SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) November 13, 1999
CLEARLOGIC, INC.
(Exact name of registrant as specified in its charter)
ST. JAMES GROUP, INC.
(Former Name)
Delaware
(State or other jurisdiction of incorporation)
0-24376 33-0612125
(Commission File Number) (IRS Employer Identification No.)
41 South Haddon Avenue, Haddonfield, New Jersey 08033
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (856) 547-7844
<PAGE>
Item 1. Change in Control of Registrant.
Item 2. Acquisition or Disposition of Assets.
Pursuant to an Agreement and Plan of Reorganization dated November
13, 1999 (the "Agreement") a wholly owned subsidiary of the Registrant,
ClearLogic, Inc. merged into ClearLogic, Inc., a New Jersey Corporation
("Clearlogic") effective November 23, 1999 and the Company issued 11,114,458
shares to acquire all of the outstanding shares of Clearlogic. Clearlogic
employee stock options to purchase 905,000 shares were converted in the Merger
to options to purchase 1,635,542 Shares of the Registrant at a price of $.027666
per share. The Registrant changed its name to Clear- logic, Inc. and Clearlogic
became a wholly owned subsidiary of the Registrant. Officers and directors of
Clearlogic, Inc. were elected as the new directors and officers of the
Registrant. Prior to the Closing the Registrant had no affiliation with
Clearlogic. The Registrant issued 137,900 shares on conversion of a promissory
note and then effected a four-for-one forward stock split immediately prior to
the Closing, resulting in 2,250,000 shares outstanding and 15,000,000 total
shares outstanding after giving effect to the issuance of shares to ClearLogic
shareholders and the potential exercise of all 1,635,542 option.
The names of the current directors and executive officers of the
Registrant and holders of more than 5% of the outstanding shares of common stock
and the number of shares held and the percentage of the total issued and
outstanding Common Stock (the only voting security) of the Registrant owned by
each of them are as follows. The table includes only those options which are
exerciseable within 60 days.
<TABLE>
<CAPTION>
Number Percentage
of Shares of Shares
Name Office Owned Owned
<S> <C> <C> <C>
Sina Khelil, CEO and Director(1) 7,969,880 53.1%
Philip Burnham, COO and Director 361,446 2.4%
Najat Khelil(1) 1,084,337 7.2%
Ronaldo Nascimento, Senior Vice
President R&D and Director 361,446 2.4%
Doug Schwarzwaelder, Director 1,626,506 10.8%
Jason Costomiris, CTO 361,446 2.4%
All officers and directors as
a group (4 persons)10,680,724 71.2%
</TABLE>
(1) Najat Khelil is the mother of Sina Khelil. Each disclaims
beneficial ownership of the shares held by the other.
2
<PAGE>
Item 7. Financial Statements, Pro Forma Financial Information
and Exhibits.
(a)(b) The required financial statements and pro forma
financial information are filed herewith.
(c) Exhibits
2. Plan of acquisition, reorganization, arrange-
ment, liquidation or succession.
2.1. Agreement and Plan of Reorganization,
dated November 13, 1999, between the
Registrant, Clearlogic and Clearlogic
Acquisition Corp.
3. Certificate of Incorporation and Bylaws
3.3 Amendment to Certificate of Incorporation
changing name to Clearlogic, Inc.
3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
Dated: November 23, 1999 CLEARLOGIC, INC.
By: /s/ Philip Burnham
Philip Burnham
COO
4
<PAGE>
Board of Directors and Stockholders
ClearLogic, Inc.:
We have audited the accompanying balance sheet of ClearLogic, Inc. as of
December 31, 1998 and June 30, 1999, and the related statements of income,
retained earnings, and cash flows (6/30/99 only) for the year and partial year
then ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of ClearLogic, Inc. as of December
31, 1998 and June 30, 1999, and the results of its operations and its cash flows
for the year then ended in conformity with generally accepted accounting
principles.
August 31, 1999
5
<PAGE>
ClearLogic, Inc.
Balance Sheets
June 30, 1999 and December 31, 1998
<TABLE>
<CAPTION>
6/30/99 12/31/98
Assets
Current Assets
<S> <C> <C>
Cash $ 124,892 $ (2,732)
Accounts Receivable 63,886 12,693
Prepaid Expenses 20,554 6,343
209,332 16,304
Property, Plant and Equipment, net 182,672 118,900
Total Assets 392,004 135,204
Liabilities and Stockholder's Equity
Current Liabilities
Accounts Payable 51,800 48,023
Line of Credit 30,000 30,000
Current Portion of Long Term Debt 9,630 9,630
Accrued Expenses 5,561
Current Portion of Capital 61,587 9,388
Lease Obligations
Total Current Liabilities 158,578 97,041
Shareholders' Loans 305,699 152,413
Notes Payable 190,000
Long Term Debt 39,293 44,108
Long Term Portion of Capital Lease 19,450 13,661
Obligations
Total Liabilities 713,020 307,223
Stockholders' Equity:
Common Stock, no par value, 20,000,000 shares
authorized, 6,055,000 issued and outstanding**
Capital Stock 106,500 106,000
Retained Earnings (427,516) (278,019)
Total Stockholders' Equity (321,016) (172,019)
Total Liabilities & Stockholders' Equity 392,004 135,204
</TABLE>
**Company also has 5,000,000 shares of preferred stock authorized.
See accompanying notes to financial statements and
accountants' audit report
6
<PAGE>
ClearLogic, Inc.
Statement of Operations and Retained Earnings
Partial Year Ended June 30, 1999 and
Year Ended December 31, 1998
<TABLE>
<CAPTION>
1/1/99-6/30/99 1998
<S> <C> <C>
Sales $ 206,894 $ 250,179
(net of allowance 6/30/99 of $3,000)
Cost of Services 148,064 198,079
Gross Profit 58,830 52,100
General & Administrative Expenses 194,793 265,392
Operating Profit (Loss) (135,963) (213,292)
Other Income (Expense)
Interest Expense (13,534) (25,012)
Other Income 6,000
(13,534) (19,012)
Income (loss) before income taxes $ (149,497) $ (232,304)
Retained Earnings:
Balance at beginning of year (278,019) (45,715)
Balance at 6/30/99 $ (427,516) $ (278,019)
</TABLE>
See accompanying notes to financial statements and accountants' audit report
7
<PAGE>
ClearLogic, Inc.
Statements of Cash Flows
Partial Year Ended 6/30/99
Cash flows from operating activities:
<TABLE>
<CAPTION>
6/30/99
<S> <C>
Net Income $ (149,497)
Adjustments to reconcile net income to net
cash provided by (used in) operating activities
Depreciation 18,370
(Increase) decrease in assets:
Accounts receivable (51,193)
Prepaid expenses (14,211)
Increase (decrease) in liabilities:
Accounts payable 3,777
Accrued expenses 5,561
Deferred income taxes
Total adjustments (37,696)
Net cash provided by
(used in) operating activities $ (187,192)
Cash flows used in investing activities:
Capital expenditures (72,601)
Net cash used in investing activities (72,601)
Cash flows from financing activities:
Net proceeds (payments) from borrowings 406,019
Payments on capital lease obligations (18,602)
Net cash provided by (used in)
financing activities 387,417
Net increase in cash $ 127,624
Cash:
Beginning of year (2,732)
End of year $ 124,892
</TABLE>
See accompanying notes to financial statements and accountants' audit report
8
<PAGE>
ClearLogic, Inc.
Notes to Financial Statements
June 30, 1999 and December 31, 1998
(1) Summary of Significant Accounting Policies
Description of Business
ClearLogic, Inc. is an enterprise solutions developer. They have
introduced to the marketplace an Internet based electronic proofing
system. Their initial focus for this product are the print and
advertising industries, while additionally targeting any enterprise that
engages in proofing/review of materials on a consistent basis. In
addition, ClearLogic, Inc. provides security, network administration and
new media. The new media department has full range of services that
include video/multimedia production and cutting edge web development.
Revenue and Cost Recognition
Software, security, network administration and new media revenues are
recognized on the accrual method for financial reporting purposes.
Direct costs associated with software, security, network administration
and new media revenues include all subcontractor, labor costs and product
costs and those indirect costs related to product or service performance,
such as travel expenses. General and administrative costs are charged to
expense as incurred. Provision for estimated losses on uncompleted
services are made in the period in which such losses are determined.
Allowance for Doubtful Accounts
The Company provides an allowance for doubtful accounts equal to the
estimated losses that may be incurred in the collection of receivables.
The estimated losses are based on a review of the current status of the
existing receivables.
Property and Equipment
Major additions and improvements of assets are capitalized at cost.
Maintenance, repairs, and minor improvements are expensed when incurred.
The cost and accumulated depreciation of items sold or otherwise disposed
of are removed from the related property, plant and equipment and
accumulated depreciation accounts, and the resulting gain or loss is
recorded. Depreciation is provided on the declining balance method at
rates based on estimated service lives.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect certain reported amounts and disclosures in the
financial statements. Accordingly, actual results could differ from those
estimates.
9
<PAGE>
ClearLogic, Inc.
Notes to Financial Statements
(1) Summary of Significant Accounting Policies, continued
Income Taxes
For the period ending December 31, 1998, the Company has elected S
corporation tax status whereby federal and state taxable income is taxed
directly to the shareholder. Accordingly, no provision for income taxes
was made in the financial statements for December 31, 1998.
Income taxes for subsequent periods are accounted for using the asset and
liability method, as required by Statement of Financial Accounting
Standards No. 109. Under this method, deferred income taxes are
recognized for the estimated future tax effects attributable to temporary
differences and carryforwards. The measurement of deferred tax
liabilities and assets is based on provisions of the enacted tax law; the
effects of future changes in tax laws or rates are not anticipated.
(2) Property, Plant and Equipment
Property, Plant and Equipment at June 30, 1999 and December 31, 1998
consisted of the following:
<TABLE>
<CAPTION>
6/30/99 12/31/98
<S> <C> <C>
Furniture and Fixtures $ 10,612 $ 5,354
Leasehold Improvements 4,000
Computer and Office Equipment 118,974 85,712
Software 31,334 30,044
Video Equipment 69,596 31,263
Less accumulated depreciation 51,844 33,473
$ 182,672 $ 118,900
</TABLE>
Depreciation expense for the partial year ended June 30, 1999 and year
ended December 31, 1998 amounted to $18,370 and $22,870, respectively.
(3) Long-Term Debt
Long-term debt at June 30, 1999 and December 31, 1998 consisted of the
following:
<TABLE>
<CAPTION>
6/30/99 12/31/98
Note Payable, Columbia Savings Bank, secured by accounts receivable and
property, plant and equipment. Payable in monthly principal and interest
payments of $1,221.72 to April 1, 2004, with interest,
<S> <C> <C> <C>
current interest rate at 10.25% $ 48,923 $ 53,738
$ 48,923 $ 53,738
Less current maturates 9,630 9,630
$ 39,293 $ 44,108
</TABLE>
10
<PAGE>
ClearLogic, Inc.
Notes to Financial Statements
(3) Long-Term Debt, continued
Maturates of long-term debt as of June 30, 1999 are as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
1999 (balance) 4,815
2000 9,630
2001 9,630
2002 9,630
2003 9,630
2004 5,589
48,923
</TABLE>
In addition, the Company has available a $30,000 line of credit; interest
payable at a rate which varies depending on the lender's prime rate;
secured by accounts receivable and property, plant, and equipment. The
line of credit is a demand obligation and has outstanding advances of
$30,000 and $30,000 at June 30, 1999 and December 31, 1998.
(4) Leases
The Company leases office space and equipment under long-term lease
agreements. The leases of computer equipment are classified as capital
leases. The leases for the office space are classified as operating
leases.
The following is a schedule of future minimum lease payments for capital
leases and operating leases as of 6/30/99:
Year ending December 31:
<TABLE>
<CAPTION>
Capital Operating
Leases Leases
<S> <C> <C> <C>
1999 $ 42,963 $ 49,000
2000 54,179 65,250
2001 5,491 74,250
2002 32,500
$ 102,632 $ 221,000
Less interest amount 17,457
Present value of
minimum lease payments $ 85,175
</TABLE>
Rent expense under the operating lease totaled $20,500 and $29,000 for
the partial year June 30, 1999 and full year December 31, 1998,
respectively. The Company relocated its offices on May 1, 1999 to
Haddonfield, NJ.
(5) Major Customers
Four of the Company's customers accounted for approximately 59% of
revenue as of 6/30/99. For 1998, two customers accounted for
approximately 47% of revenue.
11
<PAGE>
ClearLogic, Inc.
Notes to Financial Statements
(6) Concentration of Credit Risk
As of June 30, 1999, the two largest client receivable balances
represented approximately 77% of the total accounts receivable. As of
December 31, 1998, the two largest client receivable balances represent
approximately 80% of the total accounts receivable.
(7) Supplemental Cash Flow Information
Cash paid during the partial year ended 6/30/99 and yea ended December
31, 1998 for interest follows:
<TABLE>
<CAPTION>
6/30/99 12/31/98
<S> <C> <C>
Interest $ 7,242 $14,894
</TABLE>
(8) Commitments and Contingencies
The Company is subject to lawsuits and claims arising out of its normal
course of business. The Company has referred all such suits or claims to
legal counsel, and if appropriate, its insurance carriers. In the opinion
of legal counsel and management, there are no lawsuits or claims that
will have a material adverse effect upon the business or financial
position of the Company.
The Company is in the process of raising funds to fund their planned
extensive marketing efforts and to meet their working capital needs. The
notes that are being issued for the funds have a conversion option. The
payee has the right to, prior to the notes maturity, convert the note to
capital stock. The total raised as of the 6/30/99 financial statements
was $447,200. The notes issued in 1998 totaled $116,200. All notes issued
in 1998 have a 36 month maturity date, with 8% interest. The notes issued
in 1999, as of 6/30/99, totaled $331,000. Of that $331,000, $141,000 have
an 18 month maturity date and $190,000 have a 24 month maturity date, all
with 8% interest.
12
<PAGE>
The accompanying pro forma financial statements give effect to the merger
(the "Merger") of ClearLogic Acquisition Corp., a wholly-owned subsidiary of the
Company into ClearLogic, Inc. a New Jersey corporation ("ClearLogic") for
12,750,000 shares of Company Common Stock, or 85% of the outstanding shares of
Company Common Stock. As a result, ClearLogic is described for financial
reporting purposes to have acquired the Company by the issuance of 2,250,000
shares for its net assets valued at $0. The proforma balance sheets as of
December 31, 1999 and June 30, 1999 assume the Merger was effected at the end of
the periods presented. The proforma income statements for the year ended
December 31, 1998 and the six months ended June 30, 1999 assume the Merger was
effected as of the end of the periods presented.
Pro Forma Balance Sheet
December 31, 1998
ASSETS
<TABLE>
<CAPTION>
ClearLogic, Inc. St. James Pro Forma
Historical Historical Pro Forma Balance
Dec. 31, 1998 Dec. 31, 1998 Adjustments Sheets
Current Assets
<S> <C> <C>
Cash $ (2,732) $ $ $ (2,732)
Prepaid Expenses 6,343 6,343
Accounts Receivables 12,693 12,693
Total Current Assets $ 16,304 $ $ $ 16,304
Property, Plant and Equipment, Net $ 118,900 $ $ $ 118,900
Total Assets $ 135,204 $ $ $ 135,204
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts Payable $ 48,023 $ 1,941 $ (1,941)(A) $ 48,023
Line of Credit 30,000 30,000
Current Portion of Long
Term Debt 9,630 9,630
Current Portion of Capital
Lease Obligations 9,388 9,388
Total Current Liabilities $ 97,041 $ 1,941 $ (1,941)(A) $ 97,041
Shareholders' Loans $ 152,413 $ $ $ 152,413
Notes Payable -- --
Long Term Debt 44,108 44,108
Long Term Potion of Capital Lease
Obligations 13,661 13,661
Total Liabilities $ 307,223 $ $ $ 307,223
Stockholders' Equity
Common Stock $ 106,000 $ 425 $ (93,089)(B) $ 13,336
Paid-in Capital 0 821 91,843(B) 92,664
Accumulated Deficit (278,019) (3,187) 3,187(B) (278,019)
Total Stockholders' Equity $ (172,019) $ (1,941) $ 1,941(B) $ (172,019)
Total Liabilities and
Stockholders' Equity $ 135,204 $ $ $ 135,204
</TABLE>
13
<PAGE>
Pro Forma Income Statement
Year Ended December 31, 1998
<TABLE>
<CAPTION>
Pro Forma
Pro Forma Balance
ClearLogic St. James Adjustments Sheets
<S> <C> <C> <C> <C>
Sales $ 250,179 $ -- $ -- $ 250,179
Cost of Services (198,079) (198,079)
Gross Profit 52,100 52,100
Expenses
General and Administrative 265,392 110 (110)(C) 265,392
Total Expenses $ 265,392 $ 110 $ (110) $ 265,392
Net Operating Income $ (213,292) $ (110) $ 110(C) $ (213,292)
Other Income
Interest Expense (25,012) (25,012)
Other Income 6,000 6,000
Forgiveness of Debt
Total Other Income (19,012) (19,017)
Net Income (Loss) $ (232,304) $ $ $ (232,304)
</TABLE>
14
<PAGE>
Pro Forma Balance Sheet
June 30, 1999
ASSETS
<TABLE>
<CAPTION>
ClearLogic, Inc. St. James Pro Forma
Historical Historical Pro Forma Balance
June 30, 1999 June 30, 1999 Adjustments Sheets
Current Assets
<S> <C> <C>
Cash $ 124,892 $ $ $ 124,892
Prepaid Expenses 20,554 20,554
Accounts Receivables 63,886 63,886
Total Current Assets $ 209,332 $ $ $ 209,332
Property, Plant and Equipment, Net $ 182,672 $ $ $ 182,672
Total Assets $ 392,004 $ $ $ 392,004
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts Payable $ 51,800 $ 2,021 $ (2,021)(A) $ 51,800
Line of Credit 30,000 30,000
Current Portion of Long
Term Debt 9,630 9,630
Accrued Expenses 5,561 5,561
Current Portion of Capital
Lease Obligations 61,587 61,587
Total Current Liabilities $ 158,578 $ 2,021 $ (2,021)(A) $ 158,578
Shareholders' Loans $ 305,699 $ $ $ 305,699
Notes Payable 190,000 190,000
Long Term Debt 39,293 39,293
Long Term Portion of Capital Lease
Obligations 19,450 19,450
Total Liabilities $ 713,020 $ $ $ 713,020
Stockholders' Equity
Common Stock $ 106,500 $ 425 $ (93,089)(B) $ 13,336
Paid-in Capital 0 821 91,843(B) 92,664
Accumulated Deficit (427,516) (3,267) 3,267(B) (427,516)
Total Stockholders' Equity $ (321,016) $ (2,021) $ 2,021(B) $ (321,016)
Total Liabilities and
Stockholders' Equity $ 392,004 $ $ $ 392,004
</TABLE>
15
<PAGE>
Pro Forma Income Statement
Six Months Ended June 30, 1999
<TABLE>
<CAPTION>
Pro Forma
Pro Forma Balance
ClearLogic St. James Adjustments Sheets
<S> <C> <C> <C> <C>
Sales $ 206,894 $ -- $ -- $ 206,894
Cost of Services (148,064) (148,064)
Gross Profit 58,830 58,830
Expenses
General and Administrative 194,793 110 (110) 194,793
Total Expenses $ 194,793 $ 110 $ (110) $ 194,793
Net Operating Income $ (135,963) $ (110) $ 110(C) $ (135,963)
Other Income
Interest Expense (13,534) (13,534)
Total Other Income (13,534) (13,534)
Net Income (Loss) $ (149,497) $ $ $ (149,497)
</TABLE>
16
<PAGE>
Notes to Proforma Statements
(A) Represents $1,941 in accounts payable to a former officer ($2,021 as of
June 30, 1999), of which $1,379 was converted to 551,600 shares of Common
Stock pursuant to the terms of a convertible promissory note and $562 was
forgiven ($642 as of June 30, 1999). All share numbers give effect to a
four-for-one stock split effected immediately before closing of the
Merger.
(B) Stockholders' equity is calculated as follows:
<TABLE>
<CAPTION>
Paid In Accumulated
Shares Amount Capital Deficit Totals
St. James
<S> <C> <C> <C> <C> <C> <C> <C>
historical 12/31/98 424,600 425 821 (3,187) (1,941)
Issuance of Shares
for debt of $1,379 137,900 138 1,241 1,379
Balance 562,500 563 2,062 (3,187) (562)
Forgiveness of debt by
principal shareholder
by contribution to capital 562 562
562,500 563 2,624 (3,187)
Forward stock split 1,687,500 1,687 (1,687)
Balance 2,250,000 2,250 937 (3,187)
ClearLogic Amounts 7,055,000 106,000 -- (278,019) (172,019)
Net issuance of shares
in acquisition
(12,750,000 - 7,055,000) 5,695,000 5,695 (5,695)
Elimination of St. James Deficit (3,187) 3,187
Transfer of excess capital
to paid-in-capital (99,970) 99,970
Balance 15,000,000 13,336 92,664 (278,017) (172,019)
</TABLE>
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is dated
November 13, 1999, and is by and between St. James Group, Inc., a Delaware
corporation (the "Company"), ClearLogic Acquisition Corp, a New Jersey
corporation ("CA"), and ClearLogic, Inc., a New Jersey corporation
("ClearLogic").
R E C I T A L S
WHEREAS, the shareholders of ClearLogic ("Shareholders") will own,
prior to Closing, the shares of capital stock of ClearLogic as set forth in
Schedule 1 attached hereto, which will constitute all of the issued and
outstanding stock of ClearLogic (the "ClearLogic Shares");
WHEREAS, the Company hereby represents and warrants that it is in full
compliance with the Securities Exchange Act of 1934;
WHEREAS, the Company is the owner of all of the outstanding shares of
CA; and
WHEREAS, the Board of Directors of the Company, CA and ClearLogic deem
it advisable that the acquisition by the Company of ClearLogic be effected
through the merger (the "Merger") of ClearLogic and CA pursuant to this
Agreement and Articles of Merger; and
WHEREAS, the Company desires to acquire all of the outstanding
ClearLogic shares for shares of Common Stock of the Company, in a transaction
that qualifies under Section 368(a)(2)(E) of the Internal Revenue Code of 1986,
as amended (the "Code"); and
WHEREAS, the Boards of Directors of the Company, CA and ClearLogic
intend that the Merger constitute a "reorganization" under Section 368(a)(2)(E)
of the Code, and the infusion of assets to be a tax-free transfer under Section
351 of the Code and the rules and regulations of the Internal Revenue Service
(the "IRS") promulgated thereunder, have approved and adopted this Agreement as
a "plan of reorganization" within the meaning of Section 368 of the Code, and
the rules and regulations of the IRS promulgated thereunder, and intend that the
Merger be treated as a tax-free merger under the Code and the rules and
regulations of the IRS promulgated thereunder.
A G R E E M E N T
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein and in reliance upon the representations and warranties
hereinafter set forth, the parties agree as follows:
I. MERGER
1.01 Merger. CA shall merge with and into ClearLogic pursuant to the
Delaware Revised Business Corporation Act (the "Merger") and in accordance with
the Certificate of Merger among the Company, CA and ClearLogic (the "Certificate
of Merger"), a copy of which is attached hereto as Exhibit 2. The Merger shall
be effective on the date on which the Certificate of Merger, or a conformed copy
thereof, in substantially the form annexed hereto as Exhibit 2,
<PAGE>
has been filed with the Secretary of State of Delaware, which filing shall take
place upon Closing hereinafter defined.
1.02. Closing. The Closing of the transaction contemplated by this
Agreement (the "Closing") shall take place on the first closing of the offering
described in Section 6.01. At Closing, and pursuant to the Articles of Merger,
all outstanding ClearLogic Shares and employee stock options shall be cancelled
and in lieu thereof the Shareholders shall receive an aggregate of 11,114,458
shares of Company Common Stock (the "Company Shares") and holders of employee
stock options shall receive options to purchase 1,635,542 employee stock options
of the Company. The Merger shall be a "Reverse Triangular Merger" pursuant to
Section 368 (a)(2)(E) of the Internal Revenue Code.
1.03. Deliveries. Upon Closing, the parties are delivering the
following documents:
1.03(a). The items and documents set forth in Sections 1.01
and 1.02.
1.03(b). The Company Shares described in Section 1.02
1.03(c). The Company shall deliver the resignations of all of
its current officers and directors, and a board and or shareholder
resolution electing Sina Khelil, Ronaldo Nascimiento, Philip Burnham
and Douglas Schwarzwaelder to the Board of Directors of the Company.
1.04. Filings. Following with the Closing, the Company shall file a
Certificate of Amendment to the Certificate of Incorporation of the
Company with the Delaware Secretary of State changing the name of the
Company to "ClearLogic, Inc." or a similar name as may be determined by
the Board of Directors and shall file a Current Report on Form 8-K
reporting the transactions effected by this Agreement.
II. REPRESENTATIONS AND WARRANTIES OF CLEARLOGIC
ClearLogic represents and warrants to the Company as follows, as of the
date of this Agreement and as of the Closing:
2.01. Organization.
2.01(a). ClearLogic is a corporation duly organized, validly
existing and in good standing under the laws of the State of New
Jersey; ClearLogic has the corporate power and authority to carry on
its business as presently conducted; and ClearLogic is qualified to do
business in all jurisdictions where the failure to be so qualified
would have a material adverse effect on its business.
2.02. Capitalization.
2.02(a). As of the Closing, the authorized capital stock and
the issued and outstanding shares of ClearLogic will be as set forth on Exhibit
2.02(a). All of the issued
19
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and outstanding shares of ClearLogic will be duly authorized, validly
issued, fully paid and nonassessable.
2.02(b). Except as set forth in Exhibit 2.02(b) there are no
outstanding options, warrants, or rights to purchase any securities of
ClearLogic.
2.03. Subsidiaries and Investments. ClearLogic does not own any
capital stock or have any interest in any corporation, partnership or other
form of business organization, except as described in Exhibit 2.03 hereto.
2.04. Financial Statements. The audited financial statements of
ClearLogic as of and for the period since its inception to December 31, 1998,
including the audited balance sheet as of June 30, 1999 and the related audited
statement of operations for the period then ended (the "Financial Statements")
present fairly the financial position and results of operations of ClearLogic,
on a consistent basis.
2.05. No Undisclosed Liabilities. To the best knowledge of ClearLogic,
other than as described in Exhibit 2.05 attached hereto and the audited
financial statements, ClearLogic is not subject to any material liability or
obligation of any nature, whether absolute, accrued, contingent, or otherwise
and whether due or to become due, which is not reflected or reserved against in
the Financial Statements, except those incurred in the normal course of
business.
2.06. Absence of Material Changes. Since June 30, 1999, except as
described in any Exhibit attached hereto or as required or permitted under this
Agreement, there has not been:
2.06(a). any material adverse change in the condition
(financial or otherwise) of the properties, assets, liabilities or
business of ClearLogic, except changes in the ordinary course of
business which, individually and in the aggregate, have not been
materially adverse;
2.06(b). any redemption, purchase or other acquisition of
any shares of the capital stock of ClearLogic, or the granting of any rights,
warrants, options or commitments by ClearLogic relating to their authorized or
issued capital stock; or
2.06(c). any change or amendment to the Articles of
Incorporation of ClearLogic.
2.07. Litigation. Except as set forth in Exhibit 2.07 attached hereto,
to the best knowledge of ClearLogic there is no litigation, proceeding or
investigation pending or threatened against ClearLogic affecting any of its
properties or assets that might result, either in any case or in the aggregate,
in any material adverse change in the business, operations, affairs or condition
of ClearLogic or its properties or assets, or that might call into question the
validity of this Agreement, or any action taken or to be taken pursuant hereto.
2.08. Title To Assets. ClearLogic has good and marketable title to all
of its assets and properties now carried on its books including those reflected
in the balance sheets contained in the Financial Statements, free and clear of
all liens, claims, charges, security interests or other encumbrances, except as
described in Exhibit 2.08 attached hereto or any other Exhibit.
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2.09. Transactions with Affiliates, Directors and Shareholders. Except
as set forth in Exhibit 2.09 attached hereto, there are and have been no
contracts, agreements, arrangements or other transactions between ClearLogic,
and any officer, director, or stockholder of ClearLogic, or any corporation or
other entity controlled by the Shareholders, a member of the Shareholders'
families, or any affiliate of the Shareholders.
2.10. No Conflict. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby will not conflict with or
result in a breach of any term or provision of, or constitute a default under,
the Articles of Incorporation or Bylaws of ClearLogic, or any agreement,
contract or instrument to which ClearLogic is a party or by which it or any of
its assets are bound.
2.11. Disclosure. To the actual knowledge of ClearLogic, neither this
Agreement, the Financial Statements nor any other agreement, document,
certificate or written or oral statement furnished to the Company by or on
behalf of ClearLogic in connection with the transactions contemplated hereby,
contains any untrue statement of a material fact or when taken as a whole omits
to state a material fact necessary in order to make the statements contained
herein or therein not misleading.
2.12. Authority. ClearLogic has full power and authority to enter into
this Agreement and to carry out the transactions contemplated herein. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby, have been duly authorized and approved by the
Board of Directors of ClearLogic and, other than the approval by the
Shareholders of ClearLogic described in Section 6.04, no other corporate
proceedings on the part of ClearLogic are necessary to authorize this Agreement
and the transactions contemplated hereby.
III. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to ClearLogic as follows, as
of the date of this Agreement and as of the Closing:
3.01. Organization.
3.01(a). The Company is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Delaware;
has the corporate power and authority to carry on its business as
presently conducted; and is qualified to do business in all
jurisdictions where the failure to be so qualified would have a
material adverse effect on the business of the Company.
3.01(b). The copies of the Certificate of Incorporation, of
the Company, as certified by the Secretary of State of Delaware, and
the Bylaws of the Company are complete and correct copies of the
Certificate of Incorporation and the Bylaws of the Company as amended
and in effect on the date hereof. All minutes of meetings and actions
in writing without a meeting of the Board of Directors and shareholders
of the Company are contained in the minute book of the Company and no
minutes or actions in writing
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without a meeting have been included in such minute book since such
delivery to ClearLogic that have not also been delivered to ClearLogic.
3.02. Capitalization of the Company. The authorized capital stock of
the Company consists of 20,000,000 shares of Common Stock, par value $.001 per
share, of which 2,250,000 shares shall be outstanding immediately prior to the
close of the Merger, and 1,000,000 shares of preferred stock, none of which is
outstanding or will be outstanding at the close of the Merger. All outstanding
shares are duly authorized, validly issued, fully paid and non-assessable.
Following the merger issuance of Company Shares, the capitalization of the
Company shall be 15,000,000 shares of common stock.
3.03. Subsidiaries and Investments. Other than CA, the Company
does not own any capital stock or have any interest in any corporation,
partnership, or other form of business organization. CA is newly organized and
has no liabilities or assets.
3.04. Authority. The Company has full power and authority to enter into
this Agreement and to carry out the transactions contemplated herein. The
execution and delivery of this Agreement, the consummation of the transactions
contemplated hereby, and the issuance of the Company Shares in accordance with
the terms hereof, have been duly authorized and approved by the Board of
Directors of the Company and no other corporate proceedings on the part of
Company are necessary to authorize this Agreement, the transactions contemplated
hereby and the issuance of the Company Shares in accordance with the terms
hereof.
3.05. No Undisclosed Liabilities. Other than as described in
Exhibit 3.05 attached hereto, the Company is not subject to any material
liability or obligation of any nature, whether absolute, accrued, contingent,
or otherwise and whether due or to become due.
3.06. Litigation. There is no litigation, proceeding or investigation
pending or to the knowledge of the Company, threatened against the Company
affecting any of its properties or assets, or, to the knowledge of the Company,
against any officer, director, or stockholder of the Company that might result,
either in any case or in the aggregate, in any material adverse change in the
business, operations, affairs or condition of the Company or any of its
properties or assets, or that might call into question the validity of this
Agreement, or any action taken or to be taken pursuant hereto.
3.07. Title To Assets. The Company has good and marketable title to all
of its assets and properties now carried on its books including those reflected
in the balance sheet contained in the Company's financial statements, free and
clear of all liens, claims, charges, security interests or other encumbrances,
except as described in the balance sheet included in the Com- pany's financial
statements or on any Exhibits attached hereto.
3.08. Contracts and Undertakings. Exhibit 3.08 attached hereto contains
a list of all contracts, agreements, leases, licenses, arrangements, commitments
and other undertakings to which the Company is a party or by which it or its
property is bound. Each of said contracts, agreements, leases, licenses,
arrangements, commitments and undertakings is valid, binding and in full force
and effect. The Company is not in material default, or alleged to be in material
default, under any contract, agreement, lease, license, commitment, instrument
or obligation and,
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to the knowledge of the Company, no other party to any contract, agreement,
lease, license, commitment, instrument or obligation to which the Company is a
party is in default thereunder nor, to the knowledge of the Company, does there
exist any condition or event which, after notice or lapse of time or both, would
constitute a default by any party to any such contract, agreement, lease,
license, commitment, instrument or obligation.
3.09. Underlying Documents. Copies of all documents described in
any Exhibit attached hereto (or a summary of any such contract, agreement or
commitment, if oral) have been made available to ClearLogic and are complete
and correct and include all amendments, supplements or modifications thereto.
3.10. Transactions with Affiliates, Directors and Shareholders. Except
as set forth in Exhibit 3.10 hereto, there are and have been no contracts,
agreements, arrangements or other transactions between the Company, and any
officer, director, or 5% stockholder of the Company, or any corporation or other
entity controlled by any such officer, director or 5% stockholder, a member of
any such officer, director or 5% stockholder's family, or any affiliate of any
such officer, director or 5% stockholder.
3.11. No Conflict. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby will not conflict with or
result in a breach of any term or provision of, or constitute a default under,
the Certificate of Incorporation or Bylaws of the Company, or any agreement,
contract or instrument to which the Company is a party or by which it or any of
its assets are bound.
3.12. Disclosure. To the actual knowledge of the Company, neither this
Agreement nor any other agreement, document, certificate or written or oral
statement furnished to ClearLogic and the Shareholders by or on behalf of the
Company in connection with the transactions contemplated hereby, contains any
untrue statement of a material fact or when taken as a whole omits to state a
material fact necessary in order to make the statements contained herein or
therein not misleading.
3.13. Financial Statements. The financial statements of the
Company as of and for the year ended June 30, 1999 present fairly the financial
position and results of operations of the Company, on a consistent basis.
3.14. Absence of Material Changes. Since June 30, 1999, except as
described in any Exhibit hereto or as required or permitted under this
Agreement, there has not been:
3.14(a). any material change in the condition (financial or
otherwise) of the properties, assets, liabilities or business of
Company, except changes in the ordinary course of business which,
individually and in the aggregate, have not been materially adverse.
3.14(b). any redemption, purchase or other acquisition of any
shares of the capital stock of the Company, or any issuance of any
shares of capital stock or the granting, issuance or exercise of any
rights, warrants, options or commitments by the Company relating to
their authorized or issued capital stock.
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3.14(c). any amendment to the Certificate of Incorporation
of the Company.
IV. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS
All representations, warranties and covenants of the Company and
ClearLogic contained herein shall survive the consummation of the transactions
contemplated herein and remain in full force and effect.
V. CONDITIONS TO CLOSING
5.01. Conditions to Obligation of ClearLogic. The obligations of
ClearLogic under this Agreement shall be subject to each of the following
conditions:
5.01(a). The representations and warranties of the Company
herein contained shall be true in all material respects at the Closing
with the same effect as though made at such time. The Company shall
have performed in all material respects all obligations and complied in
all material respects, to its actual knowledge, with all covenants and
conditions required by this Agreement to be performed or complied with
by it at or prior to the Closing.
5.01(b). No injunction or restraining order shall be in
effect, and no action or proceeding shall have been instituted and, at
what would otherwise have been the Closing, remain pending before a
court to restrain or prohibit the transactions contemplated by this
Agreement.
5.01(c). All statutory requirements for the valid consummation
by the Company of the transactions contemplated by this Agreement shall
have been fulfilled. All authorizations, consents and approvals of all
governments and other persons required to be obtained in order to
permit consummation by the Company of the transactions contemplated by
this Agreement shall have been obtained.
5.01(d). The fulfillment by the Company of all of its
obligations under this agreement and any and all related documents
(including the sale of the offering set forth in Section 6.01.)
5.02. Conditions to Obligations of the Company. The obligation of
the Company under this Agreement shall be subject to the following conditions:
5.02(a). The representations and warranties of ClearLogic
herein contained shall be true in all material respects as of the
Closing, and shall have the same effect as though made at the Closing;
ClearLogic shall have performed in all material respects all
obligations and complied in all material respects, to its actual
knowledge, with all covenants and conditions required by this Agreement
to be performed or complied with by it prior to the Closing.
5.02(b). No injunction or restraining order shall be in
effect prohibiting this Agreement, and no action or proceeding shall have been
instituted and, at what would
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otherwise have been the Closing, remain pending before the court to
restrain or prohibit the transactions contemplated by this Agreement.
5.02(c). All statutory requirements for the valid consummation
by ClearLogic of the transactions contemplated by this Agreement shall
have been fulfilled. All authorizations, consents and approvals of all
governments and other persons required to be obtained in order to
permit consummation by ClearLogic of the transactions contemplated by
this Agreement shall have been obtained.
5.02(d) The fulfillment of the obligations of ClearLogic set
forth in Section 6.04.
VI. CERTAIN AGREEMENTS
6.01. Placement. The Company shall immediately commence the preparation
of a private placement information to issue or sell $1,000,000 in 8% Debentures
at a price of 100% per share. The infusion of cash in this placement is intended
to qualify as a tax-free transaction under Section 351 of the Code. The Company
shall rely on information provided by ClearLogic in the preparation of such
private placement information. ClearLogic agrees to indemnify the Company and
persons who control the Company for any false statement of a material fact or
the omission of any material fact required to be included to make the statements
made in the memorandum not misleading, related to ClearLogic; provided that such
statement or omission was made in reliance on information provided in writing by
ClearLogic. The Company agrees to indemnify ClearLogic and persons who control
ClearLogic for any false statement of a material fact or the omission of any
material fact required to be included to make the statements made in the
memorandum not misleading, related to the Company; provided that such statement
or omission was made in reliance on information provided in writing. The parties
acknowledge, however, that it is the position of the Securities and Exchange
Commission that indemnification for liabilities under the federal securities
laws is against public policy and is unenforceable.
6.02. Reporting Requirements. The Company shall file all reports
required by Section 13 of the Securities Exchange Act of 1934 and shall maintain
its books and records in accordance with Sections 12 and 13 thereof. The parties
agree that the breach of this Section 6.02 shall constitute a material breach of
this Agreement.
6.03. Shareholder Approval. ClearLogic shall submit the Merger to its
Shareholders for approval, and the Company shall approve the Merger as the sole
shareholder of CA. The Closing is subject to not more than 5% of the ClearLogic
shareholders electing dissentor's rights under the Delaware General Corporation
law. The Board of Directors of the Company, prior to the Closing, will reserve
sufficient shares of Company Common Stock for issuance pursuant to the terms of
the Articles of Merger and take such other action as is necessary in connection
therewith.
VII. MISCELLANEOUS
7.01. Finder's Fees, Investment Banking Fees. Neither ClearLogic
nor the Company have retained or used the services of any person, firm or
corporation in such manner as to require
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the payment of any compensation as a finder or a broker in connection with the
transactions contemplated herein.
7.02. Tax Treatment. The transactions contemplated hereby are intended
to qualify as a so-called "tax-free" reorganization under the provisions of
Section 368 of the Code and as a tax free transfer under Section 351 of the
Code. The Company and ClearLogic acknowledge, however, that they each have been
represented by their own tax advisors in connection with this transaction; that
neither has made any representation or warranty to the other with respect to the
treatment of such transaction or the effect thereof under applicable tax laws,
regulations, or interpretations; and that no attorney's opinion or private
revenue ruling has been obtained with respect to the effects thereof under the
Internal Revenue Code of 1986, as amended.
7.03. Further Assurances. From time to time, at the other party's
request and without further consideration, each of the parties will execute and
deliver to the others such documents and take such action as the other party may
reasonably request in order to consummate more effectively the transactions
contemplated hereby.
7.04. Parties in Interest. Except as otherwise expressly provided
herein, all the terms and provisions of this Agreement shall be binding upon,
shall inure to the benefit of and shall be enforceable by the respective heirs,
beneficiaries, personal and legal representatives, successors and assigns of the
parties hereto.
7.05. Entire Agreement; Amendments. This Agreement, including the
Schedules, Exhibits and other documents and writings referred to herein or
delivered pursuant hereto, which form a part hereof, contains the entire
understanding of the parties with respect to its subject matter. There are no
restrictions, agreements, promises, warranties, covenants or undertakings other
than those expressly set forth herein or therein. This Agreement supersedes all
prior agreements and understandings between the parties with respect to its
subject matter. This Agreement may be amended only by a written instrument duly
executed by the parties or their respective successors or assigns.
7.06. Headings, Etc. The section and paragraph headings contained
in this Agreement are for reference purposes only and shall not affect in any
way the meaning or interpretations of this Agreement.
7.07. Pronouns. All pronouns and any variations thereof shall be
deemed to refer to the masculine, feminine or neuter, singular or plural, as
the identity of the person, persons, entity or entities may require.
7.08. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
7.09. Governing Law. This Agreement shall be governed by the laws
of the State of Delaware (excluding conflicts of laws principles) applicable to
contracts to be performed in the State of Delaware.
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IN WITNESS WHEREOF, this Agreement has been duly executed and delivered
by the parties hereto as the date first above written.
ST. JAMES CLEARLOGIC, INC.
GROUP, INC.
By: By:
Name: Name:
Title: Title:
CLEARLOGIC ACQUISITION CORP.
By:
Name:
Title:
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CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
ST. JAMES GROUP, INC.
(Pursuant to Section 242 of
the Delaware General Corporation Law)
The undersigned Sina Khelil, being the President of St. James
Group, Inc., a Delaware corporation (the "Corporation"), does
hereby certify as follows:
1. The Certificate of Incorporation of the Corporation is
hereby amended pursuant to Section 242(a)(1) of the General Corporation Law of
the State of Delaware, in Article First and Article Fourth thereof, to read in
their entirety as follows:
FIRST: The name of the corporation is ClearLogic, Inc.
FOURTH: The total number of shares of all classes which the Corporation is
authorized to have outstanding is Twenty One Million (21,000,000) shares of
which stock Twenty Million (20,000,000) shares in the par value of $.001 each,
amounting in the aggregate of Twenty Thousand Dollars ($20,000) shall be common
stock and of which One Million (1,000,000) shares in the par value of $.001
each, amounting in the aggregate to One Thousand Dollars ($1,000) shall be
preferred stock. Effective upon filing of this amendment with the Delaware
Secretary of State, the common stock shall be reconstituted such that four new
shares of common stock shall be issued in exchange for each one outstanding
share. Any fractional shares otherwise required to be issued shall be rounded to
the nearest whole share. The board of directors is authorized, subject to
limitations prescribed by law, to provide for the issuance of the authorized
shares of preferred stock in series, and by filing a certificate pursuant to the
applicable law of the State of Delaware, to establish from time to time the
number of shares to be included in each such series and the qualifications,
limitations or restrictions thereof. The authority of the board with respect to
each series shall include, but not be limited to, determination of the
following:
(a) The number of shares constituting that series and the
distinctive designation of that series;
(b) The dividend rate on the shares of that series, whether
dividends shall be cumulative, and, if so, from which date or
dates, and the relative rights of priority, if any, of payment
of dividends on shares of that series;
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(c) Whether that series shall have voting rights, in addition to
the voting rights provided by law, and, if so, the terms of
such voting rights;
(d) Whether that series shall have conversion privileges, and, if
so, the terms and conditions of such conversion, including
provision for adjustment of the conversion rate in such events
as the Board of Directors shall determine;
(e) Whether or not the shares of that series shall be redeemable,
and, if so, the terms and conditions of such redemption,
including the date or date upon or after which they shall be
redeemable, and the amount per share payable in case of
redemption, which amount may vary under different conditions,
and at different redemption rates;
(f) Whether that series shall have a sinking fund for the
redemption or purchase of shares of that series, and, if so,
the terms and amount of such sinking fund;
(g) The rights of the shares of that series in the event of
voluntary or involuntary liquidation, dissolution or winding up
of the corporation, and the relative rights of priority, if
any, of payment of shares of that series;
(h) Any other relative rights, preferences and limitations of that
series, unless otherwise provided by the certificate of
determination.
2. The foregoing Amendment to the Certificate of Incorporation
was first authorized by the Board of Directors and subsequently duly adopted by
consent action duly adopted by the holders of all of the Corporation's
outstanding stock entitled to vote thereon in accordance with Section 228 of the
General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, the undersigned has executed this Certificate of
Amendment as of November 23, 1999 and DOES HEREBY CERTIFY, that the facts stated
in this Certificate of Amendment are true and correct.
Sina Khelil
President
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