, COMPANY shall pay a late payment charge equal to one percent (1%) of the
fees and costs in arrears for each month in which any of the fees remain unpaid.
This late payment charge is intended as liquidated damages for failure to pay
fees when due, and represents from time fees are withheld plus reasonable
administrative costs of collecting and accounting for unpaid fees. COMPANY
understands and acknowledges that separate calculation of actual damages for
each instance of late payment would be extremely difficult and impractical, and
further acknowledges that the foregoing provision for liquidated damages is
reasonable under the circumstances existing as of the date of this Agreement.
In the event that "CHALLENGE" is required to enforce the terms of this
Agreement or if same must be referred to a collection agency for collection, the
prevailing party shall also receive reimbursement for attorney's fees and court
costs expended.
DISCHARGE AND WITHDRAWAL
COMPANY may discharge "CHALLENGE" at any time for the following: felony
conviction, bankruptcy, material unremedied breach of the terms and conditions
of this Agreement, breach of fiduciary duty, or any proven unlawful or unethical
activities, provided that final payment for any outstanding balances are
received in full with written notice of termination.
"CHALLENGE" may not withdraw without COMPANY's consent unless COMPANY
materially breaches the terms of this Agreement, COMPANY's failure to pay
"CHALLENGE" fees, COMPANY's refusal to cooperate with "CHALLENGE" or to follow
"CHALLENGE"s advice or requests on any material matter, or any other COMPANY
action, in action, or caused circumstance by COMPANY that would render
"CHALLENGE"'s services unlawful or unethical, felony conviction or indictment,
bankruptcy, any proven unlawful or unethical activities by COMPANY. Furthermore,
upon "CHALLENGE"'s withdrawal for Good Cause, COMPANY shall forfeit any or all
remaining retainer balance, or if any future retainer payments have not come due
at the time of "CHALLENGE"'s withdrawal for Good Cause, such retainer payments
shall immediately become due, payable, and immediately forfeited by COMPANY to
"CHALLENGE".
INDEMNIFICATION
The COMPANY agrees to indemnify and hold harmless "CHALLENGE", and his
affiliates, agents, subsidiaries, successors, predecessors, legatees, designees,
representatives, employees, and assigns from and against any and all Losses of
COMPANY, directly or indirectly, as a result of, or based upon or arising from
(i) any inaccuracy in or breach of non-performance of any of the
representations, warranties, covenants, or agreements made by the COMPANY in or
pursuant to this Agreement, or (ii) any other matter as to which the COMPANY in
other provisions of this Agreement has agreed to indemnify "CHALLENGE".
The COMPANY agrees to indemnify, defend, and hold harmless the
"CHALLENGE" , including but not limited to, the following: (i) any Tax payable
by or on behalf of the COMPANY or any of its Affiliates, (ii) any deficiencies
in any Tax payable by or on behalf of the COMPANY or any of its Affiliates
arising from any audit by any taxing agency or authority, (iii) Taxes of any
member of a consolidated or combined tax group of which the COMPANY or any of
its Affiliates is, or was at any time, a member, for which "CHALLENGE" is
jointly or severally liable as a result of inclusion in such group, (iv) any
claim or demand for reimbursement or indemnification resulting from any transfer
by the COMPANY of any Tax benefits or credits to any other Person, and (v) any
Tax liabilities arising out of the transfer of the Shares.
The COMPANY shall have the responsibility for, and the right to
control, at the COMPANY's expense, the audit (and disposition thereof) of any
Tax Return and to participate in and approve the disposition of the audit of any
tax return if such audit or disposition thereof could give rise to a claim for
indemnification hereunder. "CHALLENGE" shall have the right directly or through
its designated representatives, to review in advance and comment upon a
submissions made in the course of audits or appeals thereof to any Governmental
Entity and to approve the disposition of any audit adjustment with respect to
such periods if such disposition will or might reasonably be expected to result
in an increase in Taxes of the COMPANY as to which "CHALLENGE" is jointly or
severally liable as a result of inclusion in such group. Any party seeking
indemnification with respect to any Loss shall give notice to the party required
to provide indemnity hereunder ( the "Indemnifying Party").
<PAGE>
If any claim, demand, or liability is asserted against any third party
against an Indemnified Party, the Indemnifying Party shall upon written request
of the Indemnified Party, defend any actions or proceedings brought against the
Indemnified Party in respect of matters embraced by the indemnity, but the
Indemnified Party shall have the right to conduct and control the defense,
compromise or settlement of any Indemnifiable Claim if the Indemnified Party
chooses to do so, on behalf of and for the account and risk of the Indemnifying
Party who shall be bound by the result so obtained to the extent provided
herein. If, after a request to defend any action or proceeding, the Indemnifying
Party neglects to defend the Indemnified Party, a recovery against the latter
suffered by it in good faith, is conclusive in its favor against the
Indemnifying Party, provided however that, if the Indemnifying Party has not
received reasonable notice of the action or proceeding against the Indemnified
Party, or is not allowed to control its defense, judgment against the
Indemnified Party is only presumptive evidence against the Indemnifying Party.
Each Party hereto, to the extent that it is or becomes an Indemnifying Party,
hereby stipulates that a judgment against an Indemnified Party shall be
conclusive against the Indemnifying Party. The parties shall cooperate in the
defense of all third party claims, which may give rise to Indemnifiable Claims
hereunder. In connection with the defense of any claim, each party shall make
available to the party controlling such defense, any books, records or other
documents within its control that are reasonably requested in the course of such
defense and necessary or appropriate for such defense.
This Section 9 shall survive any termination of this Agreement. This
indemnification shall further survive the termination and term of this Agreement
and shall remain in effect for a period of the late of (i) two years after the
termination or term of this Agreement or (ii) such time as "CHALLENGE" believes,
in the exercise of reasonable discretion, that the risk of Losses to the
"CHALLENGE" hereunder is not material to "CHALLENGE" (the "Indemnification
Period"). Any matter as to which a claim has been asserted by notice to the
other party that is pending or unresolved by the end of any applicable
limitation period shall continue to be covered by this Section 10
notwithstanding any applicable statute of limitations (which the parties hereby
waive) until such matter is finally terminated or otherwise resolved by the
parties under this Agreement or by a court of competent jurisdiction and any
amounts payable hereunder are finally determined and paid. The COMPANY agrees to
notify "CHALLENGE" of any liabilities, claims or misrepresentations, breaches or
other matters covered by this Section 9 upon discovery or receipt of notice
thereof ( other than from "CHALLENGE" ). This Section 9 shall not be deemed to
preclude or otherwise limit in any way the exercise of any other rights or
pursuit of other remedies for the breach of this Agreement or with respect to
any misrepresentation.
GOVERNING LAW
This Agreement shall be interpreted and governed by applicable
commercial and civil law of the State of California. In the event that any Party
hereto be domiciled in a jurisdiction other than the State of California, that
certain Party hereby waives all rights and privileges under such jurisdiction
and further stipulates solely to the State of California for jurisdiction of
prevailing law.
CHOICE OF LAW; BINDING ARBITRATION AS EXCLUSIVE REMEDY
Should a dispute or controversy arise relating in any way to this
Agreement, or to the rights and responsibilities set forth hereunder, the
"CHALLENGE" and the COMPANY shall make a reasonable attempt to settle the matter
amicably between themselves. Notwithstanding remedy(s) referenced in Section 4
hereinabove, failing such settlement, any action to enforce or interpret this
Agreement, or to resolve disputes between the "CHALLENGE" and the COMPANY shall
be settled by binding arbitration in the State of California, in accordance with
the rules of the American Arbitration Association. Any such Arbitration shall
take place in Los Angeles, California, and shall be conducted by a single
arbitrator.
The decision of the Arbitrator shall be final and binding. Either party
may commence arbitration by sending a written demand for arbitration to the
other parties. Such demand shall set forth the nature of the matter to be
resolved by arbitration. The substantive law of the State of California shall be
applied by the Arbitrator to the resolution of the dispute. The prevailing party
shall be entitled to reimbursement of attorney fees, costs, and expenses
incurred in connection with the arbitration.
All decisions of the Arbitrator shall be final, binding, and conclusive
on all parties. The Arbitrator shall award to the prevailing party, or parties,
attorney fees, costs, and expenses incurred in connection with the arbitration,
unless the arbitrator, in its reasonable discretion, determines such an award to
be unjust. Any award rendered by the Arbitrator, including an award of costs and
attorney's fees, may be enforced in any court having jurisdiction over the
person against whom the award is rendered. Judgment may be entered upon any such
decision in accordance with applicable law in any court having jurisdiction
thereof. The Arbitrator (if permitted under applicable law), or such court, may
issue a writ of execution to enforce the Arbitrator's decision.
REGARDING SUCH ARBITRATION, THE PARTIES UNDERSTAND THE FOLLOWING:
- the parties are waiving their right to a jury trial and their right
to seek remedies available in court proceedings;
- pre-arbitration discovery is generally more limited than and
different from court proceedings;
- the arbitrator's award is not required to include factual findings or
legal reasoning; and,
- any party's right to appeal or to seek modification of the award is
strictly limited and the award is final and binding on the parties.
<PAGE>
REMEDIES CUMULATIVE
All rights and remedies of either party hereunder are cumulative and
are in addition to and shall not exclude any other right or remedy allowed by
law. All rights and remedies may be exercised concurrently.
NON-DISCLOSURE AND NON-CIRCUMVENTION
The Parties hereto agree to abide by and adhere to the principles of
non-disclosure, non-circumvention, and ethical business practices, and each
further agrees not to disclose the nature or extent of the transactions or
business opportunities involved, so that the confidentiality and proprietary
nature of the information obtained by all parties shall be maintained for a
period of Five (5) years unless otherwise waived in writing by COMPANY. Upon
material breach of this Section 17 by COMPANY, "CHALLENGE" may pursue all
injunctive relief necessary and COMPANY hereby waives the posting of any or all
bond inherent to such relief, for the sole purpose of preventing any further
breach.
MUTUAL FIDELITY
Each of the Parties hereto shall deal with the other Parties hereto in
all matters relating to the above services with the fullest degree of fiduciary
responsibility to each other to this Agreement. Each party shall give all
material information, documents, and contracts (or copies thereof) as
necessitates to the above-mentioned matter.
COUNTERPARTS
This Agreement may be executed in any number of counterparts, each of
which is considered to be an original, but all of which together are one and the
same document. Any changes, handwritten or otherwise, must be signed by all
signatories, or successor(s) or assign(s) thereto.
CAPTIONS
The captions appearing in this agreement have been inserted for
reference only and as a matter of convenience no way define, limit, or enlarge
the scope or meaning of this Agreement or any provision thereof.
NOTICES
All notices, demands, requests and other communications under this
Agreement shall be in writing, shall be considered to have been given and
received if delivered by certified mail return receipt requested, postage
prepaid, or by overnight courier to the following addresses:
If to "CHALLENGE": The Challenge, LTD.,
C/O Chris Bromley, Atty-in-fact
25516 Schubert Circle Unit C
Stevenson Ranch, CA 91381
If to COMPANY: Cyntech Technologies, Inc. and Successors
4305 Derbyshire Trace SE
Conyers, GA 30094-4258
Attention: R. Frank Meyer, CEO
INUREMENT
This Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective heirs, legatees, designees, successors, and
permitted assigns.
WAIVER
No waiver of any terms or conditions of this Agreement shall be binding
or effective for any purpose unless expressed in writing and executed by the
party consenting the waiver.
ENTIRE AGREEMENT
The provisions described herein are the entire Agreement between the
parties and supersede all previous communications, representations, and
agreements whether verbal or written between the parties regarding the subject
matter hereof.
<PAGE>
SUCCESSORS AND ASSIGNS
This agreement shall be binding upon the successor and assigns of each
of the parties.
GENDER, TENSE, ETC,
Whenever the masculine, feminine or neuter genders are use herein, as
required by the specific context or particular circumstance, they shall include
each of the other genders as appropriate. Whenever the singular or plural
numbers are used, they shall be deemed to be the other as required. Wherever the
past or present tense is utilized in this Agreement and the context or
circumstances require another interpretation, the present shall include the past
and the future, the future shall include the present, and the past shall include
the present.
SPECIFIC PERFORMANCE; SEVERABILITY
COMPANY hereby acknowledges and agrees that irreparable damage would
occur in the event any of the provisions of this Agreement were not performed
COMPANY in accordance with their specific terms or were otherwise breached and
that such damage would not be compensable in money damages and that it would be
extremely difficult or impracticable to measure the resultant damages. It is
expressly agreed by COMPANY that "CHALLENGE" shall be entitled to an injunction
or injunctions to prevent breaches of the provisions of this Agreement and to
enforce specifically the terms and provisions hereof, in addition to any other
remedy to which "CHALLENGE" may be entitled at law or equity, and COMPANY that
is pursued for breach of this Agreement expressly waives any defense that a
remedy in damages would be adequate and expressly waives any requirement in an
action for specific performance for the posting of a bond by "CHALLENGE", the
party bringing such action. Should any part of this Agreement be declared or
held invalid for any reason, such invalidity shall not affect the validity of
the remainder of the agreement, which shall continue in full force and effect.
Further, the Parties hereby agree to immediately adopt, in writing, a substitute
provision designed to implement the Parties original intent herein, while fully
complying with the rule, statute, or ruling under which the previous provision
was stricken or unenforceable.
TELEFAX ACCEPTANCE
In the interest of saving time, this Agreement, any extensions or
modifications or supporting documentation shall be deemed to be an original if
executed and accepted or compliance therewith by telefax. AN EXECUTED TELEFAX
COPY OF THIS AGREEMENT IS A LEGALLY BINDING AGREEMENT. Said copy of originating
telefax is to be mailed or via courier to the receiving party within seventy two
(72) hours from the time of transmission.
IN WITNESS WHEREOF, the Parties hereto, through their authorized
signatories, have executed this Agreement in multiple counterparts and have set
their hands to same, intending to be legally bound thereby, as of the day and
year above written.
<TABLE>
<CAPTION>
<S> <C>
"CHALLENGE": The Challenge, LTD., Inc. COMPANY: Cyntech Technologies, Inc.
and Successors and/or Assigns Successors and/or Assigns
______________/s/_________________ _____________/s/______________
Authorized Agent: Chris Bromley, Attorney-in-fact Authorized Agent: R. Frank Meyer, CEO
</TABLE>
Services Agreement
THIS AGREEMENT (hereinafter referred to as "Agreement") is entered into
on this 17th day of April, 1999 by and between Cyntech Technologies, Inc., a
corporation promulgated under the laws of the State of UTAH, and all
Subsidiaries, Successors, Affiliates, Designees, Legatees, and Assign(s), whose
primary place of business is 4305 Derbyshire Trace SE, Conyers, GA 30094-4258
(hereinafter referred to as "CYNT") and California Business Intelligence, Inc.
and/or Assign(s), (hereinafter referred to as "CBI").
SERVICES TO BE PROVIDED BY CBI
CYNT retains CBI to provide business development services regarding
CYNT, as follows: (1) Corporate Investigations; (2) background checks; (3) due
diligence investigations; and, (4) security analysis.
COOPERATION OF CYNT
CYNT understands that CBI cannot work effectively on CYNT's behalf
without CYNT cooperation and lack of cooperation may result in higher fees, time
delays, and possibly termination of this agreement. CYNT agrees to (a) Provide
CBI with an address and telephone number(s) at which all authorized Agents of
CYNT can be reached, and immediately inform CBI of all changes; (B) Notify CBI
immediately if CYNT receives or comes into possession of material information or
knowledge of any material omissions or material errors in connection with the
operations of CYNT or the Securities Offering or bridge financing aforementioned
in section two (2); (c) Promptly provide all documentation and information as
requested by CBI; (d) Make all related parties available for telephone and
office consultations and/or inquires as well as other related activities; (e)
Promptly advise CBI of all events or changes of circumstances which may effect
CYNT's material standing; (f) Do all things reasonably necessary for the
preparation, expedition, and execution of this matter; (g) Be truthful with CBI;
(h) Pay CBI on time.
RATE OF CONSULTING FEES
CYNT agrees to pay a flat, previously agreed rate for business
development services and activities (as further defined in Section 2
hereinabove) spent on this matter by CBI. CBI's rate is $200,000.00 for such
services performed as referenced in Section 2 above. It is understood that time
is of the essence in this undertaking. Usual office hours are 10:00AM PST to
6:00PM PST on weekdays except for holidays.
Payment of fees shall be as follows:
1. The sum of $50,000USD to be paid to and received by CBI no later than
the 17th of April, 1999;
2. The sum of $50,000USD to be paid to and received by CBI no later than
the 1st of May, 1999;
3. The sum of $50,000USD to be paid to and received by CBI no later than
the 17th of May, 1999;
4. The sum of $50,000USD to be paid to and received by CBI no later than
the 1st of June, 1999;
If CYNT shall become materially delinquent in excess of seven (7)
calendar days in any payment hereinabove, all services shall cease and the full
retainer shall become due and payable to CBI immediately. Further, upon material
delinquency in payment for services rendered By CBI for the benefit of CYNT, CBI
may pursue all injunctive relief necessary and CYNT hereby expressly waives the
posting of any or all bond inherent to such relief, for the sole purpose of
collecting such fees. This rate set forth above covers general office work,
conferences, research, telephone calls and for any other tasks associated with
the above referenced matter. CYNT agrees to arrange and pay for on a timely and
expeditious manner, at CBI's prudent request, all necessary travel and lodging
arrangements, round trip basis (ie., from portal to portal) in connection with
the above referenced matter. CYNT hereby acknowledges that CBI, as a courtesy
and in good faith and trust, shall initiate said services referenced hereinabove
prior to the receipt of any funds, and that CBI shall bear certain economic and
monetary risk on behalf of CYNT.
COSTS AND EXPENSES
In addition to paying CBI's fee as defined in Section 4 of this
Agreement, CYNT shall reimburse CBI for any and all extraordinary costs and
expenses CBI may incur that is agreed by CYNT to be outside the context of
general office work covered by Section 4 above. These extraordinary other costs
and expenses are to be confirmed and when possible, in writing, with all
necessary proof provided, prior to CYNT disbursing the funds in a prudent and
timely manner. CYNT shall be obligated to pay only those expenses that are
incurred with CYNT's consent and/ or implied consent, All promotional
activities, entertainment expenses, legal fees, deposits, engagement and/or
commitment fees, and all other costs and expenses to be disbursed on behalf of
CYNT for CYNT's benefit shall be disbursed directly by CYNT in a prudent and
timely manner or if CBI is to advance such costs, at the sole discretion of CBI,
CYNT shall reimburse CBI for such costs upon request by CBI. CBI shall have no
obligation to advance any sums for costs. Further, CYNT agrees to retain and/or
engage any or all additional legal and accountancy counsel referred by CBI for
matters being undertaken by CBI for the benefit of CYNT. CYNT recognizes that if
s/he fails to provide funds for costs when requested by CBI, actions necessary
or helpful to CYNT's matter may not be taken.
<PAGE>
STATEMENTS AND LIABILITY FOR CHARGES
CBI shall submit statements if any outstanding balances exist, to CYNT
indicating the current status of the account and such balances due and payable
to CBI for services rendered. CYNT should review these statements carefully. If
CYNT does not notify CBI within forty-eight (48) hours of CYNT's receipt of the
statements of any objections CYNT may have to the statement, CBI will assume
that CYNT approves of the services rendered and charges. In reliance on that
implied approval, CBI will continue to render services pursuant to the terms of
this Agreement provided that a method of resolving all outstanding balances to
be paid to CBI is agreed to solely by CBI prior to the re-initiation of said
services.
All additional fees in excess of retainer are to be paid on the first
and the fifteenth of every month in respective amounts. CYNT is liable to CBI
for all actual services rendered and costs associated therewith at the time
services are rendered or costs are incurred. CYNT shall pay CBI's statements as
indicated on the statement received. CYNT shall pay statement in full each
billing statement.
DELINQUENCY OF STATEMENTS
The statements are due and payable immediately upon receipt unless
other specific written arrangements have been made. If any charges are not paid
as required by billing statement, they will be considered delinquent. In such
event, CYNT shall pay a late payment charge equal to one percent (1%) of the
fees and costs in arrears for each month in which any of the fees remain unpaid.
This late payment charge is intended as liquidated damages for failure to pay
fees when due, and represents from time fees are withheld plus reasonable
administrative costs of collecting and accounting for unpaid fees. CYNT
understands and acknowledges that separate calculation of actual damages for
each instance of late payment would be extremely difficult and impractical, and
further acknowledges that the foregoing provision for liquidated damages is
reasonable under the circumstances existing as of the date of this Agreement.
In the event that CBI is required to enforce the terms of this
Agreement or if same must be referred to a collection agency for collection, the
prevailing party shall also receive reimbursement for attorney's fees and court
costs expended.
DISCHARGE AND WITHDRAWAL
CYNT may discharge CBI at any time for the following: felony
conviction, bankruptcy, material unremedied breach of the terms and conditions
of this Agreement, breach of fiduciary duty, or any proven unlawful or unethical
activities, provided that final payment for any outstanding balances are
received in full with written notice of termination.
CBI may not withdraw without CYNT's consent unless CYNT materially
breaches the terms of this Agreement, CYNT's failure to pay CBI fees, CYNT's
refusal to cooperate with CBI or to follow CBIs advice or requests on any
material matter, or any other CYNT action, in action, or caused circumstance by
CYNT that would render CBI's services unlawful or unethical, felony conviction
or indictment, bankruptcy, any proven unlawful or unethical activities by CYNT.
Furthermore, upon CBI's withdrawal for Good Cause, CYNT shall forfeit any or all
remaining retainer balance, or if any future retainer payments have not come due
at the time of CBI's withdrawal for Good Cause, such retainer payments shall
immediately become due, payable, and immediately forfeited by CYNT to CBI.
INDEMNIFICATION
The CYNT agrees to indemnify and hold harmless CBI, and his affiliates,
agents, subsidiaries, successors, predecessors, legatees, designees,
representatives, employees, and assigns from and against any and all Losses of
CYNT, directly or indirectly, as a result of, or based upon or arising from (i)
any inaccuracy in or breach of non-performance of any of the representations,
warranties, covenants, or agreements made by the CYNT in or pursuant to this
Agreement, or (ii) any other matter as to which the CYNT in other provisions of
this Agreement has agreed to indemnify CBI.
The CYNT agrees to indemnify, defend, and hold harmless the CBI ,
including but not limited to, the following: (i) any Tax payable by or on behalf
of the CYNT or any of its Affiliates, (ii) any deficiencies in any Tax payable
by or on behalf of the CYNT or any of its Affiliates arising from any audit by
any taxing agency or authority, (iii) Taxes of any member of a consolidated or
combined tax group of which the CYNT or any of its Affiliates is, or was at any
time, a member, for which CBI is jointly or severally liable as a result of
inclusion in such group, (iv) any claim or demand for reimbursement or
indemnification resulting from any transfer by the CYNT of any Tax benefits or
credits to any other Person, and (v) any Tax liabilities arising out of the
transfer of the Shares.
The CYNT shall have the responsibility for, and the right to control,
at the CYNT's expense, the audit (and disposition thereof) of any Tax Return and
to participate in and approve the disposition of the audit of any tax return if
such audit or disposition thereof could give rise to a claim for indemnification
hereunder. CBI shall have the right directly or through its designated
representatives, to review in advance and comment upon a submissions made in the
course of audits or appeals thereof to any Governmental Entity and to approve
the disposition of any audit adjustment with respect to such periods if such
disposition will or might reasonably be expected to result in an increase in
Taxes of the CYNT as to which CBI is jointly or severally liable as a result of
inclusion in such group. Any party seeking indemnification with respect to any
Loss shall give notice to the party required to provide indemnity hereunder (
the "Indemnifying Party").
If any claim, demand, or liability is asserted against any third party
against an Indemnified Party, the Indemnifying Party shall upon written request
of the Indemnified Party, defend any actions or proceedings brought against the
Indemnified Party in respect of matters embraced by the indemnity, but the
Indemnified Party shall have the right to conduct and control the defense,
compromise or settlement of any Indemnifiable Claim if the Indemnified Party
chooses to do so, on behalf of and for the account and risk of the Indemnifying
Party who shall be bound by the result so obtained to the extent provided
herein. If, after a request to defend any action or proceeding, the Indemnifying
Party neglects to defend the Indemnified Party, a recovery against the latter
suffered by it in good faith, is conclusive in its favor against the
Indemnifying Party, provided however that, if the Indemnifying Party has not
received reasonable notice of the action or proceeding against the Indemnified
<PAGE>
Party, or is not allowed to control its defense, judgment against the
Indemnified Party is only presumptive evidence against the Indemnifying Party.
Each Party hereto, to the extent that it is or becomes an Indemnifying Party,
hereby stipulates that a judgment against an Indemnified Party shall be
conclusive against the Indemnifying Party. The parties shall cooperate in the
defense of all third party claims, which may give rise to Indemnifiable Claims
hereunder. In connection with the defense of any claim, each party shall make
available to the party controlling such defense, any books, records or other
documents within its control that are reasonably requested in the course of such
defense and necessary or appropriate for such defense.
This Section 9 shall survive any termination of this Agreement. This
indemnification shall further survive the termination and term of this Agreement
and shall remain in effect for a period of the late of (i) two years after the
termination or term of this Agreement or (ii) such time as CBI believes, in the
exercise of reasonable discretion, that the risk of Losses to the CBI hereunder
is not material to CBI (the "Indemnification Period"). Any matter as to which a
claim has been asserted by notice to the other party that is pending or
unresolved by the end of any applicable limitation period shall continue to be
covered by this Section 10 notwithstanding any applicable statute of limitations
(which the parties hereby waive) until such matter is finally terminated or
otherwise resolved by the parties under this Agreement or by a court of
competent jurisdiction and any amounts payable hereunder are finally determined
and paid. The CYNT agrees to notify CBI of any liabilities, claims or
misrepresentations, breaches or other matters covered by this Section 9 upon
discovery or receipt of notice thereof ( other than from CBI ). This Section 9
shall not be deemed to preclude or otherwise limit in any way the exercise of
any other rights or pursuit of other remedies for the breach of this Agreement
or with respect to any misrepresentation.
COVENANTS, REPRESENTATIONS, AND WARRANTIES OF CYNT AND PRINCIPALS
10.01. CYNT and its PRINCIPALS hereby jointly covenant, represent and
warrant to and with the CYNT, the fulfillment and accuracy of each covenant,
representation and warranty hereinbelow, and further agree and covenant that
each such covenant, representation, and warranty is a condition precedent to
CYNT's obligations pursuant to this Agreement, and further that all such
covenants, representations, and warranties shall survive the execution of the
Agreement. CYNT and its PRINCIPALS hereby covenant, represent, and warrant:
(a) CYNT is a Corporation, duly organized, validly existing, and in
good standing under the laws of the State of Colorado, has all necessary powers
to own its properties and to carry on its business as now owned and operated by
it and is duly qualified to conduct business in the State of Colorado, and is in
the process of obtaining good standing in all other jurisdictions where its
business requires it to be so qualified and in good standing.
(b) The persons signing this Agreement as its PRINCIPALS own, whether
of record. or beneficially, directly or indirectly, a majority of the common
stock, voting rights, and equitable interest in the CYNT.
(c) The CYNT has no subsidiaries.
(d) The CYNT is not a registered and reporting COMPANY under the
Exchange Act.
(e) The execution and delivery of this Agreement, the issuance of the
Shares by the CYNT to CBI and the compliance by the CYNT with all the provisions
of this Agreement (i) are within the corporate power and authority of the CYNT,
(ii) do not require the approval or consent of any stockholders of the CYNT, and
(iii) have been authorized by all requisite proceedings on the part of the CYNT.
Assuming due execution and delivery of this Agreement by CYNT, this Agreement is
a valid, legal, and binding obligation of CYNT enforceable in accordance with
its terms except (a) only as the CYNT's obligations may be affected by
bankruptcy, insolvency, reorganization or similar laws, or by equitable
principles relating to or limiting creditors' rights generally, and (b) that the
remedies of specific performance, injunction, and other forms of equitable
relief are subject to certain tests of equity jurisdiction, equitable defenses,
and the discretion of the court before which any proceeding therefore may be
brought.
(g) The total outstanding obligations of the CYNT do not exceed the sum
of $1,000,000.00 owed to various creditors, and other operating expenses.
(h) The CYNT does not have any accounts payable except as specifically
set forth herein.
(i) The CYNT does not have any material liabilities, whether accrued,
contingent or otherwise, and whither due or to become due, probable of assertion
or not, except liabilities that are reflected or disclosed herein.
(j) Except as otherwise set forth herein or previously disclosed to
CBI, there are no Orders or Actions pending, or, to the best knowledge of the
CYNT, threatened, against or affecting the CYNT or any of its properties or
assets that individually or when aggregated with one or more other Orders or
Actions has or might reasonably be expected to have a material adverse effect on
the business, on the CYNT's ability to perform under this Agreement, or any
aspect of the transactions contemplated by this Agreement. Except as otherwise
set forth herein, there are no matters for which the CYNT has received any
notice, claim or assertion, or, to the best knowledge of the CYNT, which
otherwise has been threatened or is reasonably expected to be threatened or
initiated, against or affecting the CYNT or any director, officer, employee,
agent, or representative of the CYNT or any other Person, nor to the best
knowledge of the CYNT is there any reasonable basis therefore.
(k) Minute Books. The minute books of the CYNT accurately reflect all
actions and proceedings taken to date by the respective shareholders, boards of
directors and committees of the CYNT, and such minute books contain true and
complete copies of the charter documents of the CYNT and all related amendments.
the stock record books of the CYNT reflect accurately all transactions in the
capital stock of the CYNT.
<PAGE>
(l) Accounting Records. The CYNT has records that accurately and
validly reflect their respective transactions, and accounting controls
sufficient to insure that such transactions are executed in accordance with
management's general or specific authorization.
(m) Insurance. True copies of all insurance policies of the CYNT have
been made available for review by, or delivered to, CBI.
(n) Permits. To the best knowledge of the CYNT, the CYNT holds all
Permits that are required by a Governmental Entity to permit it to conduct
business as now conducted, and all such Permits are valid and in full force and
effect and will remain so upon consummation of the transactions contemplated by
this Agreement. No suspension, cancellation, or termination of any such Permits
is threatened or imminent.
(o) Compliance with Law. To the best knowledge of the CYNT, the CYNT is
organized and has conducted business in accordance with applicable Laws, and the
forms, procedures and practices of the CYNT are in compliance with all
applicable Laws, in all material respects.
(p) Accuracy of Information. To the best knowledge of the CYNT, none of
the information supplied or to be supplied on behalf of the CYNT (i) to any
Person for inclusion in any document or application filed with any Governmental
Entity having jurisdiction over or in connection this Agreement; or (ii) to
CYNT, its agents or representatives in connection with this Agreement or
negotiations leading up to this Agreement did contain, or at the respective time
such information was delivered, will contain any untrue statement of material
fact, or omitted or will omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. If any such
information at any time subsequent to delivery and prior to the execution of
this Agreement becomes untrue or misleading, in any material respect, the CYNT
will promptly notify CBI in writing of such fact and reason for such change.
GOVERNING LAW
This Agreement shall be interpreted and governed by applicable
commercial and civil law of the State of California. In the event that any Party
hereto be domiciled in a jurisdiction other than the State of California, that
certain Party hereby waives all rights and privileges under such jurisdiction
and further stipulates solely to the State of California for jurisdiction of
prevailing law.
CHOICE OF LAW; BINDING ARBITRATION AS EXCLUSIVE REMEDY
Should a dispute or controversy arise relating in any way to this
Agreement, or to the rights and responsibilities set forth hereunder, the CBI
and the CYNT shall make a reasonable attempt to settle the matter amicably
between themselves. Notwithstanding remedy(s) referenced in Section 4
hereinabove, failing such settlement, any action to enforce or interpret this
Agreement, or to resolve disputes between the CBI and the CYNT shall be settled
by binding arbitration in the State of California, in accordance with the rules
of the American Arbitration Association. Any such Arbitration shall take place
in Los Angeles, California, and shall be conducted by a single arbitrator.
The decision of the Arbitrator shall be final and binding. Either party
may commence arbitration by sending a written demand for arbitration to the
other parties. Such demand shall set forth the nature of the matter to be
resolved by arbitration. The substantive law of the State of California shall be
applied by the Arbitrator to the resolution of the dispute. The prevailing party
shall be entitled to reimbursement of attorney fees, costs, and expenses
incurred in connection with the arbitration.
All decisions of the Arbitrator shall be final, binding, and conclusive
on all parties. The Arbitrator shall award to the prevailing party, or parties,
attorney fees, costs, and expenses incurred in connection with the arbitration,
unless the arbitrator, in its reasonable discretion, determines such an award to
be unjust. Any award rendered by the Arbitrator, including an award of costs and
attorney's fees, may be enforced in any court having jurisdiction over the
person against whom the award is rendered. Judgment may be entered upon any such
decision in accordance with applicable law in any court having jurisdiction
thereof. The Arbitrator (if permitted under applicable law), or such court, may
issue a writ of execution to enforce the Arbitrator's decision.
REGARDING SUCH ARBITRATION, THE PARTIES UNDERSTAND THE FOLLOWING:
- the parties are waiving their right to a jury trial and their right
to seek remedies available in court proceedings;
- pre-arbitration discovery is generally more limited than and
different from court proceedings;
- the arbitrator's award is not required to include factual findings or
legal reasoning; and,
- any party's right to appeal or to seek modification of the award is
strictly limited and the award is final and binding on the parties.
<PAGE>
REMEDIES CUMULATIVE
All rights and remedies of either party hereunder are cumulative and
are in addition to and shall not exclude any other right or remedy allowed by
law. All rights and remedies may be exercised concurrently.
NON-DISCLOSURE AND NON-CIRCUMVENTION
The Parties hereto agree to abide by and adhere to the principles of
non-disclosure, non-circumvention, and ethical business practices, and each
further agrees not to disclose the nature or extent of the transactions or
business opportunities involved, so that the confidentiality and proprietary
nature of the information obtained by all parties shall be maintained for a
period of Five (5) years unless otherwise waived in writing by CYNT. Upon
material breach of this Section 17 by CYNT, CBI may pursue all injunctive relief
necessary and CYNT hereby waives the posting of any or all bond inherent to such
relief, for the sole purpose of preventing any further breach.
MUTUAL FIDELITY
Each of the Parties hereto shall deal with the other Parties hereto in
all matters relating to the above services with the fullest degree of fiduciary
responsibility to each other to this Agreement. Each party shall give all
material information, documents, and contracts (or copies thereof) as
necessitates to the above-mentioned matter.
COUNTERPARTS
This Agreement may be executed in any number of counterparts, each of
which is considered to be an original, but all of which together are one and the
same document. Any changes, handwritten or otherwise, must be signed by all
signatories, or successor(s) or assign(s) thereto.
CAPTIONS
The captions appearing in this agreement have been inserted for
reference only and as a matter of convenience no way define, limit, or enlarge
the scope or meaning of this Agreement or any provision thereof.
NOTICES
All notices, demands, requests and other communications under this
Agreement shall be in writing, shall be considered to have been given and
received if delivered by certified mail return receipt requested, postage
prepaid, or by overnight courier to the following addresses:
If to CBI: California Business Intelligence, Inc.
2019 Ponderosa Suite 21
Camarillo, CA 91381
If to CYNT: Cyntech Technologies, Inc. and Successors
4305 Derbyshire Trace SE
Conyers, GA 30094-4258
Attention: R. Frank Meyer, CEO
INUREMENT
This Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective heirs, legatees, designees, successors, and
permitted assigns.
WAIVER
No waiver of any terms or conditions of this Agreement shall be binding
or effective for any purpose unless expressed in writing and executed by the
party consenting the waiver.
ENTIRE AGREEMENT
The provisions described herein are the entire Agreement between the
parties and supersede all previous communications, representations, and
agreements whether verbal or written between the parties regarding the subject
matter hereof.
<PAGE>
SUCCESSORS AND ASSIGNS
This agreement shall be binding upon the successor and assigns of each
of the parties.
GENDER, TENSE, ETC,
Whenever the masculine, feminine or neuter genders are use herein, as
required by the specific context or particular circumstance, they shall include
each of the other genders as appropriate. Whenever the singular or plural
numbers are used, they shall be deemed to be the other as required. Wherever the
past or present tense is utilized in this Agreement and the context or
circumstances require another interpretation, the present shall include the past
and the future, the future shall include the present, and the past shall include
the present.
SPECIFIC PERFORMANCE; SEVERABILITY
CYNT hereby acknowledges and agrees that irreparable damage would occur
in the event any of the provisions of this Agreement were not performed CYNT in
accordance with their specific terms or were otherwise breached and that such
damage would not be compensable in money damages and that it would be extremely
difficult or impracticable to measure the resultant damages. It is expressly
agreed by CYNT that CBI shall be entitled to an injunction or injunctions to
prevent breaches of the provisions of this Agreement and to enforce specifically
the terms and provisions hereof, in addition to any other remedy to which CBI
may be entitled at law or equity, and CYNT that is pursued for breach of this
Agreement expressly waives any defense that a remedy in damages would be
adequate and expressly waives any requirement in an action for specific
performance for the posting of a bond by CBI, the party bringing such action.
Should any part of this Agreement be declared or held invalid for any reason,
such invalidity shall not affect the validity of the remainder of the agreement,
which shall continue in full force and effect. Further, the Parties hereby agree
to immediately adopt, in writing, a substitute provision designed to implement
the Parties original intent herein, while fully complying with the rule,
statute, or ruling under which the previous provision was stricken or
unenforceable.
TELEFAX ACCEPTANCE
In the interest of saving time, this Agreement, any extensions or
modifications or supporting documentation shall be deemed to be an original if
executed and accepted or compliance therewith by telefax. AN EXECUTED TELEFAX
COPY OF THIS AGREEMENT IS A LEGALLY BINDING AGREEMENT. Said copy of originating
telefax is to be mailed or via courier to the receiving party within seventy two
(72) hours from the time of transmission.
IN WITNESS WHEREOF, the Parties hereto, through their authorized
signatories, have executed this Agreement in multiple counterparts and have set
their hands to same, intending to be legally bound thereby, as of the day and
year above written.
<TABLE>
<CAPTION>
<S> <C>
CBI: California Business Intelligence, Inc. CYNT: Cyntech Technologies, Inc.
and Successors and/or Assigns Successors and/or Assigns
/s/ /s/
- ------------------------------------ ------------------------------------
Authorized Agent: Mike Adams, Principal Authorized Agent: R. Frank Meyer, CEO
</TABLE>
MINUTES
OF
SPECIAL MEETING OF BOARD OF DIRECTORS
OF
CYNTECH TECHNOLOGIES, INC.
The Board of Directors' special meeting was called at the request of Frank
Meyer, President, via telephone, and attended by Board members Les Mallory,
William F. Meyer, and Secretary Brian Hass at Atlanta Georgia on February
19,1999.
R. Frank Meyer requests the authorization to conclude the Serengeti acquisition.
Resolution CTI-01-003
Motion was made by Brian Hass to authorize the acquisition of Serengeti and
it's associated entities. The acquisition calls for a change in the agreement
already in place, which called for:
$1,000,000 for 50% of Serengeti as follows:
$400,000 Cash
$600,000 Cyntech Stock (Q $5/share)
The new agreement calls for:
$1,125,000 for 100% of Serengeti as follows:
$225,000 Cash*
$900,000 Cyntech Stock (@ $5/share)
Cash to be applied to:
$ 75,000 (Serengeti)
$ 25,000 (Serengeti Operations)
$ 4,000 (Furniture/Office Equip./Manufacturing
Equip.)
$121,000 (Engine Tech. Operations)
Cyntech also agrees to the following:
1. Employment contracts for L. Mallory and D. Reel for 3 years.
2. Funding of Cyntech Development Company, which will consist of two
additional professionals totally dedicated to achieving the 7 year
objectives.
3. Mr. Mallory and Reel will work primarily on Cyntech programs, plus oversee
Engine Technologies and Serengeti activities as needed.
<PAGE>
Board of Directors Meeting
February 19, 1999
Page 2
Approved this 19th day of February, 1999 at Houston, Texas.
/s/
--------------------------
Brian Hass - Coporate Secretary
/s/
--------------------------
R. Frank Meyer - Director
President
/s/
--------------------------
Lester D. Mallory, Jr.
Chairman of the Board
/s/
--------------------------
William F. Meyer - Director
HYDROCARBON TECHNOLOGY LICENSING AGREEMENT
BETWEEN
CYNTECH RESEARCH & ENGINEERING, INC.
AND
CYNTECH TECHNOLOGIES, INC.
<PAGE>
This Agreement, dated November 30, 1998 by and between Cyntech Research &
Engineering, Inc., (hereafter called "Cyntech Research"), whose address is 9436
Steger Road, Post Office Box 995, Frankfort, Illinois 60432, and Cyntech
Technologies, Inc. (hereafter called "Cyntech"), whose address is 8130 Westglen
Drive, Houston, Texas 77063 to wit:
Cyntech Research is a technology and research development company which
specializes in hydrocarbon recovery technologies which utilizes proprietary and
patent pending technologies developed by Cyntech Research to recover
petrochemical feedstocks from waste rubber and plastics. The primary technology
is called "Thermal Reduction Technology."
Cyntech Technologies, Inc., is a company organized to utilize the Thermal
Reduction Technology license exclusively developed by Cyntech Research. Cyntech
will construct, manage, and market facilities utilizing the Cyntech Research
Thermal Reduction Technology.
The terms and conditions of this licensing agreement are as follows:
Technology License:
Cyntech Research hereby agrees to license to Cyntech exclusively all of the
technologies developed by Cyntech Research which will allow Cyntech to have the
capability to produce hydrocarbon petrochemical feedstock which can be sold, or
further enhance into petrochemical manufactured products such as methanol,
liquids (propane, butane, etc.).
It is furthered agreed that all technologies that would upgrade the future
plants to be built by Cyntech shall be licensed to Cyntech at no additional
charge for plant modifications. Cyntech will be solely responsible for plant
modifications as well as engineering modifications that many occur if upgraded
modifications are warranted or desired by Cyntech in existing plants.
Cyntech Research will be required to advise Cyntech that such modifications or
upgrades are available, and if such upgrades are recommended or required to
enhance the plant equipment performance or flexibility, Cyntech Research shall
supply all engineering specifications and technicians to modify any existing
plant(s). Cyntech shall be required to pay lodging, meals, and transportation to
the plant site(s) where modifications are required or recommended.
It is understood that each plant facility is a separate entity, and requires a
individual license from Cyntech Research for each location that meets the
criteria required by Cyntech research as noted in this Agreement.
<PAGE>
Term of License:
The term of this exclusive license shall be ten (10) years, with two ten (10)
years options to renew the license agreement.
The licensing fee shall not increase at the five (5) year review and adjustment
period by more than the posted inflation rate as noted in the Consumer Price
Index maintained and reported by the U.S. Government on an annualized basis for
each year during the term of the license.
The effective date of the licensing rights period shall begin when the $500,000
license fee for Phase I for the Chambers County, Texas plant facility is paid.
Cyntech shall have one year from the date of this agreement to commence the
construction of a plant, or close construction financing, whichever comes first.
Engineering Drawings and Data Ownership:
All engineering, technical, and proprietary data conveyed to Cyntech by Cyntech
Research shall remain the exclusive property in perpetuity. It is understood
that Cyntech Research will supply technical and engineering support and
qualified personnel to work with Cyntech plant engineers and contractors to
build each plant.
All engineering drawings utilized by Cyntech shall remain the property of
Cyntech Research and shall be safeguarded under strict privacy and
confidentially requirements at all times as instructed by Cyntech Research.
No third parties shall be authorized to review or copy any plant drawings
without explicit written approval by senior management of Cyntech Research.
Plant Permitting:
Cyntech Research shall provide technical and engineering support to Cyntech in
the permitting of each plant facility to be built, and to include attendance at
public meetings as may be required to explain the basic technology.
Cyntech Research shall also assist in the permitting of each plant with state,
local, and federal agencies as may be required.
It is understood that no information shall be filed or disclosed to state,
local, or federal officials in each plant permitting without Cyntech Research's
senior management written approval. All final decisions on permits shall rests
with Cyntech Research's senior management.
<PAGE>
Site Locations:
Cyntech Research will assist Cyntech is identifying site locations where a
hydrocarbon recovery facility can be located based on economic criteria
previously established by Cyntech and Cyntech Research.
The final decision to locate any Cyntech facility is the sole responsibility and
authority of Cyntech Research.
Cyntech Research will assist Cyntech is developing a site selection criteria
format which shall be utilized in all preliminary proposed plant site locations.
Cyntech Research will also have the final authority to determine the final plant
design and which products shall be produced.
Licensing Fee(s): Initial
Prior to the commencement of any plant construction and prior to any
commencement of plant engineering, the following licensing fees shall be in
effect as follows:
(1) For Phase I of each plant, a $500,000 fee shall be paid to compensate
Cyntech Research in site selection, preliminary engineering, plant permitting,
public hearings, meetings with government officials, and final engineering with
Cyntech's engineers and contractors.
(2) For Phase II of each plant, a licensing fee of $250,000 shall be paid as
noted in item (1) above.
(3) For Phase III of each plant, a licensing fee of $250,000 shall be paid as
noted in item (1) above.
(4) For each additional Phase after Phase III, no additional licensing fees
shall be required.
Licensing Fee: Plant Operational
Cyntech shall pay monthly a license fee of 7% of gross income to Cyntech
research received for each plant.
Cyntech Research shall have the right to audit the records of Cyntech at any
time during normal business hours to insure compliance with this Agreement.
In the event that errors of more than $25,000 on an annual basis of non-payment
of license fees due is discovered and documented, Cyntech shall be required to
pay it Cyntech Research's auditors' fees within ninety (90) days after invoicing
by its outside auditors.
<PAGE>
If the license underpayment fees occur more than three (3) times on an annual
basis, Cyntech Research shall be entitled to a penalty of 100% of all
underpayments in the calendar year.
The annual license fee shall be adjusted every five (5) years based on The
Consumer Price Index (CPI) maintained and reported by the U.S. Government for
each year the license has been in effect at each adjustment period.
Arbitration:
It is agreed that any disputes in this agreement shall be submitted to the
American Arbitration Association and both parties agreed to accept the finding
of any arbitration proceedings with at least three panel members present.
Each party shall be responsible for any costs associated with the arbitration
review.
The non-victorious party shall be responsible for payments of all costs incurred
by the victorious party including legal fees.
Domicile:
For purposes of this Agreement, the State of Illinois is the headquarters for
Cyntech Research for the purpose of this Agreement.
The State of Texas shall be the domicile for Cyntech.
Agreed to November 30, 1998 at Houston, Texas.
Cyntech Research & Engineering, Inc.
____________/s/_______________
Max Cornelius
Vice President - Operations
Cyntech Technologies, Inc.
___________/s/________________
R. Frank Meyer
President
Engagement Agreement
between
Charles Tovey and Cyntech Technologies, Inc.
This Engagement Agreement ("Agreement"), entered into on this 5th day of
January, 1998, will document any or all prior verbal or written agreements
entered into by and among Cyntech Technologies, Inc. (Nevada) and all
affiliates, including, parent companies, subsidiaries, successors, affiliates,
assign(s), designees and legatees ("Cyntech" or "Client"), excluding Cyntech
Research & Engineering, Inc. and Cyntech of Chambers County, Inc. for all
periods prior to January 5, 1998; and Charles Tovet and/or any assign(s) (the
"Consultant" or "Tovey")
Cyntech hereby retains Consultant as the chief oil and gas consultant to Cyntech
Technologies, Inc. for the ten-year period ending December 31, 2007, at which
time this Agreement will automatically convert to a month to month basis. The
Agreement will remain in effect until December 31, 2007 or such additional time
period until Cyntech or the Consultant provides a 60-day written notice of its
intent to terminate this Agreement to the other party.
The Consultant will work directly for and under the control and supervision of
the President of Cyntech Technologies, Inc., unless agreed otherwise to in
writing by Cyntech and Consultant. Consultant will have overall responsibility
for developing plant and technology facilities of Cyntech's North American
facilities, subject to the direction and oversight of the Chairman of the Board
of Directors. Subject to the authority and control retained by the President of
the Company, Consultant shall provide consultant advisory services, in exchange
for the fees set forth in this Agreement.
In performing its obligations under this Agreement, Consultant shall use his
best efforts to:
1) devote so much of his time as is reasonably necessary to
perform the assigned duties and obligations, as set forth in
this Agreement;
2) manage the research and development, plant construction and
operations of Cyntech in a businesslike, confidential,
ethical, and non-competitive manner;
3) periodically report to and consult with the President of the
Company, and the Board of Directors and/or other designated
individuals or committees of the Board; and, attend Board
meetings as required.
4) act in good faith and with reasonable diligence.
As a consultant to Cyntech, Tovey will be liable to Cyntech, its subsidiaries
and affiliates for monetary damages due to breach of fiduciary duty, especially
if the breach is a result of gross negligence, willful misconduct, or illegal
actions of the Consultant. Cyntech shall indemnify and hold Consultant harmless
from and against all losses, damages costs and expenses including legal fees
resulting from Consultant's involvement in the operation and management of
Cyntech.
Fees for such services performed by Consultant will be paid by Cyntech, at the
rate of $100.00 per hour, and all reasonable travel and lodging expenses, which
may be increased from time to time based on written notice to and approval by
the President of Cyntech, for the actual time spent, or minimum hours, whichever
is greater, plus all reasonable out-of-pocket costs. Cyntech agree to engage
Consultant for a minimum of 10 hours per month, beginning January 5, 1998,
through the end of this agreement (a minimum of 120 hours per calendar year),
for each month this Agreement remains in effect. Payments will be due and
payable on the fifth business day of the following month. Past due amounts
during Cyntech's development phase which may be deferred and other amounts due
thereafter, whether billed or not, will be subject to interest at the maximum
rate permitted, based on the laws of the State of Georgia.
1
<PAGE>
If the Consultant is discharged from this Agreement, prior to the expiration
date 1) for any reason except gross negligence, or other willful misconduct or
illegal acts; or 2) is unable to work by reason of death or complete and total
disability; or 3) resigns as a Consultant to Cyntech because of significant
changes in Cyntech's management policy which is unacceptable to the Consultant,
or because of significant changes in Cyntech's management personnel which is not
acceptable to the Consultant, the Consultant will be paid by Cyntech, including
any successors, at the minimum rate of $7,200 per annum, commencing with date of
such discharge, death, disability or resignation through December 31, 2007,
instead of at the minimum rate, as determined in the preceding paragraph.
If Consultant accepts a full time position with the Company, this Agreement
shall become null and void upon the execution of any such employment agreement
In addition, Consultant shall have the following reimbursements as part of this
Agreement:
(1). Consultant will be authorized the reimbursement of up to one (1) vehicles
whose total base lease cost monthly shall not exceed $600.
(2). All repairs, maintenance, damage repairs, insurance, tag, taxes, and
licenses, and other vehicle related requirements.
(3). Office rent reimbursement up to $200.00 per month. If Consultant's
residence is utilized, the same rent allocation is authorized.
If any term or provision of this Agreement or the application thereof to any
person or circumstance shall, to any extent, be invalid or unenforceable, the
remainder of the Agreement shall continue in full force and effect with respect
to any other existing or subsequent breach thereof.
This Agreement shall inure to the benefit of and shall be binding upon the
successors of the parties hereto. This Agreement shall be binding on any person,
corporation, partnership, or other entity succeeding to the ownership and/or
operation of Cyntech in any manner whatsoever including by operation of law. All
rights and remedies of either party hereunder are cumulative and are in addition
to and shall not exclude any other right or remedy allowed by law. All rights
and remedies may be exercised concurrently.
This Agreement and the performance hereunder shall be construed in accordance
with the laws of the State of Georgia. If any action, special proceedings, or
other proceedings that may be brought arising of, in connection with, or by
reason of this agreement, the laws of the State of Georgia shall be applicable
and shall govern to the exclusion of the law of any other forum.
This instrument contains the entire Agreement between the parties. It may not be
changed orally, but only by writing agreement, signed by the party against whom
enforcement of any waiver, change, modification or discharge is sought.
2
<PAGE>
In witness whereof, the parties hereto, through their authorized signatories,
have executed this Agreement in multiple counterparts and have set their hands
to same, intending to be legally bound thereby, as of the date and year above
written.
Client: Consultant:
Cyntech Technologies, Inc. Charles Tovey
and Successors and/or Assigns and Successors and/or Assigns
__________/S/__________________ ______________/S/______________
R. Frank Meyer - President
3
CONSENT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
We hereby consent to the use in this Registration Statement on Form 10-SB of our
report dated October 1, 1999, related to the financial statements of Cyntech
Technologies, Inc., and to the reference to our Firm under the caption "Experts"
in the Prospectus.
TANNER+CO.
Salt Lake City, Utah
November 9, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CYNTECH
TECHNLOGIES, INC. FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 7-MOS
<FISCAL-YEAR-END> JUL-31-1999 JUL-31-1998
<PERIOD-END> JUL-31-1999 JUL-31-1998
<CASH> 10,000 11,000
<SECURITIES> 0 0
<RECEIVABLES> 9,000 0
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 1,130,000 11,000
<PP&E> 43,000 43,000
<DEPRECIATION> 9,000 0
<TOTAL-ASSETS> 1,164,000 54,000
<CURRENT-LIABILITIES> 2,241,000 229,000
<BONDS> 0 0
0 0
0 0
<COMMON> 30,000 26,000
<OTHER-SE> (1,107,000) (241,000)
<TOTAL-LIABILITY-AND-EQUITY> 1,164,000 54,000
<SALES> 0 0
<TOTAL-REVENUES> 5,000 25,000
<CGS> 0 0
<TOTAL-COSTS> 1,676,000 2,007,000
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> (1,671,000) (1,982,000)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (1,671,000) (1,982,000)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (1,671,000) (1,671,000)
<EPS-BASIC> (0.06) (0.45)
<EPS-DILUTED> (0.06) (0.45)
</TABLE>
PROXY STATEMENT
<PAGE>
CARBON FIBER PRODUCTS, INC.
1966 North 400 East
Ogden, Utah 84414
- --------------------------------------------------------------------------------
PROXY STATEMENT
- --------------------------------------------------------------------------------
This Proxy Statement is furnished to shareholders of CARBON FIBER
PRODUCTS, INC., a Utah corporation (the "Company"), in connection with its
special meeting of shareholders (the "Special Meeting") to be held on December
22, 1998, at the Comfort Suites of Ogden 1150 West 2150 South, Ogden, Utah
84401at 8:30 a.m., Mountain Time, and at any adjournment(s) thereof. This Proxy
Statement and the notice of Special Meeting are first being mailed to
shareholders on or about December 10, 1998.
A PROXY FOR USE AT THE SPECIAL MEETING IS ENCLOSED. ANY SHAREHOLDER WHO
EXECUTES AND DELIVERS A PROXY HAS THE RIGHT TO REVOKE IT AT ANY TIME BEFORE ITS
EXERCISE BY FILING WITH THE SECRETARY OF THE COMPANY AN INSTRUMENT REVOKING IT
OR A DULY EXECUTED PROXY BEARING A LATER DATE. IN ADDITION, A SHAREHOLDER MAY
REVOKE A PROXY PREVIOUSLY EXECUTED BY HIM BY ATTENDING THE SPECIAL MEETING AND
ELECTING TO VOTE IN PERSON.
Proxies are being solicited by management. The cost of this
solicitation will be borne by the Company. Solicitation will be primarily by
mail, but may be made by telephone, telegraph, or personal contact by certain
officers and employees of the Company who will not receive any compensation
therefor.
Only holders of record holding any of the 32,387,153 shares of common
stock of the Company outstanding as of December 4, 1998 (the "Record Date"), are
entitled to vote at the Special Meeting. Since December 4, 1998, the Company has
issued an additional 18,925,000 shares of restricted common stock in
cancellation of indebtedness and in payment of services, which shares will not
be entitled to vote at the Special Meeting. (See "SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT," "CERTAIN TRANSACTIONS" and "PROPOSED
DISPOSITION OF ASSETS AND ASSIGNMENT AND ASSUMPTION OF LIABILITIES"). Each
holder of common stock has the right to one vote for each share of the Company's
common stock owned. Cumulative voting for the election of directors or for any
other purpose is not provided for. Stock representing one-half of the voting
power of the 32,387,153 shares of the Company's common stock outstanding on the
Record Date, must be represented at the Special Meeting to constitute a quorum
for conducting business.
At the Shareholders' Meeting the shareholders will consider and vote
on the following proposals:
(1) To authorize and approve an Exchange Agreement (the "Agreement")
with Cyntech Technologies Inc. ("Cyntech") a Nevada corporation, and the
shareholders of Cyntech, pursuant to which the Company will acquire all of the
outstanding stock of Cyntech, in exchange for the issuance of a total of
25,900,000 post-split shares of common stock of the Company to the Cyntech
Shareholders for the purpose of becoming engaged through Cyntech's wholly-owned
subsidiary, in the waste recovery business, all as described in the Proxy
Statement under "PROPOSED REORGINIZATION WITH CYNTECH: Business of Cyntech:"
(2) To adopt and approve a plan of recapitalization whereby the issued
and outstanding common stock of the Company will be reverse split, or
consolidated, on a one-for 16.552307 basis, so that each holder of common stock
will receive one share of the Company's common stock, par value $0.001, for each
16.552307 shares now held, and the 51,312,153 shares of the Company to be
outstanding immediately prior
<PAGE>
to the closing with Cyntech (and without giving effect to the issuance of shares
to the Cyntech Shareholders) will be reduced to a total of 3,100,000 shares
immediately prior to the reorganization, all as described in the Proxy Statement
under "PROPOSED RECAPITALIZATION;"
(3) To approve a transaction proposed by the board of directors, providing for
the transfer to H&P Investments ("H&P"), an affiliate, of substantially all of
the assets of the Company, including all of the stock in the Company's
wholly-owned subsidiary, Novus Cart Company, and the assumption by H&P of
substantially all of the indebtedness of the Company, exclusive of certain trade
payables, all for the purpose of enabling the Company to become engaged in
another business enterprise, and all as described in the Proxy Statement under
"PROPOSED DISPOSITION OF ASSETS AND ASSIGNMENT AN ASSUMPTION OF LIABILITIES;"
(4) To adopt and approve a proposed amendment to the Articles of Incorporation
of the Company which changes the name of the Company to "Cyntech Enterprises,
Inc.", or some derivation thereof as the board of directors may determine, all
as described under "PROPOSED AMENDMENT OF THE ARTICLES OF INCORPARATION TO
AUTHORIZE CHANGE OF NAME;"
(5) To elect R. Frank Mever, Lester D. Mallory, Jr., William Meyer, and Brian
Hass designees of Cyntech, as directors of the Company, to serve for a term of
one year or until their successors are elected and qualified, as described in
the Proxy Statement under "ELECTION OF DIRECTORS;" and
(6) To transact such other business as may properly come before the Special
Meeting.
The above proposals numbered (1) through (5) must all be approved for
any to be approved. If any such proposal is not approved, the remaining
proposals will be rendered null and void, and no action will be taken with
respect thereto.
MEMBERS OF MANAGEMENT AND CERTAIN OTHER SHAREHOLDERS HOLDING IN
EXCESS OF 50% OF THE ISSUED AIND OUTSTANDING SHARES OF THE COMPANY HAVE
INDICATED THEIR INTENTION TO VOTE IN FAVOR OF ALL PROPOSALS. AS A RESULT, THE
PROPOSALS WILL BE APPROVED WITHOUT THE AFFIRMATIVE VOTE OF ANY OTHER
SHAREHOLDER. HOWEVER, YOUR VOTE IS CONSIDERED IMPORTANT AND WE URGE YOU
TO ATTEND THE SPECIAL MEETING.
- --------------------------------------------------------------------------------
SELECTED AND SUMMARY INFORMATION ABOUT THE COMPANY
- --------------------------------------------------------------------------------
GENERAL
Carbon Fiber Products, Inc. (the "Company"), formerly known as "Wasatch Fiber
Group, Inc. was organized under the laws of the state of Utah on February 5,
1986. For the past several years, the Company has been engaged in the
manufacture of golf shafts and related sports equipment, in Ogden, Utah. The
Company has one wholly-owned subsidiary, Novus Cart Company ("Novus"), a Utah
corporation, which was engaged for a period of time in the manufacture and
marketing of golf carts. Novus has been inactive for the past several years.
2
<PAGE>
For the past several years, the Company has incurred substantial
recurring operating losses, deficits in cash flow, and has a substantial
deficit. The Company currently has an accumulated deficit of
approximately $2,359,012 through October 31, 1998, as a result of substantial
losses incurred in the past several years. While management has believed, and
continues to believe, that its proprietary carbon fiber shafts compare favorably
to any golf shafts in the market, management of the Company also feels that its
negative operating results and its lack of competitiveness in the industry, are
attributable in large part to the Company's limited resources, and the dominance
of a few major corporations in the golf industry.
In 1998, the Company determined that it was unable to continue
operating without a substantial infusion of capital. Given the substantial
losses incurred by the Company, management was unable to locate any financing
sources, and the sources which had previously provided substantial borrowings to
the Company, Homer and Phidia Cutrubus (the "Cutrubuses"), and their affiliates,
informed the Board of Directors that they were no longer willing to continue
funding the Company, particularly given the Company's inability to meet
obligations as they came due, and the potential for defaults on third party loan
obligations. In view of this situation, the board of directors of the Company
determined that, notwithstanding the Company's quality products, it was no
longer feasible for the Company to continue operations. As a result of this
conclusion, and in order to create some potential value for the Company's
shareholders in the future, the board of directors began to review the
possibility of disposing of its assets and assigning its substantial
indebtedness, for the purpose of utilizing the Company's public status, as a
merger or reorganization opportunity for a privately held enterprise seeking to
go public.
Toward that end, in the middle of 1998, the Company began reviewing
possible business opportunities, and preliminarily negotiated an arrangement,
with H&P Investments ("H&P"), a general partnership of the Cutrubuses, major
stockholders of the Company, to transfer substantially all of the assets of the
Company to H&P in consideration of the assumption of substantial indebtedness of
the Company by H&P. These discussions have resulted in a preliminary agreement,
described in this Proxy Statement, which is subject to the approval of the
shareholders. In the view of the Board of Directors, the present value of the
Company's assets is less than the amount of indebtedness owed to, and to be
assumed by, H&P. (See "PROPOSED DISPOSITION OF ASSETS AND ASSIGNMENT AND
ASSUMPTION OF
LIABILITIES).
In approximately September, 1998, the Company began a review of, and
negotiations with, Cyntech Technologies, Inc. ("Cyntech"), a Nevada corporation,
resulting in the Exchange Agreement with the Company described in this Proxy
Statement.
The Company is publicly held: however, the Company is not a "reporting
company" which is required to file periodic reports with the Securities &
Exchange Commission.
SUMMARY OF EXCHANGE AGREEMENT
The Exchange Agreement with Cyntech provides for the acquisition by the
Company of all of the issued and outstanding shares of Cyntech, in exchange for
the issuance to the Cyntech shareholders of a total of 25,900,000 post-split
shares of the Company's common stock (hereinafter referred to as the
reorganization). In connection with the reorganization, the Company has agreed
to effect a reverse split, or consolidation, of its issued and outstanding
shares, with the result that the 51,312,153 shares of common stock of the
Company issued, or to be issued, and outstanding immediately prior to the
reorganization, will be reverse split into a total of approximately 3,100,000
shares. As a result of the reorganization, the
3
<PAGE>
shareholders of Cvntech will own, immediately upon closing, a total of
25,900,000 shares, or approximately 89.31% of the 29,000,000 shares of common
stock of the Company to be issued and outstanding immediately upon completion of
the reorganization (without giving effect to any other events which may occur
after the closing of the reorganization). The reorganization additionally
contemplates an immediate financing by Cyntech, and the surviving company, to
raise up to $10,000,000 in equity capital to pursue the business plan of
Cyntech, and the parties have reserved in the Exchange Agreement, an additional
2,000,000 post-split shares for issuance in connection with such financing. In
addition, in connection with the reorganization, the executive officers and
directors of the Company will be replaced by the nominees of Cyntech. (See
"NOMINATION AND ELECTION OF DIRECTORS" and "PROPOSED REORGANIZATION WITH
CYNTECH").
MANAGEMENT
The names of the Company's current executive officers and directors and
the positions held by each of them are set forth below:
Name Position with the Company
J. Douglas Moore Interim Chief Executive Officer
Homer Cutrubus Director
James P. Rumpsa Chairman of the Board
Barry B. Eldredge Director
Clayton J. Wyman Director
Stephen L. Johnson Director
Each of the Company's directors have served as members of the board of
directors since at least 1997. In early 1998, Craig Moore resigned as an
officer, employee and member of the board of directors. J. Douglas Moore has
served as interim Chief Executive Officer for the past several weeks, for the
purpose of facilitating the transition described in this Proxy Statement. Such
persons will not stand for reelection at the Special Meeting.
In connection with the proposed reorganization with Cyntech, Lester D.
Mallory, Jr., Frank Meyer, William Meyer and Brian Hass, designees of Cyntech,
have been nominated for election as Directors of the Company. Certain
biographical information with respect to each of such person(s) is set forth
herein under the caption "PROPOSAL TO ELECT BOARD OF DIRECTORS". It is
anticipated that if such persons are elected as directors, they will appoint the
following, persons as officers of the Company to serve until the next annual
meeting or their successors are duly qualified:
R. Frank Meyer President
Brian L. Hass Executive Vice President
John Laska, C.P.A. Secretary/ Treasurer and Chief
Financial Officer
Charles Tovey Vice President of Operations
4
<PAGE>
Biographical information regarding each of these individuals is set forth below
under "PROPOSAL TO ELECT DIRECTORS."
- --------------------------------------------------------------------------------
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- --------------------------------------------------------------------------------
The following table sets forth as of the date of this Proxy Statement: (a) the
number of shares of the Company's common stock, par value $0.001, held of record
or beneficially by each person who held of record, or was known by the Company
to own beneficially, more than 5% of the Company's common stock; (b) the name
and shareholdings of each executive officer and director, and all officers and
directors as a group: (c) the number of shares, and percentage of outstanding
shares to be held by each officer, director, and greater than 5% shareholder of
the Company following the reorganization with Cyntech, and following the
issuance of stock in cancellation of indebtedness and for services described
under "CERTAIN TRANSACTION: Issuance of Stock in Cancellation of Indebtedness
and for Services," and (d) the percentage to be held by each nominee to the
board of directors and by all nominees as a group: (See "PROPOSED REORGANIZATION
WITH CYNTECH"):
<TABLE>
<CAPTION>
Name and Address of 5% Number of After Exchange (2)(3)
---------------------
Shareholders, and Name of Shares Percent Number of Percent
Officers and Directors and Nominees Owned(l) of Class(l) Shares Owned of Class
- ----------------------------------- -------- ----------- ------------ --------
Principal Shareholders:
<S> <C> <C> <C> <C>
Homer Cutrubus(l)(4)(5)(9) 8,043,000 15.67 485,916 1.68
895 West Riverdale Rd
Ogden. Utah 84041
Phidia Cutrubus(l)(4)(9) 5,710,000 11.13 344,967 1.20
895 Rivedale Rd
Ogden. Utah 84041
H&P Investments(l)(6)(9) 13,971,655 27.23 844,091 2.91
9~ West Riverdale Rd
Ogden. Utah 84041
DNS(4)(5)(6)(7) 6,000,000 11.69 362,497 1.25
895 West Riverdale Rd.
Ogden. Utah 84041
Officers and Directors:
James P. Rumpsa(8) 2,208,214 4.3 133,408 .46
J. Douglas Moore 170,000 .33 10,270 .04
Homer Cutrubus ------------------- See above and footnotes (1)(4)(5)(6) ---------------------
5
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Name and Address of 5% Number of After Exchange (2)(3)
----------------------
Shareholders, and Name of Shares Percent Number of Percent
Officers and Directors and Nominees Owned(1) of Class(l) Shares Owned of Class
----------------------------------- -------- ----------- ------------ --------
<S> <C> <C> <C> <C>
Barry Eldredge (9) 3,191,585 6.22 192,818 .66
Clayton Wyman (9) 3,191,585 6.22 192,818 .66
Steve L. Johnson (10) 100,000(9) .19% 6,041 .02
Nominees:
Frank Meyer (l1)(12) 0 0 0 0
William Meyer (l1) 0 0 0 0
Lester D. Mallory, Jr (13) 0 0 42,230 .15
Brian Hass 0 0 0 0
Al I Nominees as a Group: 0 0 ------- See notes (11)(l2)(l3)-----
------------------------
</TABLE>
(4 persons)
---------
(1) Does not give effect to a one-for- 16.552307 reverse stock
split or consolidation proposed in this Proxy Statement under "PROPOSED
RECAPITALIZATION," or to any other events, which may occur following the
completion of the reorganization (See "DESCRIPTION OF SECURITIES"). This
column does give effect to shares issued, as of the date of this Proxy
Statement, in cancellation of indebtedness or for services, as described
under "CERTAIN TRANSACTIONS: Issuance of Shares in Cancellation of
Indebtedness and for Services." None of the shares issued in cancellation
of indebtedness or for services was outstanding as of the Record Date, and
such shares are not, therefore, entitled to vote at the Special Meeting.
(1) After giving effect to (a) the one-for- 16.552307 reverse
split, and (b) the issuance of shares in connection with the stock exchange
with the shareholders of Cyntech. This column does not give effect to any
other events which may happen after the date of this Proxy Statement,
including the completion of a proposed equity financing by Cyntech
management immediately following the reorganization (See "PROPOSED
RECAPITALIZATION" and "PROPOSED REORGANIZATION WITH CNYNTECH"). THERE CAN
BE NO ASSURANCE THIS TRANSACTION WILL BE COMPLETED.
(3) In addition to the nominees, the other Cyntech shareholders
will receive shares in the acquisition in exchange for the shares of
Cyntech held by them; however, none of such persons will hold directly in
excess of 5% of the outstanding common stock of the Company following the
acquisition. (See "PROPOSED REORGANIZATION WITH CYNTECH.")
(4) Homer Cutrubus and Phidia Cutrubus are brothers and business
partners.
6
<PAGE>
(5) Includes a total of 50,000 shares held by Homer Cutrubus'
wife.
(6) H& P Investments is a general partnership of which Homer
Cutrubus and Phidia Cutrubus are the partners. Accordingly, they must be
considered the beneficial owners of these shares. This includes a total of
11,971,655 shares issued to H&P in December, 1998, in cancellation of
indebtedness and for consulting services rendered to the Company. (See
"CERTAIN TRANSACTIONS: Issuance of Shares in Cancellation of Indebtedness
and for Services.")
(6) DNS is a Utah partnership of which Homer Cutrubus is a general
partner. Accordingly, he must be considered to be the beneficial owner of
these shares.
(8) See "CERTAINTRANSACTIONS: Issuance of Shares in Cancellation
of Indebtedness and for Services."
(9) Includes a total of 349,448 shares issued in December, 1998,
to Messrs. Eldredge and Wyman each, upon exercise of outstanding debentures
held by them, and in consideration of services as members of the board of
directors; and an additional 1,842,137 shares, in the aggregate, also
issued in December 1998, to Wydredge L.L.C., a limited liability company of
which Messrs. Eldredge and Wyman are principals, and of which Messrs.
Eldredge and Wyman may each be considered the beneficial owner. H&P is also
a principal of Wydredge, L.L.C., and James P. Rumpsa is a minority owner of
Wydrede. In addition, H&P, Messrs Eldredge and Wyman, and James P. Rumpsa
are the owners of Efficiency Management, L.L.C., which was issued a total
of 939,000 shares in December in repayment of indebtedness, which is not
reflected on the table above. (See "CERTAIN TRANSACTIONS: Issuance of
Shares in Cancellation of Indebtedness and for Services.")
(10) Consists of shares issued to Mr. Johnson in consideration of
his services as a member of the board of directors. (See "CERTAIN
TRANSACTIONS: Issuance of Shares in Cancellation of Indebtedness and for
Services.")
(11) Frank Meyer and William Meyer are brothers.
(12) While Mr. Frank Meyer is not a direct shareholder of Cyntech,
and will not be a direct shareholder of the Company following the
reorganization, his wife and children are the majority owners of Tex0il
Chernical Limited Partnership ("TexOil"), a limited partnership which is a
principal shareholder of Cyntech. Following the closing of the
reorpanization,Tex0il will be the owner of approximately 24,071,397 shares
of common stock of the Company, or approximately 83% of the then issued and
outstanding common stock of the Company, without giving effect to any other
events, including the planned equity financing of Cyntech. (See "PROPOSED
REORGANIZATION WITH CYNTECH.") Accordingly, Mr. Meyer may be deemed to be
the beneficial owner of the shares held by TexOil.
(13) Does not include a total of approximately 422,305
post-reorganization shares to be held by Tex-Line L.P., a limited
partnership of which Mr. Mallory is a principal and as to which he may be
deemed to be a beneficial holder.
7
<PAGE>
---------------------------------------------------------------------------
MARKET FOR THE COMPANY'S COMMON STOCK
---------------------------------------------------------------------------
The Company's Common Stock is traded on a limited basis in the
over-the-counter market and have been quoted on the National Association of
Securities Dealers' OTC Bulletin Board with a symbol of "CFPI." Recently.
the shares of common stock have traded at between $0.005 and $0.01. The low
volume of shares traded and the infrequency of such trades would indicate
that the prices may not be reflective of the real market value of the
common stock if conditions were similar to those of companies where volume
of shares traded and the frequency of those transactions had a more
consistent pattern of activity.
The Company has declared no dividends on its common stock since inception,
and none are presently contemplated.
---------------------------------------------------------------------------
DESCRIPTION OF SECURITIES
---------------------------------------------------------------------------
The Company's Articles of Incorporation authorizes the issuance of
100,000,000 shares of common Stock, $0.001 par value per share, of which
51,312,153 shares are issued and outstanding as of the date of this Proxy
Statement, and 5,000,000 shares of preferred stock, par value $0.001 per
share, of which no shares are issued.
The shares of common stock have no pre-emptive or other
subscription rights, have no conversion Rights, and are not subject to
redemption. The holders of shares of common stock are entitled to one vote
for each share held. The common stock has non-cumulative voting rights.
---------------------------------------------------------------------------
PROPOSED REORGANIZATION WITH CYNTECH
---------------------------------------------------------------------------
INTRODUCTION
Beginning in approximately August, 1998, the board of directors of
the Company, in the face of mounting operational losses, began to realize
that the continuation of the Company's operations in manufacturing golf
shafts, was no longer viable without a substantial infusion of equity
capital. Certain affiliates of the Company, who had previously loaned the
Company well in excess of $1million dollars, were no longer willing to
provide debt financing to the Company, particularly in view of the
Company's poor operating results and difficulty in paying current
obligations as they came due. No other sources of debt or equity capital
were available. In recognition of this situation, the board of directors
began to consider using the Company's public status as a merger or
reorganization vehicle for a private enterprise seeking to go public. This
was viewed as an alternative which could offer the Company's shareholders
the potential to realize some value for their securities (although there is
never any assurance in these circumstances that such will occur). In order
to put the Company in a position to take advantage of a merger or
reorganization candidate, the Company's board of directors realized that
the Company had to first develop a means of divesting itself of its
substantial indebtedness. After lengthy discussions, the board of directors
negotiated an arrangement with H&P Investments, an affiliate, subject to
shareholders approval, whereby H& P would
8
<PAGE>
agree to assume substantial indebtedness and forgive and cancel other
indebtedness owed by the Company to H&P, in exchange for the transfer of
substantially all of the assets of the Company. In connection with this
transaction, the Company also caused a substantial amount of additional
indebtedness to be converted into equity in the Company. (See "PROPOSED
DISPOSITION OF ASSETS AND ASSIGNMENT AND ASSUMPTION OF LIABILITIES" and
"CERTAIN TRANSACTIONS").
In approximately September, 1998, the Company began a review of
Cyntech Technologies, Inc. ("Cyntech"), a Nevada development stage
corporation. These discussions and subsequent negotiations have resulted in
an Exchange Agreement between the Company and Cyntech, providing for the
acquisition of Cvntech as a wholly-owned subsidiary, in exchange for the
issuance of a substantial controlling interest in the Company to the
Cyntech shareholders.
It is the intention of the Company and Cyntech Management, which
will become new management of the Company if the transaction is approved,
for the Company to become engaged in the recycling of waste tires,
plastics, carpet and rubber products into useable fuel products. If the
acquisition of Cyntech is approved, Cyntech will become a wholly-owned
subsidiary, and the business plan and business operations of Cyntech will
become the business of the Company. The can be no assurance that the
Company following the reorganization will be successful in its proposed
endeavors.
PROPOSED TRANSACTION
The Agreement provides for the issuance of a total of 25,900,000
post-split shares of restricted common stock to the Cyntech Shareholders,
in exchange for all of the issued and outstanding shares of Cyntech.
Following the issuance of such shares, the Cyntech shareholders will hold
89.3% of the 29,000,000 shares of the Company which will then be issued and
outstanding, without giving effect to any other events which may occur
following completion of the reorganization.
The Exchange Agreement reserves an additional 2,000,000 shares for
issuance in connection with an equity financing Cyntech plans to undertake
immediately following the reorganization. Cyntech management has
represented that Cyntech has secured a $43 million loan commitment, and
Cyntech plans to raise up to an additional $10 in equity in a private
placement transaction, to meet the Company's working capital requirements
in connection with its plans to build a major recycling facility in
Chambers County, Texas, over the next two years. The Exchange Agreement
authorizes the issuance up to 2,000,000 shares for such purpose, and
provides that under no circumstances will the shareholdings of the present
shareholders of the Company be reduced below 8.333% over the period of
thirty months from the date of closing the reorganization. There can be no
assurance that the new management of the Company following the
reorganization will be successful in their financing efforts, or that
financing will be obtainable on terms favorable to the Company.
If the reorganization is approved by the shareholders, Cyntech
will become a wholly-owned subsidiary of the Company. The designees of
Cyntech will become the management of the Company.
BUSINESS OF CYNTECH
A. General Summary
Cyntech a Nevada corporation, is a development stage company
formed to take advantage of the
9
<PAGE>
major problems of disposing of and recycling waste tires, rubber products,
carpeting, plastics and other waste products. Cyntech's primary focus is to
develop chemical and petroleum recycling facilities utilizing its
proprietary technology.
Cvntech will seek to apply technology solutions to the recycling
of waste tires, plastics, carpet and rubber products into useable fuel
products. Cyntech and its management view this as both economically sound
and environmentally effective, although the technology which Cyntech
intends to use is unproven, not yet operational and has not been
demonstrated to be cost-effective even if it works. Cyntech believes that
it can build a plant in Chambers, Texas, to be operational by its
wholly-owned subsidiary, Cyntech ()f Chambers County, Inc. ("Cyntech
Chambers") which will be both cost effective and profitably recycle these
products without high labor costs, and develop a fast-growing market for
the by-products which are produced.
The process utilized by Cyntech, known as "Thermal Vacuum
Distillation" or "Thermal Depolymerization", involves the recapture of
hydrocarbons from the waste materials listed above. From these waste
materials, which Cyntech calls "feed stock", Cyntech hopes to produce
commercial quantities in suitable quality for the marketplace, of the
following:
1) Carbon block - to be gasified;
2) Fuel gas;
3) Liquid hydrocarbon - distillate oil (medium and light
viscosity); and
4) Scrap steel.
Cyntech's technology is designed to take, as its raw materials, scrap
tires, plastic and automobile fluff (the plastic, stuffing, etc. from
automobiles) --materials which are presently taken to landfills. Such
landfills are becoming crowded and unable to process these materials. This
is a major problem not only for land-fills, but for tire marketers and
others seeking to process such waste products.
For these reasons, Cyntech believes it will be able to receive its
raw materials at no cost and will in fact charge for the recycling of such
materials. The materials will them be "broken down" or distilled in a
thermal distillation process which uses liquid condensation to remove and
distill valuable petroleum products without actually applying flame or
burning rubber or plastic products. As presently contemplated the "feed
stock" waste products will be received by the Company for a "dump" or
"tipping" fee, which Cyntech hopes will cover shredding, or preparation,
costs for preparing these waste materials for introduction into its plants'
vacuum distillation equipment.
While this is the operational objective of Cyntech, there is no
assurance that Cyntech will be successful in these efforts.
B. Technology Facility
Cyntech's developments have been embodied in a patent application,
submitted to the U.S. Patent Office on February 12, 1998, developed by, and
to be assigned to, Cyntech Research and Engineering, Inc. ("Cvntech
Research"), Cyntech Research is an affiliate of the Company. Cyntech of
Chambers County, Inc, ("Cyntech County"), a wholly-owned subsidiary of
Cyntech acquired in July 1998, is scheduled to be the first operating
entity, and has been granted an exclusive license to use the technology
from Cyntech Research. This internal arrangement requires Cyntech of
Chambers to Compensate Cyntech Research as
10
<PAGE>
follows: a $500,000 installation fee, payable upon commencement of the
initial phase of the first facility, and, an annual licencing fee of seven
percent (7%) of the gross revenue of Cyntech Chambers.
Cyntech Chambers has informed the Company that it has performed
substantially all of the planning functions for the planned development and
construction of a chemical and recycling facility in Belview, Texas (the
"Chambers facility"). In that connection, Cyntech Chambers has selected a
general contractor, engaged an engineering firm to complete the detailed
engineering drawings for the facility, and has selected a plant manager for
the facility. In addition, Cyntech has advised the Company that it has
secured a long term loan commitment for financing the facility in the
amount of $43,500,000, subject to a number of final requirements; the
Company has not independently verified this financing, and there can be no
assurance that such financing will be obtained. Finally, the Company has
been informed that Cyntech Chambers has obtained certain contracts for the
procurement of feedstock for the proposed facility.
Cyntech plans to commence construction of the facility in 1999 and
complete it in 2000. However, these plans are subject to Cyntech's ability
to obtain substantial equity financing and the long-term debt financing
referred to above, of which there can be no assurance.
Both the Chambers facility, and other projected facilities, are
intended to operate two (2) reactors which will process "scrap" tires and
rubber, and one reactor to process "scrap" plastic. The rubber processing
reactors are planned to process 65 million pounds per year, per reactor,
while the plastics reactor is planned to process 26 million pound of
plastics per year.
Cyntech has not yet constructed a facility for refining scrap
rubber and/or plastics. Moreover, it's technology is unproven. There is no
assurance that the technology will function properly, that a facility can
be constructed to apply such technology on an operational level, or that
the plant(s) will operate economically.
Management's objective is to commence operations as soon as it has
obtained the capital necessary to fund engineering and to commence
construction.
C. Structure
The first processing facility is being developed and will be owned
by Cyntech's only operating Subsidiary, Cyntech Chambers. This facility has
been designed and contractor and engineering firms have been selected.
Furthermore, Cvntech management represents that a plant manager and
contractor for "feed stock" (i.e. raw material for refining) have been
obtained. Finally, Cyntech management represents that Cyntech has obtained
long term financing commitments for the construction and development of the
facility,
in the amount of $43,500,000.
Cyntech plans for its three subsidiaries to own and operate
chemical and recycling plants. These plants will utilize the technology
developed by Cyntech Research, which involves "upstream" and "downstream"
technology to enhance vacuum type distillation reclamation processes
together with the refinement of distillate oils and fuel gas or use with
co-generation equipment and other applications.
D. Marketing and Markets
Target markets for Cyntech's products consist of the following:
11
<PAGE>
1. Firms that will use distillate oil for blending as a fuel
source;
2. Firms desiring to blend such fuel for the marine diesel market;
3. Firms desiring to use distillate oil for co-generation of
electricity. In this regard Cyntech anticipates using a portion of the
distillate to power its facility(s);
4. Firms which will use carbon black for steel production,
smelling, asphalt, paving roofing, printing, paint manufacture, tones and
carbon fibers; and,
5. Firms that desire to purchase the scrap steel by-product from
Cyntech, such as steel manufactures for blending.
There is no assurance that sufficient buyers and markets exist
within the economical transport boundaries of Chambers to sell products
even if they can be successfully produced.
Cyntech believes it can sell the fuel which it strips initially to
a refinery in Houston, Texas. It also, believes a steel plant in Houston
will be a buyer for scrap steel. These potential buyers are not under
contract and, even if they were, do not alone constitute a sufficient
market to make the Chambers facility cost effective.
E. Regulation
Cyntech will be operating in a highly regulated industry. Among
others, the EPA, State Division of Oil and Gas, the Energy Commission and
various local regulatory agencies will monitor and govern the activity of
Cyntech, should it become operational. Cyntech believes that it can operate
effectively under all regulations, but plant operations could be subject to
close scrutiny.
F. Competition
There are numerous suppliers of the various products which Cyntech
hopes to sell, including:
1. 1. Distillate oil;
2. Carbon black; and
3. Scrap steel.
However, Cyntech believes it can produce these products more
economically because of low, or no raw material cost giving it an
advantage.
G. Significant Transactions
Cyntech has entered into two significant contractual
relationships, one with Cyntech Chambers and one with its affiliate,
Cyntech Research. The contract with Cyntech Chambers provides that Chambers
is obligated to compensate Cyntech, on a monthly basis, a management fee of
four percent (4%) of the gross revenues of Chambers. The second contract,
with Cyntech Research, whereby Cyntech Research has
12
<PAGE>
licensed its technology to Cyntech Chambers for a term of twenty (20) years
from the date of completion of a plant and a certificate of occupancy.
Cyntech Research will be compensated for use of such technology in the form
of a one-time fixed fee of $500,000 for each of two phases and $250,000 for
a final phase, together with a monthly fee of seven percent (7%) of total
gross operating revenues from Chambers.
H. Risk Factors
1. The information, facts, and descriptions regarding Cyntech and
its business has been provided by Cyntech and its management or their
representatives. The Company has not been provided with all of the
information necessary to verify any such information or facts, and,
therefore, has not been afforded a complete opportunity to independently
verify any such information. The Company's limited funds and its lack of
full-time management have made it impractical to conduct an exhaustive
investigation and analysis of Cyntech, and the preliminary decision to
enter into the reorganization with Cyntech has been made without detailed
feasibility studies, independent analyses, market surveys, or fairness
opinions which may have been desirable if the Company had more funds
available to it. Accordingly, shareholders are urged to make their
independent evaluations prior to voting on the proposals to be considered
at the Special Meeting.
2. Cyntech's ability to carry out its business objectives will be
subject to a number of significant conditions, not the least of which is
Cyntech's ability to raise substantial equity and debt financing for its
proposed processing facility. As proposed, Cyntech will need a minimum of
$43 million to complete the design and construction of the Chambers
facility. Although Cyntech believes it has a commitment for debt financing,
consisting of a 10 year, 8.5% first mortgage bond offering, totaling $43.5
million, such financing is subject to a number of standard and material
conditions. In addition, Cyntech's ability to operate will be dependent on
the completion of an equity financing of between $5 and $10 million. There
can be no assurance Cyntech will be successful in completing these
financings.
3. Cyntech does not have available audited financial statements
covering any period since inception in December, 1997. Cyntech's unaudited
financial statements for the period ended July 31, 1998, have been reviewed
by the Company and do not include a consolidation of Cyntech's
subsidiaries. The Company has not been able to determine whether these
financial statements have been prepared in accordance with generally
accepted accounting principles, and, for that reason, the Company has not
included such financial statements in this Proxy Statement. It is the
Company's preliminary opinion, based on a review of the unaudited financial
statements and other business materials, that, except for the value of the
proprietary technology, Cvntech does not have any substantial tangible
assets. Cyntech does not have available audited financial statements
covering any period since
4. Cyntech has not yet received any patents or other protection
for the technology licensed from Cyntech Research. There can be no
assurance that such technology can be protected. Furthermore, the patent
process provides no assurance of operational feasibility, and there is no
assurance that even if any patents should issue, the technology will be
operationally effective or commercially feasible.
VOTE REQUIRED
The affirmative vote of a majority of the issued and outstanding
shares of common stock is required to approve the proposed Exchange
Agreement. Management and certain shareholders holding in excess of fifty
(50%) of the issued and outstanding shares of Common Stock entitled to vote
at the Special Meeting, have indicated their intention to vote in favor of
approving the Exchange Agreement. The board of directors
13
<PAGE>
recommends a vote "FOR" approval of the Exchange Agreement.
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PROPOSED RECAPITALIZATION
---------------------------------------------------------------------------
GENERAL
The board of directors has adopted resolutions, subject to
shareholder approval, providing for the adoption of a plan of
recapitalization (the "Recapitalization"), pursuant to which the issued and
outstanding shares of the Company's common stock ("Common Stock") as of the
Closing Date of the Reorganization, will be reverse split, or consolidated,
one-for- 16.552307, so that holders of Common Stock now held will receive
one share of the Company's Common Stock ("Consolidated Common Stock") for
each 16.552307 shares now held. No fractional shares will be issued in
connection with the Recapitalization, and any fractional shares will
rounded to the nearest whole number.
The rights of existing shareholders will not be altered, and no
shareholders will be eliminated as a result of the Recapitalization. The
authorized number of shares of common stock will not change, and the par
value of the Company's common stock will remain at $0.001. The
Recapitalization will have no effect on the stockholders' equity of the
Company, except for a transfer from stated capital to additional paid-in
capital.
If the Recapitalization is approved by the shareholders, the
51,312,153 shares of common stock to be outstanding immediately prior to
the reorganization, would be converted to approximately 3,100,000 shares of
common stock. After giving effect to the split, and after closing the
reorganization, current shareholders of the Company would own 3,100,000
shares of common stock, or approximately 10.7% of the issued and
outstanding shares of the Company, and the Cyntech shareholders would own
25,900,000 shares or approximately 89.3% of the Company's issued and
outstanding shares, without giving effect to any other factors following
the closing of this transaction. (See "PROPOSED REORGANIZATION WITH
CYNTECH".)
REASON FOR RECAPITALIZATION
The Recapitalization was a negotiated term of the Exchange
Agreement and is intended to permit the Company to issue to the Cyntech
Shareholders the agreed percentage of the Company's outstanding shares
without the necessity of issuing an inordinate number of the Company's
authorized but unissued shares. Management of the Company and Cyntech are
of the opinion that the Recapitalization is in the best interest of the
Company in that it will decrease the number of outstanding shares, thereby
reducing the perceived depressive effect a large number of outstanding
shares may have on the public market in the Company's Common Stock. In
addition. the Recapitalization will make available additional authorized
and unissued shares to provide increased flexibility in structuring
possible future financings and in meeting corporate needs which may arise.
If opportunities arise that would make desirable the issuance of additional
shares of common stock, approval of the Recapitalization at the Special
Meeting would avoid the delay and expense of a shareholders' meeting at the
time such meeting may be required by law or regulatory authorities. In
addition, it is ultimately the goal of the Cyntech management to have the
Company's stock listed on the National Association of Securities Dealers,
Inc. Automated Quotation System ("NASDAQ"), or on a national stock
exchange; however, there can be absolutely no assurance that the Company
will achieve such objective.
14
<PAGE>
Management of the Company and Cyntech believe that such listings can more
readily be accomplished with a higher priced stock and, since the
Recapitalization will reduce the number of outstanding shares of the
resulting company, it should have the effect of increasing the price of the
Company in the over-the-counter market.
Except for the proposed equity financing of Cyntech, to raise
necessary capital to begin operations, no specific use of the authorized
but issued shares of the Company is proposed at this time. However, holders
of common stock have no pre-emptive rights in connection with the issuance
of additional shares of common stock in the future.
IMPLEMENTATION OF THE RECAPITALIZATION
Immediately following effectiveness of the Recapitalization, all
stock certificates which represented shares of the Company's common stock
shall represent ownership of Consolidated Common Stock. Shareholders are
not required to tender their certificates representing shares for transfer
into new certificates representing shares of Consolidated Common Stock, and
issued in the new name of the Company.
However,
to eliminate confusion in transactions in the Company's securities in the
over-the-counter market, management strongly urges the shareholders to
surrender their certificates for exchange and has adopted a policy to
facilitate this process. Each shareholder will be entitled to submit his or
her old stock certificate (any certificates issued prior to the
reorganization) to the transfer agent of the Company, Atlas Stock Transfer
Company, 5899 South State, Murray, Utah, and be issued in exchange therefor
new common stock certificates representing the number of shares of
Consolidated Common Stock of which each shareholder is the record owner
after giving effect to the Recapitalization.
For a period of 30 days commencing on December 21,1998, the
Company will pay, on one occasion only, for the issuance of new
certificates in exchange for old certificates submitted during such 30 day
Period, provided, that the Company shall not pay any of the costs of
issuing new certificates in the name of a person other than the name
appearing on the old certificate or the issuance of new certificates in
excess of the number of old certificates submitted by a shareholder. After
January 22, 1999, all exchange requests must be accompanied by a check
payable to Atlas Stock Transfer Company in the amount of $18 per
certificate to be issued.
VOTE REQUIRED
The affirmative vote of a majority of the issued and outstanding
shares of common stock is required to approve the proposed
Recapitalization. Management and certain shareholders holding in excess of
fifty (50%) of the issued and outstanding shares of Common Stock entitled
to vote at the Special Meeting, have indicated their intention to vote in
favor of the Recapitalization. The board of directors recommends a vote
"FOR" the Recapitalization.
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PROPOSED AMENDMENT OF THE ARTICLES OF INCORPORATION
TO AUTHORIZE CHANGE OF NAME
---------------------------------------------------------------------------
GENERAL
The shareholders of the Company are being asked to consider and
approve a proposed amendment to the Articles of Incorporation of the
Company, to change the name of the Company to "Cyntech
15
<PAGE>
Enterprises. Inc ", or some derivation thereof as may be
determined by the board of directors.
As discussed under "PROPOSED REORGANIZATION WITH CYNTECH", subject
to approval of the matters described in this proxy statement, it is the
Company's intention to become engaged in the recycling business, which will
initially be accomplished through the implementation by its wholly-owned
subsidiary, Cyntech, of its business plan. There can be no assurance that
Cyntech will be successful in these efforts. It is presently contemplated
that all of these business operations will bear the name "Cyntech".
Management is of the opinion that the proposed new name of the Company will
be more readily identifiable with its subsidiary (and the subsidiary of
Cyntech), and more reflective of the Company's proposed business operations
following the completion of the reorganization with Cyntech.
VOTE REQUIRED
The affirmative vote of a majority of the outstanding shares of
the Company is required to approve the above proposal. Management and
certain shareholders holding in excess of fifty (50%) percent of issued and
outstanding shares of Common Stock entitled to vote at the Special Meeting,
have indicated intention to vote in favor of the proposed name change.
Management recommends that the shareholder vote "FOR" the proposal.
---------------------------------------------------------------------------
ELECTION OF DIRECTORS
---------------------------------------------------------------------------
NOMINEES FOR ELECTION
In accordance with the Exchange Agreement with Cyntech, the
directors of the Company adopted resolutions nominating Lester D. Mallory,
Jr., R. Frank Meyer, William Meyer, and Brian Hass designees of Cyntech,
for election as directors of the Company, to serve until the next annual
shareholder meeting or until their successors are duly elected and
qualified. The following is a brief resume of nominees for election to the
board of directors:
Lester D. Mallory, Jr.
Mr. Mallory is the founder and president of Serengeti
International, Inc., a company providing remediation and cleanup services
to the oil industry, which was organized in 1992. Over the past twenty
years, he has been an executive of an international drilling contractor
(Bawden Drilling; 1979-84): a business manager of an offshore drilling
company (Dolphin Titan International; 1984-86); a principal with consulting
firm (JMS-Joint Marketing Services. head of operations and later vice
president of marketing and business development of Grasso Marino Services;
a principal in Grasso Environmental, a company founded to introduce white
oil technology to the world wide offshore market and to perform clean-up
work of hydrocarbon contaminated soils. Mr. Mallory graduated from Texas
A&M University in 1972, and focused his efforts as an executive in various
facets for the petroleum industry from that time to the present.
R. Frank Meyer
Frank Meyer is currently the President and Chief Executive Officer
of Cyntech, and has served in that position since he founded the Company at
inception. Since 1996, Mr. Meyers has also been a
16
<PAGE>
partner in a golf course development company, Century Carribean
Development Company. This company is currently engaged in the development
of a project for 701 residential units and an 18 hole golf course in
Manhattan. Illinois, as well as an eighteen hole golf course in Pearland,
Texas. These activities will continue to demand portions of Mr. Meyer's
time, potentially distracting him from Cyntech's proposed plans and/or
taking time necessary for Cyntech business. Mr. Meyer has also held the
positions of : (a) Senior Vice President of a development company in
Florida (Caribbean Building & Management; 1985-90); (b) President of a
construction company engaged in building strip malls, apartments,
condominiums and other commercial buildings (Atlas Construction Company,
1979-84); and (c) Managing Director of a project for Dolphin Construction
Company in Jeddah, Saudi Arabia, with responsibility to establish
accounting systems, purchasing systems, and construction schedules for
major Saudi Construction projects throughout the Gulf State (1972-1978).
Mr. Meyer received his B.A. from the University of Southern Florida in
Accounting in 1964. From 1969 to 1972, he was employed as a junior
accountant by Ernst & Ernst. Prior to that, Mr. Meyer served in the United
States Army, Special Forces and Reserves, from 1961 through 1967, achieving
the rank of Second Lieutenant.
William Meyer
William Meyer, the brother of Frank Meyer, has been employed as a
high school instructor, teaching economics and government, in the state of
Georgia for over 28 years. For over twenty years, Mr. Meyer has also been
engaged in various real estate activities. From 1978 to 1992, Mr. Meyer
owned his own business, which was engaged in marketing various energy
conservation products. Mr. Meyer also has many years of experience working
in the insurance industry. Mr. Meyer has been very active in local and
state politics in the state of Georgia. Mr. Meyer earned an undergraduate
degree from the University of Southern Florida, majoring in pre-law and
education.
Brian Hass
Brian Hass is currently responsible for all corporate
administrative matters of the Company, including real estate management,
personnel, payroll administration, accounts payable and receivable, and
board of director administration. Mr. Hass holds a masters of business
administration (MBA) degree from Georgia State University. For a period of
approximately seven years, he was employed by Trane Corporation, in
marketing.
OFFICERS/ SENIOR MANAGEMENT
Following the reorganization. Cyntech anticipates that the
executive officers of Cyntech will serve in the same offices with the
Company, as follows:
President R. Frank Meyer
Executive Vice President Brian L. Hass
Chief Financial Officer John Laska. C.P.A.
Senior Vice President/ Charles Tovey
Plant Operations
17
<PAGE>
Set forth below is a brief resume of the officers of Cyntech:
R. Frank Meyer (see above)
Brian L. Hass (see above)
John Laska
Mr. Laska is a certified public accountant with over eighteen
years of accounting, auditing, finance, and operations experience. From
1992 to the present, Mr. Laska has been the president and treasurer of
Laska & Associates, Inc., a management advisory services and consulting
company based in Columbus, Ohio. From 1990 to 1992, Mr. Laska was vice
president and controller for Total Systems, Inc., a New York Stock Exchange
listed credit card services company, where he was responsible for
budgeting, facilities management, operational analysis, taxation, and
assisting the company in reporting to the S.E.C., New York Stock Exchange,
and stockholders. From 1986 to 1990, Mr. Laska was vice president and
controller for AFLAC. a New York Stock Exchange and Tokyo Stock Exchange
listed financial services holding companv. From 1985 to 1986, Mr. Laska was
division controller for Charter Medial Corporation, an American Exchange
listed health care company. Prior to these positions, Mr. Laska was group
controller for a real estate and insurance group; internal audit manager
and assistant treasurer for a supermarket chain; and a staff accountant and
manager for KPMG - Peat Marwick. Mr. Laska received his B.S. and M.B.A.
degrees from Florida State University in 1972.
Charles Tovey
Mr. Tovey is currently Senior Vice President of engineering and
plant operations for Cyntech Technologies, Inc. He has spent over forty
(40) years in the petrochemical industry, and related fields, with
experience in plant operations, pipeline construction and operations;
marketing of crude oil and related finished products: labor relations: and
administration. Over the years, he held numerous positions including: vice
president of crude oil marketing for El Toro Energy (1985-90); manager of
operations for E. W. Moran Drilling Contractors. a drilling contractor
(1981-85), vice president of Southwest Petroleum Chemicals (1978-81): vice
president of administration and labor relations for Coastal Corporation
(1973-78); and manager of labor relations for Southland Paper Mill
(1969-73). Mr. Tovey holds a B.S. degree in economics from the University
of Houston (1966); and has had advanced management training at Harvard
University Business School.
VOTE REQUIRED
The affirmative vote of the majority of the outstanding shares of
the Company is required to elect the directors nominated above. Management
and certain shareholders holding in excess of fifty (50%) percent of the
issued and outstanding shares of Common Stock entitled to vote at the
Special Meeting, have indicated their intention to vote in favor of the
election of the nominee. Management recommends a vote "FOR" the election of
the nominees.
18
<PAGE>
---------------------------------------------------------------------------
PROPOSED DISPOSITION OF SUBSTANTIALLY ALL OF THE COMPANY'S
ASSETS AND ASSUMPTION OF DEBT
---------------------------------------------------------------------------
GENERAL
The board of directors of the Company has approved an agreement
with H&P Investments ("H&P"), subject to the approval of the Company's
shareholders, providing for the disposition of substantially all of the
assets of the Company to H&P, exclusive of accounts receivable, and the
formal assignment to, and assumption by, H&P of substantially all of the
indebtedness of the Company, exclusive of trade payables. H&P is a general
partnership of which Homer Cutrubus and Phidia Cutrubus, brothers, are the
partners. Homer Cutrubus and Phidia Cutrubus are, individually and through
entities which they control, principal shareholders of the Company. (See
"SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT,). The
agreement with H&P is a result of the conclusion by H&P, and the Cutrubuses
that they could no longer provide debt financing for the Company's
operations, and the Company's determination that continued operations
without a substantial infusion of additional capital, is no longer viable.
Beginning in December, 1995, and continuing through December,
1998, H&P has loaned to the Company substantial funds under a credit
facility arrangement, to cover the operating capital needs of the Company.
The borrowings from H&P are evidenced by Non-Revolving Promissory Note(s)
providing for monthly installment payments, and interest at the prime rate,
plus 2%. As of the date of this Proxy Statement, the Company owed to H&P
the principal sum of $1,280,521, together with accrued interest of
$171,144.69, or a total obligation of $1,451,666. Of such amount, the sum
of $1,000,000 of the indebtedness to H&P is secured by a second trust deed
on the real estate of the Company, and by UCC filings on substantially all
of the remaining assets of the Company. (While the board of directors has
previously committed to secure the entire obligation to H&P, the Company
has not prepared and filed a more current trust deed reflecting the current
principal amount, with accrued interest). The Company has failed to make
required payments under its note obligation to H&P over the past several
months; however. H&P has not declared a default on the note or trust deed,
as H&P and the Cutrubuses have elected to forebear on this obligation to
allow the Company an opportunity to address its operating and financial
problems.
Under the terms of the agreement between H&P and the Company, H&P
has agreed to assume all of the remaining obligations of the Company,
exclusive only of trade payables, described in more detail below, and the
Company has agreed, subject to shareholder approval, to transfer to H&P all
of the Company's assets, exclusive only of the accounts receivable of the
Company (in the amount of approximately $26,000), which will bc utilized to
pay the costs attendant this Proxy Statement and the Special Meeting. In
consideration of the transfer of such assets, H&P has agreed that the
principal amount of indebtedness owed to it, in the amount of $1,290,521,
shall be canceled. The interest on the principal indebtedness owed to
H&P.-in the amount of S171,144.69, has been canceled in exchange for the
issuance of a total of 3,422,894 pre-split shares of restricted common
stock of the Company, at an exchange rate of $0.05 per share. (See "CERTAIN
TRANSACTIONS: Issuance of Share in Cancellation of Indebtedness and for
Services").
19
<PAGE>
Pursuant to the terms of the agreement, the Company will transfer
to H&P all of the assets of the Company (exclusive onlv of accounts
receivable), including the building and real estate owned by the Company,
subject to the first trust deed obligation on the real property in the
principal amount approximately $328,112, inventory consisting of raw
graphite, graphite shafts, completed clubs and other parts and components,
having a book value of approximately $173,000; prepaid expenses of
approximate $24,000, fixed assets, including furniture, telephones,
computers and equipment, having a book value approximately $153,000; the
Company's patent rights, having a book value of approximately $17,000; and
all tradenames, trademarks, and other intangibles. In addition, the parties
have agreed that the Company will convey to H&P all of the stock of Novus
Cart Company, a wholly-owned Utah subsidiary. Novus Cart Company is
inactive, and its liabilities greatly exceed its assets.
The Company's real property is located at 1966 North 400 East,
North Ogden, Utah, and consists of a total of approximately 3.26 acres in
two adjacent parcels. Located on the real property is a commercial building
built in 1974 to serve as a grocery store, which covers an area of 26,428
square feet. The building has been used as the Company's manufacturing and
operating facility for the past several years. The real property is zoned
commercial ( C-2), and is located in a neighborhood which is a mixture of
residential and commercial, with a trend toward more commercial uses. The
Company has not had adequate funds, nor has it had sufficient time, to have
a formal appraisal performed on the real property in connection with the
proposal. However, in a formal appraisal performed in 1994, the real
property was appraised at $670,000. More recently, in September of this
year, the Company has obtained a comparative market analysis from a
qualified Ogden real estate broker, indicating that the real property is
worth between $525,000 to $550,000.
In connection with the transaction, H&P has agreed to cancel all
the principal amount indebtedness owed to it under the promissory notes,
described above, in the amount of $1,280,52 1. and a delinquency charges of
5% provided for in such notes. In addition, H&P has agreed to assume the
following additional obligations:
a) The Company's outstanding obligation on its first deed of trust
on the real property, in the current amount of $328,112;
b) The Company's obligations on two equipment loans with Key Bank
and First Securitv Bank, in the amounts of approximately $11,176 and
$2,910, respectively, or a total of $14,086:
c) Unpaid delinquent personal property taxes in the amount of
$3,055; and
d) Unpaid delinquent real property taxes in the amount of $31,275.
H&P and its principals have made arrangements with the financing
institutions that hold the obligations described in paragraphs (a) and (b)
above, for H&P's assumption of such obligations following approval of this
proposal by the shareholders.
20
<PAGE>
Based on the foregoing, the proposed transaction can be analyzed
as follows:
<TABLE>
<CAPTION>
ASSETS ACQUIRED DEBT ASSUMED OR
BY H&P VALUE FORGIVEN BY H&P VALUE
<S> <C> <C> <C> <C>
1. Real Estate $550.000- 1. Principal Note
725,000(l) Obligation $1,280,521
2. Inventory 173,000(2) 2. First Trust Deed Oligation
on Real Property 328,112
3. Furniture, Fixtures 3. Assumption of Equipment
and Fixtures 153.000(3) Loans 14,086
4. Patent 17,000(4) 4. Payment/Assumption
of Personal Property Taxes 3,055
5. Prepaid Expenses 24,000
and Fixtures 5. Payment/ Assumption of
Real Property Taxes 31,275
6. Intangibles 20,000(5)
Total Asset Value - $937,000 to Total Debt Forgiven - $1,657,049
$1,112,000 Or Assumed
</TABLE>
-----------
1) Based on varying appraisals or comparative analyses performed
on the property. The higher Valuation, which is based on an older
appraisal with an inflation factor, is believed by management to be
unrealistically high, but is presented for illustrative purposes.
2) Based on the Company's cost.
3) Based on an informal valuation recently conducted at the
request of management.
4) Based on book value.
5) The Company does not carry any value for these intangibles on
its balance sheet. This value is, therefore, subjective.
Because H&P and its affiliates are the largest shareholders of the
Company, the proposed transaction cannot be considered to be the result of
arms' length negotiations.
DISSENTERS' RIGHTS
Under the applicable Utah statutes. shareholders of the Company
will be entitled to dissenters rights in connection with the reorganization
and the proposal of the Company to dispose of substantially all of its
assets, as set forth above. Accordingly, shareholders who oppose the
reorganization and the proposal forth above, will have the right to receive
payment for the value of their shares as set forth in sections 16-
21
<PAGE>
10a-1301 et. seq., of the Utah Revised Business Corporation Act. A copy of
these sections is attached here as Exhibit "A" to this Proxy Statement. The
requirements for a shareholder to properly exercise his or her rights under
these provisions are very technical in nature, and the following summary is
qualified in entirety by the actual statutory provisions which should be
carefully reviewed by any shareholder wishing to assert such rights.
Under the Utah statutes, such dissenter's rights will be available
only to those shareholders of Company who (i) object to the transaction(s)
which give rise to the dissenter's rights (in this case reorganization and
the disposition of substantially all of the assets of the Company) in
writing prior to the Special Meeting (a negative vote will not itself
constitute such a written objection); (ii) not vote for the transaction(s)
at the Special Meeting; (iii) file a written demand with the Company prior
to the Special Meeting requesting payment of the fair value of the shares
which they hold; and (iv) meet the other requirements of the governing Utah
statutes.
Within ten (10) days after the effective date of the subject
transactions, the Company must send each shareholder who has satisfied all
of the foregoing conditions (each a "Dissenting Shareholder all together,
the "Dissenting Shareholders") a written notice in which the Company must
state that the proposed transaction(s) was authorized; the effective date
of the transactions; and an address at which the Company, will receive
payment demands and an address at which certificates will be deposited. In
addition, the Company must include in such notice a form for demanding
payment (which must include a request that Dissenting Shareholder state an
address to which payment is to be made), and the Company is required to set
a date by which the Company must receive a payment demand and by which
certificates for shares must be deposited at the address indicated in the
notice, all in accordance with the applicable statute. In case a Dissenting
Shareholder fails to make a payment demand, and follow other procedures set
forth in the statutes, within the time period prescribed by the Company in
its notice (which shall be no less than 30 nor more than 70 days after the
notice by the Company), Dissenting Shareholders will lose their rlght5
payment for their shares.
Upon receipt of the Company of a payment demand by a Dissenting
Shareholder in accordance with the statute, the Company is required to pay
to the Dissenting Shareholder the amount the Company estimates to be the
fair value of the Dissenting Shareholder's shares, plus interest, provided
such Dissent Shareholder has complied with the requirements of the statute.
With such payment, the Company is required to send to the Dissenting
Shareholder certain additional information, as specified by the statute. If
the Dissenting Shareholder is not satisfied with the payment received from
the Company, the statute provides that the Dissenting Shareholder may
notify the Company of his own estimate of the fair value of the share and
demand payment of such estimated amount.
If a Dissenting Shareholder does not agree on the fair value of
the shares within the 60 day period, then within 60 days after receipt of
written demand from any Dissenting Shareholder, the Company shall initiate
a judicial proceeding seeking determination for the fair value of such
shares. If the Company fails to institute such a proceeding, it must pay
the Dissenting Shareholder the amount demanded. All Dissenting Shareholders
must be a party to the proceeding, and all such shareholders will be
entitled to judgement against the Company for the amount of the fair value
of their shares, to be paid on surrender of the certificates representing
such shares. The judgment will include an allowance for interest (at a rate
determined by the court) from the date on which the vote was taken on the
merger to the date of payment.
The loss or forfeiture of dissenters rights simply means the loss
of the right to receive a
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payment from the Company in exchange for shares; in such event, the
Dissenting Shareholder would still hold the appropriate number of shares of
the Company.
The Company and Cyntech have reserved the right to terminate the
reorganization in the event shareholders holding in excess of 5% of the
issued and outstanding shares of common stock of the Company exercise their
statutory dissenter's rights.
REQUIRED VOTE
The affirmative vote of the majority of the outstanding shares of
the Company is required to approve the transaction described above.
Management and certain shareholders holding in excess of fifty (50%)
percent of the issued and outstanding shares of Common Stock entitled to
vote at the Special Meeting, have indicated their intention to vote in
favor of the proposed transaction. Management recommends a vote "FOR" the
proposal.
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CERTAIN TRANSACTIONS
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ISSUANCE OF SHARES IN CANCELLATION OF INDEBTEDNESS AND FOR SERVICES
Over the past few weeks, as the Company has determined that the
golf shaft business is no longer Viable, and that the Company should seek a
new direction, the board of directors has undertaken steps to convert a
number of Company obligations into equity, as elimination of substantially
all of the debt of the Company was deemed necessary for the reorganization.
These transactions are described below.
Cancellation of Interest on Indebtedness to Affiliate
As described under "PROPOSED DISPOSITION OF ASSETS AND ASSIGNMENT
AND ASSUMPTION OF LIABILITIES," the Company owes to H&P the principal sum
of $1,280,521, together with interest on such principal at the interest
rate set forth in the applicable promissory note(s), in the amount Of
$171,144.69. No charge was made for late fees and penalties, as allowed
under the terms of the note(s). In the beginning of December, H&P agreed to
accept a total of 3,422,894 shares of restricted common stock in
cancellation of' this indebtedness, at a rate of $0.05 per share.
Conversion of Loan from Third Party
In the beginning of December. 1998, the Richard I. Winwood
Revocable Living Trust agreed to accept a total of 1,199,253 shares of the
Company s restricted common stock in cancellation of a loan in the
principal amount of $300,000, together with accrued interest in the amount
of $149,720 through December 7, 1998.
Conversion of Outstanding Convertible Debentures
In 1996, the Company sold, in private transactions, a total of
eight $20,000 Convertible 9 12% Debentures. The principal and accrued
interest on such Debentures were convertible at the rate of one share for
each $0.05 in indebtedness under such Debentures. The Debentures were
purchased by certain persons
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and entities which are now affiliates of the Company (i.e., H&P
Investments, DNS, a Partnership, H Cutrubus, Phidia Cutrubus, Barry
Eldredge and Clayton Wyman, and Larry King, formerly an affiliate.
In December, 1998, the holders of the Debentures converted all of
the outstanding principal and accrued interest on the Debentures into a
total of 4,523,730 shares of restricted common stock of the Company, or a
conversion price of $0.05 per share, in accordance with the terms of the
Debentures.
Issuance of Stock in Payment for Consulting Services
In November 1995, the Company retained Homer Cutrubus as a
consultant, to assist the Company in effecting a corporate restructuring,
provide financial consulting services, and to assist in the Companies
financing efforts. Under the terms of this arrangement, Mr. Cutrubus was to
be compensated at the rate of $125 per hour. Since 1995, Mr. Cutrubus has
provided substantial consulting services, and has been assisted in such
efforts by Phidia Cutrubus and James Rumpsa, as contemplated by the
consulting arrangement. In December, 1998, a total of 6,624,642 shares of
restricted common stock were issued in exchange for consulting services
provided, having a value of $330,232.10, at a rate of $0.05 per share.
Homer Cutrubus transferred one-third of such shares to James Rumpsa, and
the remaining two thirds of such shares issued in the name of H&P, a
partnership owned by Homer Cutrubus and Phidia Cutrubus.
Issuance of Stock in Payment under Consulting Contract
In December, 1998, the Company issued a total of 939,000 shares of
restricted common stock to Efficiency Management, L.L.C., a limited
liability company of which H&P, and Clayton Wyman, B. Eldredge and James P.
Rumpsa, directors, are owners, in payment of $46,950 in consulting fees
owed under a consulting contract. Such shares were issued at a price of
$0.05 per share.
Issuance of Stock to Settle Debt
As of December 7, 1998, the Company owed the sum of $45,156.87 to
Wvdredge LC ("WN-dredge"), a limited liability company, primarily for debts
paid on behalf of the Company. Wydredge is owned by H&P, an affiliate of
Homer Cutrubus and Phidia Cutrubus, Clayton Wyman, a director, B. Eldredge,
a director; and James Rumpsa,, a director. This indebtedness was cancelled
in exchange for the issuance of a total of 903,137 shares of restricted
common stock, at a rate of $0.05 per share.
Issuance of Stock for Services
The board of directors, in contemplation of the transactions
described in this Proxy Staternent for valuable services rendered to the
Company over the past several months which could not be compensated in cash
due to inadequate funds, approved minutes issuing shares of restricted
common stock to officers, directors and key employees as follows: J.
Douglas Moore (Interim C.E.O.) - 170,000 shares: Larry Blake - 85,000
shares: Dixie M. Stucki - 50,000 shares; James P. Rumpsa (Chairman) -
100,000 share, Stephen L. Johnson, Clayton J. Wyman, Barry B. Eldredge and
Homer K Cutrubus, directors - 10,000 shares each.
None of the transactions described above can be considered to be
the result of arms' length negotiations.
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ADDITIONAL INFORMATION
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Additional information regarding the matters to be acted on by the
shareholders, including copies of the Exchange Agreement with Cyntech, the
agreement between the Company and H&P, unaudited financial statements of
the respective companies, and the proposed Amendment to the Articles of
Incorporation, will be available at the Special Meeting. Additional
information regarding the matters to be voted on by the shareholders may be
available at the Special Meeting. Consequently, shareholders are urged to
attend the Special Meeting in person.
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OTHER MATTERS
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Management of the Company knows of no other matters that are
likely to be brought before the Special Meeting, If any other matters are
brought before the Special Meeting, such matters will be properly addressed
and resolved, and the proxies will vote on such matters in accordance with
their best judgement.
CARBON FIBER PRODUCTS, INC.
By Order of the Board of Directors
By /s/ J. Douglas Moore
-----------------------------------
J. Douglas Moore-, Chief Executive Officer
Ogden. Utah
DATED: December 10, 1998
