<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 18, 1998
REGISTRATION NO. 333-53397
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1 TO
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
ENVIRONMENTAL PRODUCTS & TECHNOLOGIES CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 9511 77-0096608
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
5380 NORTH STERLING CENTER DRIVE
WESTLAKE VILLAGE, CALIFORNIA 91361
(818) 865-2205
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
MARVIN MEARS
ENVIRONMENTAL PRODUCTS & TECHNOLOGIES CORPORATION
5380 NORTH STERLING CENTER DRIVE
WESTLAKE VILLAGE, CALIFORNIA 91361
(818) 865-2205
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
MICHAEL D. DONAHUE, ESQ.
ASHER M. LEIDS, ESQ.
DONAHUE, MESEREAU & LEIDS LLP
1900 AVENUE OF THE STARS, SUITE 2700
LOS ANGELES, CALIFORNIA 90067
(310) 277-1441
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC:
As soon as practicable after Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 check the following box: [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
- ---------------
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier registration statement for the same
offering. [ ]
- ---------------
If the delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
CALCULATION OF REGISTRATION FEE
<TABLE>
<S> <C> <C> <C> <C>
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PROPOSED PROPOSED
MAXIMUM MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED PER SECURITY OFFERING PRICE FEE
- -------------------------------------------------------------------------------------------------------------------------------
Common Stock, par value $.01 per
share................................ 2,820,000(1) $7.3125(2) $20,621,250(2) $6,083.27(2)(3)
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</TABLE>
(1) Represents (i) 380,000 shares owned by Jonathan Fink; (ii) 190,000 shares
owned by Brad Billik; (iii) 200,000 shares issuable upon exercise of an
outstanding warrant, dated January 22, 1998, held by Jonathan Fink (the
"Fink Warrant") at an exercise price of $2.00 per share; (iv) 100,000 shares
issuable upon exercise of an outstanding warrant, dated January 22, 1998,
held by Brad Billik (the "Billik Warrant") at an exercise price of $2.00 per
share; (v) 1,950,000 shares issuable (A) upon conversion of 3,000 shares of
Series A Convertible Preferred Stock (the "Series A Preferred Stock") issued
in a private placement in April 1998 (the "1998 Private Placement") and (B)
upon exercise of warrants (the "Private Placement Warrants") granted to the
purchasers in the 1998 Private Placement (clauses (A) and (B) together, the
"Conversion Shares"). The Conversion Shares do not include fractional shares
of Common Stock that the Company is not required to issue upon conversion of
the Series A Preferred Stock or exercise of the Private Placement Warrants.
Although the number of Conversion Shares is currently indeterminable, for
purposes of estimating the number of shares of Common Stock included in this
Registration Statement, the Company calculated the Conversion Shares to be
registered based on 200% of the number of shares of Common Stock that would
have been issuable upon conversion of or otherwise with respect to the
Series A Preferred Stock at a conversion price of $3.875 per share, plus
300,000 shares issuable upon exercise of the Private Placement Warrants at
an exercise price of $3.875 per share. In accordance with Rule 416 of the
Securities Act of 1933, as amended ("Rule 416"). This calculation represents
the Company's good faith estimate of the additional number of shares of
Common Stock that may be issued upon conversion of the shares of Series A
Preferred Stock if the number of such shares is adjusted upward pursuant to
the floating rate conversion price mechanism as a result of a decline in the
market price of the Common Stock. Pursuant to Rule 416, this Registration
Statement also covers that number of additional shares of Common Stock that
may be offered or issued pursuant to terms which provide for a change in the
amount of shares of Common Stock being offered or issued to prevent dilution
resulting from stock splits, stock dividends or similar transactions or by
reason of reductions in the conversion price of the Series A Preferred Stock
in accordance with the terms thereof.
(2) Pursuant to Rule 457(c), the registration fee is based upon a price of
$7.3125 per share, the closing price of the Registrant's Common Stock as
reported on the over-the-counter Bulletin Board on May 19, 1998.
(3) Previously paid
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<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED AUGUST 18, 1998
PROSPECTUS
2,820,000 SHARES
ENVIRONMENTAL PRODUCTS
& TECHNOLOGIES CORPORATION
COMMON STOCK
------------------------
All of the 2,820,000 shares of Common Stock offered hereby, including
600,000 shares issuable upon exercise of warrants held by certain investors (the
"Warrants") and 1,650,000 shares issuable upon conversion of the Company's
Series A Convertible Preferred Stock (the "Series A Preferred Stock"), are being
sold by the Selling Stockholders. The Company will not receive any of the
proceeds from the sale of shares by the Selling Stockholders; however, it may
receive proceeds from the exercise of the Warrants held by the Selling
Stockholders. See "Selling Stockholders" and "Plan of Distribution." The
Company's Common Stock is traded on the OTC Bulletin Board under the symbol
EPTC. The closing price of the Company's Common Stock on August , 1998 was
$ per share.
The Company is a development stage company that intends to engage in the
business of selling and marketing a closed loop waste management system.
------------------------
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK AND LIMITED
LIQUIDITY. SEE "RISK FACTORS" ON PAGE 6.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
THE DATE OF THIS PROSPECTUS IS , 1998.
<PAGE> 3
The Company intends to furnish its stockholders annual reports containing
financial statements audited by an independent public accounting firm after the
end of each fiscal year. In addition, the Company will furnish to its
stockholders quarterly reports for the first three quarters of each fiscal year
containing unaudited financial and other information after the end of each
fiscal quarter, upon written request to the Secretary of the Company.
2
<PAGE> 4
PROSPECTUS SUMMARY
This Prospectus contains forward-looking statements that involve risks and
uncertainties. Actual events and results could differ materially from those
anticipated in these forward-looking statements as a result of certain factors,
including those set forth under "Risk Factors" and elsewhere in this Prospectus.
The following summary should be read in conjunction with, and is qualified in
its entirety by, the more detailed information and financial statements and
notes thereto appearing elsewhere in this Prospectus. Except as otherwise
indicated, all information in this Prospectus reflects a two-for-one stock split
that was effected in May 1998.
THE COMPANY
Environmental Products & Technologies Corporation (the "Company") is a
development stage company that intends to engage in the business of selling and
marketing a closed loop waste management system. A closed loop waste management
system is a fully contained and monitored system designed to process
environmentally-harmful animal, human and agricultural waste products which then
produces pathogen-free, heavy metal reduced, high nutrient value and
environmentally beneficial soil amendment. The Company is a Delaware corporation
formed in 1983. Its address is 5380 North Sterling Center Drive, Westlake
Village, California 91361 and its telephone number is (818) 865-2205.
THE OFFERING
BY SELLING STOCKHOLDERS....... 2,820,000 shares of the Company's Common Stock,
including 600,000 shares issuable upon the
exercise of warrants held by certain investors
(the "Warrants") and 1,650,000 shares issuable
upon the conversion of the company's Series A
Preferred Stock. The Company will not receive
any proceeds from the sale of these shares.
However, if the Selling Stockholders who hold
Warrants determine to exercise their Warrants
in order to sell shares hereunder, the Company
will receive the net proceeds of the exercise
of the Warrants. If all of the Warrants were
exercised, the Company would receive proceeds
of $1,762,500.
COMMON STOCK CURRENTLY
OUTSTANDING................... 8,567,148 shares, excluding the 600,000 shares
issuable upon exercise of the Warrants and the
1,650,000 shares issuable upon conversion of
the Company's Series A Preferred Stock.
RISK FACTORS.................. The securities involve a high degree of risk
and limited liquidity. See "Risk Factors."
3
<PAGE> 5
SELECTED FINANCIAL DATA
Unless otherwise specified, the following selected financial data has been
derived from the Company's audited financial statements included elsewhere
herein.
STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA AND WEIGHTED AVERAGE OUTSTANDING SHARES):
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
SEPTEMBER 30, NINE MONTHS ENDED
---------------------- ------------------------------
1996 1997 JUNE 30, 1997 JUNE 30, 1998
--------- --------- ------------- -------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Net Sales.................................. $ -0- $ -0- $ -0- $ -0-
Gross profit (loss)........................ -0- -0- -0- -0-
Loss from operations....................... (275) (388) (249) (865)
Net Loss................................... (274) (404) (262) (841)
Net loss per common share.................. (0.04) (0.06) (.04) (.10)
Weighted average common shares
outstanding.............................. 6,156,132 7,182,690 7,213,426 8,129,370
</TABLE>
BALANCE SHEET DATA (IN THOUSANDS):
<TABLE>
<CAPTION>
SEPTEMBER 30, JUNE 30,
---------------- --------------------------
1996 1997 1997 1998
----- ------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Total assets...................................... $ 273 $ 312 $ 59 $ 2,567
Total liabilities................................. $ 149 $ 223 $ 185 $ 254
Accumulated deficit............................... $(969) $(1,405) $(1,232) $(5,892)
</TABLE>
4
<PAGE> 6
PROSPECTUS-INTRODUCTION
This Prospectus relates to the offer and sale from time to time of up to
2,820,000 shares (the "Shares") of common stock, $.01 par value per share
("Common Stock"), of Environmental Products & Technologies Corporation, a
Delaware corporation (the "Company"), by the Selling Stockholders named herein
(the "Selling Stockholders"), or by their respective pledgees, donees,
transferees or other successors in interest that receive such Shares as a gift,
partnership distribution or other non-sale related transfer. Of the 2,820,000
Shares being offered hereby: (i) 1,650,000 Shares are issuable upon conversion
of or otherwise with respect to 3,000 shares of the Company's Series A
Convertible Preferred Stock, $.01 par value per share ("Series A Preferred
Stock"), held by two of the Selling Stockholders; (ii) 300,000 Shares are
issuable upon the exercise of certain warrants (the "Private Placement
Warrants") held by two of the Selling Stockholders, (iii) 380,000 Shares held by
Jonathan Fink; (iv) 190,000 Shares held by Brad Billik; (v) 200,000 Shares
issuable upon the exercise of a warrant held by Jonathan Fink (the "Fink
Warrant"); and (vi) 100,000 Shares issuable upon the exercise of a warrant held
by Brad Billik (the "Billik Warrant"). The Series A Preferred Stock and the
Private Placement Warrants were issued by the Company to the Selling
Stockholders on April 7, 1998 in a private transaction (the "1998 Private
Placement"). Jonathan Fink is the President and Brad Billick is an employee of
Strategic Planning Consultants, Inc. See "Management -- Employment and
Consulting Agreements."
The number of Shares indicated as being issuable upon conversion of or
otherwise with respect to the Series A Preferred Stock and the Private Placement
Warrants sold in the 1998 Private Placement and offered hereby represents a good
faith estimate of the number of shares of Common Stock that may be issued upon
conversion of or otherwise with respect to the Series A Preferred Stock by
reason of the floating rate conversion mechanism included in the Certificate of
Designations, Preferences and Rights for the Series A Preferred Stock. The
estimate is based on 200% of the number of shares of common Stock issuable at a
conversion price of $3.875 per share in accordance with Rule 416 ("Rule 416") of
the Securities Act of 1933, as amended (the "Securities Act"). Pursuant to Rule
416, the number of shares of Common Stock underlying the Series A Preferred
Stock and offered for sale hereby includes an indeterminate number of shares as
may be issued or issuable upon conversion of or otherwise with respect to the
Series A Preferred Stock by reason of the floating rate conversion price
mechanism and other adjustment mechanisms described in the Certificate of
Designations, Preferences and Rights of the Series A Preferred Stock (the
"Certificate of Designation"), or by reason of any stock splits, stock dividends
or similar transactions involving the Common Stock, in order to prevent
dilution. Although the Company will receive the exercise price of any Warrants
which are exercised, the Company will not receive any of the proceeds from the
sale of the Shares by the Selling Stockholders. The expenses of registration of
the Shares which may be offered hereby under the Securities Act will be paid by
the Company.
The Shares covered under the Registration Statement of which this
Prospectus is a part may be offered for sale from time to time by or for the
account of the Selling Stockholders, or their pledgees, donees, transferees or
other successors in interest, in the open market, in the over the counter market
on the electronic bulletin board (the "Bulletin Board") or on one or more
exchanges on which the Shares are then listed, in privately negotiated
transactions, in an underwritten offering, in a combination of such methods, or
by any other legally available means, at market prices prevailing at the time of
such sale, at prices related to such prevailing market prices, at negotiated
prices or at fixed prices. The Shares are intended to be sold through one or
more broker-dealers or directly to purchasers. Such broker-dealers may receive
compensation in the form of discounts, concessions or commissions from the
Selling Stockholders, their successors in interest and/or the purchasers of the
Shares for whom such broker-dealers may act as agent or to whom they may sell as
principal, or both (which compensation as to a particular broker-dealer may be
in excess of customary commissions). The Selling Stockholders, their successors
in interest and/or any broker-dealers acting in connection with the sale of the
Shares hereunder may be deemed to be underwriters within the meaning of Section
2(11) of the Securities Act, and any commissions or other compensation received
by them and any profits realized by them on the resale of the Shares as
principals may be deemed underwriting compensation under the Securities Act. See
"Selling Stockholders" and "Plan of Distribution."
5
<PAGE> 7
RISK FACTORS
The securities offered hereby are speculative in nature and an investment
in the Shares offered hereby involves a high degree of risk. In addition to the
other information contained in this Prospectus, prospective investors should
carefully consider the following risk factors in evaluating whether to purchase
the Shares offered hereby.
Accumulated Deficit; History of Operating Losses; Expectation of Future
Losses. The Company has experienced significant operating losses since its
inception. At June 30, 1998, the Company had an accumulated deficit of
approximately $5,892,000. The Company incurred an operating loss of
approximately $(388,000) for the fiscal year ended September 30, 1997, and has
incurred an operating loss of approximately $(841,000) for the nine months ended
June 30, 1998. Such losses have resulted principally from no revenues from
operations and costs associated with the acquisition of the Company's
technologies and general and administrative expenses. The Company has generated
no revenues from operations and incurred increased losses to date and expects
that it will continue to incur losses until such time, if ever, as revenues from
product sales are sufficient to fund its continuing operations. The Company's
profitability will depend on its ability to commercialize its waste management
system. There can be no assurance that the Company will ever generate sufficient
revenues to achieve profitability. See "Management's Discussion and Analysis or
Plan of Operations."
Development Stage Company. The Company is designated by its independent
auditors as a development stage company in accordance with SFAS 7 "Accounting
and Report by Development Stage Enterprises." Under this statement, a
development stage company is an enterprise that is devoting substantially all of
its time to establishing a new business and planned operations have not
commenced. At this stage there is no assurance that the Company will be able to
raise sufficient capital and develop a profitable market for its planned
product.
Capital Intensive Business; Need for Additional Financing. The Company's
business is capital intensive. The proceeds of this offering will be received by
the Selling Stockholders. While the Company may receive cash from the exercise
of warrants held by the Selling Stockholders, there can be no assurance that the
Company will derive any specific amount of proceeds from this offering.
Developments in the Company's business and possible expansion into other markets
could indicate that the Company should expand its business at a faster rate than
that currently planned for. Moreover, there can be no assurance that the Company
will not encounter unforeseen difficulties that may deplete its capital
resources more rapidly than anticipated, which would require that the Company
seek additional funds through equity, debt or other external financing. In any
event, it is likely that the Company will attempt to raise additional capital to
meet its obligations and to accelerate its growth. There can be no assurance
that any additional capital resources which the Company may need will be
available to the Company if and when required, or on terms that will be
acceptable to the Company. If additional financing is required, or desired, the
Company may be required to forgo a substantial interest in its future revenues
or dilute the equity interests of existing stockholders, and a change in control
of the Company may result. Further, if the Company is unable to obtain necessary
financing, it may be required to significantly curtail its activities or cease
operations. See "Management's Discussion and Analysis or Plan of Operations" and
"Use of Proceeds."
Limited Operating History; New Business; No Product Sales. The Company has
a limited operating history and has not generated any revenues to date. There
can be no assurance that the Company will be able to successfully market its
waste management system, products and services. While attempting to
commercialize its products, the Company will be subject to risks inherent in a
new business. Such risks include unanticipated problems relating to
environmental regulatory compliance, the competitive environment in which the
Company operates and marketing problems, and additional costs and expenses that
may exceed current estimates. There can be no assurance that, even after the
expenditure of substantial funds and efforts, the Company will ever achieve or
maintain a substantial level of sales of its products. The failure to
successfully market its products and services will have a material adverse
effect on the Company's financial condition, business and results of operations.
6
<PAGE> 8
Uncertain Market Acceptance of the Company's Products. To date, the Company
has had no sales of its waste management system. There can be no assurance that
significant, or any, sales will occur or that the Company's waste management
system will obtain broad, or even limited, market acceptance. The decision by a
potential customer to utilize the Company's waste management system is, among
other things, technical in nature, requiring the customer to make an evaluation
as to whether changes in its capital equipment or operating procedures will be
required in order to realize the performance benefits of the Company's products.
There can be no assurance that potential customers will choose to change their
equipment or established procedures or be willing to incur any necessary costs
to make such changes or that the benefits derived from utilizing the Company's
waste management system will outweigh the costs incurred to make such changes.
Further, there can be no assurance that all customers will experience the
performance and cost advantages expected by the Company. For example, a
by-product of the Company's waste management system is the ability to convert
the methane by-product into electricity. Such ability may be of little or no
interest to consumers at a time when electricity is relatively inexpensive. If
the Company is not successful in marketing its waste management system, its
ability to generate revenues will be greatly diminished and the Company will be
dependent on other future products and services that may be developed or
otherwise obtained by the Company. There can be no assurance that the Company's
waste management system will be successfully marketed or that future products
and services will be developed or obtained.
Development Risks. Environmental Products and Technologies is a development
stage company. The Company has products in various stages of development, and no
revenue has been recognized from the sale of its products. The Company has
developed and plans to market new products and new applications of technology
and, accordingly, is subject to risks associated with such ventures. To date,
the Company has assembled one prototype waste management system. The probability
of success of the Company must be considered in light of the expenses and delays
frequently encountered in connection with the operation of a new business and
the development of practical production techniques for new products.
No Independent Certification as to the Effectiveness of the Company's
Products. The Company has only recently completed development of its closed loop
waste management system and has assembled one complete system. The Company
intends to assemble three additional waste management systems within the next
three to six months. The Company has not yet tested its waste management system
under commercial circumstances. No assurance can be given that the Company's
waste management system will perform as anticipated under commercial conditions
or that substantial reengineering, redesign and/or redevelopment work will not
be required for the Company's waste management system to operate as anticipated.
Further, the Company has not submitted its waste management system to an
independent laboratory for testing to ensure that its system is effective.
Equipment Failure; Limited Engineering, Design and Construction Experience;
Limited Manufacturing Experience. The Company has completed assembly of and
operated since March 1, 1998 one waste management system. The Company commenced
demonstrations to dairies on April 24, 1998. With the proceeds from the 1998
Private Placement (as hereinafter defined), the Company intends to manufacture
three additional demonstration units of its waste management system. From time
to time, the Company has experienced mechanical or technical difficulties with
such waste management system which has required repairs and maintenance. Any
such mechanical or technical difficulties with its systems in the future could
result in an interruption in the Company's ability to manufacture and sell such
systems. The failure of the Company to effect prompt repairs and otherwise keep
its waste management systems operating at targeted capacities could have a
material adverse effect on the business, financial condition and results of
operations of the Company. The Company may experience problems associated with
the manufacturing, assembling and engineering of additional waste management
systems, including, without limitation, cost overruns, start-up delays and
technical or mechanical problems. To date, the Company has engaged in only
limited manufacturing and there can be no assurance that the Company's efforts
to expand its manufacturing capabilities will not exceed estimated costs or take
longer than expected, or that other unanticipated problems will not arise that
would materially adversely affect the Company's business and prospects. See
"Management's Discussion and Analysis or Plan of Operations" and "Business."
7
<PAGE> 9
Dependence on Major Subcontractors and Suppliers. The Company relies on
subcontractors and suppliers to manufacture, subassemble and perform certain
testing of all of the components of the Company's waste management system. The
Company plans to outsource the manufacture of major components and complete
final assembly and testing of its waste management systems at its customers
operations. The inability to develop relationships with, or the loss of,
subcontractors or suppliers, or the failure of its subcontractors or suppliers
to meet the Company's price, quality, quantity and delivery requirements, could
require the Company to reduce or eliminate expenditures for research and
development, production or marketing of its products, or otherwise to curtail or
discontinue its operations, which could have a material adverse effect on the
Company's business, financial condition and results of operations. See
"Business -- Suppliers."
Product Warranty. The Company intends to warrant its waste management
systems to be free of defects in workmanship and materials for 90 days from
installation at the location of the end user. There can be no assurance that the
Company will not experience warranty claims or parts failure rates in excess of
those which it has assumed in pricing its products and spare parts. Any such
excess warranty claims or spare parts failure rates could have a material
adverse effect on the Company's business, financial condition or results of
operations. The Company currently has no experience with warranty claims
relating to its products.
Dependence on a Single Product Line. The Company anticipates that it will
derive substantially all of its revenue in the foreseeable future from sales of
its waste management systems, related consumables and spare parts. If the
Company is unable to generate sufficient sales of its waste management systems
due to market conditions, manufacturing difficulties or other reasons, it may
not be able to continue its business. Similarly, if purchasers of its waste
management systems were to continue utilizing current waste management
practices, the Company's business, results of operations and financial condition
could be materially adversely affected. Dependence on a single product line
makes the Company particularly vulnerable to the successful introduction of
competitive products.
No Product Liability Insurance. The Company could be subject to product
liability claims in connection with the use of the products that it sells. There
can be no assurance that the Company would have sufficient resources to satisfy
any liability resulting from these claims or would be able to have its customers
indemnify or insure the Company against such claims. The Company does not
currently carry product liability insurance and there can be no assurance that
such coverage, if obtainable, would be adequate in terms and scope to protect
the Company against material adverse effects in the event of a successful
product liability claim. Accordingly, any product liability claim brought
against the Company could, and probably would, have a material adverse effect on
the Company's business, financial condition and results of operations.
Risks Inherent in International Operations. The Company intends to market
its products and services internationally and plans to seek opportunities
overseas, either independently or through joint ventures or other collaborative
arrangements with strategic partners. To the extent that the Company operates
its business overseas and/or sells its products in foreign markets, it will be
subject to all of the risks inherent in international operations and
transactions, including the burdens of complying with a wide variety of foreign
laws and regulations, exposure to fluctuations in currency exchange rates and
tariff regulations, potential economic instability and export license
requirements. In addition, international environmental regulations and
enforcement of such regulations vary by country and are subject to changes which
may adversely affect the Company's operations. See "Business."
Competition. The Company will directly and indirectly compete with other
businesses, including businesses in the solid waste collection and disposal
business. In many cases, these potential competitors are larger and more firmly
established than the Company. In addition, many of such potential competitors
have greater marketing and development budgets and greater capital resources
than the Company. Accordingly, there can be no assurance that the Company will
be able to achieve and maintain a competitive position in the businesses in
which it will compete. See "Business -- Competition."
Dependence on Patents and Proprietary Technology; Reliance on Licensed
Technology. The Company's success will depend, in part, on its ability to
maintain protection for its products and processes under United States and
foreign patent laws, to preserve its trade secrets and to operate without
infringing the proprietary rights of third parties. Currently, a portion of the
Company's technology for its waste management system is
8
<PAGE> 10
licensed from third parties and the Company has not obtained indemnification
from the licensors of such technology. Accordingly, if the technology licensed
by such licensors to the Company infringes the rights of third parties, the
Company could be held liable for damages to such third party and could not seek
reimbursement from the licensor. The Company does not maintain any insurance to
protect against such occurrence and, if such a claim were made against the
Company it could have a material adverse effect on the Company's business,
financial condition and results of operations. The Company does not possess any
patents and does not have any applications pending. There can be no assurance
that any patent applications, if applied for, will result in issued patents,
that any issued patents will afford adequate protection to the Company or not be
challenged, invalidated, infringed or circumvented or that any rights thereunder
will afford competitive advantages to the Company. Furthermore, there can be no
assurance that others have not independently developed, or will not
independently develop, similar products and technologies or otherwise duplicate
any of the Company's products and technologies.
There can be no assurance that the validity of any patent issued to the
Company or any licensor of technology to the Company would be upheld if
challenged by others in litigation or that the Company's activities would not
infringe patents owned by others. The Company could incur substantial costs in
defending itself in suits brought against it, or in suits in which the Company
seeks to enforce its patent and/or license rights against others. Should the
Company's products or technologies be found to infringe patents issued to third
parties, the Company would be required to cease the manufacture, use and sale of
the Company's products and the Company could be required to pay substantial
damages. In addition, the Company may be required to obtain licenses to patents
or other proprietary rights of third parties in connection with the development
and use of its products and technologies. No assurance can be given that any
such licenses required would be made available on terms acceptable to the
Company, or at all.
The Company also relies on trade secrets and proprietary know-how, which it
seeks to protect, in part, by confidentiality agreements with its employees,
consultants, advisors and others. There can be no assurance that such parties
will maintain the confidentiality of such trade secrets or proprietary
information, or that the trade secrets or proprietary information of the Company
will not otherwise become known or be independently developed by competitors in
a manner that would have a material adverse effect on the Company's business,
financial condition and results of operations. See "Business -- Intellectual
Property."
Dependence on Environmental Regulation. Federal, state and local
environmental legislation and regulations mandate stringent waste management and
operations practices, which require substantial capital expenditures and often
impose strict liabilities for non-compliance. Environmental laws and regulations
are, and will continue to be, a principal factor affecting demand for the
technology and services being developed or offered by the Company. The level of
enforcement activities by federal, state and local environmental protection and
related agencies, and changes in regulations and waste generator compliance
activities, will also affect demand. To the extent that the burdens of complying
with such laws and regulations may be eased as a result of, among other things,
political factors, or that producers of industrialized farm waste find
alternative means to comply with applicable regulatory requirements, demand for
the Company's products and services could be adversely affected, which could
have a material adverse effect on the Company's business, financial condition
and results of operations. Any changes in these regulations which increase
compliance standards may require the Company to change or improve its operating
procedures. To the extent the Company conducts its business overseas,
international environmental regulations will be applicable. Such regulations
vary by country and are subject to changes which may adversely affect the
Company's operations. See "Business -- Environmental Matters."
Regulatory Status of Operations. The Company and its customers operate in a
highly regulated environment, and the Company's potential customers and/or the
Company's products and services may be required to have various federal, state
and/or local government permits and authorizations, registrations and/or
exemptions. Any of these permits or approvals may be subject to denial,
revocation or modification under various circumstances. Failure to comply with
the conditions of such permits, approvals, registrations, authorizations or
exemptions may adversely affect the installation or operation of the Company's
waste management system and may subject the Company to federal, state or
locally-imposed penalties. The Company's ability to satisfy the permitting
requirements for a particular installation does not assure that
9
<PAGE> 11
permitting requirements for other installations will be satisfied. In addition,
if new environmental legislation is enacted or current regulations are amended
or are interpreted or enforced differently, the Company or its customers may be
required to obtain additional operating permits, registrations, certifications,
exemptions or approvals. There can be no assurance that the Company or its
customers will meet all of the applicable regulatory requirements.
Potential Environmental Liability. The Company's business exposes it to the
risk that harmful substances may be released or escape into the environment from
its processes or equipment, resulting in potential liability for the clean-up or
remediation of the release and/or potential personal injury associated with the
release. Liability for investigation and/or clean-up and corrective action costs
exists under the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended ("CERCLA"), the Resource Conservation and
Recovery Act of 1976, as amended ("RCRA"), and corresponding state laws.
Additionally, the Company is potentially subject to regulatory liability for the
generation, transportation, treatment, storage or disposal of hazardous waste if
it does not act in accordance with the requirements of federal or state
hazardous waste regulations or facility specific regulatory determinations,
authorizations or exemptions. The Company is also potentially subject to
regulatory liability for releases into the air or water under the Clean Air Act
of 1970, as amended, and the Federal Water Pollution Control Act of 1972, as
amended (hereinafter the "Clean Water Act"), and analogous state laws and
regulations and various other applicable federal or state laws and regulations
if it does not comply with those requirements.
Dependence on Key Management and Personnel. The Company is highly dependent
upon the efforts of its senior management and, effective April 15, 1998, entered
into a four-year employment agreement with Marvin Mears, the Company's President
and Chief Executive officer. The Company does not possess any key-man life
insurance on Mr. Mears but intends to apply for a $1 million key-man life
insurance policy on him. No assurance can be given that the Company will be able
to obtain such a policy or, if obtainable, that it will be on terms favorable to
the Company. The Company is also dependent upon its other management personnel,
as well as certain scientific advisors and consultants. The loss of the services
of one or more of these individuals could have a material adverse effect upon
the Company. The Company's future success will depend in large part upon its
ability to attract and retain additional highly skilled scientific, managerial,
manufacturing and marketing personnel. The Company faces competition for hiring
such personnel from other companies, research and academic institutions,
government agencies and other organizations. There can be no assurance that the
Company will continue to be successful in attracting and retaining such
personnel. See "Management."
Prior Legal Actions Involving Chief Executive Officer and Principal
Stockholders. On March 12, 1993, the United States District Court for the
Central District of California permanently enjoined Mr. Marvin Mears, the
President, Chief Executive Officer, Director and a major stockholder of the
Company, from, among other things, future violations or aiding and abetting
violations of the antifraud provisions of the Securities Act of 1933, as amended
(the "1933 Act"), and the Securities Exchange Act of 1934 (the "1934 Act"), as
amended. Further, Mr. Mears was permanently restrained and enjoined from making
any untrue statement of a material fact in any registration statement,
application, report, account, record or other document filed or transmitted
pursuant to the Investment Company Act of 1940, or omitting to state therein any
fact necessary in order to prevent the statements made therein, in light of the
circumstances under which they were made, from being materially misleading in
violation of the Investment Company Act of 1940. In addition, by order dated
February 27, 1996, Mr. Mears, without admitting or denying any of the findings
contained in an order issued by the Securities and Exchange Commission,
consented to the entry of an Order Making Findings and Imposing Sanctions
Pursuant to Section 9(b) of the Investment Company Act of 1940 whereby Mr. Mears
agreed to be barred from association with any investment advisor or investment
company. See "Management -- Executive Officers and Directors."
In February 1993, the United States District Court for the Central District
of California permanently enjoined Mr. Morris Lerner, a major stockholder of the
Company and formerly an officer and director of the Company, from, among other
things, future violations or aiding and abetting violations of the antifraud
provisions of the 1933 Act and the 1934 Act. In addition, Mr. Lerner was
permanently restrained and enjoined from making any untrue statement of a
material fact in any registration statement, application, report,
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<PAGE> 12
account, record or other document filed or transmitted pursuant to the
Investment Company Act of 1940, or omitting to state therein any fact necessary
in order to prevent the statements made therein, in light of the circumstances
under which they were made, from being materially misleading in violation of the
Investment Company Act of 1940.
Control by Existing Management. The Company's executive officers and
directors currently beneficially own approximately 45.74% of the outstanding
shares of Common Stock. These persons, if acting in concert, will have
significant voting power with respect to the election of directors and, in
general, the outcome of any other matter submitted to a vote of stockholders.
See "Principal Stockholders."
Potential Adverse Effects of Preferred Stock. The Company's Certificate of
Incorporation authorizes the issuance of shares of "blank check" preferred
stock, which will have such designations, rights and preferences as may be
determined from time to time by the Board of Directors. Accordingly, the Board
of Directors is empowered, without stockholder approval, to issue preferred
stock with dividend, liquidation, conversion, voting or other rights which could
adversely affect the voting power or other rights of the holders of the Common
Stock. The preferred stock could be utilized to discourage, delay or prevent a
change in control of the Company. Although the Company has no present intention
to issue any shares of preferred stock other than the shares of Series A
Preferred Stock currently outstanding, there can be no assurance that the
Company will not do so in the future. See "Description of Capital
Stock -- Preferred Stock."
No Dividends. The Company has not paid any cash dividends on its Common
Stock and does not expect to declare or pay any cash or other dividends in the
foreseeable future. The Company intends to retain earnings, if any, to provide
funds for the expansion of the Company's business. So long as any shares of
Series A Convertible Preferred Stock are outstanding, the Company may not,
without first obtaining the approval of the holders of 67% of the then
outstanding shares of Series A Convertible Preferred Stock, redeem, declare or
pay any dividend or distribution with respect to shares of Common Stock. See
"Dividend Policy."
Outstanding Warrants and Options; Exercise of Registration Rights. The
Company has outstanding (i) warrants to purchase an aggregate of 300,000 shares
of Common stock at an exercise price of $2.00 per share; (ii) the Private
Placement Warrants to purchase 300,000 shares of Common Stock at an exercise
price of $3.875 per share; and (iii) options to purchase an aggregate of 330,000
shares of Common Stock granted under the Company's 1996 Stock Option Plan at an
exercise price of $.1875 per share. The Company has reserved an aggregate of
400,000 shares of Common Stock for issuance under its stock option plan as of
the date of this Prospectus. Holders of such warrants and options are likely to
exercise them when, in all likelihood, the Company could obtain additional
capital on terms more favorable than those provided by such warrants and
options. Further, while these warrants and options are outstanding, the
Company's ability to obtain additional financing on favorable terms may be
adversely affected.
General Risks of Business. Any future success that the Company might enjoy
will depend upon many factors, including factors which may be beyond the control
of the Company or which cannot be predicted at this time. These factors may
include technological advances or product obsolescence, increased levels of
competition, including the entry of additional competitors and increased success
by existing competitors, changes in general economic conditions, increases in
operating costs including costs of supplies, personnel, and equipment, reduced
margins caused by competitive pressures and other factors, and changes in
governmental regulation imposed under federal, state or local laws.
Risks Associated with Management of Potential Growth. The Company's growth
is expected to place a significant strain on its managerial, operation,
financial and information systems resources. To accommodate its current size and
manage growth, the Company must continue to implement and improve its
operational, financial and information systems, and expand, train and manage its
employee base. Additionally, expansion of the Company's information and network
systems is required to accommodate its growth. There can be no assurance that
the Company will be able to effectively manage the expansion of its operations,
or that the Company's facilities, systems, procedures or controls will be
adequate to support the Company's operations. The inability of the company to
manage effectively its future growth would have a material adverse effect on the
Company's business, financial condition and results of operations. This problem
may be exacerbated to the
11
<PAGE> 13
extent the Company continues to acquire additional technologies, as each such
technology must then be integrated into the Company's operations and systems.
Delaware Anti-Takeover Statute; Issuance of Preferred Stock; Barriers to
Takeover. The Company is a Delaware corporation and thus, upon the consummation
of the Offering will become subject to the prohibitions imposed by Section 203
of the Delaware General Corporation Law, which is generally viewed as an
anti-takeover statute. In general, this statute will prohibit the Company, once
public, from entering into certain business combinations without the approval of
its Board of Directors and, as such, could prohibit or delay mergers or other
attempted takeovers or changes in control with respect to the Company. Such
provisions may discourage attempts to acquire the Company. In addition, the
Company's authorized capital consists of 40,000,000 shares of capital stock of
which 20,000,000 shares are designated as Common Stock and 20,000,000 shares are
designated as preferred stock. The Board of Directors, without any action by the
Company's stockholders, is authorized to designate and issue shares in such
classes or series (including classes or series of preferred stock) as it deems
appropriate and to establish the rights, preferences and privileges of such
shares, including dividends, liquidation and voting rights. The rights of
holders of preferred stock and other classes of Common Stock that may be issued
may be superior to the rights granted to the holders of the existing classes of
Common Stock. Further, the ability of the Board of Directors to designate and
issue such undesignated shares could impede or deter an unsolicited tender offer
or takeover proposal regarding the Company and the issuance of additional shares
having preferential rights could adversely affect the voting power and other
rights of holders of Common Stock. Issuance of preferred stock, which may be
accomplished through a public offering or a private placement, may dilute the
voting power of holders of Common Stock (such as by issuing preferred stock with
super voting rights) and may render more difficult the removal of current
management, even if such removal may be in the stockholders' best interests. Any
such issuance of preferred stock could prevent the holders of Common Stock from
realizing a premium on their shares. See "Description of Securities."
Risks Associated with Forward-Looking Statements Included in this
Prospectus. This Prospectus contains certain forward-looking statements
regarding the plans and objectives of management for future operations. The
forward-looking statements included herein are based on current expectations
that involve numerous risks and uncertainties. The Company's plans and
objectives are based, in part, on assumptions involving the Company's ability to
successfully integrate the various technologies it has licensed, the Company's
ability to market successfully its waste management system and insecticide
products, increased governmental regulation of livestock and poultry operations
and that there will be no unanticipated material adverse change in the Company's
business. Assumptions relating to the foregoing, among others, involve judgments
with respect to, among other things, future economic, competitive, regulatory
and market conditions and future business decisions, all of which are difficult
or impossible to predict accurately and many of which are beyond the control of
the Company. Although the Company believes that its assumptions underlying the
forward-looking statements are reasonable, any of the assumptions could prove
inaccurate and, therefore, there can be no assurance that the forward-looking
statements included in this Prospectus will prove to be accurate. In light of
the significant uncertainties inherent in the forward-looking statements
included herein, particularly in view of the Company's early stage operations,
the inclusion of such information should not be regarded as a representation by
the Company or any other person that the objectives and plans of the Company
will be achieved.
Limited Market for the Common Stock. The Company's Common Stock is traded
on the OTC Bulletin Board, but is not listed on any stock exchange or on NASDAQ.
Trading volume in the Common Stock has fluctuated considerably in the recent
past. The Company intends to file for the registration of the entire class of
its Common Stock under Section 12(g) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act" ), in order to make the Company a "reporting
company" in that it will be required to file all of the reports, proxy
statements and other information required to be filed with the Securities and
Exchange Commission (the "Commission") under the Exchange Act.
Possible Volatility of Stock Prices; Penny Stock Rules. The
over-the-counter markets for securities such as the Company's Common Stock
historically have experienced extreme price and volume fluctuations during
certain periods. These broad market fluctuations and other factors, such as new
product developments and
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<PAGE> 14
general trends in the investment markets, as well as general economic conditions
and quarterly variations in the Company's results of operations, may adversely
affect the market price of the Company's Common Stock. Moreover, unless and
until it is approved for quotation on NASDAQ, the Company's Common Stock could
become subject to rules adopted by the Commission regulating broker-dealer
practices in connection with transactions in "penny stocks." Penny stocks
generally are equity securities with a price of less than $5.00 (other than
securities registered on certain national securities exchanges or quoted on
NASDAQ, provided that current price and volume information with respect to
transactions in such securities is provided by the exchange or the NASDAQ
system). Unless an exemption from the definition of a "penny stock" were
available, any broker engaging in a transaction in the Company's Common Stock
would be required to provide any customer with a risk disclosure document,
disclosure of market conditions, if any, disclosure of the compensation of the
broker-dealer and its salesperson in the transaction, and monthly accounts
showing the market values of the Company's Common Stock held in the customer's
account. The bid and offer quotation and compensation information must be
provided prior to effecting the transaction and must be contained on the
customer's confirmation. It may be anticipated that a number of brokers may be
unwilling to engage in transactions in the Company's Common Stock because of the
need to comply with the "penny stock" rules, thereby making it more difficult
for purchasers of Common Stock offered hereby to dispose of their shares. The
Company's Common Stock is covered by a Securities and Exchange Commission rule
that imposes additional sales practice requirements on broker-dealers who sell
such securities to persons other than established customers and accredited
investors (generally institutions with assets in excess of $5,000,000 or
individuals with net worth in excess of $1,000,000 or annual income exceeding
$200,000 or $300,000 jointly with their spouse). For transactions covered by the
rule, the broker-dealer must make a special suitability determination for the
purchaser and receive the purchaser's written agreement to the transaction prior
to the sale. Consequently, the rule may affect the ability of broker-dealers to
sell the Company's securities and also may affect the ability of purchasers in
this offering to sell their shares in the secondary market.
DIVIDEND POLICY
The Company has not paid any cash dividends on its Common Stock and does
not expect to declare or pay any cash or other dividends in the foreseeable
future. The Company intends to retain earnings, if any, to provide funds for the
expansion of the Company's business. See "Risk Factors -- Dividend Policy."
USE OF PROCEEDS
The Company will not receive the proceeds of sales of shares by the Selling
Stockholders. However, if the Selling Stockholders who hold Warrants determine
to exercise their Warrants in order to sell shares hereunder, the Company will
receive the proceeds of the exercise of the Warrants. If all of the Warrants
were exercised, the Company would receive net proceeds of $1,762,500. The
Company plans to use any such net proceeds for advertising and marketing and as
working capital. The amounts actually expended for each such use, if any, are at
the discretion of the Company and may vary significantly depending upon a number
of factors, including the amount of such proceeds, future revenue growth and the
amount of cash generated by the Company's operations. To the extent such
proceeds are not utilized immediately, they will be invested in United States
government or governmental agency securities or short-term insured certificates
of deposit.
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<PAGE> 15
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
The Company was incorporated in 1983 as CCRS, III, Inc. In 1989, the
Company changed its name to Central Corporate Reports Services, Inc., merged
with Information Bureau Inc. and operated in the financial public relations
business until March 1990 when the Company became inactive. In 1990 the Company
changed its name to Combined Assets, Inc. and in 1991 changed its name to ACP
International, Inc. and in 1994 changed its name back to Combined Assets, Inc.
In January 1995, the Company's name was changed to Environmental Products &
Technologies Corporation.
At the end of 1995, the Company commenced development of a waste management
system to control odors and solid stream waste in the farming industry. In
addition, the Company is developing organic based insecticides for agricultural,
commercial and residential use.
The Company is currently in the development stage of operations and, to
this time, has devoted its time to raising capital, product and supplier
development and marketing future products. No products have been assembled,
manufactured or marketed at this time, except that the Company has assembled one
prototype closed loop waste management system for demonstration purposes and
three prototype systems for operation by various universities.
The Company has projected expenses of $1,800,000 through June 1999. The
Company currently has approximately $2,330,000 of cash and cash equivalents and
accordingly, even if the Company were to generate no revenues through June 1999,
the Company would not need to seek additional financing to satisfy its cash
requirements. The Company intends to continue its research and development
activities during the next twelve months.
The Company intends to continue product development with the test of three
full-scale systems to be operated at Utah State University, Cal Poly-Pomona and
Washington State University. The portable units will be employed for continued
demonstrations and sales activity. The goal of such tests is to refine the
process from a batch load to a continuous feed system. At the same time the
development of an input/feed conveyor system and a variable discharge rate screw
mechanism to load and unload the bioreactor needs to be completed. In addition,
a solids waste process will also need to be developed.
RESULTS OF OPERATIONS
NINE MONTHS ENDED JUNE 30, 1998 COMPARED TO NINE MONTHS ENDED JUNE 30, 1997
The Company recognized no revenue for the nine months ended June 30, 1998
(the "1998 Period") and for the nine months ended June 30, 1997 (the "1997
Period"). During each of the 1997 and 1998 Periods, the Company's efforts were
directed at researching, designing, developing and testing its closed loop waste
management system.
Research and development expenses primarily consist of the cost of
personnel and equipment needed to conduct the Company's research and development
efforts. Research and development expenses for the 1998 Period increased
$287,660, or approximately 850%, to $321,490 from $33,830 for the 1997 Period.
This increase in research and development expenses reflects additional expenses
associated with the design, development and testing of prototype systems, the
increase in personnel and purchase of components for the Company's currently
operating prototype waste management systems.
General and administrative expenses primarily consist of general and
administrative costs related to the salaries of the Company's administrative
personnel and associated costs. General and administrative expenses for the 1998
Period increased by $327,543, or approximately 152%, to $543,025 from $215,482
for the 1997 Period.
FISCAL YEAR ENDED SEPTEMBER 30, 1997 COMPARED TO FISCAL YEAR ENDED
SEPTEMBER 30, 1996
The Company generated no revenue for the fiscal year ended September 30,
1997 ("Fiscal 1997") and for the fiscal year ended September 30, 1996 ("Fiscal
1996").
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Research and development expenses for Fiscal 1997 increased by $69,238, to
$69,238 from -0- for Fiscal 1996. This increase in research and development
expenses for Fiscal 1997 reflects expenses associated with the research, design
and development of the Company's closed loop waste management system.
General and administrative expenses for Fiscal 1997 increased by $44,035,
or approximately 16%, to $319,144 from $275,109 for Fiscal 1996. This increase
in general and administrative expenses was primarily the result of increased
salaries and rental expense which was partially offset by decreased consulting
and other expenses.
Interest expense for Fiscal 1997 was $18,310 compared to -0- for Fiscal
1996. Interest expense for Fiscal 1997 related to the note payable to Ronald
Knudsen, formerly the Director of Product Development of the Company.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary capital needs have been to fund the design and
development of its prototype closed loop waste management system. The Company's
primary sources of liquidity have been private placements of equity and debt
securities and loans from officers/stockholders on an as needed basis.
Between October and December 1995, the Company sold 100,000 shares of
Common Stock for an aggregate of $10,000, or $.10 per share. Between January and
March 1996, the Company sold 400,000 shares of Common Stock for an aggregate of
$189,650, or approximately $.47 per share. Between April and June 1996, the
Company sold 40,000 shares of Common Stock for an aggregate of $35,000, or $.87
per share. Between July and September 1996, the Company sold 480,000 shares of
Common Stock for an aggregate of $149,200, or approximately $.31 per share.
Between June and September 1997, the Company sold 550,000 shares of Common Stock
for an aggregate of $337,925, or approximately $.614 per share. The figures in
this paragraph do not give effect to the two-for-one forward stock split that
was effected by the Company in May 1998.
In April 1998, the Company sold 3,000 shares of Series A Preferred Stock
together with warrants (the "Private Placement Warrants") to purchase 300,000
shares of Common Stock (the "1998 Private Placement") for gross proceeds of
$3,000,000. The net proceeds to the Company of approximately $2,675,000 will be
used for continued research and development, working capital and general
corporate purposes. The Private Placement Warrants have an initial exercise
price of $3.875 per share. Private Placement Warrants expire on March 31, 2003.
The Private Placement Warrants contain provisions for the adjustment of the
exercise price and the aggregate number of shares issuable upon exercise under
certain circumstances, including without limitation, stock dividends, stock
splits, reorganizations, reclassifications, consolidations, certain dilutive
sales of securities for which the Private Placement Warrants are exercisable
below the then existing Market Price (as defined) and failure to maintain a
sufficient number of authorized shares of Common Stock for issuance and delivery
upon exercise of the Private Placement Warrants. See "Description of
Securities -- Preferred Stock" and "-- Warrants."
The Company also has commitments under (i) an employment agreement with
Marvin Mears, the Company's President and Chief Executive Officer, (ii) a
consulting agreement with Strategic Planning Consultants, Inc., a consultant to
the Company and (iii) a note payable to Donald Knudson, formerly a Manager of
Product Development of the Company. See "Management -- Employment and Consulting
Agreements" and "Certain Transactions."
Based on its current operating plan, the Company anticipates that
additional financing will be required to finance its operations and capital
expenditures. The Company's currently anticipated levels of revenues and cash
flow are subject to many uncertainties and cannot be assured. Further, the
Company's business plan may change, or unforseen events may occur, requiring the
Company to raise additional funds. The amount of funds required by the Company
will depend upon many factors, including without limitation, the extent and
timing of sales of the Company's waste management system, future product costs,
the timing and costs associated with the establishment and/or expansion, as
appropriate, of the Company's manufacturing, development, engineering and
customer support capabilities, the timing and cost of the Company's product
development and
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<PAGE> 17
enhancement activities and the Company's operating results. Until the Company
generates cash flow from operations which will be sufficient to satisfy its cash
requirements, the Company will need to seek alternative means for financing its
operations and capital expenditures and/or postpone or eliminate certain
investments or expenditures. Potential alternative means for financing may
include leasing capital equipment, obtaining a line of credit, or obtaining
additional debt or equity financing. There can be no assurance that, if and when
needed, additional financing will be available, or available on acceptable
terms. The inability to obtain additional financing or generate sufficient cash
from operations could require the Company to reduce or eliminate expenditures
for capital equipment, research and development, production or marketing of its
product, or otherwise curtail or discontinue its operations, which could have a
material adverse effect on the Company's business, financial condition and
results of operations. Furthermore, if the Company raises funds through the sale
of additional equity securities, the Common Stock offered hereby may be further
diluted.
INFLATION
Although certain of the Company's expenses increase with general inflation
in the economy, inflation has not had a material impact on the Company's
financial results to date.
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SELECTED FINANCIAL DATA
The data set forth below is qualified by reference to, and should be read
in conjunction with, the financial statements of the Company and related notes
thereto and "Management's Discussion and Analysis or Plan of Operations"
included elsewhere in this Prospectus. The following selected financial data of
the Company for the fiscal years ended September 30, 1997 and 1996 are derived
from the financial statements of the Company audited by Clumeck, Stern, Phillips
& Schenkelberg, independent accountants. The balance sheets at September 30,
1997 and 1996 and the related consolidated statements of operations,
shareholders' equity (deficit) and cash flows for the fiscal years ended
September 30, 1997 and 1996, respectively, and notes thereto are included
elsewhere in this Prospectus. The selected financial data as of June 30, 1998
and 1997, and for the nine-month periods ended June 30, 1998 and 1997 have been
derived from the Company's unaudited financial statements which, in the opinion
of management, reflect all adjustments, which are of a normal recurring nature,
necessary for a fair presentation of the results of operations for such periods.
The results of the interim periods are not necessarily indicative of the results
of a full year.
STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA AND WEIGHTED AVERAGE OUTSTANDING SHARES):
<TABLE>
<CAPTION>
FISCAL YEARS ENDED NINE MONTHS ENDED
SEPTEMBER 30, JUNE 30,
---------------------- --------------------------------
1996 1997 1997 1998
--------- --------- -------------- --------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Net Sales............................... $ -0- $ -0- $ -0- $ -0-
Gross profit (loss)..................... -0- -0- -0- -0-
Loss from operations.................... (275) (388) (249) (865)
Net Loss................................ (274) (404) (262) (841)
Net loss per common share............... (0.04) (0.06) (.04) (.10)
Weighted average common shares
outstanding........................... 6,156,132 7,182,690 7,213,426 8,129,370
</TABLE>
BALANCE SHEET DATA (IN THOUSANDS):
<TABLE>
<CAPTION>
SEPTEMBER 30, JUNE 30,
------------------ --------------------
1996 1997 1997 1998
----- ------- ------- -------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Total assets................................... $ 273 $ 312 $ 59 $ 2,567
Total liabilities.............................. $ 149 $ 223 $ 185 $ 254
Accumulated deficit............................ $(969) $(1,405) $(1,232) $(5,892)
</TABLE>
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<PAGE> 19
PRICE RANGE OF COMMON STOCK
The Company's Common Stock is traded on the OTC Bulletin Board under the
symbol EPTC. The following table sets forth the range of high and low bid
quotation per share for the Common Stock as reported by the OTC Bulletin Board
during the calendar years indicated. The bid price reflects inter-dealer prices
and does not include retail mark-up, markdown, or commission. The Company
effected a 2 for 1 forward stock split that became effective on May 12, 1998.
The following table does not give effect to such stock split except as
indicated.
<TABLE>
<CAPTION>
HIGH LOW
------- ------
<S> <C> <C>
1996
Third Quarter............................................. $ 5.50 $ 2.00
Fourth Quarter............................................ 5.00 1.125
1997
First Quarter............................................. 4.25 1.875
Second Quarter............................................ 2.125 0.563
Third Quarter............................................. 3.188 0.625
Fourth Quarter............................................ 4.188 1.000
1998
First Quarter............................................. 10.375 2.313
Second Quarter............................................ 13.000 7.625
Second Quarter (after May 11, 1998)....................... 9.125 7.250
</TABLE>
The Company has never declared or paid a cash dividend on its Common Stock
and does not expect to pay any cash dividends in the foreseeable future. So long
as any shares of Series A Convertible Preferred Stock are outstanding, the
Company may not, without first obtaining the approval of the holders of 67% of
the then outstanding shares of Series A Convertible Preferred Stock, redeem,
declare or pay any dividend or make any distribution with respect to shares of
Common Stock.
18
<PAGE> 20
BUSINESS
GENERAL
Environmental Products and Technologies Corporation was established to
solve environmental problems regarding the safe disposal of waste created by
large livestock, hog, poultry and other similar operations. The Company has
developed a system that converts animal wastes into commercial quantities of a
pathogen-free, nutrient-rich, soil-building medium.
Over the past few years, there has been an increasing concern regarding the
potential for animal waste pollution from intensive livestock and poultry
operations. The concentration of animal waste from larger and larger operations
have lead to more complaints about odor, greater challenges for animal waste
management and a growing public opinion that more environmental protections are
needed.
Nationwide, 130 times more animal waste is produced than human waste -- 5
tons for every United States citizen -- with some livestock and poultry
operations producing as much waste as a town or even a city! As animals become
increasingly concentrated in certain regions of the country and on larger
operations, there is not always enough fallow land to use all of the manure as
fertilizer. These increasing concentrations of manure mean that the risk of
water pollution from waste spills, runoff from fields and leakage from storage
facilities is also increasing.
Currently, Federal regulations do not address the handling, storage, land
application or disposal of manure. The Inspector General of the Environmental
Protection Agency (the "EPA") recently reported that "Federal regulations
inadequately protect water quality from animal waste."
To respond to these problems, Senator Tom Harkin recently introduced the
Animal Agriculture Reform Act in the United States Senate, as the first bill of
its kind introduced in Congress, to serve as a national approach to animal waste
problems. This bill would set environmental standards for animal waste handling
by large livestock and poultry operations, and require those operations to
follow waste management plans approved by the United States Department of
Agriculture.
To address these problems the Company has developed its closed loop waste
management system. This system is comprised of four basic components: a waste
separator, an anaerobic digester, a bio-reactor and a co-generation system.
The Company currently has one prototype waste management system and intends
to develop three additional systems within the next three to six months. With
these systems, the Company expects to test its systems in, among other places,
Chino, California with the assistance of a professor from the California State
University at Pomona ("Cal Poly Pomona"), Logan, Utah with the assistance of
Utah State University and Pullman, Washington with the assistance of Washington
State University. The Company does not currently have any agreements with any of
the above mentioned universities and, although the Company is currently in
discussions with each such university and believes that an oral understanding
has been reached with each such university to participate in tests of the
Company's waste management system, no assurance can be given as to whether the
oral understanding will lead to a binding agreement for any of such universities
to participate in the testing of the Company's waste management systems. In
August 1998, the Company commenced tests of two of its waste management systems,
with one system being tested at Utah State University and the other system being
tested at Cal Poly Pomona. The Company expects that the pilot systems will run
for approximately three to six months.
BACKGROUND
In November 1994, the Company became involved in odor control and animal
factories producing food for human consumption. In the hog industry in North
Carolina, certain farmers were involved in court proceedings over odor control
threatening closure of their farms. The Company succeeded in demonstrating to
the court, the plaintiffs, and the defendants in the court actions, that an odor
solution existed. The Company came to conclude, however, that farmers that were
not engaged in legal proceedings, would not spend money to solve their odor
problems.
19
<PAGE> 21
The Company then realized that the real problem was bigger than just odor
control. It was the animal waste. The Company set its sights on the bigger
problem. The resulting focus led to the development of the Company's current
products and methods of waste management.
Currently, the Company has developed a closed-loop waste management system
that addresses all areas of waste management in a wide variety of animal and
vegetable food production waste problems, including odor control. This system is
comprised of four parts, starting with a Separator that separates solids from
liquids. Solids are processed in an Aerobic Bioreactor tank that eliminates
extent pathogens and converts the waste to a non-toxic, nutrient-rich soil
amendment. Liquids are processed in an Anaerobic Digester, a series of tanks
where methane is drawn off and the liquids filtered of heavy metals and further
processed for reuse as wash water. In the fourth part, the Cogeneration System,
methane combines with diesel fuel in a dual-fuel engine that drives a generator
to provide electrical power to the facilities.
The first full system installation is at the University of Utah, in Logan,
to provide quantitative and qualitative data to support sales and further
research.
TYPICAL ANIMAL WASTE MANAGEMENT PRACTICES
Animal waste mainly consists of manure and urine from cows, hogs, chickens,
turkeys, mink and other animals that are raised for food or other purposes.
These materials are potential sources of crop nutrients, but also can pose
environmental threats.
The composition of animal waste depends on both the kind of animal and the
way the waste is handled. For example, poultry operations typically produce dry
litter with about 15% to 25% moisture content, that may be mixed with straw or
another dry material for easier handling. The removed litter is stacked or
stored in metal or wooden structures or on the ground on a temporary basis.
Hogs and cattle generate a manure that is more liquid and typically water
is used to flush the manure out of the barns and into storage facilities. The
resulting "slurry" is up to 97% liquid, and most commonly stored in earthen
lagoons. An alternative storage method now being adopted more widely is the
"slurry tank," which offers a greater level of structural stability and
environmental protection.
In the lagoons or tanks, many of the solids settle into a sludge at the
bottom. A farmer who utilizes the animal waste for nutrients pumps the liquid
out for nutrients or irrigation and may agitate the sludge at pumping time to
capture the nutrients that otherwise would remain behind.
The problem with these methods is that as the number of animals raised has
increased and the amount of land utilized has decreased, there is an
insufficient amount of fallow land available for the farmer to utilize the waste
produced by the animals. Accordingly, the animal waste is building up on the
farm causing various health hazards such as run-off and leaching. Further,
manure cannot be spread on land when a crop is growing.
THE ENVIRONMENTAL PRODUCTS & TECHNOLOGIES SOLUTION
The Company has developed a closed loop waste management system to provide
for the safe disposal of waste created by large livestock, poultry, hog and
other similar operations. In addition, the Company's waste management system
converts animal wastes into commercial quantities of a pathogen-free,
nutrient-rich, soil-building medium. Further, if the Company's co-generation
product is utilized, the Company is able to take the methane that is produced by
the Company's system and use it for producing energy for the farmer's property.
The Company's closed loop waste management system consists of the following:
The Waste Separator. The purpose of the waste separator is to pump all of
the effluent into the waste separator which then catches all of the solids,
takes them up through a set of rollers and basically squeezes the moisture out
of the solids. The moisture then goes through a belt and goes into a large tank
at the bottom where the moisture is then pumped into the anaerobic digester. The
solids go into the bio-reactor.
The Anaerobic Digester. The anaerobic digester is sized to eliminate the
lagoon. The anaerobic digester can handle from anywhere between 10,000 and
30,000 gallons of fluid. The anaerobic digester is made out of
20
<PAGE> 22
fiberglass and, in its typical configuration, is about eight feet in diameter
and 42 feet long for a tank that can hold up to 30,000 gallons of effluent. In
that tank, the Company has isolated a set of proprietary enzymes which excite
off the methane. The methane is then captured and pulled off the tank and used
to run an engine which is able to produce electricity which the farmer can use
in his or her operations.
The anaerobic digester handles all of the fluids. From that methane is
excited off which runs the co-generation system. It goes through a series of
three tanks and in the last tank the liquid is processed. Finally, the liquid is
put through a filter system from which non-potable, re-useable, re-cyclable
water is available for use for irrigation and/or for washing and flushing and
using again to clean out the barns and wash the animals and basically used
without having to repump or use fresh water.
In the first tank, any solids that are not consumed by the enzymes
basically settle to the bottom of the tank. On a regular interval, the solids
that have settled at the bottom of the tank are flushed into the bio-reactor.
In the second set of tanks, all of the solids are settled out. In the third
tank, the clarifier, the water is filtered and then reused.
The Enzymes. The Company employs enzymes for the purpose of exciting the
methane from the animal waste in the anaerobic digester. The Company has tested
this methane producing technology with its enzymes. According to the Company,
the enzymes work best in temperatures ranging from 90 degrees to 105 degrees F.
The Technology. The Company relies, among other things, on technology that
was designed by Lifeline Enterprises L.L.C., a Utah limited liability company
("Lifeline"). Pursuant to a letter of understanding dated May 18, 1998, Lifeline
agreed to transfer to the Company all rights, title and interest in and to the
anaerobic digester, the bio-reactor and the biologicals used therewith. Patents
are currently pending on the co-generation technology and the bio-reactor. There
can be no assurance that a patent will be issued on either the co-generation
technology or the bio-reactor, that such products do not or will not infringe on
the intellectual property rights of others or that if a patent is issued that it
will not be invalidated later. In consideration for this transfer, the Company
issued 100,000 shares of Common Stock to Lifeline and has agreed to issue an
additional 50,000 shares of Common Stock upon assignment to the Company of all
patents to the bio-reactor. In addition, the Company has agreed to issue to
Lifeline an aggregate of 320,000 shares of Common Stock, payable 80,000 shares
on each of October 15, 1999, 2000, 2001 and 2002. Gary Roberts, Linda Roberts
and Bob Crouch are principals of Lifeline and Gary Roberts and Bob Crouch are
employees of the Company.
The Bio-reactor. Finally, the bio-reactor takes all of the solids. The
bio-reactor is basically a steel vessel that will be sized to the requirements
of the particular application. The tank is rotated and the Company's
biologicals, including enzymes, are introduced into the tank through a computer
controlled process. The purpose of this process is to compost the solid
materials and at the end of the process, the Company is left with useable soil,
which it intends to use for compost. The Company then intends to add biologicals
and fungi based upon established formulae for various groups of vegetable,
fruits, and vines and sell the compost to end users. By way of comparison, the
process that the Company is using is, basically, an acceleration of the process
utilized by nature. For example, windrow composting generally takes between 90
to 100 days, whereas the Company produces a stable product in less than one
week.
THE COMPANY'S STRATEGY
The Company's strategy is to enter into agreements with various
universities located in the states of California, Utah and Washington in order
to verify the utility of the Company's waste management system. The Company is
engaging in discussions with professors at Utah State University, Cal
Poly-Pomona, and Washington State University. The purpose of these placements is
to obtain third-party data that can be used by the Company to verify its
preliminary testing and, eventually, in its marketing endeavors. The Company
intends to use various vegetable crop residuals and dairy solids in the testing
program.
Pursuant to preliminary discussions with Utah State University, the Company
intends to place one of its waste management systems at Utah State University.
The Company believes that Utah State University is an ideal testing grounds for
its waste management system because Utah State University owns a dairy of 225
21
<PAGE> 23
cows. Utah State University utilizes these cattle for manufacturing and
processing its own milk and cheese for use on campus and for sale at retail. It
is the Company's intention to make arrangements with a professor at Utah State
University, to operate one of its waste management systems. From this, the
Company expects to publish test data by October 1998. There can be no assurance
that the Company will be successful in completing arrangements with Utah State
University, or if successful, that the data developed from this test will be
favorable to the Company or of sufficient quality for use by the Company to
verify the utility of its system or in its marketing endeavors.
In addition, the Company is in the process of making arrangements to test
its waste management system at a dairy located in Chino, California and to have
graduate students from Cal Poly-Pomona operate the system and compile data for
use by the Company. The Company believes that Chino, California provides a
perfect environment for testing its waste management system. According to the
Company, there are approximately 274 dairies located within a five square mile
area in Chino. There are approximately 300,000 dairy cows located in the Chino,
California area, comprising the largest concentration of cows in the United
States. There can be no assurance that the Company will be successful in
completing negotiations for placing its waste management system in Chino,
California.
SUPPLIERS
It is the Company's intention not to manufacture on its own any of the
components necessary to produce its waste management system. The Company intends
to utilize third party suppliers to provide the products necessary to complete
its waste management systems. While the Company believes that there are a
variety of suppliers for most of the components that will comprise its waste
management system, there are certain components of the waste management system
that will only be available from one or possibly two suppliers. In this regard,
the Company will be reliant on Lifeline for the co-generation technology,
Vineyard Technologies for the dual fuel engine, and RBR Technologies and Fan
Systems, Inc. for the waste separator. The Company does not have any agreements
or arrangements with any of the above-mentioned companies to provide the Company
with the products that the Company will need to assemble a full waste management
system. However, the Company believes that it will be able to purchase the
products that it needs from each of these companies. There can be no assurance,
however, that the Company will be able to purchase the components from the
above-mentioned companies, or if it is able to purchase such components, that it
will be able to do so on terms that are satisfactory to the Company.
ASSEMBLY
The Company currently contemplates that once it has proven the utility of
its waste management system that it will contract with the various suppliers of
the constituent components of the waste management system to deliver them (i.e.,
dropship) to sites specified by the Company. The Company will then provide for
the assembly of the components into the waste management system for use at the
specified location. There can be no assurance that the Company will be
successful in coordinating the various deliveries of the component parts of its
waste management system, or that it will be successful in assembling the
component parts in the field, as currently contemplated.
COMPETITION
The Company will directly and indirectly compete with other businesses,
including businesses in the solid waste collection and disposal business,
including Bion Environmental Technologies, Inc. and Thermo Tech Technologies
Inc., both of which companies engage in organic waste conversion. In many cases,
these potential competitors are larger and more firmly established than the
Company. In addition, many of such potential competitors have greater marketing
and development budgets and greater capital resources than the Company.
Accordingly, there can be no assurance that the Company will be able to achieve
and maintain a competitive position in the businesses in which it will compete.
See "Risk Factors -- Competition."
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<PAGE> 24
INTELLECTUAL PROPERTY
The Company's success will depend, in part, on its ability to maintain
protection for its products and processes under United States and foreign patent
laws, to preserve its trade secrets and to operate without infringing the
proprietary rights of third parties. Currently, a portion of the Company's
technology for its waste management system is licensed from third parties and
the Company has not obtained indemnification from the licensors of such
technology. Accordingly, if the technology licensed by such licensors to the
Company infringes the rights of third parties, the Company could be held liable
for damages to such third party and could not seek reimbursement from the
licensor. The Company does not maintain any insurance to protect against such
occurrence and, if such a claim were made against the Company it could have a
material adverse effect on the Company's business, financial condition and
results of operations. The Company does not possess any patents and does not
have any applications pending. There can be no assurance that any patent
applications, if applied for, will result in issued patents, that any issued
patents will afford adequate protection to the Company or not be challenged,
invalidated, infringed or circumvented or that any rights thereunder will afford
competitive advantages to the Company. Furthermore, there can be no assurance
that others have not independently developed, or will not independently develop,
similar products and technologies or otherwise duplicate any of the Company's
products and technologies.
There can be no assurance that the validity of any patent issued to the
Company or any licensor of technology to the Company would be upheld if
challenged by others in litigation or that the Company's activities would not
infringe patents owned by others. The Company could incur substantial costs in
defending itself in suits brought against it, or in suits in which the Company
seeks to enforce its patent and/or license rights against others. Should the
Company's products or technologies be found to infringe patents issued to third
parties, the Company would be required to cease the manufacture, use and sale of
the Company's products and the Company could be required to pay substantial
damages. In addition, the Company may be required to obtain licenses to patents
or other proprietary rights of third parties in connection with the development
and use of its products and technologies. No assurance can be given that any
such licenses required would be made available on terms acceptable to the
Company, or at all.
The Company also relies on trade secrets and proprietary know-how, which it
seeks to protect, in part, by confidentiality agreements with its employees,
consultants, advisors and others. There can be no assurance that such parties
will maintain the confidentiality of such trade secrets or proprietary
information, or that the trade secrets or proprietary information of the Company
will not otherwise become known or be independently developed by competitors in
a manner that would have a material adverse effect on the Company's business,
financial condition and results of operations. See "Risk Factors -- Dependence
on Patents and Proprietary Technology; Reliance on Licensed Technology."
ENVIRONMENTAL MATTERS
Federal, state and local environmental legislation and regulations mandate
stringent waste management and operations practices, which require substantial
capital expenditures and often impose strict liabilities for non-compliance.
Environmental laws and regulations are, and will continue to be, a principal
factor affecting demand for the technology and services being developed or
offered by the Company. The level of enforcement activities by federal, state
and local environmental protection and related agencies, and changes in
regulations and waste generator compliance activities, will also affect demand.
To the extent that the burdens of complying with such laws and regulations may
be eased as a result of, among other things, political factors, or that
producers of industrialized farm waste find alternative means to comply with
applicable regulatory requirements, demand for the Company's products and
services could be adversely affected, which could have a material adverse effect
on the Company's business, financial condition and results of operations. Any
changes in these regulations which increase compliance standards may require the
Company to change or improve its operating procedures. To the extent the Company
conducts its business overseas, international environmental regulations will be
applicable. Such regulations vary by country and are subject to changes which
may adversely affect the Company's operations.
23
<PAGE> 25
The Company and its customers operate in a highly regulated environment,
and the Company's potential customers and/or the Company's products and services
may be required to have various federal, state and/or local government permits
and authorizations, registrations and/or exemptions. Any of these permits or
approvals may be subject to denial, revocation or modification under various
circumstances. Failure to comply with the conditions of such permits, approvals,
registrations, authorizations or exemptions may adversely affect the
installation or operation of the Company's waste management system and may
subject the Company to federal, state or locally-imposed penalties. The
Company's ability to satisfy the permitting requirements for a particular
installation does not assure that permitting requirements for other
installations will be satisfied. In addition, if new environmental legislation
is enacted or current regulations are amended or are interpreted or enforced
differently, the Company or its customers may be required to obtain additional
operating permits, registrations, certifications, exemptions or approvals. There
can be no assurance that the Company or its customers will meet all of the
applicable regulatory requirements.
The Company's business exposes it to the risk that harmful substances may
be released or escape into the environment from its processes or equipment,
resulting in potential liability for the clean-up or remediation of the release
and/or potential personal injury associated with the release. Liability for
investigation and/or clean-up and corrective action costs exists under the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended ("CERCLA"), the Resource Conservation and Recovery Act of 1976, as
amended ("RCRA"), and corresponding state laws. Additionally, the Company is
potentially subject to regulatory liability for the generation, transportation,
treatment, storage or disposal of hazardous waste if it does not act in
accordance with the requirements of federal or state hazardous waste regulations
or facility specific regulatory determinations, authorizations or exemptions.
The Company is also potentially subject to regulatory liability for releases
into the air or water under the Clean Air Act of 1970, as amended, and the
Federal Water Pollution Control Act of 1972, as amended (hereinafter the "Clean
Water Act"), and analogous state laws and regulations and various other
applicable federal or state laws and regulations if it does not comply with
those requirements. See "Risk Factors -- Dependence on Environmental
Regulations," "-- Regulatory Status of Operations" and "-- Potential
Environmental Liability."
DIATOMACEOUS EARTH
In conjunction with its waste management efforts, the Company has also
resolved to develop a non-toxic, environmentally friendly insecticide and
application system. In connection with such effort, the Company recently
acquired four diatomaceous earth ("DE") claims in Eastern Oregon. Each claim is
comprised of 160 acres and will provide the Company a long-term supply of DE,
which is a basic insecticide ingredient. DE is a component of the Company's
waste management system in that it will be used to filter out hazardous elements
in the waste stream processing. In addition, DE provides water retention and
insecticide capability when mixed into the soil amendment.
Further, the Company intends to provide insect control with application of
DE-based insecticides. The Company intends to seek third-party validation that
DE will be an effective weapon in insect control, though no assurance can be
given that DE will be effective or if effective, that it will be cost effective.
It is the Company's intent to use DE as a replacement for organophosphates and
chemical agents that are considered harmful to humans as well as insects.
The Company does not have the expertise or equipment to mine the DE from
the claims. Accordingly, the Company has held discussions with Terra Minerals
Corporation ("Terra") of Salt Lake City to act as its mining consultant and
operator. However, the Company does not intend to develop or promote this
business for the next 12 months, instead, focusing its efforts and resources on
the development of its closed loop waste management systems.
FACILITIES
The Company's facilities are located at 5380 North Sterling Center Drive,
Westlake Village, California and presently consist of approximately 3,150 sq.
ft. The Company believes that these facilities will meet the Company's needs.
The Company leases this facility under a lease that expires on December 31,
1999. The
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<PAGE> 26
base rent for the leased premises is $2,520 per month. The Company has the
option to extend the lease for an additional two-year period on the same terms
and conditions except that the monthly rental payment for the first year of any
such extension would be $2,674 and $2,754 for the second year.
PERSONNEL
As of August 14, 1998, the Company employed eight people on a full-time
basis. In addition the Company utilizes on a regular basis the services of 14
consultants and part-time employees. The Company believes that its future
success will depend, in part, on its ability to continue to attract, hire and
retain qualified personnel. The competition for such personnel is intense and no
assurance can be given that the Company will be successful in attracting such
personnel, particularly considering the low unemployment rate currently being
experienced across the United States. None of the Company's employees is
represented by a labor union and the Company has never experienced a work
stoppage. The Company believes that its relations with its employees are good.
LEGAL PROCEEDINGS
The Company is not a party to any legal proceedings, and is not aware of
any pending or threatened litigation against the Company.
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<PAGE> 27
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The directors and executive officers of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Marvin Mears.... 64 President, Chief Executive Officer and Director
Joel G. 38 Chief Financial Officer and Secretary
Wadman........
</TABLE>
Two directors of the Company recently resigned and the Company is currently
seeking replacements. The Company anticipates that the Board of Directors will
consist of five members and that four additional members will be nominated and
appointed within 120 days after the date of this Prospectus during which time
the Company expects to amend its Certificate of Incorporation and Bylaws to
provide for indemnification, to the fullest extent possible under Delaware law,
for the Company's officers, directors, employees and agents. See "Description of
Capital Stock -- Limitations on Liability."
Marvin Mears has been the President, Chief Executive Officer and a director
of the Company since December 1994. From March 1993 to November 1994, Mr. Mears
was President of Combined Assets, Inc., a privately-held consulting company.
From January 1991 to February 1993, Mr. Mears was the President of Corporate
Capital Resources, Inc. and prior thereto, from November 1986 to January 1991,
Mr. Mears was the Vice President -- Corporate Development and a member of the
Valuation Committee of Corporate Capital Resources, Inc., a publicly-traded
venture capital company that specialized in early stage and start-up companies.
Mr. Mears also currently serves on the Board of Directors of Chatsworth Products
Inc., a privately-held company engaged in manufacturing hardware for computer
networks and Robert T. Dorris and Associates, a privately-held company that
provides employee assistance programs to large corporations.
On March 12, 1993, the United States District Court for the Central
District of California permanently enjoined Mr. Mears from, among other things,
future violations or aiding and abetting violations of the antifraud provisions
of the Securities Act of 1933, as amended, and the Securities Exchange Act of
1934, as amended. Furthermore, Mr. Mears was permanently restrained and enjoined
from making any untrue statement of a material fact in any registration
statement, application, report, account, record or other document filed or
transmitted pursuant to the Investment Company Act of 1940, or omitting to state
therein any fact necessary in order to prevent the statements made therein, in
light of the circumstances under which they were made, from being materially
misleading in violation of the Investment Company Act of 1940. In addition, by
order dated February 27, 1996, Mr. Mears, without admitting or denying any of
the findings contained in an order issued by the Securities and Exchange
Commission, consented to the entry of an Order Making Findings and Imposing
Sanctions Pursuant to Section 9(b) of the Investment Company Act of 1940 whereby
Mr. Mears agreed to be barred from association with any investment advisor or
investment company. See "Risk Factors -- Prior Legal Actions Involving Chief
Executive Officer and Principal Stockholders."
Joel G. Wadman has been the Chief Financial Officer of the Company since
July 1997 and became Secretary of the Company in May 1998. Mr. Wadman is not
employed by the Company full time and currently devotes approximately 40 hours
per month to the Company's business. Since January 1994 Mr. Wadman has been a
consultant to SRS Consulting specializing in system development and forensic
accounting. From February 1990 to December 1993, Mr. Wadman was the Vice
President and Controller of WCT Communications, Inc. Mr. Wadman received a B.S.
in Finance from Brigham Young University in 1989.
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<PAGE> 28
EXECUTIVE COMPENSATION
The following table sets forth certain compensation paid or accrued by the
Company during the years ended September 30, 1996 and September 30, 1997 to its
President and Chief Executive Officer (the "Named Executive Officers").
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
---------------------
ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION
--------------------------- ---- ------ ----- ------------
<S> <C> <C> <C> <C>
Marvin Mears, President and CEO................ 1966 -0- -0- -0-
1997 -0- -0- -0-
</TABLE>
1996 STOCK OPTION PLAN
On December 29, 1995 the Board of Directors adopted and, on December 29,
1995 the shareholders approved, the Company's 1996 Stock Option Plan (the
"Option Plan") under which a total of 400,000 shares of Common Stock has been
reserved for issuance. The Option Plan terminates on September 30, 2006, unless
sooner terminated by the Board of Directors.
Options granted under the Option Plan may be either "incentive stock
options" as defined in Section 422 of the Internal Revenue Code of 1986, as
amended, or nonstatutory stock options and become exercisable in accordance with
terms approved at the time of grant. Options may be granted to any employee of
or consultant to the Company or any parent, subsidiary or successor of the
Company, including employees who are also officers or directors, selected by the
Board of Directors in its discretion. The Option Plan is currently administered
by the board of directors which has the authority to determine optionees, the
number of shares covered by each option, the type of option (i.e., incentive or
nonstatutory), the applicable vesting schedule, the exercise price, the method
of payment and certain other option terms.
The exercise price of an option granted under the Option Plan may not be
less than 85%, in the case of a nonstatutory stock option, or 100%, in the case
of an incentive stock option, of the fair market value of the Common Stock
subject to the option on the date of the option grant. To the extent that the
aggregate fair market value of the stock subject to incentive stock options that
become exercisable for the first time during any one calendar year exceeds
$100,000 (as determined at the grant date) plus fifty percent (50%) of any
unused limit carryover from prior years, the options in excess of such limit
shall be treated as nonstatutory stock options. Options may be granted under the
Option Plan for terms of up to ten years and will typically be exercisable in
installments in accordance with a vesting schedule approved by the board of
Directors at the time an option is granted. Options are not transferable other
than upon death or between spouses incident to divorce. Options may be exercised
at various periods up to 12 months after the death or disability of the optionee
or up to three months after the termination of employment of the optionee, to
the extent the option was then exercisable.
With Respect to the Option Plan, the board of directors has the discretion
to subject any options granted under the Option Plan to a right of repurchase in
favor of the Company, which right may be exercised by the Company upon the
termination of employment of any employee or consultant who was granted options
under the Option Plan at a price equal to the option exercise price. In
addition, the Company has been granted a right of first refusal by each optionee
pursuant to which each optionee has agreed to provide the Company with the right
to purchase from such optionee any shares acquired by such optionee upon the
exercise of options on the same terms and conditions as such optionee was
proposing to sell such shares.
As of May 19, 1998, options to acquire 330,000 shares of Common Stock were
outstanding under the Option Plan. Such options have an exercise price of
$0.1875 per share and expire in July 2006. Holders of 280,000 of such options
have agreed not to exercise such options prior to July 15, 1999.
EMPLOYMENT AND CONSULTING AGREEMENTS
The Company entered into a four-year employment agreement with Marvin Mears
effective as of April 15, 1998 (the "Mears Employment Agreement"). The Mears
Employment Agreement provides, among
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<PAGE> 29
other things, that the Company shall pay and/or provide to Mr. Mears: (i) a
fixed annual salary of $96,000 in year one, $120,000 in year two, $144,000 in
year three and $168,000 in year four, payable in each case in equal bi-monthly
installments; (ii) all fringe benefits which the Company or any subsidiary may
make available from time-to-time for persons with comparable positions and
responsibilities; (iii) medical group insurance coverage or equivalent coverage
for Mr. Mears and his dependents, which coverage shall commence on December 31,
1998 and continue throughout the term of employment; (iv) reimbursement for
reasonable and necessary business expenses incurred by Mr. Mears in the course
of his duties as Chief Executive Officer of the Company; and (v) $750.00 per
month as an automobile allowance. The company may terminate Mr. Mears'
employment "for cause" provided the Company provides Mr. Mears with 30 days
notice and an opportunity to cure any alleged breach or violation of the
agreement. Further, Mr. Mears may be terminated if he commits gross negligence
in the performance of his duties under the agreement or breaches his fiduciary
duties to the Company. If Mr. Mears is disabled to a degree that he is unable to
fulfill his duties then the Company will pay his full salary for the first 12
months of his disability, 75% of salary for the second twelve months and 50% of
salary for the next twenty-four months; provided, however, that any such
disability payment will cease on April 14, 2002, regardless of when any such
disability commenced. If Mr. Mears is terminated without cause upon a change of
control, all of the Mr. Mears' converted stock options will immediately vest and
Mr. Mears will also be entitled to receive $250,000 and an amount of money
sufficient to allow him to exercise all unexercised options and to pay any taxes
due therefor.
Pursuant to a letter agreement (the "SPC Agreement") dated January 22,
1998, the Company retained the services of Strategic Planning Consultants, Inc.
("SPC") pursuant to which SPC has agreed to provide the Company with general
business consulting services, including without limitation, strategic planning
and analyzing the Company's capital structure. The SPC Agreement is for a period
of 360 days from January 22, 1998. In consideration for entering into the SPC
Agreement, the Company agreed to provide to the principals of SPC warrants to
purchase 300,000 shares of the Company's Common Stock at an exercise price of
$2.00 per share, the underlying shares of which are being registered under the
Registration Statement of which this Prospectus is a part. In addition, the
Company has agreed to pay SPC $3,000 per month for a period of 24 months and to
reimburse SPC for pre-approved expenses. SPC's services include consulting to
management on strategic planning, acquisitions, corporate structure and
management compensation.
CERTAIN TRANSACTIONS
The Company has an employment agreement with Marvin Mears. See
"Management -- Employment and Consulting Agreements."
On November 13, 1997, Morris Lerner, formerly a director and secretary of
the Company, borrowed $12,115.88 from the Company (the "Lerner Note"). The
Lerner Note bears interest at the rate of 9% per annum and matures on November
12, 1999.
On November 1, 1995, a company controlled by Marvin Mears, the Chief
Executive Officer, President and a Director of the Company, issued a note to the
Company in the original principal amount of $35,000 (the "Mears Note"). The
Mears Note bears interest at the rate of 9% per annum and matures on November 1,
1998. Interest has not been paid on the Mears Note and as of September 30, 1997,
accrued interest on the Mears Note totaled $4,329.
In August 1996, in satisfaction for acquiring odor control application
technology from Ronald Knudsen, formerly a Manager of Product Development of the
Company, the Company issued to Mr. Knudsen a promissory note in the original
principal amount of $125,000 (the "Knudsen Note"). The Knudsen Note bears
interest at the rate of 12% per annum and matures on August 1, 1998. The Knudsen
Note contains an acceleration clause that requires full principal and interest
payments within ten business days of the completion of a secondary offering to
the public of at least $3,000,000. The Company is currently in default of the
Knudsen Note.
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<PAGE> 30
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of June 30, 1998 by each director and
executive officer of the Company, each person known to the Company to be the
beneficial owner of more than 5% of the outstanding Common Stock, and all
directors and executive officers of the Company as a group. Except as otherwise
indicated below, each person has sole voting and investment power with respect
to the shares owned, subject to applicable community property laws.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED
(INCLUDES EXERCISABLE
OPTIONS)(2)
----------------------
NAME AND ADDRESS(1) NUMBER PERCENT
------------------- ---------- --------
<S> <C> <C>
Marvin Mears............................................. 3,868,412 45.15%
Morris L. Lerner......................................... 562,000 6.56%
Joel G. Wadman........................................... 50,000 0.58%
All directors and executive officers of the Company as a
group (2 persons)...................................... 3,918,412 45.74%
</TABLE>
- ---------------
(1) The address of each such person is 5380 North Sterling Center Drive,
Westlake Village, California 91361.
(2) Beneficial ownership is determined in accordance with the rules of the
Commission. In computing the number of shares beneficially owned by a person
and the percentage ownership of that person, shares of Common Stock subject
to options held by that person that are currently exercisable, or become
exercisable within 60 days from the date hereof, are deemed outstanding.
However, such shares are not deemed outstanding for purposes of computing
the percentage ownership of any other person. Percentage ownership is based
on 8,567,148 shares of Common Stock outstanding as of June 30, 1998.
SELLING STOCKHOLDERS
The Shares being offered for resale by the Selling Stockholders were
acquired in connection with the 1998 Private Placement, previous exercise of
warrants, and the execution of the SPC Agreement, consist of the shares of
Common Stock issuable upon the conversion of or otherwise with respect to the
Series A Preferred Stock, upon exercise of the Private Placement Warrants and
upon exercise of the Fink Warrant and the Billik Warrant that were issued
pursuant to the SPC Agreement. In connection with the 1998 Private Placement,
the Company granted the Selling Stockholders who purchased the shares of Series
A Preferred Stock and the Private Placement Warrants certain registration rights
pursuant to which the Company agreed to keep the Registration Statement, of
which this Prospectus is a part, effective until the date that all of such
Shares have been sold pursuant to the Registration Statement. The Company has
agreed to indemnify the Selling Stockholders and each of their officers,
directors, members, employees, partners, agents and each person who controls any
of the Selling Stockholders against certain expenses, claims, losses, damages
and liabilities (or action, proceeding or inquiry by any regulatory or
self-regulatory organization in respect thereof). The Company has agreed to pay
its expenses of registering the Shares under the Securities Act, including
registration and filing fees, blue sky expenses, printing expenses, accounting
fees, administrative expenses and its own counsel fees.
The following table sets forth the name of each Selling Stockholder, the
number of shares of Common Stock beneficially owned by such Selling Stockholder
as of May 21, 1998 and the number of Shares being offered by each Selling
Stockholder. The Shares being offered hereby are being registered to permit
public secondary trading, and the Selling Stockholders may offer all or part of
the Shares for resale from time to time. However, such Selling Stockholders are
under no obligation to sell all or any portion of such Shares nor are such
Selling Stockholders obligated to sell any Shares immediately under this
Prospectus. All information with respect to share ownership has been furnished
by the Selling Stockholders. Because the Selling Stockholders may sell all or
part of their Shares, no estimates can be given as to the number of Shares that
will
29
<PAGE> 31
be held by any Selling Stockholders upon termination of any offering made
hereby. See "Plan of Distribution."
In the case of the Shares underlying the Series A Preferred Stock, the
number of Shares owned and offered for sale hereby represents an estimate of the
number of shares of Common Stock issuable upon conversion of or otherwise with
respect to the Series A Preferred Stock, based on 200% of the number of shares
of Common Stock issuable at a conversion price of $3.875 in accordance with Rule
416 and in certain other events described in the Certificate of Designation.
Pursuant to Rule 416 under the Securities Act, the Selling Stockholders may also
offer and sell Shares issued with respect to the Series A Preferred Stock and/or
the Private Placement Warrants as a result of (i) stock splits, stock dividends
or similar transactions, (ii) the effect of antidilution provisions contained in
the Certificate of Designation of the Series A Preferred Stock and in the
Private Placement Warrants and (iii) by reason of changes in the conversion
price of the Series A Preferred Stock in accordance with the terms thereof. This
is not intended to constitute a prediction as to the number of Shares into which
the Series A Preferred Stock will be converted and the Private Placement
Warrants will be exercised.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES OWNED
OWNED PRIOR TO SHARES TO BE AFTER THE
NAME OF SELLING STOCKHOLDER THE OFFERING(1) SOLD IN THE OFFERING OFFERING (1)(2)
--------------------------- ------------------- -------------------- ---------------
<S> <C> <C> <C>
JNC Opportunity Fund, Ltd.(4)........... 1,787,500(3) 1,787,500 -0-
Diversified Strategies Fund, L.P.(4).... 162,500(3) 162,500 -0-
Jonathan Fink........................... 580,000 580,000 -0-
Brad Billik............................. 290,000 290,000 -0-
</TABLE>
- ---------------
(1) Except as set forth in footnote (3) below, beneficial ownership is
determined in accordance with Rule 13d-3 of the Exchange Act. The persons
named in the table above have sole voting and investment power with respect
to all shares of Common Stock shown as beneficially owned by them.
(2) Assumes all Shares offered hereby are sold in the offering.
(3) In accordance with Rule 416, the number of shares of Common Stock set forth
in the table represents an estimate of the number of shares of Common Stock
to be offered by the Selling Stockholders, based on 200% of the number of
shares of Common Stock that would have been issuable upon conversion of or
otherwise with respect to the Series A Preferred Stock at a conversion price
of $3.875 per share in accordance with Rule 416 (1,650,000 shares). In
addition, the Registration Statement also covers up to 300,000 shares that
may become issuable upon the exercise of the Private Placement Warrants. The
actual number of shares of Common Stock issuable upon conversion of the
Series A Preferred Stock is determined by a formula based on the market
price at the number depending on factors which cannot be predicted by the
Company. Specifically, at any given time, the Series A Preferred Stock is
convertible into a number of shares of Common Stock determined by dividing
the sum of (a) the stated value of the Series A Preferred Stock, (b) a
premium amount equal to 6% (on an annualized basis) of the stated value of
the Series A Preferred Stock and (c) any Conversion Default amount (as
defined in the Certificate of Designation), by the then applicable
conversion price (calculated generally as the lesser of (i) $3.875 and (ii)
80% of the average of the five (5) lowest closing bid prices of the Common
Stock for the fifteen (15) consecutive trading days immediately preceding
the date of determination) subject to certain restrictions and adjustments.
The Shares offered hereby, and included in the Registration Statement of
which this Prospectus is a part, include such additional number of shares of
Common Stock as may be issued or issuable upon conversion of the Series A
Preferred Stock by reason of the floating rate conversion price mechanism or
other adjustment mechanisms described in the Certificate of Designation for
the Series A Preferred Stock, or by reason of any stock split, stock
dividend or similar transaction involving the Common Stock, in order to
prevent dilution, in accordance with Rule 416. Pursuant to the terms of the
Series A Preferred Stock and the Private Placement Warrants, the shares of
Series A Preferred Stock and the Private Placement Warrants are convertible
or exercisable by any holder only to the extent that the number of shares of
Common Stock thereby issuable, together with the number of shares of Common
Stock owned by such holder and its affiliates (but not including shares of
Common Stock underlying unconverted shares of Series A Preferred Stock or
the unexercised portion of
30
<PAGE> 32
the Private Placement Warrants) would not exceed (except in certain limited
circumstances) 4.99% of the then outstanding Common Stock as determined in
accordance with Section 13(d) of the Exchange Act. Accordingly, the number
of Shares set forth in the table for a Selling Stockholder may exceed the
number of Shares that such Selling Stockholder could own beneficially at any
given time through such Selling Stockholder's ownership of the Series A
Preferred Stock and the Private Placement Warrants. In this regard,
beneficial ownership of such Selling Stockholder set forth in the table is
not determined in accordance with Rule 13d-3 under the Exchange Act. The
above-mentioned 4.99% restriction can be changed upon the approval of each
holder of Series A Preferred Stock and a majority of the outstanding shares
of Common Stock. Further, a holder of shares of Series A Preferred Stock may
waive the above-referenced restriction upon not less than 61 days prior
written notice to the Company. Such restriction would apply if the Selling
Stockholders were to transfer the securities owned by them.
(4) JNC Opportunity Fund Ltd. and Diversified Strategies Fund L.P. are the
beneficial owners of the shares to be sold by them under the Registration
Statement of which this Prospectus forms a part. They do not hold these
shares as nominee for any other person or entity.
USE OF PROCEEDS
All the Shares offered hereby are being offered for the account of the
Selling Stockholders. Accordingly, the Company will not receive any proceeds of
any sales made hereunder, but will receive the exercise price of any Warrants
exercised by the Selling Stockholders. Any proceeds received from the exercise
of Warrants will be used for working capital and general corporate purposes. See
"Use of Proceeds."
PLAN OF DISTRIBUTION
The Shares may be sold or distributed from time to time by the Selling
Stockholders or by pledgees, donees or transferees of, or successors in interest
to, the Selling Stockholders, directly to one or more purchasers (including
pledgees) or through brokers, dealers or underwriters who may act solely as
agents or may acquire Shares as principals, at market prices prevailing at the
time of sale, at prices related to such prevailing market prices, at negotiated
prices or at fixed prices, which may be changed. The distribution of the Shares
may be effected in one or more of the following methods: (i) ordinary brokers
transactions, which may include long or short sales, (ii) purchases by brokers,
dealers or underwriters as principal and resale by such purchasers for their own
accounts pursuant to this Prospectus, (iii) "at the market" to or through market
makers or into an existing market for the Common Stock, (iv) in other ways not
involving market makers or established trading markets, including direct sales
to purchasers or sales effected through agents, (v) through transactions in
options, swaps or other derivatives (whether exchange listed or otherwise), or
(vi) any combination of the foregoing, or by any other legally available means.
In addition, the Selling Stockholders or their successors in interest may enter
hedging transactions with broker-dealers who may engage in short sales of Shares
of Common Stock in the course of hedging the positions they assume with the
Selling Stockholders. The Selling Stockholders or their successors in interest
may also enter into option or other transactions with broker-dealers that
require that delivery by such broker-dealers of the Shares, which Shares may be
resold thereafter pursuant to this Prospectus.
Brokers, dealers, underwriters or agents participating in the distribution
of the Shares may receive compensation in the form of discounts, concessions or
commissions from the Selling Stockholders and/or the purchasers of Shares for
whom such broker-dealers may act as agent or to whom they may sell as principal,
or both (which compensation as to a particular broker-dealer may be in excess of
customary commission). Any broker-dealer acting in connection with the sale of
the Shares hereunder may be deemed to be underwriters within the meaning of
Section 2(11) of the Securities Act, and any commissions received by them and
any profit realized by them on the resale of Shares as principals may be deemed
underwriting compensation under the Securities Act. Neither the Company nor any
Selling Stockholder can presently estimate the amount of such compensation. The
Company knows of no existing arrangements between any Selling Stockholder and
any such stockholder, broker, dealer, underwriter or agent relating to the sale
or distribution of the Shares.
31
<PAGE> 33
Each Selling Stockholder and any other person participating in a
distribution of securities will be subject to applicable provisions of the
Exchange Act and the rules and regulations thereunder, including, without
limitation, Regulation M, which may restrict certain activities of, and limit
the timing of purchases and sales of securities by, Selling Stockholders and
other persons participating in a distribution of securities. Furthermore, under
Regulation M, persons engaged in a distribution of securities are prohibited
from simultaneously engaging in market making and certain other activities with
respect to such securities for a specified period of time prior to the
commencement of such distributions subject to specified exceptions or
exemptions. All of the foregoing may affect the marketability of the securities
offered hereby.
Any securities covered by this Prospectus that qualify for sale pursuant to
Rule 144 under the Securities Act may be sold under that Rule rather than
pursuant to this Prospectus.
There can be no assurance that the Selling Stockholders will sell any or
all of the Shares of Common Stock offered by them hereunder.
DESCRIPTION OF CAPITAL STOCK
The following description of the capital stock of the Company and material
provisions of the Certificate of Incorporation (the "Certificate") is a summary
and is qualified in its entirety by the provisions of the Certificate, which has
been filed as an exhibit to the Company's Registration Statement of which this
Prospectus is a part.
The authorized capital stock of the Company currently consists of
20,000,000 shares of Common Stock, $.01 par value per share ("Common Stock"), of
which 8,017,148 are currently outstanding, and 20,000,000 shares of Preferred
Stock, $.01 par value per share, of which 3,000 shares have been designated as
Series A Convertible Preferred Stock (the "Series A Preferred Stock"), all of
which shares are currently outstanding. As of May 14, 1998, there were 989
record and beneficial holders of the Common Stock and two record and beneficial
holders of the Series A Preferred Stock.
COMMON STOCK
The holders of Common Stock are entitled to one vote for each share held of
record on all matters submitted to a vote of the stockholders. There is no
cumulative voting with respect to the election of directors. The holders of
Common Stock are entitled to receive ratably such dividends as may be declared
by the Board of Directors out of funds legally available therefor. See "Dividend
Policy." In the event of a liquidation, dissolution or winding up of the
Company, holders of the Common Stock are entitled to share ratably in all assets
remaining after payment of liabilities. Holders of Common Stock have no
preemptive rights and no right to convert their Common Stock into any other
securities. There are no redemption or sinking fund provisions applicable to the
Common Stock. All outstanding shares of Common Stock are, and all shares of
Common Stock to be outstanding upon completion of this offering will be, fully
paid and nonassessable.
PREFERRED STOCK
The Board of Directors has the authority, without further action by the
stockholders, to issue up to 20,000,000 shares of Preferred Stock, $.01 par
value per share, in one or more series and to fix the rights, preferences,
privileges and restrictions thereof, including dividend rights, conversion
rights, voting rights, terms of redemption, liquidation preferences, sinking
fund terms and the number of shares constituting any series or the designation
of such series, without further vote or action by stockholders. The issuance of
Preferred Stock could adversely affect the voting power of holders of Common
Stock and the likelihood that such holders will receive dividend payments and
payments upon liquidation and could have the effect of delaying, deferring or
preventing a change in control of the Company. The Company has no present plan
to issue any shares of Preferred Stock.
32
<PAGE> 34
SERIES A CONVERTIBLE PREFERRED STOCK
The following is a brief summary of the material rights, preferences,
privileges, restrictions and limitations of the outstanding shares of Series A
Preferred Stock.
Dividends. The holders of shares of Series A Preferred Stock are not
entitled to any dividends.
Liquidation Preference. In the event of a liquidation, dissolution or
winding up of the Company, the holders of the Series A Preferred Stock are
entitled to a cash payment equal to the Liquidation Preference (as defined
below) for each share held, before any distribution of the Company's assets to
holders of the Common Stock. The "Liquidation Preference" per share means an
amount equal to (i) $1,000.00 plus (ii) a premium equal to (.06)x(N/365)x(1000),
where N equals the number of days from the date the shares of Series A Preferred
Stock were issued.
Voluntary Conversion. Each share of Series A Preferred Stock is, at the
option of the holder, convertible into such number of shares as results from
dividing 1,000 by the Conversion Price then in effect. The Conversion Price
means, with respect to any Conversion Date (as defined in the Certificate) the
lower of the Variable Conversion Price (as defined) and the Fixed Conversion
Price (as defined) but in no event less than $1.00 per share unless certain
specified events shall have occurred and be then continuing. The Conversion
Price is currently $3.875 per share.
Automatic Conversion. Subject to certain limitations and provided that all
shares of Common Stock issuable upon conversion of all outstanding shares of
Series A Preferred Stock are then (i) authorized and reserved for issuance, (ii)
registered under the Act for resale by the holders of such shares of Series A
Preferred Stock and (iii) eligible to be publicly traded, each share of Series A
Preferred Stock issued and outstanding on April 7, 2000 automatically shall be
converted at the Conversion Price then in effect.
Redemption. The holders of Series A Preferred Stock have no right to
require the Company to effect a redemption of their outstanding shares so long
as the Company (i) has not decreased the number of shares of Common Stock
reserved for issuance to the holders of Series A Preferred Stock to an amount
below 1,650,000 (the "Reserved Amount"), (ii) the Company takes immediate action
following the applicable Authorization Trigger Date (as defined) to increase the
Reserved Amount to 200% of the number of shares of Common Stock then issuable
upon conversion of the outstanding Series A Preferred Stock and (iii) the
Company continues to use its good faith best efforts to increase the Reserved
Amount to 200% of the number of shares of Common Stock then issuable upon
conversion of the outstanding Series A Preferred Stock.
Voting Rights. The holders of Series A Preferred Stock have no voting
rights except as otherwise provided by the Delaware General Corporation Law (the
"Business Corporation Law") and as follows:
So long as any shares of Series A Preferred Stock are outstanding, the
Company shall not without first obtaining the approval (by vote or written
consent, as provided by the Business Corporation Law) of the holders of 67% then
outstanding shares of Series A Preferred Stock:
(a) alter or change the rights, preferences or privileges of the
Series A Preferred Stock;
(b) alter or change the rights, preferences or privileges of any
capital stock of the Company as to affect adversely the Series A Preferred
Stock;
(c) create any new class or series of capital stock having a
preference over the Series A Preferred Stock as to distribution of assets
upon liquidation, dissolution or winding up of the Company ("Senior
Securities");
(d) create any new class or series of capital stock ranking pari passu
with the Series A Preferred Stock as to distribution of assets upon
liquidation, dissolution or winding up of the Company ("Pari Passu
Securities");
(e) increase the authorized number of shares of Series A Preferred
Stock;
(f) issue any shares of Senior Securities or Pari Passu Securities;
33
<PAGE> 35
(g) issue any additional shares of Series A Preferred Stock;
(h) redeem, or declare or pay any cash dividend or distribution on,
any Junior Securities (as defined); or
(i) increase the par value of the Common Stock.
Registration Rights. The Company has agreed to register for resale shares
of Common Stock (i) issuable upon exercise of the Series A Preferred Stock, (ii)
issuable upon exercise of the Private Placement Warrants and (iii) issuable upon
exercise of warrants previously granted to consultants to the Company. If the
Company is unable to effectuate the registration of the shares of Common Stock
issuable to the holders of Series A Preferred Stock and the Private Placement
Warrants within 123 days from March 31, 1998 or if certain other events, as
specified in the Registration Rights Agreement that was filed as an exhibit to
the Registration Statement of which this Prospectus forms a part, occur, then
the Company will be obligated to make payments to such holders of an amount
equal to the product of (i) the aggregate Purchase Price (as defined) of the
Series A Preferred Stock and accompanying warrants multiplied by (ii) two
hundredths (.02), for each thirty day period specified in the Registration
Rights Agreement. Any such amounts shall be paid in cash or, at such holder's
option may be convertible into Common Stock at the "Conversion Price" (as
defined in the "Certificate of Designation") then in effect.
WARRANTS
As of March 31, 1998, the Company had outstanding warrants to purchase
300,000 shares of Common Stock at an exercise price of $2.00 per share. The
warrants expire on January 21, 2001. Each warrant contains provisions for the
adjustment of the exercise price and the aggregate number of shares issuable
upon the exercise of the warrant under certain circumstances, including stock
dividends, stock splits, reorganizations, reclassifications, and consolidations.
See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources" for a description of
the Private Placement Warrants that have been issued to the investors in the
Private Placement.
ANTI-TAKEOVER PROVISIONS
The Company is a Delaware corporation and is subject to Section 203
("Section 203") of the Delaware General Corporation Law (the "DGCL"). In
general, Section 203 prevents an "interested stockholder" (defined generally as
a person owning 15% or more of a corporation's outstanding voting stock) from
engaging in a "business combination" (as defined) with a Delaware corporation
for three years following the time such person became an interested stockholder
unless: (i) before such person became an interested stockholder, the board of
directors of the corporation approved the transaction in which the interested
stockholder became an interested stockholder or approved the business
combination; (ii) upon consummation of the transaction that resulted in the
interested stockholder's becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced (excluding stock held by
directors who are also officers of the corporation and by employee stock plans
that do not provide employees with the right to determine confidentially whether
shares held subject to the plan will be tendered in a tender or exchange offer);
or (iii) at the time of or following the time of the transaction in which such
person became an interested stockholder, the business combination was approved
by the board of directors of the corporation and authorized at a meeting of
stockholders by the affirmative vote of the holders of 66 2/3% of the
outstanding voting stock of the corporation not owned by the interested
stockholder. Under Section 203, the restrictions described above also do not
apply to certain business combinations proposed by an interested stockholder
following the announcement or notification of one of certain extraordinary
transactions involving the corporation and a person who had not been an
interested stockholder during the previous three years or who became an
interested stockholder with the approval of a majority of the corporation's
directors who were directors prior to any person becoming an interested
stockholder during the previous three years or were recommended for election or
elected to succeed such directors by a majority of such directors.
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<PAGE> 36
Section 203 defines a business combination to include: (i) any merger or
consolidation of the corporation with the interested stockholder; (ii) any sale,
transfer, pledge or other disposition of 10% or more of the assets of the
corporation involving the interested stockholder; (iii) subject to certain
exceptions, any transaction which results in the issuance or transfer by the
corporation of any stock of the corporation to the interested stockholder; (iv)
any transaction involving the corporation which has the effect of increasing the
proportionate share of the stock of any class or series of the corporation
beneficially owned by the interested stockholder; or (v) the receipt by the
interested stockholder of the benefit of any loans, advances, guarantees,
pledges or other financial benefits provided by or through the corporation.
In addition, certain of the Company's executive officers that have entered
into employment agreements with the Company will be entitled to receive certain
bonuses in cash or Common Stock upon a change in control of the Company in such
amounts that, in the aggregate, could have an adverse effect on the Company's
liquidity and capital resources. Accordingly, such provisions could discourage
or prevent bids to takeover the Company and decrease values that would otherwise
be obtained by stockholders for their Common Stock. See
"Management -- Employment Agreements."
The Commission has indicated the use of authorized unissued shares of
voting stock could have an anti-takeover effect. It has not been management's
intent to install an anti-takeover device nor is it expected that the Company's
authorized but unissued shares of common and preferred stock would be used for
that purpose. Any business combination, as that term is used in Section 203,
would be reviewed by the Company's Board of Directors for its impact on the
Company.
EFFECT OF THE CALIFORNIA CORPORATIONS CODE
The California Corporations Code includes provisions designed to apply
certain aspects of California Law to corporations organized outside California
where, in general, such corporations are doing more than 50% of their business
in California and have more than 50% of their outstanding voting securities held
of record by persons residing in California (the "California Test"). These
provisions, which are generally more restrictive than their counterparts under
Delaware Law, currently apply to the Company.
Among the provisions of the California Law which will apply are limitations
on corporate dividends and other distributions and rights of stockholders to
cumulate votes in the election of directors. Numerous other provisions which are
listed in Section 2115 of the California General Corporation Law could also
apply. In some cases, these provisions are in conflict with the laws of
Delaware. The following summarizes some of the principal differences which could
apply to the Company:
Under both Delaware and California Law, cumulative voting for the election
directors is permitted. However, under Delaware law cumulative voting must be
expressly authorized in the Certificate of Incorporation. Both Delaware and
California Law allow a classified Board of Directors, however, Delaware Law
requires that it be authorized in the Certificate of Incorporation or the Bylaws
and California Law does not permit staggered classes for smaller corporations,
such as the Company, and directors must be elected at each annual meeting of
stockholders. Under Delaware Law, the Certificate of Incorporation or Bylaws may
limit the removal of directors for cause only while under California Law,
stockholders may remove directors without cause. Pursuant to Delaware Law, the
directors may amend the Bylaws to change the number of authorized directors.
Under California Law, subject to limited circumstances, any amendment to the
Bylaws changing the number of authorized directors requires stockholder
approval.
Under Delaware Law, a director is obligated to discharge his or her duties
in good faith and to inform himself or herself about all material information
reasonably available to him or her before making a business decision. Pursuant
to California Law, a director is obligated to discharge his or her duties in
good faith, and to exercise such care, including reasonable inquiry, as an
ordinarily prudent person in a similar position would use under similar
circumstances. Whereas California Law specifically prohibits a corporation from
limiting or eliminating a director's liability for reckless disregard or
abdication of these duties, Delaware Law contains no such prohibition.
35
<PAGE> 37
California Law also requires stockholder approval for certain
sale-of-assets and stock-for-stock reorganizations, whereas Delaware Law does
not. Delaware Law permits the payment of dividends out of paid-in and earned
surplus or out of net profits for the current and preceding fiscal years and the
repurchase or redemption of shares out of earned, paid-in or reduction surplus.
Under California Law, any such distributions cannot be made unless retained
earnings equals or exceeds the amount of the distributions, or if after giving
effect to the distribution, the corporation's tangible assets are less than 125%
of its liabilities, the corporation's current liabilities exceed its current
assets, the corporation's average operating income for the two most recently
completed fiscal years is less than 125% of its current liabilities or the
corporation would be unable to meet its liabilities as they mature.
At such time as the Company has any class of securities listed on the New
York Stock Exchange or the American Stock Exchange, or approved for inclusion on
the Nasdaq National Market System, and the Company has at least 800 holders of
its equity securities, or the Company no longer satisfies each of the elements
of the California Test, the Company will be exempt from the provisions of
Section 2115. No assurance can be given that the Company will ever satisfy any
exemption from Section 2115.
LIMITATIONS ON LIABILITY
Delaware law authorizes corporations to limit or eliminate the personal
liability of directors to corporations and their stockholders for monetary
damages for breach of a director's fiduciary duty of care. The duty of care
requires that, when acting on behalf of the corporation, directors must exercise
an informed business judgment based on all material information reasonably
available to them. Absent the limitations authorized by Delaware law, directors
are accountable to corporations and their stockholders for monetary damages for
conduct constituting gross negligence in the exercise of their duty of care.
Delaware law enables corporations to limit available relief to equitable
remedies such as injunction or rescission. Although the Company's Certificate of
Incorporation ("Certificate of Incorporation") does not limit the liability of
directors of the Company to the fullest extent permitted by Delaware law the
Company intends to seek stockholder approval in order to amend its Certificate
of Incorporation to provide for such limitation. Specifically, if the
Certificate of Incorporation is so amended, directors of the Company will not be
personally liable for monetary damages for breach of a director's fiduciary duty
as a director, except for liability (i) for any breach of the director's duty of
loyalty to the Company or its stockholders, (ii) for acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law, (iii) under Section 174 of the DGCL, or (iv) for any transaction from which
the director derived an improper personal benefit.
The inclusion of this provision in any such amended Certificate of
Incorporation may have the effect of reducing the likelihood of derivative
litigation against directors and may discourage or deter stockholders or
management from bringing a lawsuit against directors for breach of their duty of
care, even though such an action, if successful, might otherwise have benefited
the Company and its stockholders. The amended Certificate of Incorporation will
also provide indemnification to its officers and directors and certain other
persons with respect to certain matters, and the Company intends to enter into
agreements with each of its directors and executive officers providing for
indemnification with respect to certain matters.
STOCK TRANSFER AGENT AND REGISTRAR
The stock transfer agent and registrar for the Common Stock is American
Stock Transfer and Trust Company.
LEGAL MATTERS
The validity of the shares of the Company's Common Stock offered hereby
will be passed upon for the Company by Donahue, Mesereau & Leids LLP, Los
Angeles, California.
36
<PAGE> 38
EXPERTS
The audited financial statements of the Company as of September 30, 1997
and 1996 and the related statements of operations, shareholders' equity and cash
flows for the fiscal years ended September 30, 1997 and 1996, included elsewhere
in this Prospectus, have been so included in reliance on the report of Clumeck,
Stern, Phillips & Schenkelberg, independent certified public accountants, given
on the authority of such firm as experts in auditing and accounting.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission a
Registration Statement on Form SB-2 under the Securities Act of 1933, as
amended, with respect to the securities offered hereby. This Prospectus does not
contain all the information set forth in the Registration Statement. For further
information with respect to the Company and the securities offered hereby,
reference is made to the Registration Statement, including the exhibits and
financial statements filed therewith. Statements contained in this Prospectus as
to the contents of any contract or other documents are not necessarily complete,
and in each instance, reference is made to the copy of such contract or other
document filed as an exhibit to the Registration Statement, each statement being
qualified in its entirety by such reference. All of these documents may be
obtained upon payment of the prescribed fees or examined without charge at the
office of the Securities and Exchange Commission, 450 Fifth Street, N.W.,
Washington, D.C. 20549, or by way of the Commission's Internet address,
http://www.sec.gov.
37
<PAGE> 39
INDEX TO FINANCIAL STATEMENTS
ENVIRONMENTAL PRODUCTS & TECHNOLOGIES CORPORATION
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL REPORT
SEPTEMBER 30, 1997 AND SEPTEMBER 30, 1996
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report................................ F-2
Financial Statements
Balance Sheet............................................. F-3
Statements of Stockholders' Equity........................ F-4
Statements of Operations.................................. F-5
Statements of Cash Flows.................................. F-6
Notes to Financial Statements............................. F-7
</TABLE>
F-1
<PAGE> 40
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Environmental Products & Technologies Corporation
Thousand Oaks, California
We have audited the balance sheet of Environmental Products & Technologies
Corporation (a development stage company), as of September 30, 1997 and the
related statements of stockholders' equity, operations and cash flows for the
years ended September 30, 1997 and 1996. 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 audits.
We conducted our audits 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 audits provide 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 Environmental Products &
Technologies Corporation as of September 30, 1997 and the results of its
operations and its cash flow for the years ended September 30, 1997 and 1996 in
conformity with generally accepted accounting principles.
CLUMECK, STERN, PHILLIPS & SCHENKELBERG
Certified Public Accountants
Encino, California
December 18, 1997, except for Notes 12 and 13, as
to which the date is May 18, 1998
F-2
<PAGE> 41
ENVIRONMENTAL PRODUCTS & TECHNOLOGIES CORPORATION
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
SEPTEMBER 30, 1997 AND 1996
ASSETS
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
CURRENT ASSETS
Cash...................................................... $ 271,360 $ 11,871
Prepaid expenses.......................................... -- 9,500
Interest receivable....................................... 4,329 1,372
Due from stockholders..................................... -- 209,200
---------- ----------
Total Current Assets.............................. 275,689 231,943
---------- ----------
EQUIPMENT................................................... 1,093 --
---------- ----------
OTHER ASSETS
Note receivable -- related party.......................... 34,850 30,850
Deposits.................................................. 700 10,200
---------- ----------
Total Other Assets................................ 35,550 41,050
---------- ----------
TOTAL ASSETS................................................ $ 312,332 $ 272,993
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable.......................................... $ 17,383 $ 36,016
Accrued salaries.......................................... 68,000 --
Accrued interest.......................................... 7,320 --
Settlement payable........................................ 27,005 --
Note payable -- related party............................. 103,000 --
---------- ----------
Total Current Liabilities......................... 222,708 36,016
---------- ----------
LONG TERM DEBT
Note payable -- related party............................. -- 113,000
---------- ----------
TOTAL LIABILITIES........................................... 222,708 149,016
---------- ----------
COMMITMENTS
STOCKHOLDERS' EQUITY
Common stock, $.01 par value, authorized 20,000,000
shares; issued and outstanding 7,396,148 shares (1997)
and 7,607,148 shares (1996)............................ 38,035 36,980
Preferred stock, $.01 par value, authorized 20,000,000
shares; no shares issued or outstanding................ -- --
Additional paid in capital................................ 1,402,286 1,056,186
Additional paid in capital -- stock options............... 54,450 --
Retained (Deficit)........................................ (695,452) (695,452)
Deficit accumulated during development stage.............. (709,695) (273,737)
---------- ----------
89,624 123,977
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY.................. $ 312,332 $ 272,993
========== ==========
</TABLE>
(See Notes to Financial Statements)
F-3
<PAGE> 42
ENVIRONMENTAL PRODUCTS & TECHNOLOGIES CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' EQUITY
YEARS ENDED SEPTEMBER 30, 1997 AND 1996
<TABLE>
<CAPTION>
ADDITIONAL DEFICIT RETAINED
COMMON STOCK PAID-IN ACCUMULATED DEFICIT
------------------------- ADDITIONAL CAPITAL DURING THE PRIOR TO THE
NUMBER OF PAID-IN STOCK DEVELOPMENT DEVELOPMENT
SHARES AMOUNT CAPITAL OPTIONS STAGE STAGE
----------- ----------- ----------- ------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Balance -- September 30,
1995........................ 5,356,148 $ 26,780 $ 673,306 $(695,452)
----------- ----------- ----------
Common stock issued for cash
Oct. -- Dec., 1995........ 200,000 1,000 9,000
Jan. -- Mar., 1996........ 800,000 4,000 185,650
Apr. -- Jun., 1996........ 80,000 400 34,600
July -- Sept., 1996....... 960,000 4,800 144,400
----------- ----------- ---------- ------- --------- ---------
2,040,000 10,200 373,650
Executive Compensation........ 9,230
Common stockholder loss for
the year ended September 30,
1996........................ $(273,737)
----------- ----------- ---------- ------- --------- ---------
Balance, September 30, 1996... 7,396,148 36,980 1,056,186 (237,737) (695,452)
Common stock cancelled........ (889,000) (4,445) 4,445
Common stock issued for cash
June -- September, 1997..... 1,100,000 5,500 332,425
Executive Compensation........ 9,230
Stock options granted......... $54,450
Cost to raise capital......... (32,223)
Common stockholder loss for
the year ended September 30,
1997........................ (403,735)
----------- ----------- ---------- ------- --------- ---------
7,607,148 $ 38,035 $1,402,286 $54,450 $(709,695) $(695,452)
=========== =========== ========== ======= ========= =========
<CAPTION>
TOTAL
STOCKHOLDERS'
EQUITY
-------------
<S> <C>
Balance -- September 30,
1995........................ $ 4,634
Common stock issued for cash
Oct. -- Dec., 1995........
Jan. -- Mar., 1996........
Apr. -- Jun., 1996........
July -- Sept., 1996.......
---------
383,850
Executive Compensation........ 9,230
Common stockholder loss for
the year ended September 30,
1996........................ (273,737)
---------
Balance, September 30, 1996... 123,977
Common stock cancelled........
Common stock issued for cash
June -- September, 1997..... 337,925
Executive Compensation........ 9,230
Stock options granted......... 54,450
Cost to raise capital......... (32,223)
Common stockholder loss for
the year ended September 30,
1997........................ (403,735)
---------
$ 89,624
=========
</TABLE>
(See Notes to Financial Statements)
F-4
<PAGE> 43
ENVIRONMENTAL PRODUCTS & TECHNOLOGIES CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
YEARS ENDED SEPTEMBER 30, 1997 AND 1996 AND THE PERIOD
OCTOBER 1, 1995 (DATE OF DEVELOPMENT STAGE) TO SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
OCTOBER 1, 1995
TO
1997 1996 SEPTEMBER 30, 1997
--------- --------- ------------------
<S> <C> <C> <C>
SALES.............................................. $ -- $ -- $ --
--------- --------- ---------
EXPENSES
Consulting....................................... 104,171 159,605 263,776
Legal and professional........................... 33,346 7,486 40,832
Liability insurance.............................. 11,007 -- 11,007
Miscellaneous.................................... 24,354 14,200 38,554
Office supplies and expenses..................... 8,138 2,492 10,630
Other expenses................................... 216 43,642 43,858
Rent............................................. 52,155 19,775 71,930
Repairs and maintenance.......................... -- 1,500 1,500
Research and development......................... 69,238 -- 69,238
Salaries......................................... 77,230 9,230 86,460
Telephone........................................ 3,068 1,356 4,424
Travel........................................... 5,459 15,823 21,282
--------- --------- ---------
Total General & Administrative........... 388,382 275,109 663,491
--------- --------- ---------
LOSS FROM OPERATIONS............................... (388,382) (275,109) (663,491)
--------- --------- ---------
OTHER INCOME (EXPENSE)
Interest income.................................. 2,957 1,372 4,329
Interest expense................................. (18,310) -- (18,310)
--------- --------- ---------
(15,353) 1,372 (13,981)
--------- --------- ---------
NET LOSS........................................... $(403,735) $(273,737) $(677,472)
========= ========= =========
NET LOSS PER SHARE................................. $ (.06) $ (.04) (.10)
========= ========= =========
</TABLE>
(See Notes to Financial Statements)
F-5
<PAGE> 44
ENVIRONMENTAL PRODUCTS & TECHNOLOGIES CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
YEARS ENDED SEPTEMBER 30, 1997 AND 1996 AND THE PERIOD
OCTOBER 1, 1995 (DATE OF DEVELOPMENT STAGE) TO SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
OCTOBER 1, 1995
TO
1997 1996 SEPTEMBER 30, 1997
--------- --------- ------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss...................................... $(403,735) $(273,737) $(677,472)
--------- --------- ---------
Adjustments to reconcile net loss to net cash
used in operating activities
Non-cash consulting fees.................... 54,450 125,000 179,450
Non-cash executive compensation............... 9,230 9,230 18,460
(Increase) decrease in operating assets
Prepaid expenses......................... 9,500 (9,500) --
Interest receivable...................... (2,957) (1,372) (4,329)
Deposits................................. 9,500 (10,200) (700)
Increase (decrease) in operating liabilities
Accounts payable......................... (18,633) 30,758 12,125
Accrued salaries......................... 68,000 -- 68,000
Accrued interest......................... 7,320 -- 7,320
Settlement payable....................... 27,005 -- 27,005
--------- --------- ---------
Total Adjustments...................... 163,415 143,916 307,331
--------- --------- ---------
NET CASH USED IN OPERATING
ACTIVITIES....................................... (240,320) (129,821) (370,141)
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Loan to related party......................... (4,000) (30,850) (34,850)
Purchase of equipment......................... (1,093) -- (1,093)
--------- --------- ---------
NET CASH USED IN INVESTING ACTIVITIES.............. (5,093) (30,850) (35,943)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Sale of common stock.......................... 547,125 182,350 729,475
Loan payments................................. (10,000) (12,000) (22,000)
Cost to raise capital......................... (32,223) -- (32,223)
--------- --------- ---------
NET CASH PROVIDED BY FINANCING
ACTIVITIES....................................... 504,902 170,350 675,252
--------- --------- ---------
NET INCREASE IN CASH............................... 259,489 9,679 269,168
CASH, October 1.................................... 11,871 2,192 2,192
--------- --------- ---------
CASH, September 30................................. $ 271,360 $ 11,871 $ 271,360
========= ========= =========
</TABLE>
(See Notes to Financial Statements)
F-6
<PAGE> 45
ENVIRONMENTAL PRODUCTS & TECHNOLOGIES CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1997 AND 1996
NOTE 1 -- NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS
The Company was incorporated in 1983 as CCRS III, Inc. In 1989 its name was
changed to Central Corporate Reports Service, Inc., merged with Information
Bureau Inc. and operated in the financial public relation business until March,
1990 when the Company became inactive. In 1990 the Company changed its name to
Combined Assets, Inc. and in 1991 changed its name to ACP International, Inc.
and then again in 1994 changed its name back to Combined Assets, Inc. In
January, 1995 the Company's name was changed to Environmental Products &
Technologies Corporation. At the end of 1995 the Company began to develop
systems to control odors and solid stream waste in the farming industry. In
addition the Company is developing organic based insecticides for agricultural,
commercial and residential use.
The Company is currently in the development stage of operations devoting
its time to raising capital, product and supplier development, and marketing
future products. No products have been manufactured or marketed at this time.
These financial statements have been prepared on the basis that adequate capital
will be obtained.
CASH AND CASH EQUIVALENTS
For purposes of reporting cash flows, the Company considers all cash
accounts not subject to withdrawal restrictions and certificates of deposits
with original maturities of ninety days or less to be cash or cash equivalents.
INCOME TAXES
The Company accounts for income taxes in accordance with Financial
Accounting Standards Statement No. 109, "Accounting for Income Taxes", which
requires recognition of deferred tax liabilities and assets for the expected
future tax consequences of events that have been included in the financial
statements or tax returns. Under this method, deferred tax liabilities and
assets are determined based on the difference between the financial statement
and tax basis of assets and liabilities using enacted tax rates in effect for
the year which the differences are expected to be settled or realized.
LOSS PER SHARE
The computations of loss per share of common stock are based on the
weighted average number of shares outstanding of 7,182,690 shares (1997) and
6,156,132 shares (1996) and 6,669,412 shares (cumulative period).
RECLASSIFICATION
Health insurance of $10,905 for the year ended September 30, 1996 has been
reclassified as consulting expense for comparative purposes.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amount of assets and liabilities and
disclosures of contingent assets and liabilities as the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
F-7
<PAGE> 46
ENVIRONMENTAL PRODUCTS & TECHNOLOGIES CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED SEPTEMBER 30, 1997 AND 1996
NOTE 2 -- NOTE RECEIVABLE -- RELATED PARTY
The receivable is due from a corporation owned by an officer and major
stockholder of the Company. The note calls for interest at nine percent per
annum and is due November 1, 1998. Interest accrued on this note amounted to
$4,329 (1997) and $1,372 (1996).
NOTE 3 -- FAIR MARKET VALUE OF FINANCIAL INSTRUMENTS
The fair market value of the note receivable and the note payable
approximates cost based on current borrowing rates.
NOTE 4 -- DUE FROM STOCKHOLDERS
Common stock was issued in 1996 prior to receipt of full payment. Payments
for the stock were received in 1997.
NOTE 5 -- NOTE PAYABLE -- RELATED PARTY
The note payable to an officer-stockholder calls for monthly interest only
payments at the rate of 12% per annum. The principal is due August 1, 1998. The
note has an acceleration clause that requires full principal and interest
payments within ten business days of the completion of a secondary offering to
the public of at least $3,000,000. Interest charged against income for 1997 was
$14,820, of which $7,320 is accrued.
NOTE 6 -- COMMITMENTS
The Company has an employment agreement with an officer. The contract
commenced October 1, 1996 and continues for five years. The compensation calls
for an annual salary of $68,000 plus bonuses determined by the Board of
Directors.
The Company entered into a lease for facilities beginning January 1, 1998.
The lease calls for a term of two years, plus an option for an additional two
years. The minimum annual commitment is as follows:
<TABLE>
<S> <C>
1998....................................................... $22,680
1999....................................................... 30,924
2000....................................................... 7,788
-------
$61,392
=======
</TABLE>
NOTE 7 -- STOCK OPTIONS
In December 1995, the Board of Directors and the shareholders approved the
1996 Stock Option Plan. The Plan provides for non-qualified and incentive stock
options. The Board has designated 800,000 shares for the Plan. No options may be
granted under this plan after December 2005, and the Plan terminates September
30, 2006. The exercise price of the non-qualified stock option shall not be less
than 85 percent of the fair market value at the date of grant. The Board of
Directors granted 330,000 options on July 29, 1997 to outside consultants for
services rendered to the Company. The option price, which was equal to the
trading price on the grant date is $.1875 per share. The options are immediately
exercisable under the plan; however, option holders representing 280,000 shares
have signed agreements to not exercise the option prior to July 15, 1999.
Options of 50,000 remain immediately exercisable. As of September 30, 1997 none
of the options had been exercised. Under Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation", options granted to non-employees are
recognized at the fair value of the goods or services received or the fair value
of the equity instrument issued. The Company has recorded the service at the
fair value of the option
F-8
<PAGE> 47
ENVIRONMENTAL PRODUCTS & TECHNOLOGIES CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED SEPTEMBER 30, 1997 AND 1996
NOTE 7 -- STOCK OPTIONS (CONTINUED)
on the grant date using an option pricing model which used the one-year U.S.
Treasury rate of 5.54%, volatility of 300, a one year expected life, and no
expected dividends.
NOTE 8 -- WARRANTS
The Board of Directors at their June 1995 meeting authorized the issuance
of 1,200,000 warrants. These warrants entitled the holder to purchase an equal
number of capital stocks at $.05 per share. The right to purchase the shares
expires June 21, 1998. The 1,200,000 warrants authorized were purchased for the
Board stated price of $200. In 1997, 600,000 warrants were cancelled. The
600,000 remaining warrants are outstanding.
NOTE 9 -- INCOME TAXES
The Company has available at September 30, 1997, unused operating loss
carryforwards that may be applied against future taxable income and that expire
as follows:
<TABLE>
<S> <C>
September 30, 2012.......................................... $ 340,055
September 30, 2011.......................................... 264,507
September 30, 2010.......................................... 23,133
September 30, 2003.......................................... 530,859
September 30, 2004.......................................... 15,507
September 30, 2005.......................................... 1,061
----------
Total............................................. $1,175,122
==========
</TABLE>
No deferred tax asset has been recorded, as there is a more than 50% chance
that the loss carryovers will expire unused.
NOTE 10 -- SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
<TABLE>
<CAPTION>
OCTOBER 1, 1995
TO
1997 1996 SEPTEMBER 30, 1997
------- ------ ------------------
<S> <C> <C> <C>
Cash paid during the year for
Interest.................................. $10,990 $2,400 $13,390
------- ------ -------
Income taxes.............................. $ -- $ -- $ --
------- ------ -------
</TABLE>
NOTE 11 -- EXECUTIVE COMPENSATION
An officer/stockholder of the Company devoted part of his time to the
business for which he received no compensation. The fair value of that time has
been estimated to be $9,230 for each of the two years. These amounts have been
charged to income and recorded as additional paid-in capital.
NOTE 12 -- SUBSEQUENT EVENTS
Subsequent to the year end, the Company reached a settlement with a former
associate. The agreement called for payment of $15,990 cash plus 10,000 shares
of stock. This settlement was accrued at September 30, 1997.
F-9
<PAGE> 48
ENVIRONMENTAL PRODUCTS & TECHNOLOGIES CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED SEPTEMBER 30, 1997 AND 1996
Pursuant to a letter of understanding dated May 18, 1998, a Utah Limited
Liability Company agreed to transfer to the Company all rights, title and
interest in and to an anaerobic digester, a bio-reactor and the biologicals used
therewith. In consideration for this transfer, the Company issued 100,000 shares
of common stock to the Utah company and has agreed to issue an additional 50,000
shares of common stock upon assignment to the Company of all patents to the
bio-reactor. In addition, the Company has agreed to issue to the Utah company an
aggregate of 320,000 shares of common stock, payable 80,000 shares on each of
October 15, 1999, 2000, 2001 and 2002. The value of the initial 100,000 shares
at the market price on the date of the issuance of the shares was recorded as
research and development and expensed as incurred.
In January 1998, the Company issued 300,000 warrants to outside consultants
for services rendered to the Company. The warrants entitle them to purchase an
equal number of common shares at the exercise price of $2.00 per share. The
exercise period terminates on January 21, 2001. The Company has recorded their
services at the fair value of the warrant on the grant date using an option
pricing model which used the one year U.S. Treasury rate of 5.45 percent,
volatility of 225, a one year expected life and no expected dividends. 300,000
warrants remain outstanding at June 30, 1998.
In March 1998, the Board of Directors authorized the issuance of Series A
convertible preferred stock and warrants and the reserving of shares of common
stock for issuance upon the conversion of the preferred stock and exercise of
the warrants. The holders of the Series A convertible preferred stock are not
entitled to receive dividends. The preferred stock can be converted to common
stock at the fixed or variable conversion price, whichever is more beneficial to
the stockholder. The fixed conversion price is $3.875 per share. The variable
conversion price is 80% of the average of the five lowest closing market prices
of the stock in the fifteen trading days immediately before the conversion date.
The number of common shares is determined by dividing $1,000 by the conversion
price and multiplying the resulting amount by the number of preferred shares
being converted. There is also a premium that can be redeemed by the Company in
cash. If it is not redeemed in cash, it will add to the stated value of the
preferred shares in arriving at the number of common shares to be issued. The
premium is six percent (on an annualized basis) of the stated value of the
preferred shares. The securities issued have a below-market conversion feature
which the Company recorded as a preferred stock dividend in April 1998 in the
amount of $3,295,610.
The Company loaned $12,116 to an officer-stockholder. The note is dated
November 18, 1997 and principal plus interest at the rate of nine percent (9%)
per annum are due on or before November 18, 1999.
NOTE 13 -- STOCK SPLIT
In April 1998, the Board of Directors approved a two for one forward stock
split for holders of record on May 4, 1998. The effect of this stock split has
been retroactively applied to the 1997 and 1996 Financial Statements.
F-10
<PAGE> 49
- ------------------------------------------------------
- ------------------------------------------------------
No dealer, salesman or any other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus in connection with the offer made by this Prospectus and, if given or
made, such information or representations must not be relied upon as having been
authorized by the Company. This Prospectus does not constitute an offer to sell
or the solicitation of any offer to buy any security other than the shares of
the Common Stock offered by this Prospectus, nor does it constitute an offer to
sell or a solicitation of any offer to buy the shares of Common Stock by anyone
in any jurisdiction in which such offer or solicitation is not authorized, or in
which the person making such offer or solicitation is not qualified to do so, or
to any person to whom it is unlawful to make such offer or solicitation. Neither
the delivery of this Prospectus nor any sale made hereunder shall, under any
circumstances, create any implication that information contained herein is
correct as of any time subsequent to the date hereof.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 3
Risk Factors.......................... 6
Dividend Policy....................... 13
Use of Proceeds....................... 13
Management's Discussion and Analysis
or Plan of Operations............... 14
Selected Financial Data............... 17
Price Range of Common Stock........... 18
Business.............................. 19
Management............................ 26
Certain Transactions.................. 28
Principal Stockholders................ 29
Selling Stockholders.................. 29
Plan of Distribution.................. 31
Description of Capital Stock.......... 32
Legal Matters......................... 36
Experts............................... 37
Additional Information................ 37
Index to Financial Statements......... F-1
</TABLE>
Until , 1998 (90 days after the date of this Prospectus), all
dealers effecting transactions in the registered securities, whether or not
participating in this distribution, may be required to deliver a Prospectus.
This is in addition to the obligation of dealers to deliver a Prospectus when
acting as underwriters and with respect to their unsold allotments or
subscriptions.
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
2,820,000 SHARES
ENVIRONMENTAL PRODUCTS
& TECHNOLOGIES CORPORATION
COMMON STOCK
------------------------
PROSPECTUS
------------------------
AUGUST , 1998
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 50
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Neither the Company's Certificate of Incorporation nor bylaws provide for
indemnification of the Company's officers, directors, employees or agents. As
soon as practicable after the effectiveness of this Registration Statement, the
Company intends to seek stockholder approval to amend its Certificate of
Incorporation and bylaws to provide for such indemnification.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth all costs and expenses, other than
underwriting discounts and commissions, payable by the Registrant in connection
with the sale of the Units being registered hereby. All of the amounts shown are
estimates except for the Securities and Exchange Commission (the "Commission")
registration fee and the National Association of Securities Dealers ("NASD")
filing fee.
<TABLE>
<S> <C>
Commission Registration Fee................................. $ 6,083.27
Accounting Fees and Expenses................................ $ 10,000.00
Legal Fees and Expenses..................................... $ 50,000.00
Printing and Engraving Expenses............................. $ 20,000.00
Transfer Agent Fees......................................... $ 2,000.00
Miscellaneous Expenses...................................... $ 6,916.73
-----------
TOTAL.................................................. $100,000.00
===========
</TABLE>
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
Between October and December 1995, the Registrant sold 100,000 shares of
Common Stock for an aggregate of $10,000, or $.10 per share to one investor.
Between January and March 1996, the Registrant sold 400,000 shares of
Common Stock for an aggregate of $189,650, or approximately $.47 per share to
two investors.
Between April and June 1996, the Registrant sold 40,000 shares of Common
Stock for an aggregate of $35,000, or $.87 per share to one investor.
Between July and September 1996, the Registrant sold 480,000 shares of
Common Stock for an aggregate of $149,200, or approximately $.31 per share to
five investors.
Between June and September 1997, the Registrant sold 550,000 shares of
Common Stock for an aggregate of $337,925, or approximately $.614 per share to
ten investors.
On October 2, 1995, the Registrant issued warrants to purchase an aggregate
of 600,000 shares of Common Stock at an exercise price of $.10 per share to four
investors. On May 29, 1997, warrants representing the right to purchase 300,000
shares of Common Stock were canceled. On April 13, 1998 the holders of the
remaining warrants to purchase 300,000 shares of Common Stock agreed to exercise
such warrants and in lieu of paying an aggregate of $30,000 agreed to received
285,000 shares of Common Stock instead of 300,000 shares of Common Stock.
On January 22, 1998, the Registrant sold for an aggregate of $200 warrants
to purchase 300,000 shares of Common Stock at an exercise price of $2.00 per
share to Jonathan Fink and Brad Billick, consultants to the Company.
II-1
<PAGE> 51
On November 5, 1997, the Registrant issued 50,000 shares to Lifeline
Enterprises L.L.C. in consideration for the transfer by Lifeline to the
Registrant of all right, title and interest in and to the aerobic bioreactor,
the anaerobic system and the biologicals used with each.
In April 1998, the Registrant sold 3,000 shares of Series A Preferred Stock
together with warrants (the "Private Placement Warrants") to purchase 300,000
shares of Common Stock (the "Private Placement") for gross proceeds of
$3,000,000. The Private Placement Warrants have an initial exercise price of
$3.875 per share. The Private Placement Warrants expire on March 31, 2003. the
Private Placement Warrants contain provisions of the adjustment of the exercise
price and the aggregate number of shares issuable upon exercise under certain
circumstances, including without limitation, stock dividends, stock splits,
reorganizations, reclassifications, consolidations, certain dilutive sales of
securities for which the Private Placement Warrants are exercisable below the
then existing Market Price (as defined) and failure to maintain a sufficient
number of authorized shares of Common Stock for issuance and delivery upon
exercise of the Private Placement Warrants. The shares of Series A Preferred
Stock and the Private Placement Warrants were sold to two accredited investors.
The above securities were offered and sold by the Registrant in reliance
upon an exemption from registration under either (i) Section 4(2) of the
Securities Act of 1933, as amended (the "Securities Act"), as transactions not
involving any public offering or (ii) only in the case of options or warrants
granted to employees, directors, officers and consultants, Rule 701 under the
Securities Act. In the case of private placements exempt pursuant to Section
4(2), such offers and sales were made only to accredited investors; the
Registrant did not engage in any form of general solicitation or advertising;
and the Registrant exercised reasonable care to assure that the purchasers of
the Registrant's securities were not underwriters within the meaning of Section
2(11) of the Securities Act.
ITEM 27. EXHIBITS
(a) Exhibits:
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION OF EXHIBIT
-------------- ----------------------
<S> <C>
3.1 Certificate of Incorporation of the Registrant
3.2 Bylaws of the Registrant
3.3 Certificate of Designation, Preferences and Rights(1)
4.1 Articles of Incorporation of the Registrant (incorporated by
reference to Exhibit 3.1 hereof) and Bylaws of the
Registrant (incorporated by reference to Exhibit 3.2 hereof)
4.2 Form of Common Stock Certificate
5.1 Legal opinion of Donahue, Mesereau & Leids LLP re legality*
10.1 Securities Purchase Agreement dated as of March 31, 1998 by
and between the Registrant and each of Diversified
Strategies fund, L.P. and JNC Opportunity Fund, Ltd.(1)
10.2 Warrant to purchase 137,500 shares of Common Stock of the
Registrant issued to JNC Opportunity Fund, Ltd.(1)
10.3 Warrant to purchase 12,500 shares of Common Stock of the
Registrant issued to Diversified Strategies Fund, L.P.(1)
10.4 Registration Rights Agreement dated as of March 31, 1998 by
and between the Registrant and each of Diversified Fund,
L.P. and JNC Opportunity Fund, Ltd.(1)
10.5 Consulting Agreement dated January 22, 1998 by and between
the Registrant and Strategic Planning Consultants, Inc.
10.6 Warrant to purchase 200,000 shares of Common Stock of the
Registrant issued to Jonathan Fink (the "Fink Warrant") at
an exercise price of $.10 per share
</TABLE>
II-2
<PAGE> 52
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION OF EXHIBIT
-------------- ----------------------
<S> <C>
10.7 Letter agreement from Jonathan Fink to the Registrant
agreeing to exercise the Fink Warrant
10.8 Warrant to purchase 100,000 shares of Common Stock of the
Registrant issued to Brad Billik (the "Billik Warrant") at
an exercise price of $.10 per share
10.9 Letter agreement from Brad Billik to the Registrant agreeing
to exercise the Billik Warrant
10.10 Warrant to purchase 100,000 shares of Common Stock of the
Registrant issued to Jonathan Fink at an exercise price of
$4.00 per share
10.11 Warrant to purchase 50,000 shares of Common Stock of the
Registrant issued to Brad Billik at an exercise price of
$4.00 per share
10.12 Lease Agreement dated December 3, 1997 by and between the
Registrant and Westlake Industrial Complex
10.13 1996 Stock Option Plan and related agreements
10.14 Employment Agreement dated as of April 15, 1998 by and
between the Registrant and Marvin Mears
10.15 [Intentionally omitted]
10.16 Promissory Note issued to the Registrant by Morris Lerner
10.17 Promissory Note issued to the Registrant by Combined Assets,
Inc.
10.18 Promissory Note issued by the Registrant to Ronald Knudsen
10.19 Agreement with Lifeline Enterprises L.L.C.
23.1 Consent of Donahue, Mesereau & Leids LLP (incorporated by
reference to Exhibit 5.1 hereof)
23.2 Consent of Clumeck, Stern, Phillips & Schenkelberg
24.1 Power of Attorney (reference is made to page II-5 hereof)
27 Financial Data Schedule
</TABLE>
- ---------------
* To be filed by Amendment.
(1) Previously filed.
(b) Financial Statement Schedules:
None.
ITEM 28. UNDERTAKINGS
The Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(a) To include any prospectus required by section 10(a)(3) of the
Securities Act;
(b) To reflect in the prospectus any facts or events arising after
the effective date of this Registration Statement (or the most recent
post-effective amendment hereof) which individually, or in the
aggregate, represent a fundamental change in the information set forth
in this Registration Statement;
(c) To include any material information with respect to the plan of
distribution not previously disclosed in this Registration Statement or
any material change to such information in this Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered
II-3
<PAGE> 53
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(4) To provide to the underwriter at the closing specified in the
underwriting agreement certificates in such denominations and registered in
such names as required by the underwriter to permit prompt delivery to each
purchaser.
(5) That, insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the
Commission such indemnification is against public policy as expressed in
the Securities Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment
by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
(6) That, for purposes of determining any liability under the
Securities Act, the information omitted from the form of prospectus filed
as part of this Registration Statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the Registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed as part
of this Registration Statement as of the time it was declared effective.
(7) That, for the purpose of determining any liability under the
Securities Act, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-4
<PAGE> 54
SIGNATURES
In accordance with the requirements of the Securities Act, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements of filing on Form SB-2 and authorized this Amendment No. 1 to the
Registration Statement to be signed on its behalf by the undersigned, in the
City of Los Angeles, State of California, on August 18, 1998.
ENVIRONMENTAL PRODUCTS &
TECHNOLOGIES CORPORATION
/s/ MARVIN MEARS
--------------------------------------
By: Marvin Mears
Title: Chief Executive Officer and
President
In accordance with the requirements of the Securities Act, this Amendment
No. 1 to the Registration Statement was signed by the following persons in the
capacities and on the dates stated:
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<S> <C> <C>
/s/ MARVIN MEARS Chief Executive Officer, August 18, 1998
- ----------------------------------------------------- President and Director
Marvin Mears
/s/ JOEL WADMAN Chief Financial Officer August 18, 1998
- ----------------------------------------------------- (principal
Joel Wadman accounting officer) and
Secretary
</TABLE>
II-5
<PAGE> 55
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION OF EXHIBIT
-------------- ----------------------
<S> <C>
3.1 Certificate of Incorporation of the Registrant.
3.2 Bylaws of the Registrant.
3.3 Certificate of Designation, Preferences and Rights.(1)
4.1 Articles of Incorporation of the Registrant (incorporated by
reference to Exhibit 3.1 hereof) and Bylaws of the
Registrant (incorporated by reference to Exhibit 3.2
hereof).
4.2 Form of Common Stock Certificate.
5.1 Legal opinion of Donahue, Mesereau & Leids LLP re legality.*
10.1 Securities Purchase Agreement dated as of March 31, 1998 by
and between the Registrant and each of Diversified
Strategies fund, L.P. and JNC Opportunity Fund, Ltd.(1)
10.2 Warrant to purchase 137,500 shares of Common Stock of the
Registrant issued to JNC Opportunity Fund, Ltd.(1)
10.3 Warrant to purchase 12,500 shares of Common Stock of the
Registrant issued to Diversified Strategies Fund, L.P.(1)
10.4 Registration Rights Agreement dated as of March 31, 1998 by
and between the Registrant and each of Diversified Fund,
L.P. and JNC Opportunity Fund, Ltd.(1)
10.5 Consulting Agreement dated January 22, 1998 by and between
the Registrant and Strategic Planning Consultants, Inc.
10.6 Warrant to purchase 200,000 shares of Common Stock of the
Registrant issued to Jonathan Fink (the "Fink Warrant") at
an exercise price of $.10 per share.
10.7 Letter agreement from Jonathan Fink to the Registrant
agreeing to exercise the Fink Warrant.
10.8 Warrant to purchase 100,000 shares of Common Stock of the
Registrant issued to Brad Billik (the "Billik Warrant") at
an exercise price of $.10 per share.
10.9 Letter agreement from Brad Billik to the Registrant agreeing
to exercise the Billik Warrant.
10.10 Warrant to purchase 100,000 shares of Common Stock of the
Registrant issued to Jonathan Fink at an exercise price of
$4.00 per share.
10.11 Warrant to purchase 50,000 shares of Common Stock of the
Registrant issued to Brad Billik at an exercise price of
$4.00 per share.
10.12 Lease Agreement dated December 3, 1997 by and between the
Registrant and Westlake Industrial Complex.
10.13 1996 Stock Option Plan and related agreements.
10.14 Employment Agreement dated as of April 15, 1998 by and
between the Registrant and Marvin Mears.
</TABLE>
<PAGE> 56
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION OF EXHIBIT
-------------- ----------------------
<S> <C>
10.15 [Intentionally omitted].
10.16 Promissory Note issued to the Registrant by Morris Lerner.
10.17 Promissory Note issued to the Registrant by Combined Assets,
Inc.
10.18 Promissory Note issued by the Registrant to Ronald Knudsen.
10.19 Agreement with Lifeline Enterprises L.L.C.
23.1 Consent of Donahue, Mesereau & Leids LLP (incorporated by
reference to Exhibit 5.1 hereof).
23.2 Consent of Clumeck, Stern, Phillips & Schenkelberg.
24.1 Power of Attorney (reference is made to page II-5 hereof).
27 Financial Data Schedule
</TABLE>
- ---------------
* To be filed by Amendment.
(1) Previously filed.
<PAGE> 1
EXHIBIT 3.1
FILED
MAY 9 1983 9AM
[sig]
SECRETARY OF STATE
CERTIFICATE OF INCORPORATION
OF
CCRS III, INC.
-----------
FIRST. The name of this corporation shall be:
CCRS III, Inc.
SECOND. Its registered office in the State of Delaware is to be located at
4305 Lancaster Pike, in the City of Wilmington, County of New Castle, and its
registered agent at such address is CORPORATION SERVICE COMPANY.
THIRD. The purpose or purposes of the corporation shall be:
To engage in any lawful act or activity for which corporations may be
organized under the General Corporation Law of Delaware.
FOURTH. The total number of shares of stock which this corporation is
authorized to issue is:
One Thousand (1,000) shares of the par value of Ten Cents ($.10) each,
amounting to One Hundred Dollars ($100.00).
FIFTH. The name and mailing address of the incorporator is as follows:
JACQUELINE N. CASPER
Corporation Service Company
4305 Lancaster Pike
Wilmington, Delaware
SIXTH. The Board of Directors shall have the power to adopt, amend or
repeal the by-laws.
IN WITNESS WHEREOF, the undersigned, being the incorporator hereinbefore
named, has executed, signed and acknowledged this certificate of incorporation
this sixth day of May, A.D. 1983.
/s/ Jacqueline N. Casper
----------------------------------
Jacqueline N. Casper
Incorporator
<PAGE> 2
FILED
AUG 11 1989
[sig]
SECRETARY OF STATE
CERTIFICATE OF AMENDMENT
OF
CCRS III, INC.
-----------
CCRS III, INC., a corporation organized and existing under and by virtue
of the General Corporation Law of the State of Delaware, DOES HEREBY CERTIFY:
FIRST. That the Board of Directors of said corporation, at a meeting duly
convened and held, adopted the following resolution:
RESOLVED that the Board of Directors hereby declares it advisable and in
the best interest of the Company that Articles FIRST and FOURTH of the
Certificate of Incorporation be amended to read as follows:
FIRST. The name of the corporation shall be:
CENTRAL CORPORATE REPORTS SERVICE, INC.
FOURTH. The total number of shares of stock which this corporation shall
have the authority to issue is: Ten Million (10,000,000) shares of the par
value of One Cent ($.01) each, amounting to One Hundred Thousand Dollars
($100,000.00).
SECOND. That the said amendment has been consented to and authorized by
the holders of a majority of the issued and outstanding stock entitled to vote
by a written consent given in accordance with the provisions of Section 228 of
the General Corporation Law of the State of Delaware.
THIRD. That the aforesaid amendment was duly adopted in accordance with
the applicable provisions of Section 242 and 228 of the General Corporation Law
of the State of Delaware.
FOURTH. That the capital of said corporation will not be reduced under or
by reason of said amendment.
IN WITNESS WHEREOF, said corporation has caused this Certificate to be
signed by Daniel D. Weston its President, and attested by Wilma Conforti its
Secretary, this Ninth day of August A.D. 1983.
/s/ DANIEL D. WESTON
-------------------------------------
President
/s/ WILMA CONFORTI
Attested by: -------------------------------------
Secretary
<PAGE> 3
FILED
OCT 14 1983 9 AM
[sig]
SECRETARY OF STATE
CERTIFICATE OF INCORPORATION
OF
CENTRAL CORPORATE REPORTS SERVICE, INC.
-----------
Central Corporate Reports Service, Inc., a corporation organized and
existing under and by virtue of the General Corporation Law of the State of
Delaware, DOES HEREBY CERTIFY:
FIRST. That the Board of Directors of said corporation, at a meeting duly
convened and held, adopted the following resolution:
RESOLVED, that this Board of Directors does consider it advisable that
Article I of the Certificate of Incorporation, as amended, shall read as
follows:
The name of the corporation shall be: Information Bureau Inc.
SECOND. That the amendment has been consented to and authorized by the
holders of all of the issued and outstanding stock entitled to vote by a
written consent given in accordance with the provisions of Section 228 of the
General Corporation Law of the State of Delaware.
THIRD. That the aforesaid amendment was duly adopted in accordance with
the applicable provisions of Section 242 and 228 of the General Corporation Law
of the State of Delaware.
FOURTH. That the capital of said corporation will not be reduced under or
by reason of said amendment.
IN WITNESS WHEREOF, said corporation has caused this certificate to be
signed by David H. Groark, its President, and attested by Judy Rochotte, its
Secretary, this 28 day of September, 1983.
/s/ DAVID H. GROARK
-------------------------------------
President
Attested by:
/s/ JUDY ROCHOTTE
- ------------------------------------
<PAGE> 4
F I L E D
JUL 27 1984 9 AM
[sig]
SECRETARY OF STATE
CERTIFICATE OF AMENDMENT
OF
INFORMATION BUREAU INC.
Information Bureau Inc., a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware, DOES HEREBY
CERTIFY:
FIRST. That the Board of Directors of said corporation, at a meeting duly
convened and held, adopted the following resolution:
RESOLVE, that this Board of Directors does consider it advisable that
Article Fourth of the Certificate of Incorporation, as amended, shall read
as follows:
FOURTH: The total number of shares of capital stock which this corporation
shall have the authority to issue is Ten Million (10,000,000) shares of
common stock of the par value of One Cent ($0.01) each, amounting to One
Hundred Thousand Dollars ($100,000.00).
SECOND. That said amendment has been consented to and authorized by the
holders of all of the issued and outstanding stock entitled to vote by a written
consent given in accordance with the provisions of Section 228 of the General
Corporation Law of the State of Delaware.
THIRD. That the aforesaid amendment was duly adopted in accordance with
the applicable provisions of Sections 247 and 228 of the General Corporation
Law of the State of Delaware.
FOURTH. That the capital of said corporation will not be reduced under or
by reason of said amendment.
IN WITNESS WHEREOF, said corporation has caused this certificate to be
signed by David H. Groark, its President, and attested by Judy Rochotte, its
Secretary, this 23rd day of July, 1984.
/s/ DAVID H. GROARK
---------------------------------
David H. Groark, President
Attested by:
/s/ JUDY ROCHOTTE
- ------------------------------
Judy Rochotte, Secretary
<PAGE> 5
FILED
AUG 25 1989 9 AM
[SIG]
SECRETARY OF STATE
CERTIFICATE OF OWNERSHIP
MERGING
CENTRAL CORPORATE REPORTS SERVICE, INC.
INTO
INFORMATION BUREAU INC.
(Pursuant to Section 253 of the General Corporation Law
of the State of Delaware)
INFORMATION BUREAU INC., a corporation incorporated on the 9th day of May,
A.D. 1983, pursuant to the provisions of the General Corporation Law of the
State of Delaware, DOES HEREBY CERTIFY that this corporation owns all the
capital stock of CENTRAL CORPORATE REPORTS SERVICE, INC. a corporation
incorporated on the 23rd day of July, A.D. 1985, pursuant to the provisions of
the General Corporation Law of the State of Delaware, and that this corporation,
by a resolution of its Board of Directors duly adopted at a meeting held on the
15th day of August, A.D. 1989 determined to and did merge into itself said
CENTRAL CORPORATE REPORTS SERVICE, INC. which resolution is in the following
words to wit:
WHEREAS this corporation lawfully owns all the outstanding stock of CENTRAL
CORPORATE REPORTS SERVICE, INC., a corporation organized and existing under
the Laws of the State of Delaware, and
WHEREAS this corporation desires to merge into itself the said CENTRAL
CORPORATE REPORTS SERVICE, INC, and to be possessed of all the estate,
property, rights, privileges and franchises of said corporation,
NOW, THEREFORE, BE IT
RESOLVED, that this corporation merge into itself, and it does hereby merge
into itself said CENTRAL CORPORATE REPORTS SERVICE, INC. and assumes all of
its liabilities and obligations, and
FURTHER RESOLVED, that the president or a vice president, and the secretary
or treasurer of this corporation be and they hereby are directed to make
and execute the corporate seal of this corporation, a certificate of
ownership setting forth a copy of the resolution to merge said CENTRAL
CORPORATE REPORTS SERVICE, INC. and assume its liabilities and obligations,
and the date of adoption thereof, and to file the same in the office of the
Secretary of State of Delaware, and a certified copy thereof in the office
of the Recorder of Deeds of New Castle County; and
FURTHER RESOLVED, that the officers of this corporation be and they hereby
are authorized and directed to do all acts and things whatsoever, whether
within or without the State of Delaware which may be in anywise necessary
or proper to effect said merger.
FURTHER RESOLVED, that the Board of Directors hereby declares it advisable
and in the best interest of the corporation that the ???
<PAGE> 6
FIRST. The name of this corporation shall be:
CENTRAL CORPORATE REPORTS SERVICE, INC.
The Corporation DOES HEREBY CERTIFY that the said amendment has been
consented to and authorized by the holders of a majority of the issued and
outstanding stock entitled to vote by written consent given in accordance with
the provisions of Section 228 of the General Corporation Law of the State of
Delaware.
IN WITNESS WHEREOF, said INFORMATION BUREAU INC. has caused this
certificate to be signed by Martin L. Goldberg, its President, and attested by
Morris L. Lerner, its Secretary, this Fifteenth day of August, A.D. 1989.
/s/ MARTIN L. GOLDBERG
----------------------------
President
Attest /s/ MORRIS L. LERNER
----------------------------
Secretary
<PAGE> 7
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 09:00 AM 06/06/1990
710157003 - 2008430
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
CENTRAL CORPORATE REPORTS SERVICE, INC.
----------------------------------
CENTRAL CORPORATE REPORTS SERVICE, INC., a corporation organized and
existing under and by virtue of the General Corporation Law of the State of
Delaware, DOES HEREBY CERTIFY:
FIRST: That the Board of Directors of said corporation, at a meeting duly
convened and held, adopted the following resolution:
RESOLVED that the Board of Directors hereby declares it advisable and in
the best interest of the Company that Article FIRST and Article FOURTH of the
Certificate of Incorporation be amended to read as follows:
FIRST: The name of this corporation shall be:
COMBINED ASSETS, INC.
FOURTH: The total number of shares of stock which this corporation is
authorized to issue is:
Ten Million (10,000,000) shares of common stock with a par value of $.01
per share, amounting to One Hundred Thousand Dollars ($100,000.00).
Twenty Million (20,000,000) shares of preferred stock with a par value of
$.01 per share, amounting to Two Hundred Thousand Dollars ($200,000.00).
SECOND: That the said amendment has been consented to and authorized by
the holders of a majority of the issued and outstanding stock entitled to vote
by written consent given in accordance with the provisions of Section 228 of
the General Corporation Law of the State of Delaware.
THIRD: That the aforesaid amendment was duly adopted in accordance with
the applicable provisions of Sections 242 and 228 of the General Corporation
Law of the State of Delaware.
<PAGE> 8
IN WITNESS WHEREOF, said corporation has caused this Certificate to be
signed by its President, and attested by its Secretary, this thirty-first day
of May A.D. 1990.
[SIG]
----------------------------------------
President
/s/ MORRIS L. LERNER
----------------------------------------
Attested by: Secretary
<PAGE> 9
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 09:00 AM 06/17/1991
911685287--2008430
CERTIFICATE
FOR RENEWAL AND REVIVAL OF CHARTER
OF
COMBINED ASSETS, INC.
COMBINED ASSETS, INC., a corporation organized under the laws of the State
of Delaware, the certificate of incorporation of which was filed in the Office
of the Secretary of State on the 9th day of May, A.D., 1983, the charter of
which was voided for non-payment of taxes, now desires to procure a
restoration, renewal and revival of its charter, and hereby certifies as
follows:
1. The name of this corporation is:
COMBINED ASSETS, INC.
2. Its registered office in the State of Delaware is located at 1013
Centre Road, City of Wilmington, County of New Castle and the name and address
of its registered agent is CORPORATION SERVICE COMPANY.
3. The date when the restoration, renewal, and revival of the charter of
this company is to commence is the 28th day of February, 1991, same being prior
to the date of the expiration of the charter This renewal and revival of the
charter of this corporation is to be perpetual.
4. This corporation was duly organized and carried on the business
authorized by its charter until the 1st day of March, 1991, at which time its
charter became inoperative and void for non-payment of taxes and this
certificate for renewal and revival is filed by authority of the duly elected
directors of the corporation in accordance with the laws of the State of
Delaware.
IN TESTIMONY WHEREOF, and in compliance with the provisions of Section 312
of the General Corporation Law of the State of Delaware, as amended, COMBINED
ASSETS, INC. has caused this Certificate to be signed by Alvin A. McCollum, the
last and Acting President, and attested by Morris L. Lerner, the last and
Acting Secretary, this 13th day of June, A.D. 1991.
/s/ ALVIN A. McCOLLUM
----------------------------------------
Last and Acting President
Attested by: /s/ MORRIS L. LERNER
----------------------------------------
Last and Acting Secretary
<PAGE> 10
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 09:00 AM 06/26/1991
711177002 - 2008430
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
COMBINED ASSETS, INC.
__________________________________
COMBINED ASSETS, INC., a corporation
organized and existing under and by virtue of the General Corporation Law of the
State of Delaware, DOES HEREBY CERTIFY:
FIRST: That the Board of Directors of said corporation, at a meeting duly
convened and held, adopted the following resolution:
RESOLVED that the Board of Directors hereby declares it advisable and in
the best interest of the Company that Article FIRST and Article FOURTH of the
Certificate of Incorporation be amended to read as follows:
FIRST: The name of this corporation shall be:
ACP INTERNATIONAL, INC.
FOURTH: The total number of shares of stock which this corporation is
authorized to issue is:
One Hundred Million (100,000,000) shares of common stock with a par
value of $.0001 per share, amounting to Ten Thousand Dollars ($10,000.00).
Ten Thousand (10,000) shares of preferred stock with a par value of
$.0001 per share, amounting to One Dollar ($1.00).
SECOND: That the said amendment has been consented to and authorized by
the holders of a majority of the issued and outstanding stock entitled to vote
by a written consent given in accordance with the provisions of Section 228 of
the General Corporation Law of the State of Delaware.
THIRD: That the aforesaid amendment was duly adopted in accordance with
the applicable provisions of Sections 242 and 228 of the General Corporation
Law of the State of Delaware.
IN WITNESS WHEREOF, said corporation has caused this certificate to
be signed by its President, and attested by its Secretary, this 19th day of
June A.D. 1991.
/s/ ALVIN McCOLLUM
------------------------------------
President
/s/ MORRIS L. LERNER
Attested by: ------------------------------------
Secretary
<PAGE> 11
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 09:00 AM 02/15/94
944021029-2008430
CERTIFICATE
FOR RENEWAL AND REVIVAL OF CHARTER
OF
ACP INTERNATIONAL, INC.
ACP INTERNATIONAL, INC., a corporation organized under the laws of the
State of Delaware, the Certificate of Incorporation of which was filed in the
Office of the Secretary of State on the ninth day of May A.D. 1994, the charter
of which was voided for nonpayment of taxes, now desires to procure a
restoration, renewal and revival of its charter, and hereby certifies as
follows:
1. The name of this corporation is:
ACP INTERNATIONAL, INC.
2. Its registered office in the State of Delaware is located at 1013
Centre Road, in the City of Wilmington, County of New Castle and its registered
agent is CORPORATION SERVICE COMPANY.
3. The date when the restoration, renewal, and revival of the charter of
this company is to commence is the twenty-eighth day of February, A.D., 1993,
same being prior to the date of the expiration of the charter. This renewal and
revival of the charter of this corporation is to be perpetual.
4. This corporation was duly organized and carried on the business
authorized by its charter until the first day of March, A.D., 1993, at which
time its charter became inoperative and void for non-payment of taxes and this
certificate for renewal and revival is filed by authority of the duly elected
directors of the corporation in accordance with the laws of the State of
Delaware.
IN TESTIMONY WHEREOF, and in compliance with the provisions of Section
312 of the General Corporation Law of the State of Delaware, as amended, ACP
INTERNATIONAL, INC. has caused this Certificate to be signed by Alvin A.
McCollum, the last and Acting President and attested by Morris L. Lerner the
last and Acting Secretary, this second day of February, A.D., 1994.
/s/ ALVIN A. McCOLLUM
-------------------------------------
Last and Acting President
Attested by: /s/ MORRIS L. LERNER
--------------------------------------
Last and Acting Secretary
<PAGE> 12
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 09:01 AM 02/15/1994
944021030 -- 2008430
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
ACP INTERNATIONAL, INC.
----------------------------------
ACP INTERNATIONAL INC., a corporation organized and existing under and by
virtue of the general corporation Law of the State of Delaware, DOES HEREBY
CERTIFY:
FIRST. That the Board of Directors of said corporation, at a meeting duly
convened and held, adopted the following resolution:
RESOLVED that the Board of Directors hereby declares it advisable and in
the best interest of the Company that Article FIRST and FOURTH of the
Certificate of Incorporation be amended to read as follows:
FIRST: The name of this corporation shall be:
COMBINED ASSETS, INC.
FOURTH: The total number of shares of capital stock which the corporation
shall have authority to issue is 10,000,000 shares of Common Stock with
$.0001 par value per share.
SECOND. That the said amendment has been consented to and authorized by
the holders of a majority of the issued and outstanding stock entitled to vote
by written consent given in accordance with the provisions of Section 228 of
the General Corporation Law of the State of Delaware.
THIRD. That the aforesaid amendment was duly adopted in accordance with the
applicable provisions of Sections 242 and 228 of the General Corporation Law of
the State of Delaware.
IN WITNESS WHEREOF, said corporation has caused this Certificate to be
signed by MARVIN MEARS its President, and attested by MORRIS L. LERNER its
Secretary, this 2nd day of February, A.D. 1994.
/s/ MARVIN MEARS
----------------------------------------
President
/s/ MORRIS L. LERNER
----------------------------------------
Attested by: Secretary
<PAGE> 13
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 09:00 AM 01/13/1995
950009839 - 2008430
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
COMBINED ASSETS, INC.
_________________________________
Combined Assets, Inc., a corporation organized and existing under and by
virtue of the general corporation Law of the State of Delaware, DOES HEREBY
CERTIFY:
FIRST. That the Board of Directors of said corporation, at a meeting duly
convened and held, adopted the following resolution:
RESOLVED that the Board of Directors hereby declares it advisable and in
the best interest of the Company that Article FIRST of the Certificate of
Incorporation be amended to read as follows:
FIRST: The name of this corporation shall be:
ENVIRONMENTAL PRODUCTS & TECHNOLOGIES CORPORATION
SECOND. That the said amendment has been consented to and authorized by the
holders of a majority of the issued and outstanding stock entitled to vote by
written consent given in accordance with the provisions of Section 228 of the
General Corporation Law of the State of Delaware.
THIRD. That the aforesaid amendment was duly adopted in accordance with the
applicable provisions of Sections 242 and 228 of the General Corporation Law of
the State of Delaware.
IN WITNESS WHEREOF, said corporation has caused this Certificate to be
signed by President this 10th day of January A.D. 1995.
/s/ MARVIN MEARS
--------------------------
Authorized Officer
<PAGE> 14
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 09:00 AM 07/25/1995
950-165876 - 2008430
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
ENVIRONMENTAL PRODUCTS & TECHNOLOGIES CORPORATION
-------------------------------------------
ENVIRONMENTAL PRODUCTS & TECHNOLOGIES CORPORATION, a corporation organized
and existing under and by virtue of the general corporation Law of the State of
Delaware, DOES HEREBY CERTIFY:
FIRST. That the Board of Directors of said corporation, at a meeting duly
convened and held, adopted the following resolution:
RESOLVED that the Board of Directors hereby declares it advisable and in
the best interest of the Company that Article FOURTH of the Certificate of
Incorporation be amended to read as follows:
FOURTH: The total number of shares of stock which this corporation is
authorized to issue is:
Twenty Million (20,000,000) par value $.01
SECOND. That the said amendment has been consented to and authorized by
the holders of a majority of the issued and outstanding stock entitled to vote
by written consent given in accordance with the provisions of Section 228 of
the General Corporation Law of the State of Delaware.
THIRD. That the aforesaid amendment was duly adopted in accordance with
the applicable provisions of Sections 242 and 228 of the General Corporation
Law of the State of Delaware.
IN WITNESS WHEREOF, said corporation has caused this Certificate to be
signed by the President, this 5th day of July A.D. 1995.
/s/ MARVIN MEARS
---------------------------
Authorized Officer
President
<PAGE> 15
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 09:00 AM 04/02/1998
981127888 - 2008430
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
ENVIRONMENTAL PRODUCTS & TECHNOLOGIES CORPORATION
Environmental Products & Technologies Corporation, a corporation organized
and existing under and by virtue of the General Law of Delaware, DOES HEREBY
CERTIFY:
FIRST. That the Board of Directors of said corporation, at a meeting duly
convened and held, adopted the following resolution.
RESOLVED. The Corporation is authorized to issue two classes of shares.
One class shall be designated as common stock, $.01 par value per share and one
class shall be designated as preferred stock, $.01 par value per share. The
total number of common shares which this corporation is authorized to issue is
20,000,000. The total number of preferred shares which this Corporation is
authorized to issue is 20,000,000. The Corporation's Board of Directors may
designate different series of preferred stock and may fix the number of
authorized shares of preferred stock for each series. The holders of each
series of preferred stock shall have such rights, preferences and privileges as
may be determined by the Corporation's Board of Directors prior to the issuance
of such shares.
SECOND. That the said amendment has been consented to and authorized by
the holders of a majority of the issued and outstanding stock entitled to vote
by written consent given in accordance with the provisions of Section 228
General Corporation Law of the State of Delaware.
THIRD. That the aforesaid said amendment was duly adopted in accordance
with the applicable provisions of Sections 242 and 228 of the General
Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, said corporation has caused this Certificate to be
signed by its President, this 2nd day of April, 1998.
/s/ MARVIN MEARS
------------------------------
Marvin Mears
<PAGE> 16
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 09:00 AM 04/06/1998
981132624 - 2008430
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
ENVIRONMENTAL PRODUCTS & TECHNOLOGIES CORPORATION
Environmental Products & Technologies Corporation, a Corporation organized
and existing under and by virtue of the general corporation Law of the State of
Delaware, DOES HEREBY CERTIFY:
FIRST: That the Board of Directors of said corporation, at a meeting duly
convened and held, adopted the following resolution.
RESOLVED: That the Board of Directors hereby declares it advisable and in
the best interest of the Company that Article Fourth of the Certificate of
Incorporation be amended to read as follows:
FOURTH: The Corporation is authorized to issue two classes of shares. One
class shall be designated as common stock, $.01 par value per share and one
class shall be designated as preferred stock, $.01 par value per share. The
total number of common shares which this corporation is authorized to issue is
20,000,000. The total number of preferred shares which this Corporation is
authorized to issue is 20,000,000. The Corporation's Board of Directors may
designate different series of preferred stock and may fix the number of
authorized shares of preferred stock for each series. The holders of each
series of preferred stock shall have such rights, preferences and privileges as
may be determined by the Corporation's Board of Directors prior to the issuance
of such shares.
SECOND. That the said amendment has been consented to and authorized by
the holders of a majority of the issued and outstanding stock entitled to vote
by written consent given in accordance with the provisions of Section 228
General Corporation Law of the State of Delaware.
THIRD. That the aforesaid amendment was duly adopted in accordance with
the applicable provisions of Sections 242 and 228 of the General Corporation
Law of the State of Delaware.
IN WITNESS WHEREOF, said corporation has caused this Certificate to be
signed by its President, this 27th day of March, 1998.
/s/ MARVIN MEARS
- -----------------------
Authorized Officer
Marvin Mears
<PAGE> 1
EXHIBIT 3.2
BY-LAWS
CCRS III, INC.
----------
OFFICES
1. The registered office of the corporation shall be in Wilmington,
Delaware, and the registered agent in charge thereof shall be:
CORPORATION SERVICE COMPANY
4305 Lancaster Pike
Wilmington, Delaware
The corporation may also have an office or offices: at such other places
as the board of directors may from time to time designate.
CORPORATE SEAL
2. The corporate seal shall have inscribed thereon the name of the
corporation, the year of its incorporation and the words "Corporate Seal,
Delaware".
MEETINGS OF STOCKHOLDERS
3. The annual meeting of stockholders for the election of directors
shall be held on the third Monday in April, in each year, or if that day be a
legal holiday, on the next succeeding day not a legal holiday, at Eleven o'clock
in the forenoon at which meeting they shall elect by ballot, by plurality vote,
a board of directors and may transact such other business as may come before the
meeting.
<PAGE> 2
Special meetings of the stockholders may be called at any time by the
president and shall be called by the president or secretary on the request in
writing or by vote of a majority of the directors or at the request in writing
of stockholders of record owning a majority in amount of the capital stock
outstanding and entitled to vote.
All meetings of the stockholders for the election of directors shall be
held at the office of the corporation in Garland, Texas or at such other place
within such city as may be fixed by the board of directors provided that at
least ten days' notice be given to the stockholders of the place so fixed. All
other meetings of the stockholders shall be held at such place or places, within
or without the State of Delaware, as may from time to time be fixed by the board
of directors or as shall be specified and fixed in the respective notices or
waivers of notice thereof.
No change of the time or other change of place of a meeting for the
election of directors, as fixed by the by-laws shall be made within sixty days
next before the day on such election is to be held. In case of any change in
time or other change of place for the election of directors, notice thereof
shall be given to each stockholder entitled to vote at least twenty days before
the election is held.
<PAGE> 3
DIRECTORS
4. The property and business of the corporation shall be managed and
controlled by its board of directors, one in number. Directors need not be
stockholders.
The directors shall hold office until the next annual election and until
their successors are elected and qualified. They shall be elected by the
stockholders, except that if there be any vacancies in the board by reason of
death, resignation or otherwise, or if there be any newly created directorships
resulting from any increase in the authorized number of directors, such
vacancies or newly created directorships may be filled for the unexpired term by
a majority of the directors then in office, though less than a quorum.
POWERS OF DIRECTORS
5. The board of directors shall have, in addition to such powers as are
hereinafter expressly conferred on it, all such powers as may be exercised by
the corporation, subject to the provisions of the statute, the certificate of
incorporation and the by-laws.
The board of directors shall have power:
To purchase or otherwise acquire property, rights or privileges for the
corporation, which the corporation has power to take, at such prices and on such
terms as the board of directors may deem proper.
<PAGE> 4
A complete list of stockholders entitled to vote, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder shall be prepared by the
secretary and shall be open to the examination of any stockholder at the place
of election, for ten days prior thereto, and during the whole time of the
election.
Each stockholder entitled to vote shall, at every meeting of the
stockholders, be entitled to one vote in person or by proxy, signed by him, for
each share of voting stock held by him, but no proxy shall be voted on after
three years from its date, unless it provides for a longer period. Such right to
vote shall be subject to the right of the board of directors to close the
transfer books or to fix a record date for voting stockholders as hereinafter
provided and if the directors shall not have exercised such right, no share of
stock shall be voted on at any election for directors which shall have been
transferred on the books of the corporation within twenty days next preceding
such election.
Notice of all meetings shall be mailed by the secretary to each
stockholder of record entitled to vote, at his or her last known post office
address, for annual meetings ten days and for special meetings five days prior
thereto.
The holders of a majority of stock outstanding and entitled to vote
shall constitute a quorum, but the holders of a smaller amount may adjourn from
time to time without further notice until a quorum is secured.
<PAGE> 5
To pay for such property, rights or privileges in whole or in part with
money, stock, bonds, debentures or other securities of the corporation, or by
the delivery of other property of the corporation.
To create, make and issue mortgages, bonds, deeds of trust, trust
agreements and negotiable or transferable instruments and securities, secured by
mortgages or otherwise, and to do every act and thing necessary to effectuate
the same.
To appoint agents, clerks, assistants, factors, employees and trustees,
and to dismiss them at its discretion, to fix their duties and emoluments and to
change them from time to time and to require security as it may deem proper.
To confer on any officer of the corporation the power of selecting,
discharging or suspending such employees.
To determine by whom and in what manner the corporation's bills, notes,
receipts, acceptances, endorsements, checks, releases, contracts, or other
documents shall be signed.
MEETINGS OF DIRECTORS
6. After each annual election of directors, the newly elected directors
may meet for the purpose of organization, the election of officers, and the
transaction of other business, at such place and time as shall be fixed by the
stockholders at the annual meeting, and, if a majority of the directors be
present at
<PAGE> 6
such place and time, no prior notice of such meeting shall be required to be
given to the directors. The place and time of such meeting may also be fixed by
written consent of the directors.
Regular meetings of the directors shall be held at the office of the
corporation as hereinbefore designated or elsewhere at the following time:
First Monday of each calendar qtr. at 11:00 am. Meetings may be held at other
times as may be fixed by resolution of the board. No notice of regular meetings
shall be required.
Special meetings of the directors may be called by the president on two
days' notice in writing or on one day's notice by telegraph to each director and
shall be called by the president in like manner on the written request of two
directors.
Special meetings of the directors may be held within or without the
State of Delaware at such place as is indicated in the notice or waiver of
notice thereof.
A majority of the directors shall constitute a quorum, but a smaller
number may adjourn from time to time, without further notice, until a quorum is
secured.
COMMITTEES
7. From time to time the board may appoint from their own number, any
committee or committees for any purpose, which shall have such powers as shall
be specified in the resolution of appointment.
<PAGE> 7
COMPENSATION OF DIRECTORS AND MEMBERS
OF COMMITTEES
8. Directors and members of standing committees shall receive such
compensation for attendance at each regular or special meeting as the board may
from time to time prescribe.
OFFICERS OF THE CORPORATION
9. The officers of the corporation may be a president, one or more vice
presidents, a secretary, a treasurer and such other officers as may from time to
time be chosen by the board of directors.
Any number of offices may be held by the same person unless the
certificate of incorporation or by-laws otherwise provide.
The officers of the corporation shall hold office until their successors
are chosen and qualify in their stead. Any officer chosen or appointed by the
board of directors may be removed either with or without cause at any time by
the affirmative vote of a majority of the whole board of directors. If the
office of any officer or officers becomes vacant for any reason, the vacancy
shall be filled by the affirmative vote of a majority of the whole board of
directors.
PRESIDENT
10. The president shall be the chief executive officer of the
corporation. It shall be his duty to preside at all meetings of the stockholders
and directors; to have general and active management of the business of the
corporation; to see that all orders and resolutions of the board of directors
are carried into effect,
<PAGE> 8
to execute all contracts, agreements, deeds, bonds, mortgages and other
obligations and instruments, in the name of the corporation, and to affix the
corporate seal thereto when authorized by the board.
He shall have general supervision and direction of the other officers of
the corporation and shall see that their duties are properly performed.
He shall submit a report of the operations of the corporation for the
year to the directors at their meeting next preceding the annual meeting of the
stockholders and to the stockholders at their annual meeting.
He shall be ex-officio a member of all standing committees and shall
have the general duties and powers of supervision and management usually vested
in the office of president of a corporation.
VICE PRESIDENT
11. The vice president or vice presidents, in the order designated by
the board of directors, shall be vested with all the powers and required to
perform all the duties of the president in, his absence or disability and shall
perform such other duties as may be prescribed by the board of directors.
PRESIDENT PRO TEM
12. In the absence or disability of the president and the vice
presidents, the board may appoint from their own number a president pro tem.
<PAGE> 9
SECRETARY
13. The secretary shall attend all meetings of the corporation, the
board of directors, and standing committees. He shall act as clerk thereof and
shall record all of the proceedings of such meetings in a book kept for that
purpose. He shall give proper notice of meetings of stockholders and directors
and shall perform such other duties as shall be assigned to him by the president
or the board of directors.
TREASURER
14. The treasurer shall have custody of the funds and securities of the
corporation and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the corporation and shall deposit all moneys
and other valuable effects in the name and to the credit of the corporation in
such depositories as may be designated by the board of directors.
He shall disburse the funds of the corporation as may be ordered by the
board, or president, taking proper vouchers for such disbursements, and shall
render to the president and directors, whenever they may require it, an account
of all his transactions as treasurer and of the financial condition of the
corporation, and at the regular meeting of the board next preceding the annual
stockholders' meeting, a like report for the preceding year.
He shall keep an account of stock registered and transferred in such
manner and subject to such regulations as the board of directors may prescribe.
<PAGE> 10
He shall give the corporation a bond, if required by the board of
directors, in such sum and in such a form and with security satisfactory to the
board of directors for the faithful performance of the duties of his office and
the restoration to the corporation, in case of his death, resignation or removal
from office, of all books, papers, vouchers, money and other property of
whatever kind in his possession, belonging to the corporation. He shall perform
such other duties as the board of directors may from time to time prescribe or
require.
DUTIES OF OFFICERS MAY BE DELEGATED
15. In case of the absence or disability of any officer of the
corporation or for any other reason deemed sufficient by a majority of the
board, the board of directors may delegate his powers or duties to any other
officer or to any director for the time being.
CERTIFICATES OF STOCK
16. Certificates of stock shall be signed by the President or vice
president and either the treasurer, assistant treasurer, secretary or assistant
secretary. If a certificate of stock be lost or destroyed, another may be issued
in its stead upon proof of such loss or destruction and the giving of a
satisfactory bond of indemnity, in an amount sufficient to indemnify the
corporation against any claim. A new certificate may be issued without requiring
bond when, in the judgment of the directors, it is proper to do so.
<PAGE> 11
TRANSFER OF STOCK
17. All transfers of stock of the corporation shall be made upon its
books by the holder of the shares in person or by his lawfully constituted
representative, upon surrender of certificates of stock for cancellation.
FIXING DATE FOR DETERMINATION OF
STOCKHOLDERS OF RECORD
18. In order that the corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock for the purpose of any
other lawful action, the board of directors may fix, in advance, a record date,
which shall not be more than sixty nor less than ten days before the date of
such meeting, nor more than sixty days prior to any other action.
If no record date is fixed:
The record date for determining stockholders entitled to notice of or to
vote at a meeting of stockholders shall be at the close of business on the day
next preceding the day on which notice is given, or, if notice is waived, at the
close of business on the day next preceding the day on which the meeting is
held.
<PAGE> 12
The record date for determining stockholders entitled to express consent
to corporate action in writing without a meeting, when no prior action by the
board of directors is necessary, shall be the day on which the first written
consent is expressed.
The record date for determining stockholders for any other purpose shall
be at the close of business on the day on which the board of directors adopts
the resolution relating thereto.
A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the board of directors may fix a new record date for the
adjourned meeting.
STOCKHOLDERS OF RECORD
19. The corporation shall be entitled to treat the holder of record of
any share or shares of stock as the holder in fact thereof and accordingly shall
not be bound to recognize any equitable or other claim to or interest in such
share on the part of any other person whether or not it shall have express or
other notice thereof, save as expressly provided by the laws of Delaware.
FISCAL YEAR
20. The fiscal year of the corporation shall end: December 31st.
DIVIDENDS
21. Dividends upon the capital stock may be declared by the board of
directors at any regular or special meeting and may be
<PAGE> 13
paid in cash or in property or in shares of the capital stock. Before paying any
dividend or making any distribution of profits, the directors may set apart out
of any of the funds of the corporation available for dividends a reserve or
reserves for any proper purpose and may alter or abolish any such reserve or
reserves.
CHECKS FOR MONEY
22. All checks, drafts or orders for the payment of money shall be
signed by the treasurer or by such other officer or officers as the board of
directors may from time to time designate. No check shall be signed in blank.
BOOKS AND RECORDS
23. The books, accounts and records of the corporation, except as
otherwise acquired by the laws of the State of Delaware, may be kept within or
without the State of Delaware, at such place or places as may from time to time
be designated by the by-laws or by resolution of the directors.
NOTICES
24. Notice required to be given under the provisions of these by-laws to
any director, officer or stockholder shall not be construed to mean personal
notice, but may be given in writing by depositing the same in a post office or
letter-box, in a postpaid sealed wrapper, addressed to such stockholder, officer
or director at such address as appears on the books of the corporation, and such
notice shall be deemed to be given at the time when the same shall
<PAGE> 14
be thus mailed. Any stockholder, officer or director may waive, in writing, any
notice required to be given under these by-laws, whether before or after the
time stated therein.
AMENDMENTS OF BY-LAWS
25, These by-laws may be amended, altered, repealed or added to at any
regular meeting of the stockholders or board of directors or at any special
meeting called for that purpose, by affirmative vote of a majority of the stock
issued and outstanding and entitled to vote or of a majority of the whole
authorized number of directors, as the case may be.
<PAGE> 1
<TABLE>
<S> <C>
EXHIBIT 4.2
[SAMPLE]
EP & T
Environmental Products & Technologies Corporation
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
NUMBER SHARES
EP 0362 ***5000***
EP0000362 COMMON STOCK
-----------------
THIS CERTIFIES that MARVIN MEARS CUSIP 29406K 10 4
43 E. AVENIDA DE LOS ARBOLES ------------------
THOUSAND OAKS, CA 93360 REVERSE FOR CERTAIN DEFINITIONS
0000010015
is the owner of **FIVE THOUSAND**
FULLY PAID AND NON-ASSESSABLE SHARES OF COMMON STOCK PAR VALUE $.01 PER SHARE OF
ENVIRONMENTAL PRODUCTS & TECHNOLOGIES CORPORATION
(hereinafter referred to as the Corporation), transferable on the books of the Corporation in person
or by duly authorized attorney upon surrender of this Certificate properly endorsed. This Certificate,
and the shares represented hereby, are issued under and shall be subject to all the provisions of the
Certificate of Incorporation of the Corporation and the amendments thereto, copies of which are on file
with the Transfer Agent, to all of which the holder, by acceptance hereof, assents. This Certificate
is not valid unless countersigned by the Transfer Agent and registered by the Registrar. WITNESS the
facsimile seal of the Corporation and the facsimile signatures of its duly authorized officers.
Dated: OCTOBER 30, 1997 [ENVIRONMENTAL PRODUCTS &
07558000169 EG TECHNOLOGIES CORPORATION
CORPORATE
SEAL
Morris L. Lerner 1983 Marvin Mears
SECRETARY DELAWARE] PRESIDENT
COUNTERSIGNED AND REGISTERED
AMERICAN STOCK TRANSFER & TRUST COMPANY
(NEW YORK CITY) TRANSFER AGENT AND REGISTRAR
BY [SIG]
------------------------------
AUTHORIZED SIGNATURE
</TABLE>
<PAGE> 1
EXHIBIT 10.5
STRATEGIC PLANNING CONSULTANTS, INC.
January 22, 1998
Mr. Marvin Mears
Environmental Products & Technologies Corporation
2219 E. Thousand Oaks Blvd.
Suite 337
Thousand Oaks, CA 91362
CONSULTING AGREEMENT
Dear Mr. Mears:
Strategic Planning Consultants, Inc. (hereafter "SPC") is a resource for a
number of interdisciplinary financial and business skills. We provide a unique
cross section of talented associates to meet the challenges of dealing with the
financing community and to assist in the expansion of new companies into the
main stream of the institutional and international finance markets. It is our
job to help define your company in terms of its securities and its funding
opportunities.
The following are terms and conditions of the consulting relationship between
SPC and Environmental Products & Technologies Corporation:
GENERAL
It is hereby understood that Environmental Products & Technologies Corporation
(hereafter "EPTC") is desirous of obtaining general business consulting
services from SPC.
SCOPE OF ASSIGNMENT
Based on our understanding of your business plan and the conversations with
EPTC, we propose the following objectives for a working relationship with EPTC.
o Structure the appropriate share ownership of Management.
o Organize the capital structure of the company to meet future needs.
o Coordinate and arrange for the eventual trading in the company's
shares on the Small Cap Market.
o Assist in the documentation process by working with the accountants,
and the attorneys.
o Working with the public relations and marketing people to complete
information materials for the investing public.
o Work with the company to facilitate all of its funding needs.
o Coordinate all investment banking and financial planning activities of
EPTC.
o Work closely with the investment community and the public relations
effort to help develop an active market for the company's stock.
o Continue to take an active role as needed in the strategic planning
activities of the company.
Page 1 of 4
Investment Banking Agreement EPTC
January 22, 1998
<PAGE> 2
STRATEGIC PLANNING CONSULTANTS, INC.
We recommend that the company develop operating models to accommodate variables
in accounting for the operations of the company as may be required by special
S.E.C. regulations. The need for additional capital must be addressed to
accommodate future funding requirements. As part of this plan, we will assist
in organizing the capital structure of the company to better reflect the future
of the company and the market for its shares. This plan will provide for an
active trading market for the company's shares. We will also include creating
the best combination of securities to provide for future funding for the
company and at the same time give management the appropriate ownership and
control position. Additionally, we will suggest a plan for providing liquidity
for investors and management alike.
SPC NOT A REGISTERED BROKER/DEALER.
Strategic Planning Consultants, Inc. is not registered broker dealer. SPC is
not licensed to sell securities, and we do not have any in-house pool of funds
to invest in the companies with which we consult. We will work with you to
achieve your funding goals and assist in providing you with the strategic plan
to accomplish the funding required as part of this project. SPC agrees to work
on a best efforts basis on your behalf.
INDEMNIFICATION
SPC will be relying on both confidential and general information provided by
EPTC. SPC will be disseminating this information to others to assist in
completing the transaction. EPTC will specifically indemnify SPC and its
principals against any actions that may arise as a result of SPC efforts on
behalf of EPTC, including but not limited to attorneys' fees and monetary
damages (see SCHEDULE A attached). EPTC agrees to furnish to SPC in a timely
manner all documentation that may have a material import or significance to the
transaction contemplated herein.
TERM OF THE AGREEMENT
This agreement shall be binding on and inure to the benefit of the heirs,
executors, administrators, legal representatives, derivative companies,
subsidiaries successors and assigns of the respective parties hereto. The term
of this agreement shall be for 360 days, unless extended in writing by the
parties hereto.
RELATIONSHIP OF THE PARTIES
SPC is acting as an independent contractor and no part of this agreement shall
be deemed to cause an employer employees relationship between the parties or
their respective officers, employees or directors.
FEES AND EXPENSES.
SPC works on a combination of fees including cash retainers, reimbursement of
pre-approved expenses, and equity in the company. The fees for this project are
as follows:
1. Upon the signing of this Agreement, SPC or its assigns will be
entitled to purchase warrants which are exercisable into 150,000 shares
of common stock of EPTC at $4.00 per share for a period of three years
from the date of issue. The cost of the warrants will be $150. The
Page 2 of 4
Investment Banking Agreement, EPTC
January 22, 1998
<PAGE> 3
STRATEGIC PLANNING CONSULTANTS, INC.
common stock that underlies said warrants will have demand registration
rights anytime after 24 months of the signing of this agreement and
"piggyback" registration rights on any registration completed by EPTC. SPC
will have the right to assign any or all of these warrants and EPTC agrees
to issue said warrants directly to those entities at SPC's direction.
2. SPC will receive a monthly fee of $3,000 per month payable on the 1st
of each month, staring January 1, 1998 for a period of 24 months.
3. Expense reimbursement will be on a pre-approved basis only.
Pre-approved expenses include travel, certain outside services such as
printing, overnight mail, and other business expenses not considered to be
in the normal course of our work. EPTC will provide SPC with EPTC's FEDEX
or UPS account number to cover the cost of overnight shipments.
LITIGATION.
This agreement and the rights and obligations of the parties under this
agreement shall be governed by, and construed and interpreted in accordance
with the laws of the State of California. In the event of a dispute arising
between the parties regarding any of the terms of this agreement, the matter
whether decided by arbitration in the County of Los Angeles, California.
JURISDICTION
This agreement shall be deemed to have been entered into in the County of Los
Angeles in the State of California, and all provisions hereof shall be
construed in accordance with the laws of said state.
PARTITION OF AGREEMENT
If any part of this agreement is found to be unenforceable or invalid it shall
no way affect the remainder of this agreement which shall remain in full force
and effect.
AGREED AND ACCEPTED: AGREED AND ACCEPTED:
EPTC SPC
/s/ Marvin Mears 1/20/98 /s/ Jonathan Fink 1-22-98
- ------------------- --------- -------------------- ---------
Mr. Marvin Mears Date Jonathan Fink Date
President President
Page 3 of 4
Investment Banking Agreement, EPTC
January 22, 1998
<PAGE> 4
STRATEGIC PLANNING CONSULTANTS, INC.
SCHEDULE "A"
As a supplement to the CONSULTING AGREEMENT ("Agreement") to which this is
incorporated as Schedule A, Environmental Products & Technologies Corporation
(hereafter "EPTC") and Strategic Planning Consultants, Inc. (hereafter "SPC")
agree to the following:
1. EPTC shall indemnify and hold harmless SPC and each of its officers,
directors, employees, agents, affiliates and assigns (collectively
"Indemnified Party") against any losses, claims, damages or liabilities,
joint or several, or actions in respect thereto (which shall, for the
purposes of this agreement, including without limitations all reasonable
costs of defense and investigation and all reasonable attorneys' fees) to
which any Indemnified Party is or may be subjected, insofar as such losses,
claims, damages or liabilities (or actions in respect thereto) arise out of
or are based directly or indirectly on any act or omission by or on behalf
of EPTC in furtherance of or in connection with any act or event
contemplated by the Agreement, and the preparation, filing and
dissemination of all documents in connection therewith, and including the
performance by SPC of the acts required to be performed pursuant to the
Agreement, but excluding any such claims to the extent they arise out of or
are based directly or indirectly on the intentional wrong doing or
negligence of any Indemnified Party.
2. EPTC agrees that the indemnification and reimbursement provisions set
forth above shall apply whether or not any Indemnified Party is a formal
party to any suit, claim or other proceeding and that the Indemnified
Parties, and each of them, are entitled to retain counsel in connection
with any of the matters to which said provisions apply. Such counsel shall
be selected by the Indemnified Party, and funds to cover legal expenses
and any damages shall be paid to the Indemnified Party within three
business days of being requested in writing to cover said legal costs and
damages.
AGREED AND ACCEPTED: AGREED AND ACCEPTED:
EPTC SPC
/s/ MARVIN MEARS 1/22/98 /s/ JONATHAN FINK 1/22/98
- ---------------------------------- -------------------------------
Mr. Marvin Mears Date Jonathan Fink Date
President President
Page 4 of 4
Investment Banking Agreement, EPTC
January 22, 1998
<PAGE> 1
EXHIBIT 10.6
This Warrant Agreement Supersedes Any And All Previous Agreements!
WARRANTS
for the
Purchase of Shares of Common Stock
of
ENVIRONMENTAL PRODUCTS & TECHNOLOGIES CORPORATION
OCTOBER 2, 1995 200,000 Warrants
FOR VALUE RECEIVED, ENVIRONMENTAL PRODUCTS & TECHNOLOGIES CORPORATION, a
Delaware corporation ("Company") hereby certifies that JONATHAN FINK and or
assigns, is entitled to purchase from the "Company" an aggregate of two hundred
thousand (200,000) Warrants, for a purchase price of sixty-six dollars &
sixty-seven cents ($66.67).
1. Exercise of Warrant. Each Warrant may be exercised for an equal
number of common shares, with the subscription form herewith duly executed. The
exercise price of each Warrant equals ten cents ($.10) for each common share.
Payment for the common shares shall be by check payable to the order of the
"Company". The common shares will be issued in the name of the Warrant holder.
This Warrant may be transferred or assigned in whole or in part by warrant
holder. The Company will issue a new warrant agreement at the instruction of
the holder for a payment of $25.00.
This Warrant may be exercised in whole or in part by the Warrant holder.
The holder will deliver this agreement along with a check and instructions to
the Company on how many shares are being exercised and where to deliver both
the shares and any replacement warrant agreement.
2. Fully Paid Stock: Taxes. The "Company" agrees and represents that the
shares of common stock delivered by each and every certificate for Warrant
shares delivered on the exercise of each Warrant shall at the time of such
delivery be validly issued and outstanding, fully paid and non-assessable.
The exercise period terminates on June 21, 1998. The number of Warrants
that are exercisable is equal to the basis of one for one for each dollar
raised for EPTC through the efforts of Strategic Planning Consultants, Inc.
and/or Howard Alweil.
3. Loss, Etc., of Warrant. Upon receipt of evidence satisfactory to the
"Company" of the loss, theft, destruction or mutilation of any Warrant, and of
indemnity reasonably satisfactory to the "Company", if loss, stolen, or
destroyed, and upon surrender and cancellation of the Warrant, if mutilated,
upon payment of Twenty Five Dollars ($25.00) the "Company" shall execute and
deliver to the holder a new Warrant of like date, tenor and denomination.
Initial [SIG] [SIG]
------ -----
page 1 of 2
<PAGE> 2
4. Warrant Holder Not Shareholder. Except as otherwise provided herein, a
Warrant does not confer upon the holder any right to vote or to consent or to
receive notice as a shareholder of the "Company", as such, in respect of any
matters whatsoever, or any other rights or liabilities as a shareholder, prior
to the exercise hereof.
5. Communications. No notice or other communication under Warrant shall be
effective unless, the same is in writing and is mailed by first class mail,
postage prepaid, addressed to:
(a) if to the "Company", at its principal executive offices;
ENVIRONMENTAL PRODUCTS & TECHNOLOGIES CORPORATION
100 Industrial Drive
New Bern, NC 28562
(b) if to the Holder, to such address as the holder has designated in
writing to the "Company".
Jonathan Fink
10329 Monte Mar Drive
Los Angeles, CA 90064
6. Registration Rights. The common shares reserved for the exercise of
these Warrants will be entitled to piggy back registration rights on any
registration. Additionally, the Warrant holder will have demand registration
rights on the common shares reserved for the exercise of these Warrants after
eighteen months of the issue date of these warrant if no prior registration has
been completed.
7. Headings. The headings of the warrant have been inserted as a matter of
convenience and shall not affect the construction hereof.
8. Applicable Law. The Warrant shall be governed by and construed in
accordance with the laws of the State of California.
9. Enforceability. If any part of this agreement is found to be
unenforceable or invalid it shall no way affect the remainder of this agreement
which shall remain in full force and effect.
IN WITNESS WHEREOF, Environmental Products & Technologies Corporation has
caused this Warrant to be signed by its President and its Secretary this 2ND
day of October, 1995.
Environmental Products & Technologies Corporation
/s/ MARVIN MEARS
-----------------------------------
Marvin Mears, President
CERTIFICATE NO. ONE
/s/ MORRIS L. LERNER
-----------------------------------
Morris Lerner, Secretary
page 2 of 2
<PAGE> 1
EXHIBIT 10.7
[LETTERHEAD OF JONATHAN FINK]
April 13, 1998
Morris Lerner
Corporate Secretary
Environmental Products & Technologies Corporation
5380 Sterling Center Drive
Westlake Village, CA 91361
Dear Mr. Lerner:
I hereby accept EPTC's offer, dated April 7, 1998, to encourage me to exercise
my warrants early. I agree to cancel 10,000 warrants in lieu of payment of the
exercise price ($20,000). My acceptance of the offer is based on our agreement
that the 190,000 shares to be issued to me will be registered as part of the
1st registration statement to be filed by EPTC.
Thank you for your attention to this matter.
/s/ JONATHAN FINK
Jonathan Fink
<PAGE> 1
EXHIBIT 10.8
This Warrant Agreement Supersedes Any And All Previous Agreements!
WARRANTS
for the
Purchase of Shares of Common Stock
of
ENVIRONMENTAL PRODUCTS & TECHNOLOGIES CORPORATION
October 2, 1995 1000,000 Warrants
FOR VALUE RECEIVED, ENVIRONMENTAL PRODUCTS & TECHNOLOGIES CORPORATION,
a Delaware corporation ("Company") hereby certifies that BRAD BILLIK and or
assigns, is entitled to purchase from the "Company" an aggregate of one hundred
thousand (100,000) Warrants, for a purchase price of thirty-three dollars &
thirty-three cents ($33.33).
1. Exercise of Warrant. Each Warrant may be exercised for an equal
number of common shares, with the subscription form herewith duly executed. The
exercise price of each Warrant equals ten cents ($.10) for each common share.
Payment for the common shares shall be by check payable to the order of the
"Company". The common shares will be issued in the name of the Warrant holder.
This Warrant may be transferred or assigned in whole or in part by
warrant holder. The Company will issue a new warrant agreement at the
instruction of the holder for a payment of $25.00.
This Warrant may be exercised in whole or in part by the Warrant
holder. The holder will deliver this agreement along with a check and
instructions to the Company on how many shares are being exercised and where to
deliver both the shares and any replacement warrant agreement.
2. Fully Paid Stock: Taxes. The "Company" agrees and represents that
the shares of common stock delivered by each and every certificate for Warrant
shares delivered on the exercise of each Warrant shall at the time of such
delivery be validly issued and outstanding, fully paid and non-assessable.
The exercise period terminates on June 21, 1998. The number of Warrants
that are exercisable is equal to the basis of one for one for each dollar
raised for EPTC through the efforts of Strategic Planning Consultants, Inc.
and/or Howard Alweil.
3. Loss, Etc., of Warrant. Upon receipt of evidence satisfactory to the
"Company" of the loss, theft, destruction or mutilation of any Warrant, and of
indemnity reasonably satisfactory to the "Company", if loss, stolen, or
destroyed, and upon surrender and cancellation of the Warrant, if mutilated,
upon payment of Twenty Five Dollars ($25.00) the "Company" shall execute and
deliver to the holder a new Warrant of like date, tenor and denomination.
page 1 of 2
Initial /s/
--------
<PAGE> 2
4. Warrant Holder Not Shareholder. Except as otherwise provided herein, a
Warrant does not confer upon the holder any right to vote or to consent or to
receive notice as a shareholder of the "Company", as such, in respect of any
matters whatsoever, or any other rights or liabilities as a shareholder, prior
to the exercise hereof.
5. Communications. No notice or other communication under Warrant shall
be effective unless, the same is in writing and is mailed by first class mail,
postage prepaid, addressed to:
(a) if to the "Company", at its principal executive offices;
ENVIRONMENTAL PRODUCTS & TECHNOLOGIES CORPORATION
100 INDUSTRIAL DRIVE
NEW BERN, NC 28562
(b) if to the Holder, to such address as the holder has designated in
writing to the "Company".
BRAD BILLIK
10394 ALMAYO AVE.
LOS ANGELES, CA 90064
6. Registration Rights. The common shares reserved for the exercise of
these Warrants will be entitled to piggy back registration rights on any
registration. Additionally, the Warrant holder will have demand registration
rights on the common shares reserved for the exercise of these Warrants after
eighteen months of the issue date of these warrant if no prior registration has
been completed.
7. Headings. The headings of the warrant have been inserted as a matter
of convenience and shall not affect the construction hereof.
8. Applicable Law. The Warrant shall be governed by and construed in
accordance with the laws of the State of California.
9. Enforceability. If any part of this agreement is found to be
unenforceable or invalid it shall no way affect the remainder of this agreement
which shall remain in full force and effect.
IN WITNESS WHEREOF, Environmental Products & Technologies Corporation has
caused this Warrant to be signed by its President and its Secretary this 2ND
day of October, 1995.
Environmental Products & Technologies Corporation
/s/ MARVIN MEARS
-------------------------------------------------
Marvin Mears, President
CERTIFICATE NO. TWO
/s/ MORRIS P. LERNER
-------------------------------------------------
Morris P. Lerner, Secretary
page 2 of 2
<PAGE> 1
EXHIBIT 10.9
BRAD BILLIK
10394 ALMAYO AVE.
LOS ANGELES, CA 90064
April 13, 1998
Morris Lerner
Corporate Secretary
Environmental Products & Technologies Corporation.
5380 Sterling Center Drive.
Westlake Village, CA 91361
Dear Mr. Lerner:
I hereby accept EPTC's offer, dated April 7, 1998 to encourage me to exercise
my warrants early. I agree to cancel 5,000 warrants in lieu of payment of the
exercise price ($10,000). My acceptance of the offer is based on our agreement
that the 95,000 shares to be issued to me will be registered as part of the 1st
registration statement to be filed by EPTC.
Thank you for your attention to this matter,
/s/ BRAD BILLIK
- -------------------------
Brad Billik
<PAGE> 1
EXHIBIT 10.10
1998 $4.00 WARRANTS
for the
Purchase of Shares of Common Stock
of
Environmental Products & Technologies Corporation
January 22, 1998 100,000 Warrants
FOR VALUE RECEIVED, Environmental Products & Technologies Corporation, a
Delaware corporation ("Company") hereby certifies that Jonathan Fink and or
assigns, is entitled to purchase from the "Company" an aggregate of one hundred
thousand (100,000) Warrants, for a purchase price of one hundred dollars
($100.00).
1. EXERCISE OF WARRANT. Each Warrant may be exercised for an equal
number of common shares, with the subscription form herewith duly executed. The
exercise price of each Warrant equals four dollars ($4.00) for each common
share. Payment for the common shares shall be by check payable to the order of
the "Company". The common shares will be issued in the name of the Warrant
holder.
This Warrant may be transferred or assigned in whole or in part by
warrant holder. The Company will issue a new warrant agreement at the
instruction of the holder for a payment of $25.00.
This Warrant may be exercised in whole or in part by the Warrant holder.
The holder will deliver this agreement along with a check and instructions to
the Company on how many shares are being exercised and where to deliver both
the shares and any replacement warrant agreement.
2. FULLY PAID STOCK TAXES. The "Company" agrees and represents that
the shares of common stock delivered by each and every certificate for Warrant
shares delivered on the exercise of each Warrant shall at the time of such
delivery be validly issued and outstanding, fully paid and non-assessable. The
exercise period terminates on January 21, 2001.
3. LOSS, ETC., OF WARRANT. Upon receipt of evidence satisfactory to
the "Company" of the loss, theft, destruction or mutilation of any Warrant, and
of indemnity reasonably satisfactory to the "Company", if loss, stolen, or
destroyed, and upon surrender and cancellation of the Warrant, if mutilated,
upon payment of Twenty Five Dollars ($25.00) the "Company" shall execute and
deliver to the holder a new Warrant of like date, tenor and denomination.
4. WARRANT HOLDER NOT SHAREHOLDER. Except as otherwise provided
herein, a Warrant does not confer upon the holder any right to vote or to
consent or to receive notice as a shareholder of the "Company", as such, in
respect of any matters whatsoever, or any other rights or liabilities as a
shareholder, prior to the exercise hereof.
page 1 of 2
<PAGE> 2
5. Communications. No notice of other communication under Warrant shall
be effective unless, the same is in writing and is mailed by first class mail,
postage prepaid, addressed to:
(a) if to the "Company", at its principal executive offices;
Environmental Products & Technologies Corporation
5380 Sterling Center Drive
Westlake Village, CA 91361
(b) if to the Holder, to such address as the holder has designated in
writing to the "Company".
Jonathan Fink
10550 Wilshire Blvd. Apt. #105
Los Angeles, CA 90024
6. Registration Rights. The common shares reserved for the exercise of
these Warrants will be entitled to piggy back registration rights on any
registration. Additionally, the Warrant holder will have demand registration
rights on the common shares reserved for the exercise of these Warrants after
eighteen months of the issue date of these warrant if no prior registration has
been completed.
7. Headings. The headings of the warrant have been inserted as a matter
of convenience and shall not affect the construction hereof.
8. Applicable Law. The Warrant shall be governed by and construed in
accordance with the laws of the State of California.
9. Enforceability. If any part of this agreement is found to be
unenforceable or invalid it shall no way affect the remainder of this agreement
which shall remain in full force and effect.
IN WITNESS WHEREOF, Environmental Products & Technologies Corporation has
caused this Warrant to be signed by its President and its Secretary this 22nd
day of January, 1998.
Environmental Products & Technologies Corporation
/s/ MARVIN MEARS
----------------------------------------
Marvin Mears, President
/s/ MORRIS LERNER
----------------------------------------
Morris Lerner, Secretary
page 2 of 2
<PAGE> 1
EXHIBIT 10.11
1998 $4.00 WARRANTS
for the
Purchase of Shares of Common Stock
of
Environmental Products & Technologies Corporation
January 22, 1998 50,000 Warrants
FOR VALUE RECEIVED, Environmental Products & Technologies Corporation, a
Delaware corporation ("Company") hereby certifies that Brad Billik and or
assigns, is entitled to purchase from the "Company" an aggregate of fifty
thousand (50,000) Warrants, for a purchase price of one hundred dollars
($100.00).
1. Exercise of Warrant. Each Warrant may be exercised for an equal number
of common shares, with the subscription form herewith duly executed. The
exercise price of each Warrant equals four dollars ($4.00) for each common
share. Payment for the common shares shall be by check payable to the order of
the "Company". The common shares will be issued in the name of the Warrant
holder.
This Warrant may be transferred or assigned in whole or in part by warrant
holder. The Company will issue a new warrant agreement at the instruction of
the holder for a payment of $25.00.
This Warrant may be exercised in whole or in part by the Warrant holder.
The holder will deliver this agreement along with a check and instructions to
the Company on how many shares are being exercised and where to deliver both
the shares and any replacement warrant agreement.
2. Fully Paid Stock: Taxes. The "Company" agrees and represents that the
shares of common stock delivered by each and every certificate for the Warrant
shares delivered on the exercise of each Warrant shall at the time of such
delivery be validly issued and outstanding, fully paid and non-assessable. The
exercise period terminates on January 21 2001.
3. Loss, Etc., of Warrant. Upon receipt of evidence satisfactory to the
"Company" of the loss, theft, destruction or mutilation of any Warrant, and of
indemnity reasonably satisfactory to the "Company", if lost, stolen, or
destroyed, and upon surrender and cancellation of the Warrant, if mutilated,
upon payment of Twenty Five Dollars ($25.00) the "Company" shall execute and
deliver to the holder a new Warrant of like date, tenor and denomination.
4. Warrant Holder Not Shareholder. Except as otherwise provided herein, a
Warrant does not confer upon the holder any right to vote or to consent or to
receive notice as a shareholder of the "Company", as such, in respect of any
matters whatsoever, or any other rights or liabilities as a shareholder, prior
to the exercise hereof.
Initial [Illegible]
------------
page 1 of 2
<PAGE> 2
5. Communications. No notice or other communications under Warrant shall
be effective unless, the same is in writing and is mailed by first class mail,
postage prepaid, addressed to:
(a) if to the "Company", at its principal executive offices:
Environmental Products & Technologies Corporation
5380 Sterling Center Drive
Westlake Village, CA 91361
(b) if to the Holder, to such address as the holder has designated in
writing to the "Company".
Brad Billik
10394 Almayo Ave.
Los Angeles, CA 90064
6. Registration Rights. The common shares reserved for the exercise of
those Warrants will be entitled to piggy back registration rights on any
registration. Additionally, the Warrant Holder will have demand registration
rights on the common shares reserved for the exercise of these Warrants after
eighteen months of the issue date of these warrant if no prior registration has
been completed.
7. Headings. The headings of the warrant have been inserted as a matter
of convenience and shall not affect the construction hereof.
8. Applicable Law. The Warrant shall be governed by and construed in
accordance with the laws of the State of California.
9. Enforceability. If any part of this agreement is found to be
unenforceable or invalid it shall no way affect the remainder of this agreement
which shall remain in full force and effect.
IN WITNESS WHEREOF, Environmental Products & Technologies Corporation has
caused this Warrant to be signed by its President and its Secretary this 22nd
day of January, 1998.
Environmental Products & Technologies Corporation
/s/ MARVIN MEARS
--------------------------------
Marvin Mears, President
/s/ MORRIS LERNER
--------------------------------
Morris Lerner, Secretary
page 2 of 2
<PAGE> 1
EXHIBIT 10.12
AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION
STANDARD INDUSTRIAL/COMMERCIAL SINGLE-TENANT LEASE - GROSS
(Do not use this form for Multi-Tenant Property)
1. BASIC PROVISIONS ("BASIC PROVISIONS")
1.1 PARTIES: This Lease ("LEASE"), dated for reference purposes only,
December 3, 1997, is made by and between WESTLAKE INDUSTRIAL COMPLEX, a
California limited partnership ("Lessor") and ENVIRONMENTAL PRODUCTS &
TECHNOLOGIES CORPORATION, a Delaware corporation ("Lessee"), (collectively the
"PARTIES," or individually a "PARTY").
1.2 PREMISES: That certain real property, including all improvements
therein or to be provided by Lessor under the terms of this Lease, and commonly
known by the street address of 5380 Sterling Center Dr., Westlake Village,
located in the County of Los Angeles, State of California, and generally
described as (describe briefly the nature of the property) approximately 3,150
s.f. within a larger concrete tilt-up building, as outlined in red on Exhibit A
hereto ("PREMISES"). (See Paragraph 2 for further provisions.)
1.3 TERM: two (2) years and 0 months ("ORIGINAL TERM") commencing
January 1, 1998 ("COMMENCEMENT DATE") and ending December 31, 1999 ("EXPIRATION
DATE"). (See Paragraph 3 for further provisions.)
1.4 EARLY POSSESSION: See Addendum for Paragraph 49 ("Early Possession
Date").
1.5 BASE RENT: $2,520.00 per month ("BASE RENT"), payable on the lst day
of each month commencing January 1, 1998 (See Addendum for Paragraph 1.5
Cont'd.) (See Paragraph 4 for further provisions.)
[X] If this box is checked, there are provisions in this Lease for the Base Rent
to be adjusted.
1.6 BASE RENT PAID UPON EXECUTION: $2,520.00 as Base Rent for the period
January 1 through January 31, 1998.
1.7 SECURITY DEPOSIT: $2,520.00 ("SECURITY DEPOSIT"). (See Paragraph 5
for further provisions.)
1.8 PERMITTED USE: Mechanical assembly, packaging of dry pesticide
materials, warehousing & distribution of environmental products, & related
activities (See Paragraph 6 for further provisions.)
1.9 INSURING PARTY: Lessor is the "INSURING PARTY." $285.00 is the "Base
Premium." (See Paragraph 8 for further provisions.)
1.10 REAL ESTATE BROKERS: The following real estate brokers
(collectively, the "BROKERS") and brokerage relationships exist in this
transaction and are consented to by the Parties (check applicable boxes):
Group 100/Jim McDonald represents [ ] Lessor exclusively ("LESSOR'S BROKER") ;
[X] both Lessor and Lessee, and N/A
[ ] Lessee exclusively ("LESSEE'S BROKER") ; [X] both Lessee and Lessor. (See
Paragraph 15 for further provisions.)
1.11 GUARANTOR. The obligations of the Lessee under this Lease are to be
guaranteed by N/A .
1.12 ADDENDA. Attached hereto is an Addendum or Addenda consisting of
Paragraphs * through 61 and Exhibits A *1.5 Con't. and 49 all of which
constitute a part of this Lease.
2. PREMISES.
2.1 LETTING. Lessor hereby leases to Lessee, and Lessee hereby leases
from Lessor, the Premises, for the term, at the rental, and upon all of the
terms, covenants and conditions set forth in this Lease. Unless otherwise
provided herein, any statement of square footage set forth in this Lease, or
that may have been used in calculating rental, is an approximation which Lessor
and Lessee agree is reasonable and the rental based thereon is not subject to
revision whether or not the actual square footage is more or less.
2.2 CONDITION. Lessor shall deliver the Premises to Lessee clean and
free of debris on the Commencement Date and warrants to Lessee that the existing
plumbing, fire sprinkler system, lighting, air conditioning, heating, and
loading doors, if any, in the Premises, other than those constructed by Lessee,
shall be in good operating condition on the Commencement Date. If a
non-compliance with said warranty exists as of the Commencement Date, Lessor
shall, except as otherwise provided in this lease, promptly after receipt of
written notice from Lessee setting forth with specificity the nature and extent
of such non-compliance, rectify same at Lessor's expense. If Lessee does not
give Lessor written notice of a non-compliance with this warrant within thirty
(30) days after the Commencement date, correction of that non-compliance shall
be the obligation of Lessee at Lessee's sole cost and expense.
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2.3 COMPLIANCE WITH COVENANTS, RESTRICTIONS AND BUILDING CODE. Lessor
warrants to Lessee that the improvements on the Premises comply with all
applicable covenants or restrictions or record and applicable building codes.
regulations, and ordinances in effect on the Commencement Date. Said warranty
does not apply to the use to which Lessee will put the Premises or to any
Alternations or Utility Installations (as defined in Paragraph 7.3(a)) made or
to be made by Lessee. If the Premises do not comply with said warranty, Lessor
shall, except as otherwise provided in this Lease, promptly after receipt of
written notice from Lessee setting forth with specificity the nature and extent
of such non-compliance, rectify the same at Lessor's expense. If Lessee does not
give Lessor written notice of a non-compliance with this warranty within six (6)
months following the Commencement Date, correction of that non-compliance shall
be the obligation of Lessee at Lessee's sole cost and expense.
2.4 ACCEPTANCE OF PREMISES. Lessee hereby acknowledges: (a) that it has
been advised by the Brokers to satisfy itself with respect to the condition of
the Premises (including but no limited to the electrical and fire sprinkler
systems, security, environmental aspects, compliance with applicable Law, as
defined in Paragraph 6.3) and the present and future suitability of the Premises
for Lessee's intended use, (b) that Lessee has made such investigation as it
deems necessary with reference to such matters and assumes all responsibility
therefor as the same relate to Lessee's occupancy of the Premises and/or the
term of this Lease, and (c) that neither Lessor, nor any of Lessor's agents, has
made any oral or written representations or warranties with respect to the said
matters other than as set forth in this Lease.
2.5 LESSEE PRIOR OWNER/OCCUPANT. The warranties made by Lessor in this
Paragraph 2 shall be of no force or effect if immediately prior to the date set
forth in paragraph 1.1 Lessee was the owner or occupant of the Premises. In such
event, Lessee shall, at Lessee's sole cost and expense, correct any
non-compliance of the Premises with said warranties.
3. TERM.
3.1 TERM. The Commencement Date, Expiration Date and Original Term of
this Lease are as specified in Paragraph 1.3.
3.2 EARLY POSSESSION. If Lessee totally or partially occupies the
Premises prior to the Commencement Date, the obligations to pay Base Rent shall
be abated for the period of such early possession. All other terms of this
Lease, however, shall be in effect during such period. Any such early possession
shall not affect or advance the Expiration Date of the Original Term.
3.3 DELAY IN POSSESSION. If for any reason Lessor cannot deliver
possession of the Premises to Lessee as agreed herein by the Early Possession
Date, if one is specified in Paragraph 1.4, or, if no Early Possession Date is
specified, by the Commencement Date, Lessor shall not be subject to any
liability therefor, nor shall such failure affect the validity of this Lease, or
the obligations of Lessee hereunder, or extend the term hereof, but in such
case, Lessee shall not, except as otherwise provided herein, be obligated to pay
rent or perform any other obligation of Lessee under the terms of this Lease
until Lessor delivers possession of the Premises to Lessee, if possession of the
Premises is not delivered to Lessee within sixty (60) days after the
Commencement Date, Lessee may, at its option, by notice in writing to Lessor
within ten (10) days thereafter, cancel this Lease, in which event the Parties
shall be discharged from all obligations hereunder; provided, however, that if
such written notice by Lessee is not received by Lessor within said ten (10 )
day period, lessee's right to cancel this Lease shall terminate and be of no
further force or effect. Except as may be otherwise provided, and regardless of
when the term actually commences, if possession is not tendered to Lessee when
required by this Lease and Lessee does not terminate this Lease, as aforesaid,
the period free of the obligation to pay Best Rent, if any, that Lessee would
otherwise have enjoyed shall run from the date of delivery of possession and
continue for a period equal to what Lessee would otherwise have enjoyed under
the terms hereof, but minus any days of delay caused by the acts, changes or
omissions of Lessee.
4. RENT.
4.1 BASE RENT. Lessee shall cause payment of Base Rent and other rent
charges, as the same may be adjusted from time to time, to be received by Lessor
in lawful money of the United States, without offset or deduction, on or before
the day on which it is due under the terms of this Lease. Base Rent and all
other rent and charges for any period during the term hereof which is for less
than one (1) full calendar month shall be prorated based upon the actual number
of days of the calendar month involved. Payment of Base Rent and other charges
shall be made to Lessor at its address stated herein or to such other persons or
at such other addresses as Lessor may from time to time designate in writing to
Lessee.
5. SECURITY DEPOSIT. Lessee shall deposit with Lessor upon execution hereof the
Security Deposit set forth in Paragraph 1.7 as security for lessee's faithful
performance of Lessee's obligations under this Lease. If Lessee fails to pay
Base Rent or other rent or charges due hereunder, or otherwise Defaults under
this Lease (as defined in paragraph 13.1), Lessor may use, apply or retain all
or any portion of said Security Deposit for the payment of any amount due Lessor
or to reimburse or compensate Lessor for any liability, cost, expense, loss or
damage (including attorneys' fees) which Lessor may suffer or incur by reason
thereof. If Lessor uses or applies all or any portion of said Security Deposit,
Lessee shall within ten (10) days after written request therefor deposit moneys
with Lessor sufficient to restore said Security Deposit to the full; amount
required by this Lease. Any time the Base Rent increases during the term of this
Lease, Lessee shall, upon written request from Lessor, deposition additional
moneys with Lessor sufficient to maintain the same ratio between the Security
Deposit and the Base Rent as those amounts are specified in the Basic
Provisions. Lessor shall not be required to keep all or any part of the Security
Deposit separate from its general accounts. Lessor shall, at the expiration or
earlier termination of the term hereof and after Lessee has vacated the
Premises, return to Lessee (or, at Lessor's option, to the last assignee, if
any, if Lessee's interest herein), that portion of the Security Deposit not used
or applied by Lessor. Unless otherwise expressly agreed in writing by Lessor, no
part of the Security Deposit shall be considered to be held in trust, to bear
interest or other increment for its use, or to be prepayment for any moneys to
be paid by Lessee under this Lease.
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6. USE.
6.1 USE. Lessee shall use and occupy the Premises only for the purposes
set forth in Paragraph 1.8, or any other use which is comparable thereto, and
for no other purpose. Lessee shall not use or permit the use of the Premises in
a manner that creates waste or a nuisance, or that disturbs owners and/or
occupants of, or causes damage to, neighboring premises or properties. Lessor
hereby agrees to not unreasonably withhold or delay its consent to any written
request by Lessee, Lessees assignees or subtenants, and by prospective assignees
and subtenants of the Lessee, its assignees and subtenants, for a modification
of said permitted purpose for which the premises may be used or occupied, so
long as the same will not impair structural integrity of the improvements on the
Premises, the mechanical or electrical systems therein, is not significantly
more burdensome to the Premises and the improvements thereon, and is otherwise
permissible pursuant to this Paragraph 6. If Lessor elects to withhold such
consent, Lessor shall within five (5) business days give a written notification
of the same, which notice shall include an explanation of Lessor's reasonable
objections to the change in use.
6.2 HAZARDOUS SUBSTANCES.
(a) REPORTABLE USES REQUIRE CONSENT. The term "HAZARDOUS
SUBSTANCE" as used in this Lease shall mean any product, substances, chemical,
material or waste whose presence, nature, quantify and/or intensity of
existence, use, manufacture, disposal, transportation, spill, release or effect,
either by itself or in combination with other materials expected to be on the
Premises, is either (i) potentially injurious to the public health, safety or
welfare, the environment or the Premises, (ii) regulated or monitored by any
governmental authority, or (iii) a basis for liability of Lessor to any
governmental agency or third party under any applicable statute or common law
theory. Hazardous Substance shall include, but not be limited to, hydrocarbons,
petroleum, gasoline, crude oil or any products, by-products or fractions
thereof. Lessee shall not engage in any activity in, on or about the Premises
which constitutes a Reportable Use (as hereinafter defined) of Hazardous
Substances without the express prior written consent of Lessor and compliance in
a timely manner (at Lessee's sole cost and expense) with all Applicable Law (as
defined in Paragraph 6.3). "REPORTABLE USE" shall mean (i) the installation or
use of any above or below ground storage tank, (ii) the generation, possession,
storage, use, transportation, or disposal of a Hazardous Substance that requires
a permit from, or with respect to which a report, notice, registration or
business plan is required to be filed with, any governmental authority.
Reportable Use shall also include Lessee's being responsible for the presence
in, on or about the Premises of a Hazardous Substance with respect to which any
Applicable Law requires that a notice be given to persons entering or occupying
the Premises or neighboring properties. Notwithstanding the foregoing, Lessee
may, without Lessor's prior consent, but in compliance with all Applicable Law,
use any ordinary and customary materials reasonable required to be used by
Lessee in the normal course of Lessee's business permitted on the Premises, so
long as such use is not a Reportable Use and does not expose the Premises or
neighboring properties to any meaningful risk of contamination or damage or
expose Lessor to any liability therefor. In addition, Lessor may (but without
any obligation to do so) condition its consent to the use or presence of any
Hazardous Substance, activity or storage tank by Lessee upon Lessee's giving
Lessor such additional assurances as Lessor, in its reasonable discretion, deems
necessary to protect itself, the public, the Premises and the environment
against damage, contamination or injury and/or liability therefrom or therefor,
including, but not limited to, the installation (and removal on or before Lease
expiration or earlier termination) of reasonably necessary protective
modifications to the Premises (such as concrete encasements) and/or the deposit
of an additional Security Deposit under Paragraph 5 hereof.
(b) DUTY TO INFORM LESSOR. If Lessee knows, or has reasonable
cause to believe, that a Hazardous Substance, or a condition involving or
resulting from same, has come to be located in, on, under or about the Premises,
other than as previously consented to by Lessor, Lessee shall immediately give
written notice of such fact to Lessor. Lessee shall also immediately give Lessor
a copy of any statement, report, notice, registration ,application, permit,
business plan, license, claim, action or proceeding given to , or received from,
any governmental authority or private party, or persons entering or occupying
the Premises, concerning the presence, spill, release, discharge of, or exposure
to, any Hazardous Substance or contamination in, on, or about the Premises,
including but not limited to all such documents as may be involved in any
Reportable Uses involving the Premises.
(c) INDEMNIFICATION. Lessee shall indemnify, protect, defend and
hold Lessor, its agents, employees, lenders and ground lessor, if any, and the
Premises, harmless from and against any and all loss of rents and/or damages,
liabilities, judgments, costs, claims, liens, expenses, penalties, permits and
attorney's and consultant's fees arising out of or involving any Hazardous
Substance or storage tank brought onto the Premises by or for Lessee or under
Lessee's control, Lessee's obligations under this Paragraph 6 shall include, but
not be limited to , the effects of any contamination or injury to person,
property or the environment created or suffered by Lessee, and the cost of
investigation (including consultant's and attorney's fees and testing), removal,
remediation, restoration and/or abatement thereof, or of any contamination
therein involved, and shall survive the expiration or earlier termination or
this Lease. No termination, cancellation or release agreement entered into by
Lessor and Lessee shall release Lessee from its obligations under this Lease
with respect to Hazardous Substances or storage tanks, unless specifically so
agreed by Lessor in writing at the time of such agreement.
6.3 LESSEE'S COMPLIANCE WITH LAW. Except as otherwise provided in this
Lease, Lessee, shall, at Lessee's sole cost and expense, fully, diligently and
in a timely manner, comply with all APPLICABLE LAW," which term is used in this
Lease to include all laws, rules, regulations, ordinances, directives,
covenants, easements and restrictions of record, permits, the requirements of
any applicable fire insurance underwriter or rating bureau, and the
recommendations of Lessor's engineers and/or consultants, relating in any manner
to the Premises (including but not limited to matters pertaining to (i)
industrial hygiene, (ii) environmental conditions on, in, under or about the
Premises, including soil and groundwater conditions, and (iii) the use,
generation, manufacture, production, installation, maintenance, removal,
transportation, storage, spill or release of any Hazardous Substance or storage
tank), now in effect or which may hereafter come into effect, and whether or not
reflecting a change in policy from any previously existing policy. Lessee shall,
within five (5) days after receipt of Olessor's written request, provide Lessor
with copies of all documents and information, including, but not limited to,
permits, registrations, manifests, applications, reports and certificates,
evidencing Lessee's compliance with any Applicable Law specified by Lessor, and
shall immediately upon receipt, notify Lessor in writing (with copies of any
documents involved)
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of any threatened or actual claim, notice, citation, warning, complaint or
report pertaining to or involving failure by Lessee or the Premises to comply
with any Applicable Law.
6.4 INSPECTION; COMPLIANCE. Lessor and Lessor's Lender(s) (as defined in
paragraph 8.3(a)) shall have the right to enter the Premises at any time, in the
case of an emergency, and otherwise at reasonable times, for the purpose of
inspecting the condition of the Premises and for verifying compliance by Lessee
with this Lease and all Applicable Laws (as defined in Paragraph 6.3), and to
employ experts and/or consultants in connection therewith and/or to advise
Lessor with respect to Lessee's activities, including but not limited to the
installation, operation, use, monitoring, maintenance, or removal of any
Hazardous Substance or storage tank on or from the Premises. the costs and
expenses of any such inspections shall be paid by the party requesting same,
unless a Default or Breach of this Lease, violation of Applicable Law, or a
contamination, caused by materially contributed to by Lessee is found to exist
or be imminent, or unless the inspection is requested or ordered by a
governmental authority as the result of any such existing or imminent violation
or contamination. In any such case, Lessee shall upon request reimburse Lessor
or Lessor's Lender, as the case may be, for the costs and expenses of such
inspections.
7. MAINTENANCE; REPAIRS; UTILITY INSTALLATIONS; TRADE FIXTURES AND
ALTERATIONS.
7.1 LESSEE'S OBLIGATIONS.
(a) Subject to the provisions of Paragraphs 2.2 (Lessor's
warranty as to condition), 2.3 (Lessor's warranty as to compliance with
covenants, etc), 7.2 (Lessor's obligations to repair), 9 (damage and
destruction), and 14 (condemnation), Lessee shall, at Lessee's sole cost and
expense and at all times, keep the Premises and every part thereof in good
order, condition and repair, (whether or not such portion of the Premises
requiring repair, or the means of repairing the same, are reasonably or readily
accessible to Lessee, and whether or not the need for such repairs occurs as a
result of Lessee's use, any prior use, the elements or the age of such portion
of the Premises), including , without limiting the generality of the foregoing,
all equipment or facilities serving the Premises, such as plumbing, heating, air
conditioning, ventilating, electrical, lighting facilities, boilers, fired or
unfired pressure vessels, fire sprinkler and/or standpipe and hose or other
automatic fire extinguishing system, including the fire alarm and /or smoke
detection systems and equipment, fire hydrants, fixtures, walls (interior and
exterior), ceilings, floors, windows, doors, plate glass, skylights,
landscaping, driveways, parking lots, fences, retaining walls, signs, sidewalks
and parkways located in, on, about, or adjacent to the Premises, but excluding
foundations, the exterior roof and the structural aspects of the Premises.
Lessee shall not cause or permit any Hazardous Substance to be spilled or
released in, on, under or about the Premises (including through the plumbing or
sanitary sewer system) and shall promptly, at Lessee's expense, take all
investigatory and/or remedial action reasonably recommended, whether or not
formally ordered or required, for the cleanup of any contamination of, and for
the maintenance, security and/or monitoring of, the Premises, the elements
surrounding same, or neighboring properties, that was caused or materially
contributed to by Lessee, or pertaining to or involving any Hazardous Substance
and/or storage tank brought onto the Premises by or for Lessee or under its
control. Lessee, in keeping the Premises in good order, condition and repair,
shall exercise and perform good maintenance practices. Lessee's obligations
shall include restorations, replacements or renewals when necessary to keep the
Premises and all improvements thereon or a part thereof in good order, condition
and state of repair.
(b) Lessee shall, at Lessee's sole cost and expense, procure and
maintain contracts, with copies to Lessor, in customary form and substance for,
and with contractors specializing and experienced in, the inspection,
maintenance and service of the following equipment and improvements, if any,
located on the Premises: (i) heating, air conditioning and ventilation
equipment, (ii) boiler, fired or unfired pressure vessels, (iii) fire sprinkler
and/or standpipe and hose or other automatic fire extinguishing systems,
including the fire alarm and/or smoke detection, (iv) landscaping and irrigation
systems, (v) roof covering and drain maintenance and (vi) asphalt and parking
lot maintenance.
7.2 LESSOR'S OBLIGATIONS.
Upon receipt of written notice of the need for such repairs and
subject to Paragraph 13.5, Lessor shall, at Lessor's expense, keep the
foundations, exterior roof and structural aspects of the Premises in good order,
condition and repair, Lessor shall not, however, be obligated to paint the
exterior surface of the exterior walls or to maintain the windows, doors or
plate glass or the interior surface of the exterior walls. Lessor shall not, in
any event, have any obligation to make any repairs until Lessor receives written
notice of the need for such repairs. It is the intention of the Parties that the
terms of this Lease govern the respective obligations of the Parties as to
maintenance and repair of the Premises. Lessee and Lessor expressly waive the
benefit of any statute now or hereafter in effect to the extent it is
inconsistent with the terms of this Lease with respect to, or which affords
Lessee the right to make repairs at the expense of Lessor or to terminate this
Lease by reason of, any needed repairs.
7.3 UTILITY INSTALLATIONS; TRADE FIXTURES; ALTERATIONS.
(a) DEFINITIONS; CONSENT REQUIRED. The term "UTILITY
INSTALLATIONS" is used in this Lease to refer to all carpeting, window
coverings, air lines, power panels, electrical distribution, security, fire
protection systems, communication systems, lighting fixtures, heating
ventilating, and air conditioning equipment, plumbing, and fencing in, on or
about the Premises. The term "TRADE FIXTURES" shall mean Lessee's machinery and
equipment that can be removed without doing material damage to the Premises. The
term "ALTERATIONS" shall mean any modification of the improvements on the
Premises from that which are provided by Lessor under the terms of this Lease,
other than Utility Installations or Trade Fixtures, whether by addition or
deletion. "LESSEE OWNED ALTERATIONS AND/OR UTILITY INSTALLATIONS" are defined as
Alterations and/or Utility Installations made by lessee that are not yet owned
by Lessor as defined in Paragraph 7.4(a). Lessee shall not make any Alterations
or Utility Installations in, on, under or about the Premises without Lessor's
prior written consent. Lessee may, however, make non-structural Utility
Installations to the
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interior of the Premises (excluding the roof), as long as they are not visible
from the outside, do not involve puncturing, relocating or removing the roof or
any existing walls, and the cumulative cost thereof during the term of this
lease as extended does not exceed $25,000.
(b) CONSENT. Any Alterations or Utility Installations that
Lessee shall desire to make and which require the consent of the Lessor shall be
presented to Lessor in written form with proposed detailed plans. All consents
given by Lessor, whether by virtue of Paragraph 7.3(a) or by subsequent specific
consent, shall be deemed conditioned upon: (i) Lessee's acquiring all applicable
permits required by governmental authorities, (ii) the furnishing of copies of
such permits together with a copy of the plans and specifications for the
Alteration or Utility Installation to Lessor prior to commencement of the work
thereon, and (iii) the compliance by Lessee with all conditions of said permits
in a prompt and expeditious manner. Any Alterations or Utility Installations by
Lessee during the term of this Lease shall be done in a good and workmanlike
manner, with good and sufficient materials, and in compliance with all
Applicable Law. Lessee shall promptly upon completion thereof furnish Lessor
with as-built plans and specifications therefor. Lessor may (but without
obligation to do so) condition its consent to any requested Alteration or
Utility Installation that costs $10,000 or more upon Lessee's providing Lessor
with a lien and completion bond in an amount equal to one and one-half times the
estimated cost of such Alteration or Utility Installation and/or upon Lessor's
posting an additional Security Deposit with Lessor under Paragraph 36 hereof.
(c) INDEMNIFICATION. Lessee shall pay, when due, all claims for
labor or materials furnished or alleged to have been furnished to or for Lessee
at or for use on the Premises, which claims are or may be secured by any
mechanic's or materialmen's lien against the Premises or any interest therein.
Lessee shall give Lessor not less than ten (10) days' notice prior to the
commencement of any work in, on or about the Premises, and Lessor shall have the
right to post notices of non-responsibility in or on the Premises as provided by
law. If Lessee shall, in good faith, contest the validity of any such lien,
claim or demand, then Lessee shall, at its sole expense defend and protect
itself, Lessor and the Premises against the same and shall pay and satisfy any
such adverse judgment that may be rendered thereon before the enforcement
thereof against the Lessor or the Premises. If Lessor shall require, Lessee
shall furnish to Lessor a surety bond satisfactory to Lessor in an amount equal
to one and one-half times the amount of such contested lien claim or demand,
indemnifying Lessor against liability for the same, as required by law for the
holding of the Premises free from the effect of such lien or claim. In addition,
Lessor may require Lessee to pay Lessor's attorney's fees and costs in
participating in such action if Lessor shall decide it is to its best interest
to to do so.
7.4 OWNERSHIP; REMOVAL; SURRENDER; AND RESTORATION.
(a) OWNERSHIP. Subject to Lessor's right to require their
removal or become the owner thereof as hereinafter provided in this Paragraph
7.4, all Alterations and Utility Additions made to the Premises by Lessee shall
be the property of and owned by Lessee, but considered a part of the Premises.
Lessor may, at any time and at its option, elect in writing to Lessee to be the
owner of all or any specified part of the Lessee Owned Alterations and Utility
Installations. Unless otherwise instructed per subparagraph 7.4(b) hereof, all
Lessee Owned Alterations and Utility Installations shall, at the expiration or
earlier termination of this Lease, become the property of Lessor and remain upon
and be surrendered by Lessee with the Premises.
(b) REMOVAL. Unless otherwise agreed in writing, Lessor may
require that any or all Lessee Owned Alterations or Utility Installations be
removed by the expiration or earlier termination of this Lease, notwithstanding
their installation may have been consented to by Lessor. Lessor may require the
removal at any time of all or any part of any Lessee Owned Alternations or
Utility Installations made without the required consent of Lessor.
(c) SURRENDER/RESTORATION. Lessee shall surrender the Premises
by the end of the last day of the Lease term or any earlier termination date,
with all of the improvements, parts and surfaces thereof clean and free of
debris and in good operating order, condition and state of repair, ordinary wear
and tear excepted. "ORDINARY WEAR AND TEAR" shall not include any damage or
deterioration that would have been prevented by good maintenance practice or by
Lessee performing all of its obligations under this Lease. Except as otherwise
agreed or specified in writing by Lessor, the Premises, as surrendered, shall
include the Utility Installations. The obligation of Lessee shall include the
repair of any damage occasioned by the installation, maintenance or removal of
Lessee's Trade Fixtures, furnishings, equipment, and Alterations and/or Utility
Installations, as well as the removal of any storage tank installed by or for
Lessee, and the removal, replacement, or remediation of any soil, material or
ground water contamination by Lessee, all as may then be required by Applicable
Law and/or good service practice. Lessee's Trade Fixtures shall remain the
property of Lessee and shall be removed by Lessee subject to its obligation to
repair and restore the Premises per this Lease.
8. INSURANCE; INDEMNITY.
8.1 PAYMENT OF PREMIUM INCREASES.
(a) Lessee shall pay to Lessor any insurance cost increase
("INSURANCE COST INCREASE") occurring during the term of this Lease. "INSURANCE
COST INCREASE" is defined as any increase in the actual cost of the insurance
required under Paragraphs 8.2(b), 8.3(a) and 8.3(b). ("REQUIRED INSURANCE"),
over and above the Base Premium, as hereinafter defined, calculated on an annual
basis. "INSURANCE COST INCREASE" shall include, but not be limited to, increases
resulting from the nature of Lessee's occupance, any act or omission of Lessee,
requirements of the holder of a mortgage or deed of trust covering the Premiums,
increased valuation of the Premises, and/or a premium rate increase. If the
parties insert a dollar amount in Paragraph 1.9, such amount shall be considered
the "BASE PREMIUM." In lieu thereof, if the Premiers have been previously
occupied, the "BASE PREMIUM" shall be the annual premium applicable to the most
recent occupancy. If the Premises have never been occupied, the "BASE PREMIUM"
shall be the lowest annual premium reasonably obtainable for the Required
Insurance as of the
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commencement of the Original Term, assuming the most nominal use possible of the
Premises. In no event, however, shall Lessee be responsible for any portion of
the premium cost attributable to liability insurance coverage in excess of
$1,000,000 procured under Paragraph 8.2(b) (Liability Insurance Carried By
Lessor).
(b) Lessee shall pay any such Insurance Cost Increase to Lessor
within thirty (30) days after receipt by Lessee of a copy of the premium
statement or other reasonable evidence of the amount due. If the insurance
policies maintained hereunder cover other property besides the Premises, Lessor
shall also deliver to Lessee a statement of the amount of such Insurance Cost
Increase attributable only to the Premises showing in reasonable detail the
manner in which such amount was computed. Premiums for policy periods commencing
prior to, or extending beyond, the term of this Lease shall be prorated to
coincide with the corresponding Commencement or Expiration of the Lease term.
8.2 LIABILITY INSURANCE.
(a) CARRIED BY LESSEE. Lessee shall obtain and keep in force
during the term of this Lease a Commercial General Liability policy of insurance
protecting Lessee and Lessor (as an additional insured) against claims for
bodily injury, personal injury and property damage based upon, involving or
arising out of the ownership, use, occupancy or maintenance of the Premises and
all areas appurtenant thereto. Such insurance shall be on an occurrence basis
providing single limit coverage in an amount not less than $1,000,000 per
occurrence with an "Additional Insured-Managers or Lessors of Premises"
Endorsement and contain the "Amendment of the Pollution Exclusion" for damage
caused by heat, smoke or fumes from a hostile fire. The policy shall not contain
any intra-insured exclusions as between insured persons or organizations, but
shall include coverage for liability assumed under this Lease as an "insured
contract" for the performance of Lessee's indemnity obligations under this
Lease. The limits of said insurance required by this Lease or as carried by
Lessee shall not, however, limit the liability of Lessee nor relieve Lessee of
any obligation hereunder. All insurance to be carried by Lessee shall be primary
to and not contributory with any similar insurance carried by Lessor, whose
insurance shall be considered excess insurance only.
(b) CARRIED BY LESSOR. In the event Lessor is the Insuring
Party, Lessor shall also maintain liability insurance described in paragraph
8.2(a), above, in addition to, and not in lieu of, the insurance required to be
maintained by Lessee. Lessee shall not be named as an additional insured
therein.
8.3 PROPERTY INSURANCE - BUILDING IMPROVEMENTS AND RENTAL VALUE.
(a) BUILDING AND IMPROVEMENTS. The Insuring Party shall obtain
and keep in force during the term of this Lease a policy or policies in the name
of Lessor, with loss payable to Lessor and to the holders of any mortgages,
deeds of trust or ground leases on the Premises ("LENDER(S)"), insuring loss or
damage to the Premises. The amount of such insurance shall be equal to the full
replacement cost of the Premises, as the same shall exist from time to time, or
the amount required by Lenders, but in no event more than the commercially
reasonable and available insurable value thereof if, by reason of the unique
nature or age of the improvements involved, such latter amount is less than full
replacement cost. Lessee Owned Alterations and Utility Installations shall be
insured by Lessee under Paragraph 8.4. If the coverage is available and
commercially appropriate, such policy or policies shall insure against all risks
of direct physical loss or damage (except the perils of flood and/or earthquake
unless required by a Lender), including coverage for any additional costs
resulting from debris removal and reasonable amounts of coverage for the
enforcement of any ordinance or law regulating the reconstruction or replacement
of any undamaged sections of the Premises required to be demolished or removed
by reason of the enforcement of any building, zoning, safety or land use laws as
the result of a covered cause of loss, but not including plate glass insurance.
Said policy or policies shall also contain an agreed valuation provision in lieu
of any coinsurance clause, waiver of subrogation, and inflation guard protection
causing an increase in the annual property insurance coverage amount by a factor
of not less than the adjusted U.S. Department of Labor Consumer Price Index for
All Urban Consumers for the city nearest to where the Premises are located.
(b) RENTAL VALUE. Lessor shall, in addition, obtain and keep in
force during the term of this Lease a policy or policies in the name of Lessor,
with loss payable to Lessor and Lender(s), insuring the loss of the full rental
and other charges payable by Lessee to Lessor under this Lease for one (1) year
(including all real estate taxes, insurance costs, and any scheduled rental
increases). Said insurance shall provide that in the event the Lease is
terminated by reason of an insured loss, the period of indemnity for such
coverage shall be extended beyond the date of the completion of repairs or
replacement of the Premises, to provide for one full year's loss of rental
revenues from the date of any such loss. Said insurance shall contain an agreed
valuation provision in lieu of any coinsurance clause, and the amount of
coverage shall be adjusted annually to reflect the projected rental income,
property taxes, insurance premium costs and other expenses, if any, otherwise
payable by Lessee, for the next twelve (12) month period.
(c) ADJACENT PREMISES. If the Premises are part of a larger
building, or if the Premises are part of a group of buildings owned by Lessor
which are adjacent to the Premises, the Lessee shall pay for any increase in the
premiums for the property insurance of such building or buildings if said
increase is caused by Lessee's acts, omissions, use or occupancy of the
Premises.
(d) TENANT'S IMPROVEMENTS. Since Lessor is the Insuring Party,
the Lessor shall not be required to insure Lessee Owned Alterations and Utility
Installations unless the item in question has become the property of Lessor
under the terms of this Lease.
8.4 LESSEE'S PROPERTY INSURANCE. Subject to the requirements of
Paragraph 8.5, Lessee at its cost shall either by separate policy or, at
Lessor's option, by endorsement to a policy already carried, maintain insurance
coverage on all of Lessee's personal property, Lessee Owned Alterations and
Utility Installations in, on, or about the Premises similar in coverage to that
carried by the Insuring Party under Paragraph 8.3. Such insurance shall be full
replacement cost coverage with a deductible of not to exceed $1,000 per
occurrence. the proceeds from any such
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insurance shall be used by lessee for the replacement of personal property or
the restoration of Lessee Owned Alterations and Utility Installations. Lessee
shall be the Insuring Party with respect to the insurance required by this
Paragraph 8.4 and shall provide Lessor with written evidence that such insurance
is in force.
8.5 INSURANCE POLICIES. Insurance required hereunder shall be in
companies duly licensed to transact business in the state where the Premises are
located, and maintaining during the policy term a "General Policyholders Rating"
of at least B+, V, or such other rating as may be required by a Lender having a
lien on the Premises, as set forth in the most current issued of "Bests
Insurance Guide." Lessee shall not to do or permit to be done anything which
shall invalidate the insurance policies referred to in this Paragraph 8. Lessee
shall cause to be delivered to Lessor certified copies of , or certificates
evidencing the existence and amounts of, the insurance, and with the additional
insureds, required under Paragraph 8.2(a) and 8.4. No such policy shall be
cancelable to subject to modification except after thirty (30) days prior
written notice to Lessor. Lessee shall at least thirty (30) days prior to the
expiration of such policies, furnish Lessor with evidence of renewals or
"insurance binders" evidencing renewal thereof, or Lessor may order such
insurance and charge the cost thereof to Lessee, which amount shall be payable
by Lessee to Lessor upon demand.
8.6 WAIVER OF SUBROGATION. Without affecting any other rights or
remedies, Lessee and Lessor ("Waiving Party') each hereby release and relieve
the other, and waive their entire right to recover damages (whether in contract
or in tort) against the other, for loss or damage to the Waiving Party's
property arising out of or incident to the perils required to be insured against
under Paragraph 8. The effect of such releases and waivers of the right to
recover damages shall not be limited by the amount of insurance carried or
required, or by any deductibles applicable thereto.
8.7 INDEMNITY. Except for Lessor's negligence and/or breach of express
warranties, Lessee shall indemnify, protect, defend and hold harmless the
Premises, Lessor and its agents, Lessor's master or ground lessor, partners and
Lenders, from and against any and all claims, loss of rents and/or damages,
costs, liens, judgments, penalties, permits, attorney's and consultant's fees,
expenses and/or liabilities arising out of, involving, or in dealing with, the
occupancy of the Premises by Lessee, the conduct of Lessee's business, any act,
omission or neglect of Lessee, its agents, contractors, employees or invitees,
and out of any Default or Breach by Lessee in the performance in a timely manner
of any obligation on Lessee's part to be performed under this Lease. The
foregoing shall include, but not be limited to, the defense or pursuit of any
claim or any action or proceeding involved therein, and whether or not (in the
case of claims made against Lessor) litigated and/or reduced to judgment, and
whether well founded or not. In case any action or proceeding be brought against
Lessor by reason of any of the foregoing matters, Lessee upon notice from Lessor
shall defend the same at Lessee's expense by counsel reasonably satisfactory to
Lessor and Lessor shall cooperate with Lessee in such defense. Lessor need not
have first paid any such claim in order to be so indemnified.
8.8 EXEMPTION OF LESSOR FROM LIABILITY. Lessor shall not be liable for
injury or damage to the person or goods, wares, merchandise or other property of
Lessee, Lessee's employees, contractors, invitees, customers, or any other
person in or about the Premises, whether such damage or injury is caused by or
results from fire, steam, electricity, gas, water or rain, or from the breakage,
leakage, obstruction or other defects of pipes, fire sprinklers, wires,
appliances, plumbing, air conditioning or lighting fixtures, or from any other
cause, whether the said injury or damage results from conditions arising upon
the Premises or upon other portions of the building of which the Premises are a
part, or from other sources or places, and regardless of whether the cause of
such damage or injury or the means of repairing the same is accessible or not.
Lessor shall not be liable for any damages arising from any act or neglect of
any other tenant of Lessor. Notwithstanding Lessor's negligence or breach of
this Lease, Lessor shall under no circumstances be liable for injury to Lessee's
business or for any loss of income or profit therefrom.
9. DAMAGE OR DESTRUCTION.
9.1 DEFINITIONS.
(a) "PREMISES PARTIAL DAMAGE" shall mean damage or destruction
to the improvements on the Premises, other than Lessee Owned Alterations and
Utility Installations, the repair cost of which damage or destruction is less
than 50% of the then Replacement cost of the Premises immediately prior to such
damage or destruction, excluding from such calculation the value of the land and
Lessee Owned Alterations and Utility Installations.
(b) "PREMISES TOTAL DESTRUCTION" shall mean damage or
destruction to the Premises, other than Lessee Owned Alterations and Utility
Installations, the repair cost of which damage or destruction is 50% or more of
the then Replacement Cost of the Premises immediately prior to such damage or
destruction, excluding from such calculation the value of the land and Lessee
Owned Alterations and Utility Installations.
(c) "INSURED LOSS" shall mean damage or destruction to
improvements on the Premises, other than Lessee Owned Alterations and Utility
Installations, which was caused by an event required to be covered by the
insurance described in Paragraph 8.3(a), irrespective of any deductible amounts
or coverage limits involved.
(d) "REPLACEMENT COST" shall mean the cost to repair or rebuild
the improvements owned by Lessor at the time of the occurrence to their
condition existing immediately prior thereto, including demolition, debris
removal and upgrading required by the operation of applicable building codes,
ordinances or laws, and without deduction for depreciation.
(e) "HAZARDOUS SUBSTANCE CONDITION" shall mean the occurrence or
discovery of a condition involving the presence of, or a contamination by, a
Hazardous Substance as defined in Paragraph 6.2(a), in, on, or under the
Premises.
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9.2 PARTIAL DAMAGE - INSURED LOSS. If a Premises Partial Damage that is
an insured loss occurs, then Lessor shall, at Lessor's expense, repair such
damage (but not Lessee's Trade Fixtures of Lessee Owned Alterations and Utility
Installations) as soon as reasonably possible and this Lease shall continue in
full force and effect. Notwithstanding the foregoing, if the required insurance
was not in force or the insurance proceeds are not sufficient to effect such
repair, the Insuring Party shall promptly contribute the shortage in proceeds as
and when required to complete said repairs. In the event, however, the shortage
in proceeds was due to the fact that, by reason of the unique nature of the
improvements, full replacement cost insurance coverage was not commercially
reasonable and available, Lessor shall have no obligation to pay for the
shortage in insurance proceeds or to fully restore the unique aspects of the
Premises unless Lessee provides Lessor with the funds to cover same, or adequate
assurance thereof, within ten (10) days following receipt of written notice of
such shortage and request therefor. If Lessor receives said funds or adequate
assurance thereof within said ten (10) day period, the party responsible for
making the repairs shall complete them as soon as reasonably possible and this
Lease shall remain in full force and effect. If Lessor does not receive such
funds or assurance within said period, Lessor may nevertheless elect by written
notice to Lessee within ten (10) days thereafter to make such restoration and
repair as is commercially reasonable with Lessor paying any shortage in
proceeds, in which case this Lease shall remain in full force and effect. If in
such case Lessor does not so elect, then this Lease shall terminate sixty (60)
days following the occurrence of the damage or destruction. Unless otherwise
agreed, Lessee shall in no event have any right to reimbursement from Lessor for
any funds contributed by Lessee to repair any such damage or destruction .
Premises Partial Damage due to flood or earthquake shall be subject to Paragraph
9.3 rather than Paragraph 9.2, notwithstanding that there may be some insurance
coverage, but the net proceeds of any such insurance shall be made available for
the repairs if made by either Party.
9.3 PARTIAL DAMAGE - UNINSURED LOSS. If a Premises partial Damage that
is not an Insured Loss occurs, unless caused by a negligent or willful act of
Lessee (in which event Lessee shall make the repairs at Lessee's expense and
this Lease shall continue in full force and effect, but subject to Lessor's
rights under Paragraph 13), Lessor may at Lessor's option, either: (i) repair
such damage as soon as reasonably possible at Lessor's expense, in which event
this Lease shall continue in full force and effect, or (ii) give written notice
to Lessee within thirty (30) days after receipt by Lessor of knowledge of the
occurrence of such damage of Lessor's desire to terminate this Lease as of the
date sixty (60) days following the giving of such notice. In the event Lessor
elects to give such notice of Lessor's intention to terminate this Lease, Lessee
shall have the right within ten (10) days after receipt of such notice to give
written notice to Lessor with the required funds or satisfactory assurance
thereof within thirty (30) days following Lessee's said commitment. In such
event this Lease shall continue in full force and effect, and Lessor shall
proceed to make such repairs as soon as reasonably possible and the required
funds are available. If Lessee does not give such notice and provide the funds
or assurance thereof within the times specified above, this Lease shall
terminate as of the date specified in Lessor's notice of termination.
9.4 TOTAL DESTRUCTION. Notwithstanding any other provision hereof, if a
Premises Total Destruction (including any destruction required by any authorized
public authority), this Lease shall terminate sixty (60) days following the date
of such Premises total Destruction, whether or not the damage or destruction is
an insured Loss or was caused by a negligent or willful act of Lessee. In the
event, however, that the damage or destruction was caused by Lessee, Lessor
shall have the right to recover Lessor's damages from Lessee except as released
and waived in Paragraph 8.6.
9.5 DAMAGE NEAR END OF TERM. If at any time during the last six (96)
months of the term of this Lease there is damage for which the cost to repair
exceeds one (1) month's Base Rent, whether or not an insured Loss, Lessor may,
at Lessor's option, terminate this Lease effective sixty (60) days following the
date of occurrence of such damage by giving written notice to Lessee of Lessor's
election to to do so within thirty (30) days after the date of occurrence of
such damage. Provided, however, if Lessee at that time has an exercisable option
to extend this Lease or to purchase the Premises, then Lessee may preserve this
Lease by, within twenty (20 days following the occurrence of the damage, or
before the expiration of the time provided in such option for its exercise,
whichever is earlier ("EXERCISE PERIOD"), (i) exercising such option and (ii)
providing Lessor with any shortage in insurance proceeds (or adequate assurance
thereof) needed to make the repairs. If Lessee duly exercises such option during
said Exercise Period and provides Lessor with funds (or adequate assurance
thereof) to cover any shortage in insurance proceeds, Lessor shall, at Lessor's
expense repair such damage as soon as reasonably possible and this Lease shall
continue in full force and effect. If Lessee fails to exercise such option and
provide such funds or assurance during said Exercise Period, then Lessor may at
Lessor's option terminate this Lease as of the expiration of said sixty (60) day
period following the occurrence of such damage by giving written notice to
Lessee of Lessor's election to to do so within ten (10) days after the
expiration of the Exercise Period, notwithstanding any term or provision in the
grant of option to the contrary.
9.6 ABATEMENT OF RENT; LESSEE'S REMEDIES.
(a) In the event of damage described in Paragraph 9.2 (Partial
Damage - Insured), whether or not Lessor or Lessee repairs or restores the
Premises, the Base Rent, Real Property Taxes, insurance premiums, and other
charges, if any, payable by Lessee hereunder for the period during which such
damage, its repair or the restoration continues (not to exceed the period for
which rental value insurance is required under Paragraph 8.3(b)), shall be
abated in proportion to the degree to which Lessee's use of the Premises is
impaired. Except for abatement of Base Rent, Real Property Taxes, insurance
premiums, and other charges, if any ,as aforesaid, all other obligations of
Lessee hereunder shall be performed by Lessee, and Lessee shall have no claim
against Lessor for any damage suffered by reason of any such repair or
restoration.
(b) If Lessor shall be obligated to repair or restore the
Premises under the provisions of this Paragraph 9 and shall not commence, in a
substantial and meaningful way, the repair or restoration of the Premises within
ninety (90) days after such obligation shall accrue, Lessee may, at any time
prior to the commencement of such repair or restoration, give written notice to
Lessor and to any Lenders of which Lessee has actual notice of Lessee's election
to terminate this Lease on a date not less than sixty (60) days following the
giving of such notice. If Lessee gives such notice to Lessor and such Lenders
and such repair or restoration is not commenced within thirty (30) days after
receipt
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of such notice, this Lease shall terminate as of the date specified in said
notice. If Lessor or a Lender commences the repair or restoration of the
Premises within thirty (30) days after receipt of such notice, this Lease shall
continue in full force and effect. "COMMENCE" as used in this Paragraph shall
mean either the unconditional authorization of the preparation of the required
plans, or the beginning of the actual work on the Premises, whichever first
occurs.
9.7 HAZARDOUS SUBSTANCE CONDITIONS. If a Hazardous Substance Condition
occurs, unless Lessee is legally responsible therefor (in which case Lessee
shall make the investigation and remediation thereof required by Applicable Law
and this Lease shall continue in full force and effect, but subject to Lessor's
rights under Paragraph 13), Lessor may at Lessor's option either (i) investigate
and remediate such Hazardous Substance Condition, if required, as soon as
reasonably possible at Lessor's expense, in which event this Lease shall
continue in full force and effect, or (ii) if the estimated cost to investigate
and remediate such condition exceeds twelve (12) times the then monthly Base
Rent or $100,000, whichever is greater, give written notice to Lessee within
thirty (30) days after receipt by Lessor of knowledge of the occurrence of such
Hazardous Substance Condition of Lessor's desire to terminate this Lease as of
the date sixty (60) days following the giving of such notice. In the event
Lessor elects to give such notice of Lessor's intention to terminate this Lease,
Lessee shall have the right within ten (10) days after the receipt of such
notice to give written notice to Lessor of Lessee's commitment to pay for the
investigation and remediation of such Hazardous Substance Condition totally at
Lessee's expense and without reimbursement from Lessor except to the extent of
an amount equal to twelve (12) times the then monthly Base Rent or $100,000,
whichever is greater. Lessee shall provide Lessor with the funds required of
Lessee or satisfactory assurance thereof within thirty (30) days following
Lessee's said commitment. In such event this Lease shall continue in full force
and effect, and Lessor shall proceed to make such investigation and remediation
as soon as reasonably possible and the required funds are available. If Lessee
does not give such notice and provide the required funds or assurance thereof
within the times specified above, this Lease shall terminate as of the date
specified in Lessor's notice of termination. If a Hazardous Substance condition
occurs for which Lessee is not legally responsible, there shall be abatement of
Lessee's obligations under this Lease to the same extent as provided in
Paragraph 9.6(a) for a period of not to exceed twelve (12) months.
9.8 TERMINATION -- ADVANCE PAYMENTS. Upon termination of this Lease
pursuant to this Paragraph 9, an equitable adjustment shall be made concerning
advance Base Rent and any other advance payments made by Lessee to Lessor.
Lessor shall, in addition, return to Lessee so much of Lessee's Security Deposit
as has not been, or is not then required to be, used by Lessor under the terms
of this Lease.
9.9. WAIVE STATUTES. Lessor and Lessee agree that the terms of this
Lease shall govern the effect of any damage to or destruction of the Premises
with respect to the termination of this Lease and hereby waive the provisions of
any present or future statute to the extent inconsistent herewith.
10. REAL PROPERTY TAXES.
10.1 (a) PAYMENT OF TAXES. Lessor shall pay the Real Property Taxes, as
defined in Paragraph 10.2, applicable to the Premises; provided, however, that
Lessee shall pay, in addition to rent, the amount, if any, by which Real
Property Taxes applicable to the Premises increase over the fiscal tax year
during which the Commencement Date occurs ("TAX INCREASE"). Subject to Paragraph
10.1(b), payment of any such Tax Increase shall be made by Lessee within thirty
(30) days after receipt of Lessor's written statement setting forth the amount
due and the computation thereof. Lessee shall promptly furnish Lessor with
satisfactory evidence that such taxes have been paid. If any such taxes to be
paid by Lessee shall cover any period of time prior to or after the expiration
or earlier termination of the term hereof, Lessee's share of such taxes shall be
equitably prorated to cover only the period of time within the tax fiscal year
this Lease is in effect, and Lessor shall reimburse Lessee for any overpayment
after such proration.
(b) ADVANCE PAYMENT. In order to insure payment when due and
before delinquency of any of all Real Property Taxes, Lessor reserves the right,
at Lessor's option, to estimate the current Real Property Taxes applicable to
the Premises, and to require such current year's Tax Increase to be paid in
advance to Lessor by Lessee, either: (i) in a lump sum amount equal to the
amount due, at least twenty (20) days prior to the applicable delinquency date,
or (ii) monthly in advance with the payment of the Base Rent. If Lessor elects
to require payment monthly in advance, the monthly payment shall be that equal
monthly amount which, over the number of months remaining before the month in
which the applicable tax installment would become delinquent (and without
interest thereon), would provide a fund large enough to fully discharge before
delinquency the estimated Tax Increase to be paid. When the actual amount of the
applicable Tax Increase is known, the amount of such equal monthly advance
payment shall be adjusted as required to provide the fund needed to pay the
applicable Tax Increase before delinquency. If the amounts paid to Lessor by
Lessee under the provisions of this Paragraph are insufficient to discharge the
obligations of Lessee to pay such Tax Increase as the same becomes due, Lessee
shall pay to Lessor, upon Lessor's demand, such additional sums as are necessary
to pay such obligation. All moneys paid to Lessor under this Paragraph may be
intermingled with other moneys of Lessor and shall not bear interest. In the
event of a Breach by Lessee in the performance of the obligations of Lessee
under this Lease, then any balance of funds paid to Lessor under the provisions
of this Paragraph may, subject to proration as provided in Paragraph 10.1(a), at
the option of lessor, be treated as an additional Security Deposit under
Paragraph 5.
(c) ADDITIONAL IMPROVEMENTS. Notwithstanding Paragraph 10.1(a)
hereof; Lessee shall pay to Lessor upon demand therefor the entirety of any
increase in Property Taxes assessed by reason of Alterations or Utility
Installations placed upon the Premises by Lessee or at Lessee's request.
10.2 DEFINITION OF "REAL PROPERTY TAXES." As used herein, the term "Real
Property Taxes" shall include any form of real estate tax or assessment,
general, special, ordinary or extraordinary, and any license fee, commercial
rental tax, improvement bond or bonds, levy or tax (other than inheritance,
personal income or estate taxes) imposed upon the Premises by any authority
having the direct or indirect power to tax, including any city, state or federal
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government, or any school, agricultural, sanitary, fire, street, drainage or
other improvement district thereof, levied against any legal or equitable
interest of Lessor in the Premises or in the real property of which the Premises
are a part, Lessor's right to rent or other income therefrom, and/or Lessor's
business of leasing the Premises. The term "Real Property Taxes" shall also
include any tax, fee, levy, assessment or charge, or any increase therein,
imposed by reason of events occurring, or changes in applicable law taking
effect, during the term of this Lease, including but not limited to a change in
the ownership of the Premises or in the Improvements thereon, the execution of
this Lease, or any modification, amendment or transfer thereof, and whether or
not contemplated by the Parties.
10.3 JOINT ASSESSMENT. If the Premises are not separately assessed,
Lessee's liability shall be an equitable proportion of the Real Property Taxes
for all of the land and improvements included within the tax parcel assessed,
such proportion to be determined by Lessor from the respective valuations
assigned in the assessor's work sheets or such other information as may be
reasonably available. Lessor's reasonable determination thereof, in good faith,
shall be conclusive.
10.4 PERSONAL PROPERTY TAXES. Lessee shall pay prior to delinquency all
taxes assessed against and levied upon Lessee Owned Alterations, Utility
Installations, Trade Fixtures, furnishings, equipment and all personal property
of Lessee contained in the Premises or elsewhere. When possible, Lessee shall
cause its Trade Fixtures, furnishings, equipment and all personal property to be
assessed and billed separately from the real property of Lessor. If any of
Lessee's said personal property shall be assessed with Lessor's real property,
Lessee shall pay Lessor the taxes attributable to Lessee within ten (10) days
after receipt of a written statement setting forth the taxes applicable to
Lessee's property or, at Lessor's option, as provided in Paragraph 10.1(b).
11. UTILITIES. Lessee shall pay for all water, gas, heat, light, power,
telephone, trash disposal and other utilities and services supplied to the
Premises together with any taxes thereon. If any such services are not
separately metered to Lessee, Lessee shall pay a reasonable proportion, to be
determined by Lessor, of all charges jointly metered with other premises.
12. ASSIGNMENT AND SUBLETTING.
12.1 LESSOR'S CONSENT REQUIRED.
(a) Lessee shall not voluntarily or by operation of law
assign, transfer, mortgage or otherwise transfer or encumber (collectively
"ASSIGNMENT") or sublet all or any part of Lessee's interest in this Lease or in
the Premiers without Lessor's prior written consent given under and subject to
the terms of Paragraph 36.
(b) A change in the control of Lessee shall constitute an
assignment requiring Lessor's consent. The transfer, on a cumulative basis, of
twenty-five percent (25%) or more of the voting control of Lessee shall
constitute a change in control for this purpose.
(c) The involvement of Lessee or its assets in any
transaction, or series of transactions (by way of merger, sale, acquisition,
financing, refinancing, transfer, leveraged buy-out or otherwise), whether or
not a formal assignment or hypothecation of this Lease or Lessee's assets
occurs, which results or will result in a reduction of the Net Worth of Lessee,
as hereinafter defined, by an amount equal to or greater than twenty-five
percent (25%) of such Net Worth of Lessee as it was represented to Lessor at the
time of the execution of this Lease or at the time of the most recent assignment
to which Lessor has consented, or as it exists immediately prior to said
transaction or transactions constituting such reduction, at whichever time said
Net Worth of Lessee was or is greater, shall be considered an assignment of this
Lease by Lessee to which Lessor may reasonably withhold its consent. "NET WORTH
OF LESSEE" for purposes of this Lease shall be the net worth of Lessee
(excluding any guarantors) established under generally accepted accounting
principles consistently applied.
(d) An assignment or subletting of Lessee's interest in this
Lease without Lessor's specific prior written consent shall, at Lessor's option,
be a Default curable after notice per Paragraph 13.1(c), or a noncurable Breach
without the necessity of any notice and grace period. If Lessor elects to treat
such unconsented to assignment or subletting as a noncurable Breach, Lessor
shall have the right to either: (i) terminate this Lease, or (ii) upon thirty
(30) days written notice ("Lessor's Notice"), increase the monthly Base Rent to
fair market value or one hundred ten percent (110%) of the Base Rent then in
effect, whichever is greater. Pending determination of the new fair market
rental value, if disputed by Lessee, Lessee shall pay the amount set forth in
Lessor's Notice, with any overpayment credited against the next installment(s)
of Base Rent coming due, and any underpayment for the period retroactively to
the effective date of the adjustment being due and payable immediately upon the
determination thereof. Further, in the event of such Breach and market value
adjustment, (i) the purchase price of any option to purchase the Premises held
by Lessee shall be subject to similar adjustment to the then fair market value
(without the Lease being considered an encumbrance or any deduction for
depreciation or obsolescence, and considering the Premises at its highest and
best use and in good condition), or one hundred ten percent (110%) of the price
previously in effect, whichever si greater, (ii) any index-oriented rental or
price adjustment formulas contained in this Lease shall be adjusted to require
that the base index be determined with reference to the index applicable to the
time of such adjustment, and (iii) any fixed rental adjustments scheduled during
the remainder of the Lease term shall be increased in the same ratio as the new
market rental bears to the Base Rent in effect immediately prior to the market
value adjustment.
(e) Lessee's remedy for any breach of this Paragraph 12.1 by
Lessor shall be limited to compensatory damages and injunctive relief.
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12.2 TERMS AND CONDITIONS APPLICABLE TO ASSIGNMENT AND SUBLETTING.
(a) Regardless of Lessor's consent, any assignment or
subletting shall not: (i) be effective without the express written assumption by
such assignee or sublessee of the obligations of Lessee under this Lease, (ii)
release Lessee of any obligations hereunder, or (iii) after the primary
liability of Lessee for the payment of Base Rent and other sums due Lessor
hereunder or for the performance of any other obligations to be performed by
Lessee under this Lease.
(b) Lessor may accept any rent or performance of Lessee's
obligations from any person other than Lessee pending approval or disapproval of
an assignment. Neither a delay in the approval or disapproval of such assignment
nor the acceptance of any rent or performance shall constitute a waiver or
estoppel of Lessor's right to exercise its remedies for the Default or Breach by
Lessee of any of the terms , covenants or conditions of this Lease.
(c) The consent of Lessor to any assignment or subletting
shall not constitute a consent to any subsequent assignment or subletting by
Lessee or to any subsequent or successive assignment or subletting by the
sublessee. However, Lessor may consent to subsequent sublettings and assignments
of the sublease or any amendments or modifications thereto without notifying
Lessee or anyone else liable on the Lease or sublease and without obtaining
their consent, and such action shall not relieve such persons from liability
under this Lease or sublease.
(d) In the event of any Default of Breach of Lessee's
obligations under this Lease, Lessor may proceed directly against Lessee, any
Guarantors or anyone else responsible for the performance of the Lessee's
obligations under this Lease, including the sublessee, without first exhausting
Lessor's remedies against any other person or entity responsible therefor to
Lessor, or any security held by Lessor or Lessee.
(e) Each request for consent to an assignment or subletting
shall be in writing, accompanied by information relevant to Lessor's
determination as to the financial and operational responsibility and
appropriateness of the proposed assignee or sublessee, including but not limited
to the intended use and/or required modification of the Premises, if any,
together with a non-refundable deposit of $1,000 or ten percent (10%) of the
current monthly Base Rent, whichever is greater, as reasonable consideration for
Lessor's considering and processing the request for consent. Lessee agrees to
provide Lessor with such other or additional information and/or documentation as
may be reasonably requested by Lessor.
(f) Any assignee of, or sublessee under, this Lease shall, by
reason of accepting such assignment or entering into such sublease, be deemed,
for the benefit of Lessor, to have assumed and agreed to conform and comply with
each and every term, covenant, condition and obligation herein to be observed or
performed by Lessee during the term of said assignment or sublease, other than
such obligations as are contrary to or inconsistent with provisions of an
assignment or sublease to which Lessor has specifically consented in writing.
(g) The occurrence of a transaction described in Paragraph
12.1(c) shall give Lessor the right (but not the obligation) to require that the
Security Deposit be increased to an amount equal to six (6) times the then
monthly Base Rent, and Lessor may make the actual receipt by Lessor of the
amount required to establish such Security Deposit a condition to Lessor's
consent to such transaction.
(h) Lessor, as a condition to giving its consent to any
assignment or subletting, may require that the amount and adjustment structure
of the rent payable under this Lease be adjusted to what is then the market
value and/or adjustment structure for property similar to the Premises as then
constituted.
12.3 ADDITIONAL TERMS AND CONDITIONS APPLICABLE TO SUBLETTING. The
following terms and conditions shall apply to any subletting by Lessee of all or
any part of the Premises and shall be deemed included in all subleases under
this Lease whether or not expressly incorporated therein:
(a) Lessee hereby assigns and transfers to Lessor all of
Lessee's interest in all rentals and income arising from any sublease of all or
a portion of the Premises heretofore or hereafter made by Lessee, and Lessor may
collect such rent and income and apply same toward Lessee's obligations under
this Lease; provided, however, that until a Breach (as defined in Paragraph
13.1) shall occur in the performance of Lessee's obligations under this Lease,
Lessee may, except as otherwise provided in this Lease, receive, collect and
enjoy the rents accruing under such sublease. Lessor shall not, by reason of
this or any other assignment of such sublease to Lessor, nor by reason of the
collection of the rents from a sublessee, be deemed liable to the sublessee for
any failure of Lessee to perform and comply with any of Lessee's obligations to
such sublessee under such sublease. Lessee hereby irrevocably authorizes and
directs any such sublessee, upon receipt of a written notice from Lessor stating
that a Breach exists in the performance of Lessee's obligations under this
Lease, to pay to Lessor the rents and other charges due and to become due under
the sublease. Sublessee shall rely upon any such statement and request from
Lessor and shall pay such rents and other charges to Lessor without any
obligation or right to inquire as to whether such Breach exists and
notwithstanding any notice from or claim from Lessee to the contrary. Lessee
shall have no right or claim against said sublessee, or, until the Breach has
been cured, against Lessor, for any such rents and other charges so paid by said
sublessee to Lessor.
(b) In the event of a Breach by Lessee in the performance of
its obligations under this Lease, Lessor, at its option and without any
obligation to to do so, may require any sublessee to attorn to Lessor, in which
event Lessor shall undertake the obligations of the sublessor under such
sublease from the time of the exercise of said option to the expiration of such
sublease; provided, however, Lessor shall not be liable for any prepaid rents or
security deposit paid by such sublessee to such sublessor or for any other prior
Defaults or Breaches of such sublessor under such sublease.
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(c) Any matter or thing requiring the consent of the sublessor
under a sublease shall also require the consent of Lessor herein.
(d) No sublessee shall further assign or sublet all or any
part of the Premises without Lessor's prior written consent.
(e) Lessor shall deliver a copy of any notice of Default or
Breach by Lessee to the sublessee, who shall have the right to cure the Default
of Lessee within the grace period, if any, specified in such notice. The
sublessee shall have a right of reimbursement and offset from and against Lessee
for any such defaults cured by the sublessee.
13. DEFAULT; BREACH; REMEDIES.
13.1 DEFAULT; BREACH. Lessor and Lessee agree that if an attorney is
consulted by Lessor in connection with a Lessee Default or Breach (as
hereinafter defined), $350.00 is a reasonable minimum sum per such occurrence
for legal services and costs in the preparation and service of a notice of
Default, and that Lessor may include the cost of such services and costs in said
notice as rent due and payable to cure said Default. A "Default" is defined as a
failure by the Lessee to observe, comply with or perform any of the terms,
covenants, conditions or rules applicable to Lessee under this Lease. A "Breach"
is defined as the occurrence of any one or more of the following Defaults, and,
where a grace period for cure after notice is specified herein, the failure by
Lessee to cure such default prior to the expiration of the applicable grace
period, shall entitle Lessor to pursue the remedies set forth in Paragraphs 13.2
and/or 13.3:
(a) The vacating of the Premises without the intention to
reoccupy same, or the abandonment of the Premises.
(b) Except as expressly otherwise provided in this Lease, the
failure by Lessee to make any payment of Base Rent or any other monetary payment
required to be made by Lessee hereunder, whether to Lessor or to a third party,
as and when due, the failure by Lessee to provide Lessor with reasonable
evidence of insurance or surety bond required under this Lease, or the failure
of Lessee to fulfill any obligation under this Lease which endangers or
threatens life or property, where such failure continues for a period of three
(3) days following written notice thereof by or on behalf of Lessor to Lessee.
(c) Except as expressly otherwise provided in this Lease, the
failure by Lessee to provide Lessor with reasonable written evidence (in duly
executed original form, if applicable) of (i) compliance with applicable law per
Paragraph 6.3, (ii) the inspection, maintenance and service contracts required
under Paragraph 7.1(b), (iii) the rescission of an unauthorized assignment or
subletting per Paragraph 12.1(b), (iv) a Tenancy Statement per Paragraphs 16 or
37, (v) a subordination or non-subordination of this Lease per Paragraph 30,
(vi) the guaranty of the performance of Lessee's obligations under this Lease if
required under Paragraphs 1.11 and 37, (vii) the execution of any document
requested under Paragraph 42 (easements), or (viii) any other documentation or
information which Lessor may reasonably require of Lessee under the terms of
this Lease, where any such failure continues for a period of ten (10) days
following written notice by or on behalf of Lessor to Lessee.
(d) A Default by Lessee as to the terms, covenants, conditions
or provisions of this Lease, or of the rules adopted under Paragraph 40 hereof,
that are to be observed, complied with or performed by Lessee, other than those
described in subparagraphs (a), (b) or (c), above , where such Default continues
for a period of thirty (30) days after written notice thereof by or on behalf of
Lessor to Lessee; provided, however, that if the nature of Lessee's Default is
such that more than thirty (30) days are reasonably required for its cure, then
it shall not be deemed to be a Breach of this Lease by Lessee if Lessee
commences such cure within said thirty (30) day period and thereafter diligently
prosecutes such cure to completion.
(e) The occurrence of any of the following events: (i) the
making by lessee of any general arrangement or assignment for the benefit of
creditors; (ii) Lessee's becoming a "debtor" as defined in 11 U.S.C. Section 101
or any successor statute thereto (unless, in the case of a petition filed
against Lessee, the same is dismissed within sixty (60) days; (iii) the
appointment of a trustee or receiver to take possession of substantially all of
Lessee's assets located at the Premises or of Lessee's interest in this Lease,
where possession is not restored to Lessee within thirty (30) days; or (iv) the
attachment, execution or other judicial seizure of substantially all of Lessee's
assets located at the Premises or of Lessee's interest in this Lease, where such
seizure is not discharged within thirty (30) days; provided, however, in the
event that any provision of this subparagraph (e) is contrary to any applicable
law, such provision shall be of no force or effect, and not affect the validity
of the remaining provisions.
(f) The discovery by Lessor that any financial statement given
to Lessor by Lessee or any Guarantor of Lessee's obligations hereunder was
materially false.
(g) If the performance of Lessee's obligations under this
Lease is guaranteed: (i) the death of a guarantor, (ii) the termination of a
guarantor's liability with respect to this Lease other than in accordance with
the terms of such guaranty, (iii) a guarantor's becoming insolvent or the
subject of a bankruptcy filing, (iv) a guarantor's refusal to honor the
guaranty, or (v) a guarantor's breach of its guaranty obligation on an
anticipatory breach basis, and Lessee's failure, within sixty (60) days
following written notice by or on behalf of Lessor to Lessee of any such event,
to provide Lessor with written alternative assurance or security, which, when
coupled with the then existing resources of lessee, equals or exceeds the
combined financial resources of Lessee and the guarantors that existed at the
time of execution of this Lease.
13.2 REMEDIES. If Lessee fails to perform any affirmative duty or
obligation of Lessee under this Lease, within ten (10) days after written notice
to Lessee (or in case of an emergency, without notice), Lessor may at its option
(but without obligation to to do so), perform such duty or obligation on
Lessee's behalf, including but not limited to the
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obtaining of reasonably required bonds, insurance policies, or governmental
licenses, permits or approvals. The costs and expenses of any such performance
by Lessor shall be due and payable by Lessee to Lessor upon invoice therefor. If
any check given to Lessor by Lessee shall not be honored by the bank upon which
it is drawn, Lessor, at its option, may require all future payments to be made
under this Lease by Lessee to be made only by cashier's check. In the event of a
Breach of this Lease by Lessee, as defined in Paragraph 13.1, with or without
further notice or demand, and without limiting Lessor in the exercise of any
right or remedy which Lessor may have by reason of such Breach, Lessor may:
(a) Terminate Lessee's right to possession of the Premises by
any lawful means, in which case this Lease and the term hereof shall terminate
and Lessee shall immediately surrender possession of the Premises to Lessor. In
such event Lessor shall be entitled to recover from Lessee: (i) the worth at the
time of the award of the unpaid rent which had been earned at the time of
termination; (ii) the worth at the time of award of the amount by which the
unpaid rent which would have been earned after termination until the time of
award exceeds the amount of such rental loss that the Lessee proves could have
been reasonably avoided; (iii) the worth at the time of award of the amount by
which the unpaid rent for the balance of the term after the time of award
exceeds the amount of such rental loss that the Lessee proves could be
reasonably avoided; and (iv) any other amount necessary to compensate Lessor for
all the detriment proximately caused by the Lessee's failure to perform the
obligations under this Lease or which in the ordinary course of things would be
likely to result therefrom, including but not limited to the cost of recovering
possession of the Premises, expenses of reletting, including necessary
renovation and alteration of the Premises, reasonable attorneys' fees, and that
portion of the leasing commission paid by Lessor applicable to the unexpired
term of this Lease. The worth at the time of award of the amount referred to in
provision (iii) of the prior sentence shall be computed by discounting such
amount at the discount rate of the Federal Reserve Bank of San Francisco at the
time of award plus one percent (1%) . Efforts by Lessor to mitigate damages
caused by Lessee's Default or Breach of this Lease shall not waive Lessor's
right to recover damages under this Paragraph. If termination of this Lease is
obtained through the provisional remedy of unlawful detainer, Lessor shall have
the right to recover in such proceeding the unpaid rent and damages as are
recoverable therein, or Lessor may reserve therein the right to recover all or
any part thereof in a separate suit for such rent and/or damages. If a notice
and grace period required under subparagraphs 13.1(b), (c) or (d) was not
previously given, a notice to pay rent or quit, or to perform or quit, as the
case may be, given to Lessee under any statute authorizing the forfeiture of
leases for unlawful detainer shall also constitute the applicable notice for
grace period purposes required by subparagraphs 13.1(b), (c) or (d). In such
case, the applicable grace period under subparagraphs 13.1(b), (c) or (d) and
under the unlawful detainer statute shall run concurrently after the one such
statutory notice, and the failure of Lessee to cure the Default within the
greater of the two such grace periods shall constitute both an unlawful detainer
and a Breach of this Lease entitling Lessor to the remedies provided for in this
Lease and/or by said statute.
(b) Continue the Lease and Lessee's right to possession in
effect (in California under California Civil Code Section 1951.4) after Lessee's
Breach and abandonment and recover the rent as it becomes due, provided Lessee
has the right to sublet or assign, subject only to reasonable limitations. See
Paragraphs 12 and 36 for the limitations on assignment and subletting which
limitations Lessee and Lessor agree are reasonable. Acts of maintenance or
preservation, efforts to relet the Premises, or the appointment of a receiver to
protect the Lessor's interest under the Lease, shall not constitute a
termination of the Lessee's right to possession.
(c) Pursue any other remedy now or hereafter available to
Lessor under the laws of judicial decisions of the state wherein the Premises
are located.
(d) The expiration or termination of this Lease and/or the
termination of Lessee's right to possession shall not relieve Lessee from
liability under any indemnity provisions of this Lease as to matters occurring
or accruing during the term hereof or by reason of Lessee's occupancy of the
Premises.
13.3 INDUCEMENT RECAPTURE IN EVENT OF BREACH. Any agreement by Lessor
for free or abated rent or other charges applicable to the Premises, or for the
giving or paying by Lessor to or for Lessee of any cash or other bonus,
inducement or consideration for Lessee's entering into this Lease, all of which
concessions are hereinafter referred to as "Inducement Provisions," shall be
deemed conditioned upon Lessee's full and faithful performance of all of the
terms, covenants and conditions of this Lease to be performed or observed by
Lessee during the term hereof as the same may be extended. Upon the occurrence
of a Breach of this Lease by Lessee, as defined in Paragraph 13.1, any such
Inducement Provision shall automatically be deemed deleted from this Lease and
of no further force and effect, and any rent, other charge, bonus, inducement or
consideration therefore abated, given or paid by Lessor under such an Inducement
Provision shall be immediately due and payable by Lessee to lessor, and
recoverable by Lessor as additional rent due under this Lease, notwithstanding
any subsequent cure of said Breach by Lessee. The acceptance by Lessor or rent
or the cure of the Breach which initiated the operation of this Paragraph shall
not be deemed a waiver by Lessor of the provisions of this Paragraph unless
specifically so stated in writing by Lessor at the time of such acceptance.
13.4 LATE CHARGES. Lessee hereby acknowledges that late payment by
Lessee to Lessor of rent and other sums due hereunder to incur costs not
contemplated by this Lease, the exact amount of which will be extremely
difficult to ascertain. Such costs include, but are not limited to, processing
and accounting charges, and late charges which may be imposed upon Lessor by the
terms of any ground lease, mortgage or trust deed covering the Premises.
Accordingly, if any installment of rent or any other sum due from Lessee shall
not be received by Lessor or Lessor's designee within five (5) days after such
amount shall be due, then, without any requirement for notice to Lessee, Lessee
shall pay to Lessor a late charge equal to six percent (6%) of such overdue
amount. The parties hereby agree that such late charge represents a fair and
reasonable estimate of the costs Lessor will incur by reason of late payment by
Lessee. Acceptance of such late charge by Lessor shall in no event constitute a
waiver of Lessee's Default or Breach with respect to such overdue amount, nor
prevent Lessor from exercising any of the other rights and remedies granted
hereunder. In the event that a late charge is payable hereunder, whether or not
collected, for three (3) consecutive installments of Base Rent, then
notwithstanding Paragraph 4.1 or any other provision of this Lease to the
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contrary, Base Rent shall, at Lessor's option, become due and payable quarterly
in advance.
13.5 BREACH BY LESSOR. Lessor shall not be deemed in breach of this
Lease unless Lessor fails within a reasonable time to perform an obligation
required to be performed by Lessor. For purposes of this Paragraph 13.5, a
reasonable time shall in no event be less than thirty (30) days after receipt by
Lessor, and by the holders of any ground lease, mortgage, or deed of trust
covering the Premises whose name and address shall have been furnished Lessee in
writing for such purpose, of written notice specifying wherein such obligation
of Lessor has not been performed; provided, however, that if the nature of
Lessor's obligation is such that more than thirty (30) days after such notice
are reasonably required for its performance, then Lessor shall not be in breach
of this Lease if performance is commenced within such thirty (30) day period and
thereafter diligently pursued to completion.
14. CONDEMNATION. If the Premises or any portion thereof are taken under the
power of eminent domain or sold under the threat of the exercise of said power
(all of which are herein called "condemnation"), this Lease shall terminate as
to the part so taken as of the date the condemning authority takes title or
possession, whichever first occurs. If more than ten percent (10%) of the floor
area of the Premises, or more than twenty-five percent (25%) of the land area
not occupied by any building, is taken by condemnation, Lessee may, at Lessee's
option, to be exercised in writing within ten (10) days after Lessor shall have
given Lessee written notice of such taking (or in the absence of such notice,
within ten (10) days after the condemning authority shall have taken possession)
terminate this Lease as of the date the condemning authority takes such
possession. If Lessee does not terminate this Lease in accordance with the
foregoing, this Lease shall remain in full force and effect as to the portion of
the Premises remaining, except that the Base Rent shall be reduced in the same
proportion as the rentable floor area of the Premises taken bears to the total
rentable floor area of the building located on the Premises. No reduction of
Base Rent shall occur if the only portion of the Premises taken is land on which
there is no building. Any award for the taking of all or any part of the
Premises under the power of eminent domain or any payment made under threat of
the exercise of such power shall be the property of Lessor, whether such award
shall be made as compensation for diminution in value of the leasehold or for
the taking of the fee, or as severance damages; provided, however, that Lessee
shall be entitled to any compensation separately awarded to Lessee for Lessee's
relocation expenses and/or loss of Lessee's Trade Fixtures. In the event that
this Lease is not terminated by reason of such condemnation, Lessor shall to the
extent of its net severance damages received, over and above the legal and other
expenses incurred by Lessor in the condemnation matter, repair any damage to the
Premises caused by such condemnation, except to the extent that Lessee has been
reimbursed therefor by the condemning authority. Lessee shall be responsible for
the payment of any amount in excess of such net severance damages required to
complete such repair.
15. BROKER'S FEE.
15.1 The Brokers named in Paragraph 1.10 are the procuring causes of
this Lease.
15.2 Upon execution of this Lease by both Parties, Lessor shall pay to
said Brokers jointly, or in such separate shares as they may mutually designate
in writing, a fee as set forth in a separate written agreement between Lessor
and said Brokers (or in the event there is no separate written agreement between
Lessor and said Brokers, the sum of $3,070.00 for brokerage services rendered by
said Brokers to Lessor in this transaction.
15.3 Unless Lessor and Brokers have otherwise agreed in writing, Lessor
further agrees that : (a) if Lessee exercises any Option (as defined in
Paragraph 39.1) or any Option subsequently granted which is substantially
similar to an Option granted to Lessee in this Lease, or (b) if Lessee acquires
any rights to the Premises or other premises described in this Lease which are
substantially similar to what Lessee would have acquired had an Option herein
granted to Lessee been exercised, or (c) if Lessee remains in possession of the
Premises, with the consent of Lessor, after the expiration of the term of this
Lease after having failed to exercise an Option, or (d) if said Brokers are the
procuring cause of any other lease or sale entered into between the Parties
pertaining to the Premises and/or any adjacent property in which Lessor has an
interest, or (e) if Base Rent is increased, whether by agreement or operation of
an escalation clause herein, then as to any of said transactions, Lessor shall
pay said Brokers a fee in accordance with the schedule of said Brokers in effect
at the time of the execution of this Lease.
15.4 Any buyer or transferee of Lessor's interest in this Lease, whether
such transfer is by agreement or by operation of law, shall be deemed to have
assumed Lessor's obligation under this Paragraph 15. Each Broker shall be a
third party beneficiary of the provisions of this Paragraph 15 to the extent of
its interest in any commission arising from this Lease and may enforce that
right directly against Lessor and its successors.
15.5 Lessee and Lessor each represent and warrant to the other that it
has had no dealings with any person, firm, broker or finder (other than the
Brokers, if any, named in Paragraph 1.10) in connection with the negotiation of
this Lease and/or the consummation of the transaction contemplated hereby, and
that no broker or other person, firm or entity other than said named Brokers is
entitled to any commission or finder's fee in connection with said transaction.
Lessee and Lessor to do each hereby agree to indemnify, protect, defend and hold
the other harmless from and against liability for compensation or charges which
may be claimed by any such unnamed broker, finder or other similar party by
reason of any dealings or action s of the indemnifying Party, including any
costs, expenses, attorneys' fees reasonably incurred with respect thereto.
15.6 Lessor and Lessee hereby consent to and approve all agency
relationships, including any dual agencies, indicated in Paragraph 1.10.
16. TENANCY STATEMENT.
16.1 Each Party (as "Responding Party") shall within ten (10) days after
written notice from the other Party (the "Requesting Party ") execute,
acknowledge and deliver to the Requesting Party a statement in writing in form
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similar to the then most current "Tenancy Statement" form published by the
American Industrial Real Estate Association, plus such additional information,
confirmation and/or statements as may be reasonably requested by the Requesting
Party.
16.2 If Lessor desires to finance, refinance, or sell the Premises, any
part thereof, or the building of which the Premises are a part, Lessee and all
Guarantors of Lessee's performance hereunder shall deliver to any potential
lender or purchaser designated by Lessor such financial statements of Lessee and
such Guarantors as may be reasonably required by such lender or purchaser,
including but not limited to Lessee's financial statements for the past three
(3) years. All such financial statements shall be received by Lessor and such
lender or purchaser in confidence and shall be used only for the purposes herein
set forth.
17. LESSOR'S LIABILITY. The term "Lessor" as used herein shall mean the owner or
owners at the time in question of the fee title to the Premises, or, if this is
a sublease, of the Lessee's interest in the prior lease. In the event of a
transfer of Lessor's title or interest in the Premises or in this Lease, Lessor
shall deliver to the transferee or assignee (in cash or by credit) any unused
Security Deposit held by Lessor at the time of such transfer or assignment.
Except as provided in Paragraph 15, upon such transfer or assignment and
delivery of the Security Deposit, as aforesaid, the prior Lessor shall be
relieved of all liability with respect to the obligations and/or covenants under
this Lease thereafter to be performed by the Lessor. Subject to the foregoing,
the obligations and/or covenants in this Lease to be performed by the Lessor
shall be binding only upon the Lessor as hereinabove defined.
18. SEVERABILITY. The invalidity of any provision of this Lease, as determined
by a court of competent jurisdiction, shall in no way affect the validity of any
other provision hereof.
19. INTEREST ON PAST-DUE OBLIGATIONS. Any monetary payment due Lessor hereunder,
other than late charges, not received by Lessor within thirty (30) days
following the date on which it was due, shall bear interest from the
thirty-first (31st) day after it was due at the rate of 12% per annum, but not
exceeding the maximum rate allowed by law, in addition to the late charge
provided for in Paragraph 13.4.
20. TIME OF ESSENCE. Time is of the essence with respect to the performance of
all obligations to be performed or observed by the Parties under this Lease.
21. RENT DEFINED. All monetary obligations of Lessee to Lessor under the terms
of this Lease are deemed to be rent.
22. NO PRIOR OR OTHER AGREEMENTS; BROKER DISCLAIMER. This Lease contains all
agreements between the Parties with respect to any matter mentioned herein, and
no other prior or contemporaneous agreement or understanding shall be effective.
Lessor and Lessee each represents and warrants to the Brokers that it has made,
and is relying solely upon, its own investigation as to the nature, quality,
character and financial responsibility of the other Party to this Lease and as
to the nature, quality and character of the Premises. Brokers have no
responsibility with respect thereto or with respect to any default or breach
hereof by either Party.
23. NOTICES.
23.1 All notices required or permitted by this Lease shall be in writing
and may be delivered in person (by hand or by messenger or courier service) or
may be sent by regular, certified or registered mail or U.S. Postal Service
Express Mail, with postage prepaid, or by facsimile transmission, and shall be
deemed sufficiently given if service in a manner specified in this Paragraph 23.
The addresses noted adjacent to a Party's signature on this Lease shall be that
Party's address for delivery or mailing of notice purposes. Either Party may by
written notice to the other specify a different address for notice purposes,
except that upon Lessee's taking possession of the Premises, the Premises shall
constitute Lessee's address for the purpose of mailing or delivering notices to
Lessee. A copy of all notices required or permitted to be given to Lessor
hereunder shall be concurrently transmitted to such party or parties at such
addresses as lessor may from time to time hereafter designate by written notice
to Lessee.
23.2 Any notice sent by registered or certified mail, return receipt
requested, shall be deemed given on the date of delivery shown on the receipt
card, or if no delivery date is shown, the postmark thereon. If sent by regular
mail the notice shall be deemed given forty-eight (48) hours after the same is
addressed as required herein and mailed with postage prepaid. Notices delivered
by United States Express Mail or overnight courier that guarantees next day
deliver shall be deemed given twenty-four (24) hours after delivery of the same
to the United States Postal Service or courier. If any notice is transmitted by
facsimile transmission or similar means, the same shall be deemed served or
delivered upon telephone confirmation of receipt of the transmission thereof,
provided a copy is also delivered via delivery or mail. If notice is received on
a Sunday or legal holiday, it shall be deemed received on the next business day.
24. WAIVERS. No waiver by Lessor of the Default of Breach of any term, covenant
or condition hereof by Lessee, shall be deemed a waiver of any other term,
covenant or condition hereof, or of any subsequent Default or Breach by Lessee
of the same or of any other term, covenant or condition hereof. Lessor's consent
to, or approval of, any act shall not be deemed to render unnecessary the
obtaining of Lessor's consent to, or approval of, any subsequent or similar act
by Lessee, or be construed as the basis of an estoppel to enforce the provision
or provisions of this Lease requiring such consent. Regardless or Lessor's
knowledge of a Default or Breach at the time of accepting rent, the acceptance
of rent by Lessor shall not be a waiver of any preceding Default or Breach by
Lessee of any provision hereof, other than the failure of Lessee to pay the
particular rent so accepted. Any payment given Lessor by Lessee may be accepted
by Lessor on account of moneys or damages due Lessor, notwithstanding any
qualifying statements or conditions made by Lessee in connection therewith,
which such statements and/or conditions shall be of no force or effect
whatsoever unless specifically agreed to in writing by Lessor at or before the
time of deposit of such payment.
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25. RECORDING. Either Lessor or Lessee shall, upon request of the other,
execute, acknowledge and deliver to the other a short form memorandum of this
Lease for recording purposes. The Party requesting recordation shall be
responsible for payment of any fees or taxes applicable thereto.
26. NO RIGHT TO HOLDOVER. Lessee has no right to retain possession of the
Premises or any part thereof beyond the expiration or earlier termination of
this Lease.
27. CUMULATIVE REMEDIES. No remedy or election hereunder shall be deemed
exclusive but shall, wherever possible, be cumulative with all other remedies at
law or in equity.
28. COVENANTS AND CONDITIONS. All provisions of this Lease to be observed or
performed by Lessee are both covenants and conditions.
29. BINDING EFFECT; CHOICE OF LAW. This Lease shall be binding upon the parties,
their personal representatives, successors and assigns and be governed by the
laws of the State in which the Premises are located. Any litigation between the
Parties hereto concerning this Lease shall be initiated in the county in which
the Premises are located.
30. SUBORDINATION; ATTORNMENT; NON-DISTURBANCE.
30.1 SUBORDINATION. This Lease and any Option granted hereby shall be
subject and subordinate to any ground lease, mortgage, deed of trust, or other
hypothecation or security device (collectively, "SECURITY DEVICE"), now or
hereafter placed by Lessor upon the real property of which the Premises are a
part, to any and all advances made on the security thereof, and to all renewals,
modifications, consolidations, replacements and extensions thereof. Lessee
agrees that the Lenders holding any such Security Device shall have no duty,
liability or obligation to perform any of the obligations of Lessor under this
Lease, but that in the event of Lessor's default with respect to any such
obligation, Lessee will give any Lender whose name and address have been
furnished Lessee in writing for such purpose notice of Lessor's default and
allow such Lender thirty (30) days following receipt of such notice for the cure
of said default before invoking any remedies Lessee may have by reason thereof.
If any Lender shall elect to have this Lease and/or any Option granted hereby
superior to the lien of its Security Device and shall give written notice
thereof to Lessee, this Lease and such Options shall be deemed prior to such
Security Device, notwithstanding the relative dates of the documentation or
recordation thereof.
30.2 ATTORNMENT. Subject to the non-disturbance provisions of Paragraph
30.3, Lessee agrees to attorn to a Lender or any other party who acquires
ownership of the Premises by reason of a foreclosure of a Security Device, and
that in the event of such foreclosure, such new owner shall not: (i) be liable
for any act or omission of any prior lessor or with respect to events occurring
prior to acquisition of ownership, (ii) be subject to any offsets or defenses
which Lessee might have against any prior lessor, or (iii) be bound by
prepayment of more than one (1) month's rent.
30.3 NON-DISTURBANCE. With respect to Security Devices entered into by
Lessor after the execution of this Lease, Lessee's subordination of this Lease
shall be subject to receiving assurance (a "non-disturbance agreement") from the
Lender that Lessee's possession and this Lease, including any options to extend
the term hereof, will not be disturbed so long as Lessee is not in Breach hereof
and attorns to the record owner of the Premises.
30.4 SELF-EXECUTING. The agreements contained in this Paragraph 30 shall
be effective without the execution of any further documents; provided, however,
that, upon written request from Lessor or a Lender in connection with a sale,
financing or refinancing of the Premises, Lessee and Lessor shall execute such
further writings as may be reasonably required to separately document any such
subordination or non-subordination, attornment and/or non-disturbance agreement
as is provided for herein.
31. ATTORNEY'S FEES. If any Party or Broker brings an action or proceeding to
enforce the terms hereof or declare rights hereunder, the Prevailing Party (as
hereafter defined) or Broker in any such proceeding, action, or appeal thereon,
shall be entitled to reasonable attorney's fees. Such fees may be awarded in the
same suit or recovered in a separate suit, whether or not such action or
proceeding is pursuant to decision or judgment. The term, "Prevailing Party"
shall include, without limitation, a Party or Broker who substantially obtains
or defeats the relief sought, as the case may be, whether by compromise,
settlement, judgment, or the abandonment by the other Party or Broker of its
claim or defense. The attorney's fee award shall not be computed in accordance
with any court fee schedule, but shall be such as to fully reimburse all
attorney's fees reasonably incurred. Lessor shall be entitled to attorney's
fees, costs and expenses incurred in the preparation and service of notices of
Default and consultations in connection therewith, whether or not a legal action
is subsequently commenced in connection with such Default or resulting Breach.
32. LESSOR'S ACCESS; SHOWING PREMISES; REPAIRS. Lessor and Lessor's agents shall
have the right to enter the Premises at any time, in the case of an emergency,
and otherwise at reasonable times for the purpose of showing the same to
prospective purchasers, lenders, or lessees, and making such alterations,
repairs, improvements or additions to the Premises or to the building of which
they are a part, as Lessor may reasonable deem necessary. Lessor may at any time
place on or about the Premises or building any ordinary "For Sale" signs and
Lessor may at any time during the last one hundred twenty (120) days of the term
hereof place on or about the Premises any ordinary "For Lease" signs. All such
activities of Lessor shall be without abatement of rent or liability to Lessee.
33. AUCTIONS. Lessee shall not conduct, nor permit to be conducted, either
voluntarily or involuntarily, any auction upon the Premises without first having
obtained Lessor's prior written consent. Notwithstanding anything to the
contrary in this Lease, Lessor shall not be obligated to exercise any standard
of reasonableness in determining whether to grant such consent.
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34. SIGNS. Lessee shall not place any sign upon the Premises, except that Lessee
may, with Lessor's prior written consent, install (but not on the roof) such
signs as are reasonably required to advertise Lessee's own business. The
installation of any sign on the Premises by or for Lessee shall be subject to
the provisions of Paragraph 7 (Maintenance, Repairs, Utility Installations,
Trade Fixtures and Alterations). Unless otherwise expressly agreed herein,
Lessor reserves all rights to the use of the roof and the right to install, and
all revenues from the installation of, such advertising signs on the Premises,
including the roof, as to do not unreasonably interfere with the conduct of
Lessee's business.
35. TERMINATION; MERGER. Unless specifically stated otherwise in writing by
Lessor, the voluntary or other surrender of this Lease by Lessee, the mutual
termination or cancellation hereof, or a termination hereof by Lessor for Breach
by Lessee, shall automatically terminate any sublease or lesser estate in the
Premises; provided, however, Lessor shall, in the event of any such surrender,
termination or cancellation, have the option to continue any one or all of any
existing subtenancies. Lessor's failure within ten (10) days following any such
event to make a written election to the contrary by written notice to the holder
of any such lesser interest, shall constitute Lessor's election to have such
event constitute the termination of such interest.
36. CONSENTS.
(a) Except for Paragraph 33 hereof (Auctions) or as otherwise provided
herein, wherever in this Lease the consent of a Party is required to an act by
or for the other Party, such consent shall not be unreasonably withheld or
delayed. Lessor's actual reasonable costs and expenses (including but not
limited to architects', attorneys', engineers' or other consultants' fees)
incurred in the consideration of, or response to, a request by Lessee for any
Lessor consent pertaining to this Lease or the Premises, including but not
limited to an assignment, a subletting or the presence or use of a Hazardous
Substance, practice or storage tank, shall be paid by Lessee to Lessor upon
receipt of an invoice and supporting documentation therefor. Subject to
Paragraph 12.2(e) (application assignment or subletting), Lessor may, as a
condition to considering any such request by Lessee, require that Lessee deposit
with Lessor an amount of money (in addition to the Security Deposit held under
Paragraph 5) reasonably calculated by Lessor to represent the cost Lessor will
incur in considering and responding to Lessee's request. Except as otherwise
provided, any unused portion of said deposit shall be refunded to Lessee without
interest. Lessor's consent to any act, assignment of this Lease or subletting of
the Premises by Lessee shall not constitute an acknowledgment that no Default or
Breach by Lessee of this Lease exists, nor shall such consent be deemed a waiver
of any then existing Default or Breach, except as may be otherwise specifically
stated in writing by Lessor at the time of such consent.
(b) All conditions to Lessor's consent authorized by this Lease are
acknowledged by Lessee as being reasonable. The failure to specify herein any
particular condition to Lessor's consent shall not preclude the imposition by
Lessor at the time of consent of such further or other conditions as are then
reasonable with reference to the particular matter for which consent is being
given.
37. GUARANTOR.
37.1 If there are to be any Guarantors of this Lease per Paragraph 1.11,
the form of the guaranty to be executed by each such Guarantor shall be in the
form most recently published by the American Industrial Real Estate Association,
and each said Guarantor shall have the same obligations as Lessee under this
Lease, including but not limited to the obligation to provide the Tenancy
Statement and information called for by Paragraph 16.
37.2 It shall constitute a Default of the Lessee under this Lease if any
such Guarantor fails or refuses, upon reasonable request by Lessor to give: (a)
evidence of the due execution of the guaranty called for by this Lease,
including the authority of the Guarantor (and of the party signing on
Guarantor's behalf) to obligate such Guarantor on said guaranty, and including
in the case of a corporate Guarantor, a certified copy of a resolution of its
board of directors authorizing the making of such guaranty, together with a
certificate of incumbency showing the signature of the persons authorized to
sign on its behalf, (b) current financial statements of Guarantor as may from
time to time be requested by Lessor, (c) a Tenancy Statement, or (d) written
confirmation that the guaranty is still in effect.
38. QUIET POSSESSION. Upon payment by Lessee of the rent for the Premises and
the observance and performance of all of the covenants, conditions and
provisions on Lessee's part to be observed and performed under this Lease,
Lessee shall have quiet possession of the Premises for the entire term hereof
subject to all of the provisions of this Lease.
39. OPTIONS.
39.1 DEFINITIONS. As sued in this Paragraph 39 the word "Option" has the
following meaning: (a) the right to extend the term of this Lease or to renew
this Lease or to extend or renew any lease that Lessee has on other property of
Lessor; (b) the right of first refusal to lease the Premises or the right of
first offer to lease the Premises or the right of first refusal to lease other
property of Lessor or the right of first offer to lease other property of
Lessor; (c) the right to purchase the Premises, or the right of first refusal to
purchase the Premises, or the right of first offer to purchase the Premises, or
the right to purchase other property of Lessor, or the right of first refusal to
purchase other property of Lessor, or the right of first offer to purchase other
property of Lessor.
39.2 OPTIONS, PERSONAL TO ORIGINAL LESSEE. Each Option granted to Lessee
in this Lease is personal to the original Lessee named in Paragraph 1.1 hereof,
and cannot be voluntarily or involuntarily assigned or exercised by any person
or entity other than said original Lessee while the original Lessee is in full
and actual possession of the Premises and without the intention of thereafter
assigning or subletting. The Options, if any, herein granted to Lessee are not
assignable, either as a part of an assignment of this Lease or separately or
apart therefrom, and no Option may
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be separated from this Lease in any manner, by reservation or otherwise.
39.3 MULTIPLE OPTIONS. In the event that Lessee has any Multiple Options
to extend or renew this Lease, a later Option cannot be exercised unless the
prior Options to extend or renew this Lease have been validly exercised.
39.4 EFFECT OF DEFAULT ON OPTIONS.
(a) Lessee shall have no right to exercise an Option,
notwithstanding any provision in the grant of Option to the contrary: (i) during
the period commencing with the giving of any notice of Default under Paragraph
13.1 and continuing until the noticed Default is cured, or (ii) during the
period of time any monetary obligation due Lessor by Lessee is unpaid (without
regard to whether notice thereof is given Lessee), or (iii) during the time
Lessee is in Breach of this Lease, or (iv) in the event that Lessor has given to
Lessee three (3) or more notices of Default under Paragraph 13.1, whether or not
the Defaults are cured, during the twelve (12) month period immediately
preceding the exercise of the Option.
(b) The period of time within which an Option may be exercised
shall not be extended or enlarged by reason of Lessee's inability to exercise an
Option because of the provisions of Paragraph 39.4(a).
(c) All rights of Lessee under the provisions of an Option
shall terminate and be of no further force or effect, notwithstanding Lessee's
due and timely exercise of the Option, if, after such exercise and during the
term of this Lease, (i) Lessee fails to pay to Lessor a monetary obligation of
Lessee for a period of thirty (30) days after such obligation becomes due
(without any necessity of Lessor to give notice thereof to Lessee), or (ii)
Lessor gives to Lessee three (3) or more notices of Default under Paragraph 13.1
during any twelve (12) month period, whether or not the Defaults are cured, or
(iii) if Lessee commits a Breach of this Lease.
40. MULTIPLE BUILDINGS. If the Premises are part of a group of buildings
controlled by Lessor, Lessee agrees that it will abide by, keep and observe all
reasonable rules and regulations which Lessor may make from time to time for the
management, safety, care, and cleanliness of the grounds, the parking and
unloading of vehicles and the preservation of good order, as well as for the
convenience of other occupants or tenants of such other buildings and their
invitees, and that Lessee will pay its fair share of common expenses incurred in
connection therewith.
41. SECURITY MEASURES. Lessee hereby acknowledges that the rental payable to
Lessor hereunder does not include the cost of guard service or other security
measures, and that Lessor shall have no obligation whatsoever to provide same.
Lessee assumes all responsibility for the protection of the Premises, Lessee,
its agents and invitees and their property from the acts of third parties.
42. RESERVATIONS. Lessor reserves to itself the right, from time to time, to
grant, without the consent or joinder of Lessee, such easements, rights and
dedications that Lessor deems necessary, and to cause the recordation of parcel
maps and restrictions, so long as such easements, rights, dedications, maps and
restrictions to do not unreasonably interfere with the use of the Premises by
Lessee. Lessee agrees to sign any documents reasonably requested by Lessor to
effectuate any such easement rights, dedication, map or restrictions.
43. PERFORMANCE UNDER PROTEST. If at any time a dispute shall arise as to any
amount or sum of money to be paid by one Party to the other under the provisions
hereof, the Party against whom the obligation to pay the money is asserted shall
have the right to make payment "under protest" and such payment shall not be
regarded as a voluntary payment and there shall survive the right on the part of
said Party to institute suit for recovery of such sum. If it shall be adjudged
that there was no legal obligation on the part of said Party to pay such sum or
any part thereof, said Party shall be entitled to recover such sum or so much
thereof as it was not legally required to pay under the provisions of this
Lease.
44. AUTHORITY. If either Party hereto is a corporation, trust, or general or
limited partnership, each individual executing this Lease on behalf of such
entity represents and warrants that he or she is duly authorized to execute and
deliver this Lease on its behalf . If Lessee is a corporation, trust or
partnership, Lessee shall, within thirty (30) days after request by Lessor,
deliver to Lessor evidence satisfactory to Lessor of such authority.
45. CONFLICT. Any conflict between the printed provisions of this Lease and the
typewritten or handwritten provisions shall be controlled by the typewritten or
handwritten provisions.
46. OFFER. Preparation of this Lease by Lessor or Lessor's agent and submission
of same to Lessee shall not be deemed an offer to lease to Lessee. This Lease is
not intended to be binding until executed by all Parties hereto.
47. AMENDMENTS. This Lease may be modified only in writing, signed by the
parties in interest at the time of the modification. The parties shall amend
this Lease from time to time to reflect any adjustments that are made to the
Base Rent or other rent payable under this Lease. As long as they to do not
materially change Lessee's obligations hereunder, Lessee agrees to make such
reasonable non-monetary modifications to this Lease as may be reasonably
required by an institutional, insurance company, or pension plan Lender in
connection with the obtaining or normal financing or refinancing of the property
of which the Premises are a part.
48. MULTIPLE PARTIES. Except as otherwise expressly provided herein, if more
than one person or entity is named herein as either Lessor or Lessee, the
obligations of such Multiple Parties shall be the joint and several
responsibility of all persons or entities named herein as such Lessor or Lessee.
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LESSOR AND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM AND
PROVISION CONTAINED HEREIN, AND BY THE EXECUTION OF THIS LEASE SHOW THEIR
INFORMED AND VOLUNTARY CONSENT THERETO. THE PARTIES HEREBY AGREE THAT, AT THE
TIME THIS LEASE IS EXECUTED, THE TERMS OF THIS LEASE ARE COMMERCIALLY REASONABLE
AND EFFECTUATE THE INTENT AND PURPOSE OF LESSOR AND LESSEE WITH RESPECT TO THE
PREMISES.
IF THIS LEASE HAS BEEN FILLED IN, IT HAS BEEN PREPARED FOR SUBMISSION TO YOUR
ATTORNEY FOR HIS APPROVAL. FURTHER, EXPERTS SHOULD BE CONSULTED TO EVALUATE THE
CONDITION OF THE PROPERTY AS TO THE POSSIBLE PRESENCE OF ASBESTOS, STORAGE TANKS
OR HAZARDOUS SUBSTANCES. NO REPRESENTATION OR RECOMMENDATION IS MADE BY THE
AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION OR BY THE REAL ESTATE BROKER(S) OR
THEIR AGENTS OR EMPLOYEES AS TO THE LEGAL SUFFICIENCY, LEGAL EFFECT, OR TAX
CONSEQUENCES OF THIS LEASE OR THE TRANSACTION TO WHICH IT RELATES; THE PARTIES
SHALL RELY SOLELY UPON THE ADVICE OF THEIR OWN COUNSEL AS TO THE LEGAL AND TAX
CONSEQUENCES OF THIS LEASE. IF THE SUBJECT PROPERTY IS LOCATED IN A STATE OTHER
THAN CALIFORNIA, AN ATTORNEY FROM THE STATE WHERE THE PROPERTY IS LOCATED SHOULD
BE CONSULTED.
The parties hereto have executed this Lease at the place on the dates specified
above to their respective signatures.
<TABLE>
<S> <C>
Executed at Westlake Village, CA Executed at Westlake Village, CA
-------------------------------------------- -------------------------------------------
on December 8, 1997 on December 5, 1997
----------------------------------------------------- -----------------------------------------------------
by LESSOR: by LESSEE:
WESTLAKE INDUSTRIAL COMPLEX ENVIRONMENTAL PRODUCTS & TECHNOLOGIES CORP.
- ------------------------------------------------------- -------------------------------------------------------
- ------------------------------------------------------- -------------------------------------------------------
By [signature] By [signature]
----------------------------------------------------- -----------------------------------------------------
Name Printed: Christopher E. Turner Name Printed: Marvin Mears
------------------------------------------ ------------------------------------------
Title: General Partner Title: President
------------------------------------------------- -------------------------------------------------
By [signature] By
----------------------------------------------------- -----------------------------------------------------
Name Printed: Daryl Parker Name Printed:
------------------------------------------ ------------------------------------------
Title: General Partner Title:
------------------------------------------------- -------------------------------------------------
Address: 5351 Sterling Center Dr. Address: 2219 E. Thousand Oaks Bl., Suite 337
----------------------------------------------- -----------------------------------------------
Westlake Village, CA 91361 Thousand Oaks, CA 91362
- ------------------------------------------------------- -------------------------------------------------------
Tel No. (818 ) 889-3600 Fax No. (818 ) 991-2808 Tel No. (805 ) 492-6865 Fax No. (805 ) 492-6272
------------------------------------------------ ------------------------------------------------
</TABLE>
NOTICE: These forms are often modified to meet changing requirements of law and
industry needs. Always write or call to make sure you are utilizing the
most current form; American Industrial Real Estate Association, 345
South Figueroa Street, Suite M-1, Los Angeles, CA 90071, (213) 687-8777,
Fax. No. (213) 687-8616.
(C) Copyright 1990 - By American Industrial Real Estate Association. All
rights reserved. No part of these works may be reproduced in any form
without permission in writing.
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ADDENDUM TO STANDARD INDUSTRIAL/COMMERCIAL
SINGLE-TENANT LEASE-GROSS DATED DECEMBER 3, 1997
BETWEEN WESTLAKE INDUSTRIAL COMPLEX AS LESSOR
AND ENVIRONMENTAL PRODUCTS & TECHNOLOGIES CORP. AS LESSEE
1.5 Cont'd. Notwithstanding any contrary provision hereof, the monthly rental
stipulated to be paid by Lessee to Lessor hereunder shall be paid in accordance
with the following schedule:
(a) The monthly rental to be paid hereunder for the period from
January 1, 1998 through December 31, 1998 shall be the sum of
$2,520.00; AND,
(b) The monthly rental to be paid hereunder for the period from
January 1, 1999 through December 31, 1999 shall be the sum of
$2,596.00.
49. ACCESS TO PREMISES. Notwithstanding the Commencement Date specified herein,
the parties hereto agree that Lessee shall have the right to have access to the
Premises upon the execution of this Lease by both parties and the delivery of a
fully executed copy thereof by Lessor to Lessee, subject to all of the terms,
covenants and conditions of this Lease (including the tax, insurance, utility,
and maintenance obligations of Lessee, to the extent applicable) other than the
payment of rent from the date of such access through the day immediately
preceding the Commencement Date ("Access Period"). The purpose of such access
shall be to enable Lessee to prepare the Premises for its use and for incidental
storage of Lessee's personal property or equipment. Lessee shall not, by reason
of such access, interfere with Lessor or Lessor's agents in the performance of
any obligations Lessor may have under this Lease in connection with the
Premises, including the obligation of Lessor, if applicable, to complete any
construction, or to obtain any required final approval from any governmental
agency having jurisdiction with respect to any such obligation of Lessor. Lessor
shall have no liability for any loss, damage or injury to Lessee's personal
property, equipment, employees or agents which may be on or about the Premises
during the Access Period, and Lessee agrees to hold Lessor harmless from any
cost, expense or liability of any kind whatsoever arising out of Lessee's so
entering into the Premises during the Access Period, in accordance with the
applicable provisions of this Lease.
50. PARKING/TRUCKING AREAS. In connection with the use and occupancy of the
Premises by Lessee, Lessor hereby grants to Lessee the irrevocable license to
the exclusive use of seven (7) parking spaces at the front and rear of the
Premises, as outlined in blue on Exhibit A hereto, and the trucking area at the
rear of the Premises, together with all driveways, walkways and landscaped areas
pertinent thereto ("Appurtenant Land") during the term hereof or any extension
thereof, providing Lessee shall not be in Breach under any of the terms,
covenants or conditions of this Lease. This license shall terminate at the
expiration or earlier termination of this Lease. The applicable provisions of
this Lease pertaining to Lessee's maintenance obligations, tax and insurance
obligations, or any other applicable obligations or Lessee hereunder, shall
apply to the Appurtenance Land as if it were part of the Premises.
51. LESSOR'S OBLIGATIONS. Prior to the commencement of the term hereof, Lessor
shall at Lessor's sole cost and expense, complete the following repairs and/or
modifications to the Premises:
(a) Fill in, with matching frame and drywall, the opening in the wall
between the reception area and the office adjoining the reception
area on the East side, and paint both sides of the wall to match
the existing paint.
(b) Remove all abandoned wires, piping, conduit and/or other
non-functional items in the office immediately to the North of
the reception area, and patch & paint
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ADDENDUM TO STANDARD INDUSTRIAL/COMMERCIAL
SINGLE-TENANT LEASE-GROSS DATED DECEMBER 3, 1997
BETWEEN WESTLAKE INDUSTRIAL COMPLEX AS LESSOR
AND ENVIRONMENTAL PRODUCTS & TECHNOLOGIES CORP. AS LESSEE
to match the existing paint.
(c) Remove the wall of approximately 15 feet in length @ the East
side of the shipping-receiving area which currently separates the
shipping-receiving area from the warehouse area of the Premises.
52. PERCENT OF TOTAL PROPERTY. For any purpose under this Lease for which a
pro-ration of expenses applicable to the Premises is called for, the parties
hereto acknowledge that the Premises constitute 13.2% of the total property of
which the Premises are a part, and that Lessee shall be liable for any such
expenses in that same percentage proportion.
53. AIR CONDITIONING MAINTENANCE. It is agreed by the Parties hereto that Lessor
shall maintain, on Lessee's behalf, during the term hereof or any extension
thereof, a regular full-service air conditioning maintenance contract with a
qualified air conditioning contractor in satisfaction of Lessee's maintenance
obligation for the heating and air conditioning equipment in the Premises as
provided in this Lease. Such maintenance contract shall include the changing of
filters at the intervals recommended by the equipment manufacturer or
maintenance contractor. It is expressly understood and agreed by and between the
Parties hereto that the maintenance obligations or Lessee hereunder include the
replacement of any components of such heating and air conditioning equipment
which such contractor shall determine must be replaced from time to time during
the term hereof or any extension thereof to maintain such equipment in good
operating condition and repair. Lessee shall pay to Lessor as additional rent
under this Lease all costs of such maintenance contact and/or repairs promptly
as billed by Lessor.
54. LANDSCAPE MAINTENANCE. Notwithstanding any contrary provision hereof, the
Parties hereto agree that, during the term hereof or any extension thereof,
Lessor shall maintain all exterior landscaping which is part of the Appurtenant
Land pertaining to the Premises on behalf of Lessee, at Lessee's sole cost and
expense. Lessor reserves the right to engage the services of an independent
landscape contractor to do such work. Lessor shall bill Lessee periodically at
Lessor's cost for such maintenance, and Lessee shall pay to Lessor the amounts
so billed as additional rent hereunder as and when due. Such landscape
maintenance is understood to include the periodic cleaning of the parking and
trucking areas which are part of the Appurtenant Land.
55. TRASH DISPOSAL. Lessee understands and agrees that it shall be responsible
for its own trash disposal at all times during the term hereof or any extension
thereof. In that regard, in the event Lessee shall elect to have an outside
dumpster, it shall use the trash enclosure at the rear of the Premises which
Lessor shall designate for its use. Lessee shall not permit any dumpster to be
located anywhere on the exterior of the Premises other than in the designated
trash enclosure.
56. SIGNS. Lessee understands and agrees that it shall place no sign of any kind
on the exterior of the building of which the Premises are a part without the
prior written consent of Lessor. Lessor will arrange for the installation of the
standard sign at the entry monument to identify Lessee's Premises in compliance
with the sign conventions of the property of which the Premises are a part. Upon
Lessee's receipt from Lessor of the invoice evidencing the cost of Lessee's
sign, Lessee shall pay to Lessor as additional rent under this Lease the amount
of Lessor's actual cost for such signs.
57. DUAL AGENCY. Lessor and Lessee acknowledge by their execution hereof that
Group 100/Jim McDonald is acting as the agent of both Lessor and Lessee in
connection with this transaction and they consent to such dual representation.
In addition, Lessor and Lessee acknowledge that they have been presented with a
separate Agency Disclosure form for their approval and execution affirming the
foregoing agency relationships.
58. BROKER AS PRINCIPAL. The parties hereto acknowledge that James L. McDonald
is a principal in the entity acting as Lessor herein, is a licensee of the State
of California Real Estate Department, and is acting as a broker hereunder.
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Lessor's Initials Lessee's Initials
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<PAGE> 22
ADDENDUM TO STANDARD INDUSTRIAL/COMMERCIAL
SINGLE-TENANT LEASE-GROSS DATED DECEMBER 3, 1997
BETWEEN WESTLAKE INDUSTRIAL COMPLEX AS LESSOR
AND ENVIRONMENTAL PRODUCTS & TECHNOLOGIES CORP. AS LESSEE
59. NOTICE OF INDEPENDENCE. BY PLACING THEIR INITIALS WHERE INDICATED AT THE END
OF THIS PARAGRAPH, LESSEE AND LESSOR ACKNOWLEDGE THAT GROUP 100/JIM McDONALD HAS
REPRESENTED TO EACH OF THEM, AND THEY UNDERSTAND, THAT GROUP 100/JIM McDONALD IS
AN INDEPENDENTLY OWNED AND OPERATED BROKERAGE BUSINESS AND THAT GROUP 100/JIM
McDONALD IS SOLELY RESPONSIBLE FOR ITS OWN ACTS AND OMISSIONS. LESSEE AND LESSOR
ALSO UNDERSTAND THAT, NOTWITHSTANDING GROUP 100/JIM McDONALD'S USE OF THE TERM
"GROUP 100" IN ITS NAME, NO OTHER PERSON, ENTITY OR BROKER IS ANY WAY
RESPONSIBLE FOR ANY ACTS OR OMISSIONS OF GROUP 100/JIM McDONALD REGARDLESS OF
WHETHER SUCH OTHER PERSON, ENTITY OR BROKER ALSO USES THE TERM "GROUP 100" IN
ITS NAME.
/s/ /s/
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Lessor's Initials Lessee's Initials
60. MAJOR REPLACEMENT - USEFUL LIFE. Notwithstanding any contrary provision of
this Lease, if at any time during the term hereof or any extension thereof any
component of the subject building, or of any equipment located therein, which it
is the obligation of Lessee to maintain, requires replacement in the reasonable
opinion of a contract reasonably acceptable to Lessee and Lessor, the cost of
which component shall be $1,000.00 or more ("Major Component"), Lessee and
Lessor shall share the cost of such replacement as hereinafter set forth. If the
benefit or useful life of the Major Component extends beyond the term of this
Lease (as such term amy be extended by exercise of any options by Lessee), the
useful life of the Major Component shall be prorated over the remaining portion
of the term of this Lease (as extended), and Lessee shall be liable only for
that portion of the cost which is applicable to the term of this Lease (as
extended). For the purposes of this provision, the useful life of an air
conditioning compressor is stipulated to be five (5) years, and the useful life
of a firebox component of any HVAC unit is stipulated to be ten (10) years.
61. OPTION TO EXTEND.
61.1 If Lessee is not then and shall not previously have been in Breach under
any of the terms, covenants and conditions of this Lease, and providing it shall
deliver written notice to Lessor during the period from August 1, 1999 through
September 30, 1999 of its election to extend the term hereof, then it shall have
the option to extend the term of this Lease for an additional period of two (2)
years.
61.2 The terms, covenants and conditions for said extended term shall be the
same as in this Lease, except that the monthly rental during the extended term
shall be paid in accordance with the following schedule:
(a) The monthly rental to be paid hereunder for the period from
January 1, 2000 through December 31, 2000 shall be the sum of
$$2,674.00; AND,
(b) The monthly rental to be paid hereunder for the period from
January 1, 2001 through December 31, 2001 shall be the sum of
$2,754.00.
61.3 If this option is exercised by Lessee, the Security Deposit shall be
increased by the same percentage as the upward adjustment of the monthly rental
provided in this paragraph. In such event, Lessor is authorized to hold the
Security Deposit from the immediately preceding period of this Lease as a
portion of the Security Deposit for the term extended by the exercise of this
option, and Lessee shall remit to Lessor the amount of the increase determined
as a result of the increase in the monthly rental upon its notification in
writing by Lessor of the amount of such increase.
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<PAGE> 23
ADDENDUM TO STANDARD INDUSTRIAL/COMMERCIAL
SINGLE-TENANT LEASE-GROSS DATED DECEMBER 3, 1997
BETWEEN WESTLAKE INDUSTRIAL COMPLEX AS LESSOR
AND ENVIRONMENTAL PRODUCTS & TECHNOLOGIES CORP. AS LESSEE
61.4 It is the intent of the parties hereto that the option granted to Lessee
herein shall not be exercisable by Lessee unless Lessee shall be in possession
of the Premises as of the date of its exercise hereof. This option is being
granted to Lessee with the express understanding that the option is personal to
Lessee and is not assignable to nay sublessee or assignee under this Lease other
than to any corporation which controls, is controlled by or is under common
control with Lessee, or to nay corporation resulting from the merger or
consolidation with Lessee, or to any person or entity which acquires all the
assets of Lessee as a going concern of the business that is being conducted on
the Premises ("Lessee Affiliate"), and is intended solely to enable Lessee to
continue to occupy the Premises for the conduct of its own business for the
period beyond the initial term hereof.
61.5 This option shall terminate and be of no further force and effect in the
event Lessee shall either sublease or agree to sublease the Premises for all of
the then current term of this Lease, or assign this Lease or agree to enter into
such assignment, at any time prior to the exercise of this option or within
ninety (90) days after the exercise of this option, except, where such sublease
or assignment shall be to a Lessee Affiliate, provided that said assignee shall
have assumed in full the obligations of Lessee under this Lease.
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Lessor's Initials Lessee's Initials
Page 4
<PAGE> 1
EXHIBIT 10.13
1996 STOCK OPTION PLAN
OF
ENVIRONMENTAL PRODUCTS & TECHNOLOGIES CORPORATION
1. Purpose of the Plan
The purposes of the 1996 Stock Option Plan (the "Plan") of Environmental
Products & Technologies Corporation (the "Company") is to:
(a) Furnish incentive to individuals chosen to receive options because
they are considered capable of responding by improving operations and increasing
profits;
(b) Encourage officers, selected employees and consultants to accept
or continue employment with, or continue consulting to, the Company or its
Affiliates; and
(c) Stimulate greater participation of selected employees, directors
and consultants in the Company's welfare through increasing their interest, and
participation in the growth of the Common Stock of the Company.
To accomplish the foregoing objectives, this Plan provides a means whereby
officers, directors, employees and consultants may receive options to purchase
Common shares. Options granted under this Plan will be either nonqualified
options ("NQO") or incentive stock options ("ISO").
2. Eligible Persons
Every person who at the date of grant is an employee of the Company is
eligible to receive NQOs or ISOs under this Plan; provided, however, that an ISO
may not be granted under this Plan to any person who owns, directly or
indirectly, stock of the Company constituting more than twenty five percent of
the total combined voting power of the Company's outstanding stock, unless the
exercise price of the ISO at the time of the option is granted is at least 110
percent of the fair market value of the stock subject to the option, and the
option is exercisable for no more than five years after the date of the grant,
as set forth in Section 6.2. The term employee includes an officer or director
who is an employee, as well as a non-officer, non-director, regular employee of
the Company. Every person who at the date of grant is a non-employee director or
consultant to the Company is eligible to receive NQOs but shall not be eligible
to receive ISOs. The term "consultant" includes persons employed by, or
otherwise affiliated with, a consultant.
3. Stock Subject To This Plan
The total number of shares of stock which may be granted pursuant to the
Plan is 400,000 common shares of the Company, par value $.01 per share. The
shares covered by the portion of any grant which expires unexercised under the
Plan shall become available again for grants under the Plan. The number of
shares reserved for purchase under the Plan is subject to adjustment in
accordance with the provisions for adjustment in the Plan.
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4. Administration
The Plan shall be administered by the Board of Directors of the Company or
by a committee appointed by the Board which shall not have less than three
Board members (in either case, the "Administrator"). Subject to the provisions
of the Plan, the Administrator shall have the authority to select the persons to
receive options under the Plan, to fix the number of shares which each optionee
may purchase, to set the terms and conditions of each option (including whether
each option should be a NQO, an ISO or in part a NQO and in part an ISO), and
to determine all other matters relating to the Plan. All questions of
interpretation, implementation, and application of the Plan shall be determined
by the Administrator. Such determination shall be final and binding on all
persons.
5. Granting of Options
No options shall be granted under this Plan after ten years from the date
of adoption of this Plan by the Board of Directors.
Each option shall be evidenced by a written stock option agreement, in
form satisfactory to the Company, executed by the Company and the person to
whom such option is granted. The agreement shall specify whether each option it
evidences is a NQO, an ISO, or in part a NQO and in part an ISO. If an option
is in part a NQO and in part an ISO, the agreement shall clearly identify each
portion and the number of shares subject to each portion.
The Administrator can grant ISOs for shares of any value, provided that
the value of the shares subject to one or more ISOs first exercisable in any
calendar year does not exceed $100,000 (determined at the grant date) plus
fifty percent (50%) of any unused limit carryover from prior years.
The Administrator may approve the grant under this Plan to persons who are
expected to become officers, directors, employees of, or consultants to, the
Company, but are not officers, directors, employees or consultants at the date
of approval. In such cases, the option shall be deemed granted, without further
approval, on the date the grantee becomes an officer, director, employee or
consultant and must satisfy all requirements of this Plan for options granted
on that date.
6. Terms and Conditions of Option
Each option granted under this Plan shall be designated as an ISO, a NQO,
or in part an ISO and in part a NQO. Each option shall be subject to the terms
and conditions set forth in Section 6.1. NQOs shall be also subject to the terms
and conditions set forth in Section 6.2, but not those set forth in Section
6.3. ISOs shall also be subject to the terms and conditions set forth in
Section 6.3, but not set forth in Section 6.2.
6.1 Terms and Conditions to which all Options are subject
All options granted under this Plan shall be subject to the following
terms and conditions:
6.1.1 Changes in Capital Structure
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Subject to Section 6.1.2, if the stock of the Company is changed by reason
of a stock split, reverse stock split, stock dividend, or recapitalization, or
converted into or exchanged for other securities as a result of a merger,
consolidation or reorganization, appropriate adjustments shall be made in (A)
the number and class of shares of stock subject to this Plan and each option
outstanding under this Plan, and (B) the exercise price of each outstanding
option; provided, however, that the Company shall not be required to issue
fractional shares as a result of any such adjustments. In the case of a
fractional share, it shall be rounded to the next full share. Each such
adjustment shall be determined by the Administrator at his sole discretion,
which determination shall be final and binding on all persons.
6.1.2 Corporate Transactions.
New option rights may be substituted for the option right granted
under this Plan, or the Company's obligations as to options outstanding under
this Plan may be assumed, by an employer corporation other than the Company, or
by a parent or subsidiary of such employer corporation, in connection with any
merger, consolidation, acquisition, separation, reorganization, liquidation or
like occurrence in which the Company is involved, in such manner that the then
outstanding options which are ISOs will continue to be "incentive stock
options" within the meaning of the applicable section of the Internal Revenue
Code, as amended (the "Code"), to the full extent permitted thereby.
Notwithstanding the foregoing or the provisions of Section 6.1.1, if such
employer corporation, or parent or subsidiary of such employer corporation,
does not substitute new option rights for, and substantially equivalent to, the
option rights granted hereunder, or assume the option rights granted hereunder,
or if the Company's Board of Directors determines, in its sole discretion, that
option rights outstanding under this Plan should not then continue to be
outstanding, the option rights granted hereunder shall terminate (a) upon
dissolution, liquidation, merger, consolidation, acquisition, separation, or
similar occurrence, or (b) upon any merger, consolidation, acquisition,
separation, or similar occurrence, where the Company will not in economic
substance be a surviving corporation; provided however, that each optionee
shall be mailed notice at least ten days prior to such dissolution,
liquidation, merger, consolidation, acquisition, separation or similar
occurrence, and shall have at least six days after the mailing of such notice
to exercise any unexpired option rights granted hereunder to the extent such
option rights are then exercisable.
6.1.3 Time of Option Exercise. Options granted under this Plan shall
be immediately exercisable, and shall be exercisable in whole or in part.
6.1.4 Change of Option Period. Notwithstanding any other provision
of this Plan (except Section 6.3.3), the Administrator may accelerate or defer
the earliest date or dates on which outstanding options (or any installments
thereof) are exercisable.
6.1.5 Option Grant Date. Except in case of advance approvals
described in Section 5, the date of grant of an option under this Plan shall be
the date on which the Administrator approves the grant. No option shall be
exercisable, however, until a written stock option agreement in form
satisfactory to the Company is executed by the Company and the optionee.
6.1.6 Nonassignability of Option Rights. No option granted under
this Plan shall be assignable or otherwise transferable by the optionee except
by will or by the laws of descent and distribution. During the life of the
optionee, an option shall be exercisable only by the optionee.
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6.1.7 Payment. Except as provided below, payment in full, in cash, shall
be made for all stock purchased at the time written notice of exercise of an
option is given to the Company, and proceeds of any payment shall constitute
general funds of the Company. At the time an option is granted or exercised,
the Administrator, in the exercise of its absolute discretion, may authorize
any one or more of the following additional methods of payment.
(a) Acceptance, in the case of an optionee who is an employee, of the
optionee's full recourse promissory note for all or part of the option price,
payable on such terms and bearing such interest rate as determined by the
Administrator (but in no event less than the minimum interest rate specified by
Federal tax law at which no additional interest would be imputed), which
promissory note may be either secured or unsecured in such manner as the
Administrator shall approve (including, without limitation, by a security in
the shares of the Company); and
(b) Delivery by the optionee of Common Shares already owned by the
optionee of all or part of the option price, provided the Value (determined as
set forth in Section 6.3.1) of such Common Shares is equal on the date of
exercise to the option price, or such portion thereof as the optionee is
authorized to pay by delivery of such stock; provided, however, that if an
optionee has exercised any portion of any option granted by the Company by
delivery of Common Shares, the optionee may not, within six months following
such exercise, exercise any option granted under this Plan by delivery of Common
Shares.
6.1.8 Termination of Employment. Option rights, granted to an employee
under this Plan, to the extent such rights have not then expired or been
exercised, shall terminate three months after optionee ceases, for any reason,
to be an employee of the Company, and shall not be exercisable on or after said
date, except that if termination of employment is due to the disability or
death of the optionee, the optionee, or the optionee's representative or any
other person who acquires the option rights from the optionee by will or the
applicable laws of descent and distribution, may within twelve months after the
termination of employment, exercise the rights to the extent they were
exercisable on the date of the termination. A transfer of an optionee from the
company to an Affiliate or vice versa, or from one Affiliate to another, or a
leave of absence duly authorized by the Company, shall not be deemed a
termination of employment or a break in continuous employment. Option rights
granted to a consultant under this Plan, to the extent such rights have not
expired or been exercised, shall terminate at such times and in such a manner
as provided by the Administrator at the time of grant.
6.1.9 Repurchase of Stock. At the option of the Administrator, the stock
to be delivered pursuant to the exercise of any option granted to an employee
under this Plan may be subject to a right of repurchase in favor of the Company
with respect to any employee whose employment with the Company is terminated.
At the option of the Administrator, the stock to be delivered pursuant to
exercise of any option granted to a consultant under this Plan may be subject
to a right of repurchase in favor of the Company with respect to any consultant
whose consultancy to the Company is terminated. Any right of repurchase shall
be at the option exercise price and shall expire at such times as set by the
Administrator. Fractional Shares subject to repurchase shall be rounded to the
nearest full share.
6.1.10 Other Provisions. Each option granted under this Plan may contain
such other terms, provisions, and conditions not inconsistent with this Plan as
may be determined by the Administrator, and each ISO granted under this Plan
shall include such provisions and conditions as are necessary to qualify the
option as an "incentive stock option" within the meaning of the Code.
6.2 Terms and Conditions to Which Only NQOs Are Subject.
Options granted under this Plan which are designated as NQOs shall be subject
to the following
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terms and conditions:
6.2.1 Exercise Price. The exercise price of a NQO shall be not less
than 85 percent of the fair market value (determined in accordance with Section
6.3.1) of the stock subject to the option on the date of the grant.
6.2.2 Option Term. Each NQO granted under this Plan shall expire ten
years from the date of its grant or such earlier date as may be set by the
Administrator on the date of its grant.
6.2.3 Withholding and Employment Taxes. At the time of exercise of an
NQO, the optionee shall remit to the Company in cash all applicable federal and
state withholding and employment taxes.
6.3 Terms and Conditions to which Only ISOs Are Subject.
Options granted under this Plan which are designated as ISOs shall be subject
to the following terms and conditions:
6.3.1 Exercise Price. The exercise price of an ISO, which shall be
approved by the Board of Directors, shall be determined in accordance with the
applicable provisions of the Code and shall in no event be less than the fair
market value (determined as described in the paragraph) of the stock covered by
the option at the time the option is granted, except that the exercise price of
an ISO granted to any person who owns, directly or indirectly, (or is treated as
owning by reason of attribution rules, currently set forth in Code Section 425)
stock of the Company constituting more than ten percent of the total combined
voting power of the Company's outstanding stock, or the stock of any Affiliate
of the Company, shall in no event be less than 110 percent of such fair market
value. In the absence of an established market for the stock, the fair market
value thereof shall be determined in good faith by the Administrator, with
reference to the Company's net worth, prospective earning power, dividend-paying
capacity, and other relevant factors, including the goodwill of the Company, the
economic outlook in the Company's industry, the Company's position in the
industry and its management, and the values of stock of other corporations in
the same or a similar line of business. If the stock of the Company is regularly
quoted by a recognized securities dealer, its fair market value shall be the
mean between the high bid and the low asked price for the stock on the date the
option is granted (or if there are no quoted prices for the date of grant, then
for the last preceding business day on which there were quoted prices). If the
stock of the Company is listed on any stock exchange, its fair market value
shall be the mean between the highest and lowest selling prices for such stock
as quoted on such exchange (or the largest such exchange) for the date the
option is granted (or if there are no sales for such date of grant, then for the
last preceding business day on which there were sales).
6.3.2 Expiration. Unless an earlier expiration date is specified by
the Administrator at the time of grant, each ISO granted under this Plan shall
expire ten years from the date of its grant, except that an ISO granted to any
person who owns, directly or indirectly, (or is treated as owning by reason of
applicable attribution rules, currently set forth in Code Section 425) stock of
the Company constituting more than twenty five percent of the total stock of
any Affiliate of the Company, shall expire five years from the date of its
grant.
6.3.3 Disqualifying Dispositions. If stock acquired by exercise of an
ISO granted pursuant to this Plan is disposed of within two years from the date
of grant of the option or within one year after the transfer of the stock to the
optionee, the holder of the stock immediately prior to the disposition shall
promptly notify the Company in writing of the date and terms of the disposition
and shall provide such other information regarding the disposition as the
Company may
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reasonably require.
6.3.4 Withholding Taxes. At the time of exercise of the ISO,
the optionee shall remit to the Company in cash any applicable state
withholding and employment taxes.
7. Manner of Exercise.
An optionee wishing to exercise an option shall give written notice to
the Company at its principal executive office, to the attention of the
Secretary of the Company, accompanied by an executed stock option agreement in
the form and substance satisfactory to the Company and by payment of the
exercise price as provided in Section 6.1.7. The date the Company receives
written notice of an exercise hereunder accompanied by payment of the exercise
price will be considered as the date such option was exercised.
Promptly after receipt of written notice of exercise of an option, the
Company shall, without stock issue or transfer taxes to the optionee or other
person entitled to exercise the option, deliver to the optionee or such other
person a certificate or certificates for the requisite number of shares of
stock. An optionee or transferee of an option shall not have any privileges as
shareholders with respect to any stock covered by the option until the date of
issuance of a stock certificate.
8. Employment or Consulting Relationship
Nothing in this Plan or any option granted hereunder shall interfere
with or limit in any way the right of the Company or any of its Affiliates to
terminate any optionee's employment or consultancy at any time, nor confer upon
any optionee any right to continue in the employ of, or consulting to, the
Company or any of its Affiliates.
9. Amendment, Suspension or Termination of This Plan
The Board of Directors of the Company may from time to time, with
respect to any shares at the time not subject to options, suspend or terminate
the Plan or amend or revise the terms of the Plan; provided that any amendment
would (i) materially increase the benefits accruing to participants under the
Plan; (ii) increase the number of shares of Common Stock which may be issued
under the Plan; or (iii) materially modify the requirements as to eligibility
for participation in the Plan.
No amendment, suspension or termination of the Plan shall, without the
consent of the Optionee, alter or impair any rights or obligations under any
option theretofore granted to such Optionee under the Plan.
The Plan shall terminate on September 30, 2006.
10. Effective Date of the Plan
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The Plan shall become effective upon adoption by the Board of
Directors; provided, however, that no option shall be exercisable unless and
until unanimous written consent of the stockholders of the Company, or approval
by stockholders of the company voting at a validly called Stockholders meeting
and holding a majority (or such greater number as may be required by law or
entitled to vote), is obtained within 12 months after adoption by the Board of
Directors.
Options may be granted and exercised under this Plan only after there has been
compliance with all applicable federal and state securities laws.
Date adopted by the Board of Directors: Dec. 27, 1995
Date approved by Shareholders: Dec. 30, 1995
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EMPLOYEE STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT ("Agreement") is made and entered into as of
___________, between Environmental Products & Technologies Corporation, a
Delaware Corporation ("Company"), and ____________________ ("Purchaser").
THE PARTIES AGREE AS FOLLOWS:
1. Purchase of Shares. Pursuant to the Company's 1996 Stock Option
Plan ("Plan") a copy of which is attached to this Agreement as Exhibit 1, the
Company hereby sells to Purchaser, and the Purchaser hereby buys from the
Company, __________ shares ("Plan Shares") of the Company's $.01 par value
Restricted Common Stock on the terms and conditions set forth herein and in the
Plan, the terms and conditions of the Plan being hereby incorporated into this
Agreement by reference.
2. Purchase Price. The purchase price of the Plan Shares shall be
$______ per share, for a total purchase price of $______ ("Purchase Price")
payable upon execution of this Agreement in cash or by check to the order of
the Company.
3. Employee Stock Restriction Agreement.
3.1 Execution of Agreement. This Agreement shall not become
effective until Purchaser shall have executed an Employee Stock Restriction
Agreement with respect to "Plan Shares" ("Restrictive Agreement") in the form
attached hereto as Exhibit 2.
3.2 Taxation Election. No certificate for "Plan Shares" shall
be delivered and this Agreement shall not become effective until Purchaser
shall have signed and delivered to the Company either the election attached
hereto as Exhibit 3, or the waiver of election attached hereto as Exhibit 4.
4. Representations, Warranties, Covenants, and Acknowledgements of
Purchaser. Purchaser hereby represents, warrants, covenants, acknowledges and
agrees that:
4.1 Investment. Purchaser is acquiring the "Plan Shares" for
Purchaser's own account, and not for the account of any other person. Purchaser
is acquiring the "Plan Shares" for investment and not with a view to
distribution or resale thereof except in compliance with applicable laws
regulating securities.
4.2 Business Experience. Purchaser is capable of evaluating
the merits and risks of Purchaser's investment in the Company evidenced by the
purchase of the "Plan Shares."
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4.3 Relation to Company. Purchaser is presently an officer, director, or
employee of the Company and in such capacity has become personally familiar
with the business, affairs, financial condition, and results of operations of
the Company.
4.4 Access to Information. Purchaser has had the opportunity to ask
questions of, and to receive answers from, appropriate executive officers of
the Company with respect to the terms and conditions of the transactions
contemplated hereby and with respect to the business, affairs, financial
conditions, and results of operations of the Company. Purchaser has had the
opportunity to obtain any additional information necessary to verify any of
such information to which Purchaser has had access.
4.5 Speculative Investment. Purchaser's investment in the Company
represented by the "Plan Shares" is highly speculative in nature and is subject
to a high degree of risk of loss in whole or in part. The amount of such
investment is within Purchaser's total financial resources and would not
jeopardize the personal financial needs of Purchaser or Purchaser's family in
the event such investment were lost in whole or in part.
4.6 Registration. Purchaser must bear the economic risk of investment for
an indefinite period of time because the sale to Purchaser of the "Plan Shares"
has not been registered under the Securities Act of 1933 (the "Act") and the
"Plan Shares" cannot be transferred by Purchaser unless such transfer is
registered under the Act or an exemption from such registration is available.
The Company has made no agreements, covenants or undertakings whatsoever to
register the transfer of any of the "Plan Shares" under the Act. The Company
has made no representations, warranties, or covenants whatsoever as to whether
any exemption from the Act, including without limitation any exemption pursuant
to Rule 144, will be available; if the exemption under Rule 144 is available at
all, it will not be available unless: (i) a public trading market then exists
in the Company's capital stock; (ii) adequate information as to the Company's
financial and other affairs and operations is then available to the public; and
(iii) all other terms and conditions of Rule 144 have been satisfied.
4.7 Public Trading. The Company's securities are presently publicly
traded, and the Company has made no representations, covenant or agreement as
to whether there will be a public market for any of its securities at the time
the option is exercised.
4.8 Tax Advise. The Company has made no warranties or representations to
Purchaser with respect to the income tax consequences of the transactions
contemplated by this Agreement and Purchaser is in no manner relying on the
company or its representatives for an assessment of such tax consequences.
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<PAGE> 10
5. Binding Effect. Subject to the limitations set forth in this
Agreement, this Agreement shall be binding upon and inure to the benefit of,
the executors, administrators, heirs, legal representatives, successors and
assigns of the parties hereto.
6. Damages. Purchaser shall be liable to the Company for all cost and
damages, including incidental and consequential damages, resulting from a
disposition of "Plan Shares" which is not in conformity with the provisions of
this Agreement.
7. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of North Carolina.
8. Notice. All notices and other communications under this Agreement
shall be in writing. Unless and until the Participant is notified in writing to
the contrary, all notices, communications and documents directed to the Company
and related to this Agreement, if not delivered by hand, shall be mailed to the
Company's executive offices.
Unless and until the Company is notified in writing to the contrary, all
notices, communications and documents intended for the Participant and relating
to this Agreement, if not delivered by hand, shall be mailed to Participant's
last known address as shown on the Company's books. Notice and communications
shall be mailed by registered mail, return receipt requested, postage prepaid.
All mailing and deliveries related to this Agreement shall be deemed received
only when actually received.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of this
_____ day of _____________, 199__.
ENVIRONMENTAL PRODUCTS & TECHNOLOGIES CORPORATION
By ___________________________
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<PAGE> 11
The Purchaser hereby accepts and agrees to be bound by all of the terms
and conditions of this Agreement and the Plan.
Purchaser:
----------------------------------------
Purchaser's spouse indicates by the execution of this Agreement his or her
consent to be bound by the terms herein as to his or her interests, whether as
community property or otherwise, if any, in the shares hereby purchased.
Purchaser's Spouse:
-----------------------------------------------
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<PAGE> 12
NON-QUALIFIED STOCK OPTION AGREEMENT
This Stock Option Agreement ("Agreement"), is made and entered into as of
___________, 199_, between Environmental Products & Technologies Corporation, a
Delaware corporation ("Company") and____________________, ("Optionee").
The Parties Agree As Follows:
1. Grant of Option and Effective Date.
1.1 Grant. The Company hereby grants to Optionee pursuant to the
Company's 1996 Stock Option Plan ("Plan"), a Non Qualified Stock Option ("NQO")
to purchase all or any part of an aggregate of_____________ shares ("NQO
Shares") of the Company's Common Stock on the terms and conditions set forth
herein and in the Plan, the terms and conditions of the Plan being incorporated
into this Agreement by reference.
1.2 Effective Date. The effective date of this NQO is
_____________("Effective Date").
2. Exercise Price. The exercise price for the purchase of the NQO shares
covered by this NQO shall be $_________ per share.
3. Term. Unless otherwise specified on Exhibit 1 attached hereto, (the
absence of such exhibit indicating that no exhibit was intended), this NQO shall
expire as provided in Section 6.3.2 of the Plan.
4. Adjustment of NQOs. The Company shall adjust the number and kind of
shares and the exercise price thereof in certain circumstances in accordance
with the provisions of Section 6.1.1 of the Plan.
5. Exercise of Options.
5.1 Time of Exercise. The NQO shall be exercisable in whole or in part
as of the Effective Date.
5.2 Exercise After Termination of Employment. This NQO may be
exercised after termination of the Optionee's employment only in accordance with
the provisions of Section 6.1.8 of the Plan.
5.3 Manner of Exercise. Optionee may exercise this NQO, or any portion
of this NQO, by giving written notice to the company at its principal executive
office, to the attention of the Secretary of the Company, accompanied by a copy
of the Stock Option Plan Purchase Agreement ("Stock Purchase Agreement") in
substantially the form attached hereto as Exhibit 1 executed by Optionee (or at
the option of the Company such other form of stock purchase agreement as shall
then be acceptable to the Company), payment of the exercise price and payment of
any applicable withholding or employment taxes. The date the Company receives
written notice of an exercise hereunder accompanied by payment will be
considered as the date this NQO was exercised.
Promptly after receipt of written notice of exercise of the NQO, the
Company shall without stock issue taxes or transfer taxes to the Optionee or
other person entitled to exercise, deliver to the
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<PAGE> 13
Optionee or other person a certificate or certificates for the requisite number
of NQO Shares. An Optionee or transferee of an option shall not have any
privileges as a shareholder with respect to any NQO Shares covered by the option
until the date of issuance of a stock certificate.
5.4 Payment. Payment in full, in cash, shall be made for all NQO
Shares purchased at the time written notice of exercise of the NQO is given to
the Company, and proceeds of any payment shall constitute general funds of the
Company.
6. Nonassignability of NQO. This NQO is not assignable or transferable by
Optionee except by will or by the laws of descent and distribution. During the
life of Optionee, the NQO is exercisable only by the Optionee. Any attempt to
assign, pledge, transfer, hypothecate or otherwise dispose of this NQO in a
manner not herein permitted, and any levy of execution, attachment, or similar
process on this NQO, shall be null and void.
7. Company's Rights to Repurchase Upon Termination of Employment. The NQO
Shares shall be subject to a right of repurchase in favor of the Company (the
"Right of Repurchase"). The company may purchase NQO Shares subject to the Right
of Repurchase for an amount per share equal to the price per share the Optionee
paid for the NQO Shares (exclusive of any taxes paid upon acquisition of the
stock) if the Optionee's employment, directorship or consultancy with the
Company terminates before the Right of Repurchase expires. Fractional shares
subject to repurchase shall be rounded to the fullest share. The Optionee may
not dispose of or transfer NQO Shares while such shares are subject to the Right
of Repurchase and any such attempted transfer shall be null and void.
8. Company's Right of First Refusal Repurchasing Exercised Shares.
8.1 Right of First Refusal. In the event that the Optionee proposes to
sell, pledge, or otherwise transfer any NQO Shares, the Company shall have a
right of first refusal ("Right of First Refusal") with respect to such NQO
Shares. Any Optionee desiring to transfer NQO Shares to any person or entity
shall give a written notice ("Transfer Notice") to the Company describing fully
the proposed transfer, including the number of NQO Shares proposed to be
transferred, the proposed transfer price, and the name and address of the
purposed transferee. The Transfer Notice shall be signed both by the Optionee
and by the proposed transferee and must constitute a binding commitment of both
parties for the transfer of such NQO Shares. The Company shall have the right to
purchase the NQO Shares subject to the Transfer Notice on the terms of the
proposed transfer described in the Transfer Notice by delivery of a notice of
exercise of the Company's Right of First Refusal within 30 days after the date
the Transfer Notice is delivered at the Company. The Company's rights under this
Section 8.1 shall be freely assignable, in whole or in part.
8.2 Transfer of Exercised Shares. If the Company fails to exercise the
Right of First Refusal within 30 days from the date the Transfer Notice is
delivered to the Company, the Optionee may, not less than 30 days following
delivery to the Company of the Transfer Notice, conclude a transfer of the NQO
Shares subject to the Transfer Notice. Any proposed transfer on terms and
conditions different from those described in the Transfer Notice, as well as any
subsequent proposed transfer by the Optionee, shall again be subject to the
Right of First Refusal and shall require compliance by the Optionee with the
procedure described in Section 8.1 of this Agreement. If the Company exercises
the Right of First Refusal, the parties shall consummate the sale of the NQO
Shares on the terms set forth in the Transfer Notice; provided, however, in the
event the Transfer Notice provides for payment for the NQO Shares other than in
cash, the Company shall have the option of paying for the NQO Shares by the
discounted cash equivalent of the consideration described in the Transfer
Notice.
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<PAGE> 14
8.3 Binding Effect. The Right of First Refusal shall inure to the benefit
of the successors and assigns of the Company and shall be binding upon any
transferee of the NQO Shares other than a transferee acquiring NQO Shares in a
transaction where the Company failed to exercise the Right of First Refusal (a
"Free Transferee") or a transferee of a Free Transferee.
8.4 Termination of Company's Right of First Refusal. Notwithstanding
anything in this Section 8, in the event that the stock is listed on an
established stock exchange or quoted on the National Association of Securities
Dealers Automated Quotation system at the time the Optionee desires to transfer
NQO Shares, the Company shall have no Right of First Refusal, and Optionee
shall have no obligation to comply with the procedures Sections 8.1 through 8.3.
9. Restriction on Issuance of Shares.
9.1 Legality of Issuance. The Company shall not be obligated to sell
or issue any NQO Shares pursuant to this Agreement if such sale or issuance, in
the opinion of the Company and the Company's counsel, might constitute a
violation by the Company of any provision of law, including without limitation
the provisions of the Securities Act of 1933, as amended ("Act").
9.2 Registration or Qualification of Securities. The Company may,
but shall not be required to, register or qualify the sale of this NQO or any
NQO Shares under the Act or any other applicable law. The Company shall not be
obligated to take any affirmative action in order to cause the grant or
exercise of this option or the issuance or sale of any NQO Shares pursuant
thereto to comply with any law.
10. Restriction on Transfer. Regardless of whether the sale of the NQO
Shares has been registered under the Act or has been registered or qualified
under the securities laws of any state, the Company may impose restrictions
upon the sale, pledge or other transfer of the NQO Shares (including the
placement of appropriate legends on stock certificates) if, in the judgment of
the Company and the Company's counsel, such restrictions are necessary or
desirable in order to achieve compliance with the provisions of the Act, the
securities laws of any state, or any other law.
11. Stock Certificates. Stock Certificates evidencing NQO Shares will
bear such restrictive legends as the Company and the Company's counsel deem
necessary or advisable under applicable law or pursuant to this Agreement,
including, without limitation, the following legends:
"The offering and sale of the securities represented hereby have not
been registered under the Securities Act of 1933 ("Act"). Any transfer of such
securities will be invalid unless a Registration Statement under the Act is in
effect as to such transfer or in the opinion of counsel for the Company such
registration is unnecessary in order for such transfer to comply with the Act."
"It is unlawful to consummate a sale or transfer of these securities,
or any interest therein, or to receive any consideration therefor, without
the prior written consent of the Secretary of State of the State of North
Carolina, except as permitted in the Commissioner's rules."
"The securities represented hereby are subject to a Right of First
Refusal ("Right of First Refusal") by the company pursuant to the provisions of
the Company's 1995 Stock Option Plan and a purchase agreement relating to such
securities, and may not be sold or otherwise transferred except in compliance
with the terms of such Right of First Refusal."
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<PAGE> 15
"The securities represented hereby may be subject to a right of repurchase
by the Company, pursuant to the provisions of the Company's 1996 Stock Option
Plan and the agreement relating to the acquisition of such securities should
the person initially issued these securities cease to be employed by the
Company or any affiliate thereof."
12. Representations, Warranties, Covenants and Acknowledgements of the
Optionee Upon Exercise of NQO. Optionee hereby agrees that in the event that
the Company and the Company's counsel deem it necessary or advisable in the
exercise of their discretion, the issuance of the NQO Shares may be conditioned
upon the purchasing NQO Shares ("Purchaser") making certain representations,
warranties, and acknowledgements, including, without limitation those set forth
in Section 12.1 through 12.7 inclusive:
12.1 Investment. Purchaser is acquiring the NQO Shares for
Purchaser's own account, and not for the account of any other person. Purchaser
is acquiring the NQO Shares for investment and not with a view to distribution
or resale thereof except in compliance with applicable laws regulating
securities.
12.2 Business Experience. Purchaser is capable of evaluating the
merits and risks of Purchaser's investment in the Company evidenced by the
purchase of the NQO Shares.
12.3 Relations to Company. Purchaser is presently an officer,
director or other employee of the Company and in such capacity has become
personally familiar with the business affairs, financial condition, and results
of operations of the Company.
12.4 Access to Information. Purchaser has had the opportunity to ask
questions of, and to receive answers from, appropriate executive officers of
the Company with respect to the terms and conditions of the transaction
contemplated hereby and with respect to the business, affairs, financial
conditions, and results of operations of the Company. Purchaser has had access
to such financial and other information as is necessary in order for Purchaser
to make a fully-informed decision as to investment in the Company by way of
purchase of the NQO Shares, and has had the opportunity to obtain any
additional information necessary to verify any of such information to which
Purchaser has had access.
12.5 Speculative Investment. Purchaser's investment in the Company
represented by the NQO Shares is highly speculative in nature and is subject to
a high degree of risk of loss in whole or in part. The amount of such
investment is within Purchaser's risk capital means and is not so great in
relation to Purchaser's total financial resources as would jeopardize the
personal financial needs of the Purchaser or Purchaser's family in the event
such investment were lost in whole or in part.
12.6 Registration. Purchaser must bear the economic risk of
investment for an indefinite period of time because the sale to Purchaser of
the NQO Shares has not been registered under Act and the NQO Shares cannot be
transferred by Purchaser unless such transfer is registered under the Act or an
exemption from such registration is available. The Company has made no
agreement, covenants or undertakings whatsoever to register the transfer of any
of the NQO Shares under the Act. The Company has made no representations,
warranties, or covenants whatsoever as to whether any exemption including
without limitation any exemption for limited sales in routine brokers'
transactions pursuant to Rule 144, will be available.
12.7 Tax Advice. The Company has made no warranties or
representations to
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<PAGE> 16
Purchaser with respect to the income tax consequences of the transactions
contemplated by the option agreement pursuant to which the NQO Shares will be
purchased and Purchaser is in no manner relying on the Company or the Company's
representatives for an assessment of such tax consequences.
13. Recision, Avoidance or Reformation in Certain Circumstances. The
parties acknowledge that any grant to purchase Restricted Common Stock was
based upon their mutual belief that: (i) Restricted Common Stock constitutes a
series of Common Shares and its conversion into Common Stock is not a taxable
event, and (ii) that the Company need not incur compensation expense for
financial reporting or accounting purposes based on the difference between the
fair market value of the Company's Restricted Common Stock and the fair market
value of the Common Stock into which it is convertible. The parties further
acknowledge that the above beliefs were a basic assumption on which the grant
was made and that the failure of either or both of the assumptions would be a
mutual mistake of fact having a material effect on the agreed exchange of
performances. In consequence, should the Company be notified by its certified
public accountants prior to December 31, that it will be required to recognize
any such compensation expense, or should any legal authority be published
relating to securities similar to the Restricted Common Stock (including
without limitation, any revenue ruling of the Internal Revenue Service or any
pronouncement by the Financial Accounting Standards Board) which shows the
above beliefs to have been false, the Company shall have a right (but not an
obligation), without further act of the Optionee, to rescind or avoid this
Agreement or to reform this Agreement to conform with any such published
authority. The Company in such event shall also have a right (but not an
obligation) to rescind the sale of the NQO Shares (and any other securities
into which they may be converted).
14. Assignment; Binding Effect. Subject to the limitations set forth in
this Agreement, this Agreement shall be binding upon and inure to the benefit
of the executors, administrators, heirs, legal representatives, and successors
of the parties hereto; provided, however, that Optionee may not assign any of
Optionee's rights under this Agreement.
15. Damages. Optionee shall be liable to the Company for all costs and
damages, including incidental and consequential damages, resulting from a
disposition of shares which is not in conformity with the provisions of this
Agreement.
16. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of North Carolina.
17. Notices. All matters and other communications under this Agreement
shall be in writing. Unless and until the Optionee is notified in writing to
the contrary, all notices, communications and documents directed to the Company
and related to the Agreement if not delivered by hand, shall be mailed to the
Company's executive offices:
Environmental Products & Technologies Corporation
P.O. Box 261
New Bern, North Carolina 28563-0261
Unless and until the Company is notified in writing to the contrary, all
notices, communications and documents intended for the Optionee and related to
this Agreement, if not delivered by hand, shall be mailed to Optionee's last
known address as shown on the Company's books. Notice and communications shall
be mailed by first class mail, postage prepaid; documents shall be mailed by
registered mail, return receipt requested, postage prepaid. All mailings and
deliveries related to this Agreement shall be deemed received only when
actually received.
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<PAGE> 17
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
Effective Date.
Environmental Products & Technologies Corporation
By
-----------------------------
This Optionee hereby accepts and agrees to be bound by all of the terms and
conditions of this Agreement and the Plan.
---------------------------
Optionee
Date:
------------------------
Optionee's spouse indicates by execution of this Non-Qualified Stock Option
Agreement his or her consent to be bound by the terms thereof as to his or her
interests, whether as community property or otherwise, in the options granted
hereunder, and in any NQO Shares purchased pursuant to this Agreement.
---------------------------
Optionee's Spouse
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<PAGE> 18
SCHEDULE ONE
<TABLE>
<CAPTION>
If Termination
Occurs Following
the Effective Date Portion of The Stock
of the Option Agmt For Purchase at Cost
------------------ --------------------
<S> <C>
Within 12 Months 100%
From the 13th thru the 24th mo 75%
Between 25 months and 50%
less an additional 2%
each full month after
initial 24 months
After 50 months None
</TABLE>
Environmental Products & Technologies Corporation
By:
--------------------------
- -----------------------------
Optionee
Dated:
-----------------------
Optionee's Spouse
- -----------------------------
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<PAGE> 19
INCENTIVE STOCK OPTION AGREEMENT
This Agreement Stock Option Agreement ("Agreement"), is made and
entered into as of __________, 199__, between Environmental Products &
Technologies Corporation, a Delaware corporation ("Company") and
______________, ("Optionee").
The Parties Agree As Follows:
1. Grant of Option and Effective Date.
1.1 Grant. The Company hereby grants to Optionee pursuant to
the Company's 1996 Stock Option Plan ("Plan"), an Incentive Stock Option (the
"ISO") to purchase all or any part of an aggregate of ____________ shares (the
"ISO Shares") of the Company's Common Stock on the terms and conditions set
forth herein and in the Plan, the terms and conditions of the Plan being
incorporated into this Agreement by reference.
1.2 Effective Date. The effective date of this ISO is
__________ ("Effective Date").
2. Exercise Price. The exercise price for the purchase of the ISO
shares covered by this ISO shall be $______ per share.
3. Term. Unless otherwise specified on Exhibit 1 attached hereto, this
ISO shall expire as provided in Section 6.3.2 of the Plan.
4. Adjustment of ISOs. The Company shall adjust the number and kind of
shares and the exercise price thereof in certain circumstances in accordance
with the provisions of Section 6.1.1 of the Plan.
5. Exercise of Options.
5.1 Time of Exercise. The ISO shall be exercisable in whole or
in part as of the Effective Date except as provided in Exhibit 1 attached
hereto.
5.2 Exercise After Termination of Employment. This ISO may be
exercised after termination of the Optionee's employment only in accordance
with the provisions of Section 6.1.8 of the Plan.
5.3 Manner of Exercise. Optionee may exercise this ISO, or any
portion of this ISO, by giving written notice to the Company at its principal
executive office, to the attention of the Secretary of the Company, accompanied
by a copy of the Stock Option Plan Purchase Agreement ("Stock Purchase
Agreement") executed by Optionee. The date the Company receives written notice
of an exercise hereunder accompanied by payment will be considered as the date
this ISO was exercised.
Promptly after receipt of written notice of exercise of the ISO, the
Company shall without stock issue taxes or transfer taxes to the Optionee or
other person entitled to exercise, deliver to the Optionee or other person a
certificate or certificates for the requisite number of ISO Shares. An Optionee
or transferee of an option shall not have any privileges as a shareholder with
respect to any ISO Shares covered by the option until the date of issuance of a
stock certificate.
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<PAGE> 20
5.4 Payment. Payment in full, in cash, shall be made for all
ISO Shares purchased at the time written notice of exercise of the ISO is given
to the Company, and proceeds of any payment shall constitute general funds of
the Company.
6. Nonassignability of ISO. This ISO is not assignable or
transferable by Optionee except by will or by the laws of descent and
distribution. During the life of the Optionee, the ISO is exercisable only by
the Optionee. Any attempt to assign, pledge, transfer, hypothecate or otherwise
dispose of this ISO in a manner not herein permitted, and any levy of
execution, attachment, or similar process on this ISO, shall be null and void.
7. Company's Rights to Repurchase Upon Termination of Employment. The
ISO Shares shall be subject to a right of repurchase in favor of the Company
("Right of Repurchase"). The company may purchase ISO Shares subject to the
Right of Repurchase for an amount per share equal to the price per share the
Optionee paid for the ISO Shares if the Optionee's employment, directorship or
consultancy with the Company terminates before the Right of Repurchase expires.
Fractional shares subject to repurchase shall be rounded to the fullest share.
The Optionee may not dispose of or transfer ISO Shares while such shares are
subject to the Right of Repurchase and any such attempted transfer shall be
null and void.
8. Company's Right of First Refusal Repurchasing Exercised Shares.
8.1 Right of First Refusal. In the event that the Optionee
proposes to sell, pledge, or otherwise transfer any ISO Shares, the Company
shall have a right of first refusal ("Right of First Refusal") with respect to
such ISO Shares. Any Optionee desiring to transfer ISO Shares to any person or
entity shall give a written notice ("Transfer Notice") to the Company
describing fully the proposed transfer, including the number of ISO Shares
proposed to be transferred, the proposed transfer price, and the name and
address of the proposed transferee. The Transfer Notice shall be signed by both
the Optionee and by the proposed transferee and must constitute a binding
commitment of both parties for the transfer of such ISO Shares. The Company
shall have the right to purchase the ISO Shares subject to the Transfer Notice
on the terms of the proposed transfer described in the Transfer Notice by
delivery of a notice of exercise of the Company's Right of First Refusal within
30 days after the date the Transfer Notice is delivered at the Company. The
Company's rights under this Section 8.1 shall be freely assignable, in whole or
in part.
8.2 Transfer of Exercised Shares. If the Company fails to
exercise the Right of First Refusal within 30 days from the date the Transfer
Notice is delivered to the Company, the Optionee may, not less than 30 days
following delivery to the Company of the Transfer Notice, conclude a transfer
of the ISO Shares subject to the Transfer Notice. Any proposed transfer on
terms and conditions different from those described in the Transfer Notice, as
well as any subsequent proposed transfer by the Optionee, shall again be
subject to the Right of First Refusal and shall require compliance by the
Optionee with the procedure described in Section 8.1 of this Agreement. If the
Company exercises the Right of First Refusal, the parties shall consummate the
sale of the ISO Shares on the terms set forth in the Transfer Notice; provided,
however, in the event the Transfer Notice provides for payment for the ISO
Shares other than in cash, the Company shall have the option of paying for the
ISO Shares by the discounted cash equivalent of the consideration described in
the Transfer Notice.
8.3 Binding Effect. The Right of First Refusal shall inure to
the benefit of the successors and assigns of the Company and shall be binding
upon any transferee of the ISO Shares other than a transferee acquiring ISO
Shares in a transaction where the Company failed to exercise the Right of First
Refusal (a "Free Transferee") or a transferee of a Free Transferee.
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<PAGE> 21
8.4 Termination of Company's Right of First Refusal. Notwithstanding
anything in this Section 8, in the event that the stock is listed on an
established stock exchange or quoted on the National Association of Securities
Dealers Automated Quotation system at the time the Optionee desires to transfer
ISO Shares, the Company shall have no Right of First Refusal, and Optionee
shall have no obligation to comply with the procedures Sections 8.1 through 8.3.
9. Restriction on Issuance of Shares.
9.1 Legality of Issuance. The Company shall not be obligated to sell
or issue any ISO Shares pursuant to this Agreement if such sale or issuance,
in the opinion of the Company and the Company's counsel, might constitute a
violation by the Company of any provision of law, including without limitation
the provisions of the Securities Act of 1933, as amended (the "Act").
9.2 Registration or Qualification of Securities. The Company may,
but shall not be required to, register or qualify the sale of this ISO or any
ISO Shares under the Act or any other applicable law. The Company shall not be
obligated to take any affirmative action in order to cause the grant or
exercise of this option or the issuance or sale of any ISO Shares pursuant
thereto to comply with any law.
10. Restriction on Transfer. Regardless of whether the sale of the ISO
Shares has been registered under the Act or has been registered or qualified
under the securities laws of any state, the Company may impose restrictions
upon the sale, pledge or other transfer of the ISO Shares (including the
placement of appropriate legends on stock certificates) if, in the judgment of
the Company and the Company's counsel, such restrictions are necessary or
desirable in order to achieve compliance with the provisions of the Act, the
securities laws of any state, or any other law.
11. Stock Certificates. Stock Certificates evidencing ISO Shares will
bear such restrictive legends as the Company and the Company's counsel deem
necessary or advisable under applicable law or pursuant to this Agreement,
including, without limitation, the following legends:
"The offering and sale of the securities represented hereby have not
been registered under the Securities Act of 1933 ("Act"). Any transfer of such
securities will be invalid unless a Registration Statement under the Act is in
effect as to such transfer or in the opinion of counsel for the Company such
registration is unnecessary in order for such transfer to comply with the Act."
"It is unlawful to consummate a sale or transfer of these securities,
or any interest therein, or to receive any consideration therefor, without the
prior written consent of the Secretary of State of the State of North Carolina,
except as permitted in the Commissioner's rules."
"The securities represented hereby are subject to a Right of First
Refusal ("Right of First Refusal") by the company pursuant to the provisions of
the Company's 1996 Stock Option Plan and a purchase agreement relating to such
securities, and may not be sold or otherwise transferred except in compliance
with the terms of such Right of First Refusal."
"The securities represented hereby may be subject to a right of
repurchase by the Company, pursuant to the provisions of the Company's 1996
Stock Option Plan and the agreement relating to the acquisition of such
securities should the person initially issued these securities cease to be
employed by the Company or any affiliate thereof."
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<PAGE> 22
12. Representations, Warranties, Covenants and Acknowledgements of the
Optionee Upon Exercise of ISO. Optionee hereby agrees that in the event that
the Company and the Company's counsel deem it necessary or advisable in the
exercise of their discretion, the issuance of the ISO Shares may be conditioned
upon the purchasing ISO Shares ("Purchaser") making certain representations,
warranties, and acknowledgements, including, without limitation those set forth
in Section 12.1 through 12.7 inclusive:
12.1 Investment. Purchaser is acquiring the ISO Shares for
Purchaser's own account, and not for the account of any other person. Purchaser
is acquiring the ISO Shares for investment and not with a view to distribution
or resale thereof except in compliance with applicable laws regulating
securities.
12.2 Business Experience. Purchaser is capable of evaluating the
merits and risks of Purchaser's investment in the Company evidenced by the
purchase of the ISO Shares.
12.3 Relation to Company. Purchaser is presently an officer, director
or other employee of the Company and in such capacity has become personally
familiar with the business affairs, financial condition, and results of
operations of the Company.
12.4 Access to Information. Purchaser has had the opportunity to ask
questions of, and to receive answers from, appropriate executive officers of
the Company with respect to the terms and conditions of the transaction
contemplated hereby and with respect to the business, affairs, financial
conditions, and results of operations of the Company. Purchaser has had access
to such financial and other information as is necessary in order for Purchaser
to make a fully-informed decision as to investment in the Company by way of
purchase of the ISO Shares, and has had the opportunity to obtain any
additional information necessary to verify any of such information to which
Purchaser has had access.
12.5 Speculative Investment. Purchaser's investment in the Company
represented by the ISO Shares is highly speculative in nature and is subject to
a high degree of risk of loss in whole or in part. The amount of such
investment is within Purchaser's risk capital means and is not so great in
relation to Purchaser's total financial resources as would jeopardize the
personal financial needs of the Purchaser or Purchaser's family in the event
such investment were lost in whole or in part.
12.6 Registration. Purchase must bear the economic risk of investment
for an indefinite period of time because the sale to Purchaser of the ISO
Shares has not been registered under Act and the ISO Shares cannot be
transferred by Purchaser unless such transfer is registered under the Act or an
exemption from such registration is available. The Company has made no
agreement, covenants or undertakings whatsoever to register the transfer of any
of the ISO Shares under the Act. The Company has made no representations,
warranties, or covenants whatsoever as to whether any exemption including
without limitation any exemption for limited sales in routine brokers'
transactions pursuant to Rule 144, will be available.
12.7 Tax Advice. The Company has made no warranties or
representations to Purchaser with respect to the income tax consequences of the
transactions contemplated by the option agreement pursuant to which the ISO
Shares will be purchased and Purchaser is in no manner relying on the Company
or the Company's representatives for an assessment of such tax consequences.
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<PAGE> 23
13. Recision, Avoidance or Reformation in Certain Circumstances. The
parties acknowledge that any grant to purchase Restricted Common Stock was
based upon their mutual belief that: (i) Restricted Common Stock constitutes a
series of Common Shares and its conversion into Common Stock is not a taxable
event, and (ii) that the Company need not incur compensation expense for
financial reporting or accounting purposes based on the difference between the
fair market value of the Company's Restricted Common Stock and the fair market
value of the Common stock into which it is convertible. The parties further
acknowledge that the above beliefs were a basic assumption on which the grant
was made and that the failure of either or both of the assumptions would be a
mutual mistake of fact having a material effect on the agreed exchange of
performances. In consequence, should the Company be notified by its certified
public accountants prior to December 31, that it will be required to recognize
any such compensation expense, or should any legal authority be published
relating to securities similar to the Restricted Common Stock (including
without limitation, any revenue ruling of the Internal Revenue Service or any
pronouncement by the Financial Accounting Standards Board) which shows the
above beliefs to have been false, the Company shall have a right (but not an
obligation), without further act of the Optionee, to rescind or avoid this
Agreement or to reform this Agreement to conform with any such published
authority. The Company in such event shall also have a right (but not an
obligation) to rescind the sale of the ISO Shares (and any other securities
into which they may be converted).
14. Assignment; Binding Effect. Subject to the limitations set forth in
this Agreement, this Agreement shall be binding upon and inure to the benefit
of the executors, administrators, heirs, legal representatives, and successors
of the parties hereto; provided, however, that Optionee may not assign any of
Optionee's rights under this Agreement.
15. Damages. Optionee shall be liable to the Company for all costs and
damages, including incidental and consequential damages, resulting from a
disposition of shares which is not in conformity with the provisions of this
Agreement.
16. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware.
17. Notices. All matters and other communications under this Agreement
shall be in writing. Unless and until the Optionee is notified in writing to
the contrary, all notices, communications and documents directed to the Company
and related to the Agreement if not delivered by hand, shall be mailed to the
Company's executive offices:
P.O. Box 261
New Bern, North Carolina 28563-0261
Unless and until the Company is notified in writing to the contrary, all
notices, communications and documents intended for the Optionee and related to
this Agreement, if not delivered by hand, shall be mailed to Optionee's last
known address as shown on the Company's books. Notice and communications shall
be mailed by first class mail, postage prepaid; documents shall be mailed by
registered mail, return receipt requested, postage prepaid. All mailings and
deliveries related to this Agreement shall be deemed received only when
actually received.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
Effective Date.
Environmental Products and Technologies Corporation
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<PAGE> 24
By ____________________
This Optionee hereby accepts and agrees to be bound by all of the terms and
conditions of this Agreement and the Plan.
_______________________
Optionee
Date: _________________
Optionee's spouse indicates by execution of this Incentive Stock Option
Agreement his or her consent to be bound by the terms thereof as to his or her
interests, whether as community property or otherwise, in the options granted
hereunder, and in any ISO Shares purchased pursuant to this Agreement.
_______________________
Optionee's Spouse
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<PAGE> 25
SCHEDULE ONE
If Termination Portion of The Stock
Occurs Following For Purchase at Cost
The Effective Date
Of the Option Agmt
------------------
Within 12 Month 100%
From the 13th thru 24th 75%
From 25th mo. thru 49th mo. 50%
less an Additional 2% each
full month after 24th month
After 50 months None
Environmental Products & Technologies Corporation
By: _________________________
_____________________________
Optionee
Dated: ______________________
Optionee's Spouse
_____________________________
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<PAGE> 26
EMPLOYEE STOCK RESTRICTION AGREEMENT
This Agreement is made as of the _______ day of ______________, 199__, by
and between Environmental Products & Technologies Corporation, an Delaware
Corporation, ("Company"), and ________________ (Shareholder).
WITNESSETH:
WHEREAS, the Company has issued and the Shareholder has acquired Common
Stock of the Company; and
WHEREAS, it is in the interest of the Company and Shareholder that
Shareholder be required to remain with the Company for a period of time as
designated in the 1996 Stock Option Plan to retain his Common Stock.
NOW, THEREFORE, IT IS AGREED between the parties as follows:
1. Consideration. In consideration, for the execution by other
employee-shareholders of substantially similar agreements, Shareholder is a
party to this Agreement.
2. Purchase Option.
2.1 General. The _______ shares of the Company's Restricted
Common Stock purchased by Shareholder (hereinafter sometimes collectively
referred to as the "Stock") shall be subject to the option ("Purchase Option")
set forth in this paragraph 2. In the event Shareholder shall cease to be
employed by the Company (the term Company to include all parent, subsidiaries
or affiliates of the Company) for any reason, with or without cause, other than
by reason of death or Permanent Disability (as hereinafter defined), The
Purchase Option may be exercised in accordance with this Agreement. In such
event, the Company shall have the right to purchase from the Shareholder up to
but not exceeding the number of shares of Stock specified in paragraph 2.2 or
2.3 below, whichever is applicable.
2.2 Termination of the Cause. If Shareholder's employment is
terminated by the Company for cause at any time during the term of this
Agreement, the Company may exercise the Purchase option, at a price per share
equal to $_________ ("Cost"), as to all or any portion of the Stock. For
purposes of this paragraph 2.2 the term "cause" shall mean the willful breach
or habitual neglect by Shareholder of such reasonable duties as Shareholder is
required to perform as an employee of the Company or under any employment
agreement with the Company, except that it shall not encompass resignation by
Shareholder even if such resignation would constitute a willful breach by
Shareholder of an employment agreement with the Company.
2.3 Termination Other than by Death, Disability or for Cause.
If Shareholder ceases to be employed by the Company for any reason other than
death, Permanent Disability or termination for cause, as defined above, at any
time during the term of this Agreement, the Company may exercise the Purchase
Option, at a price per share equal to a Cost, as to the maximum portion of the
Stock specified in the table below. As to any remaining portion of the Stock,
the Company may exercise the Purchase Option at a price per share equal to the
fair market value per share of such Stock, determined as set forth in paragraph
2.4.
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<PAGE> 27
<TABLE>
<CAPTION>
If Termination Portion of the Stock Portion of Stock for
Occurs for Purchase at Cost Purchase at Fair
Following the Market
Effective Date Value
Of the Option Agmt:
- ------------------- -------------------- --------------------
<S> <C> <C>
Within 12 Months
of the date 100%
From 13th thru 24th 75% 25%
From 25th thru 49th 50% 50%
less 2% per Mo. plus 2% per mo.
after 24th mo. after 24th mo.
After 50 month None None
</TABLE>
Provided, however, anything in this paragraph 2.3 notwithstanding, in the event
that Shareholder's employment is terminated by the Company without cause after
36 months from the date of this Agreement, the Company shall have the Purchase
Option only with respect to the portion of the Stock specified in the table
above for purchase at Cost.
2.4 Fair Market Value. For purposes of paragraph 2 and paragraph 3,
the fair market value per share of the Stock shall be determined as follows: If
shareholder (or his personal representative) and the board of Directors of the
Company are unable to agree on the fair market value per share of the stock,
such fair market value shall be determined by an independent third party
selected and agreed to by the Shareholder (or his personal representative) and
the Board of Directors. In the event the parties cannot agree to an independent
third party within 10 days after the date of termination of employment, either
party may petition any court of competent jurisdiction to select such third
party.
2.5 No Effect on Right to Terminate Shareholder. Nothing in this
Agreement shall affect in any manner whatsoever the right or power of the
Company, or a parent or subsidiary of the company, to terminate Shareholder's
employment, for any reason, with or without cause.
2.6 Permanent Disability. For the purposes of paragraphs 2 and 3,
"Permanent Disability" means a physical or mental disability which causes the
Shareholder to be absent from, or to be unable to perform, his or her duties or
obligations to the Company on a full time basis for a period of at least six
months. Whether Shareholder has incurred Permanent Disability shall be
conclusively determined for purposes of this Agreement by a physician appointed
by the head of Internal Medicine Department at a locally selected hospital
convenient to the Shareholder.
3. Death or Disability.
3.1 Death. In the event that Shareholder dies, the Company shall
purchase from the Shareholder or his personal representative, as the case may
be, at a purchase price equal to the fair market value of the Stock determined
as set forth in paragraph 2.4, that portion of the
2 of 5
<PAGE> 28
Stock which can be purchased at such price by use of the proceeds from any
insurance policy insuring against the death of Shareholder which names the
Company as the beneficiary thereof. In addition, the Company may purchase the
remaining portion of the Stock at a purchase price equal to such fair market
value.
3.2 Disability. In the event that Shareholder is permanently Disabled,
the Company shall purchase from the Shareholder or his personal representative,
as the case may be, all of the Stock. In such event, the purchase price for the
Stock shall be the fair market value of the Stock determined as set forth in
paragraph 2.4.
4. Purchase Procedure.
4.1 No Dispute Regarding Fair Market Value. In the event of a purchase
of Stock pursuant to this Agreement when there is agreement on the fair market
value per share, the Company shall have the right at any time within 30 days
after the date Shareholder ceases to be employed by the company for any reason
or 30 days from the date the Board of Directors of the Company and Shareholder
(or his personal representative) agree on the fair market value per share of
Stock, whichever is later, to purchase from Shareholder shares of Stock pursuant
to paragraphs 2.2, 2.3, 3.1 or 3.2. the right to make any such purchase shall be
exercised by written notice by an officer of the Company and delivered as
provided in paragraph 12.
4.2 Dispute Re Fair Market Value. In the event of a purchase of Stock
pursuant to this Agreement the fair market value of which is determined by a
third party selected pursuant to paragraph 2.4, such third party shall render
his determination of the fair market value per share of the Stock within 15 days
of his selection and shall contingently apportion his fees an costs for such
determination between the Company and the Shareholder. If the Company thereafter
purchases all or any shares of Stock at such determined fair market value then
such apportionment shall be final. If the Company purchases none of the Stock
then it shall pay all fees and costs of such third party. The Company may give
notice of its intent to purchase Stock at any time within 30 days after the date
the third party renders his determination of the fair market value of the Stock,
and may purchase such Stock at any time within 45 days after the date of such
notice.
4.3 Payment. Payment by the Company may be made, at its option, in
cancellation of all or a portion of any acknowledged outstanding indebtedness of
Shareholder to the Company or in cash or both.
5. Certain Events. If, from time to time, there is any stock dividend or
liquidating dividend of cash and/or property, stock split or other change in the
character or amount of any of the outstanding securities of the Company, then,
in such event, any and all new, substituted or additional securities or other
property to which Shareholder is entitled by reason of his ownership of Stock
shall be immediately subject to the Purchase Option and be included in the word
"Stock" for all purposes of this Agreement with the same force and effect as the
shares of Stock presently subject hereto. While the total purchase price shall
remain the same after each such event, the purchase price per share of Stock
upon exercise of the Purchase Option shall be appropriately adjusted.
6. Right of First Refusal. Before any shares of stock registered in the
name of Shareholder and not subject to the Purchase Option may be sold or
transferred (including transfer by operation of law) such shares shall first be
offered to the Company.
6.1 Shareholder's Notice. The Shareholder shall deliver a notice
("Notice") to the Company stating (i) his bona fide intention to sell or
transfer such shares, (ii) the number of
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<PAGE> 29
such shares to be sold or transferred, (iii) the price for which he proposes to
sell or transfer such shares, and (iv) the name of the proposed purchaser or
transferee.
6.2 Exercise of First Refusal Right. Within thirty (30) days after
delivery of the Notice, the Company may by notice duly given elect to purchase
at least fifty percent of the shares to which the Notice refers, at the price
per share specified in the Notice.
6.3 Sale to Third Parties. If all or any portion of the shares to
which the Notice refers are not elected to be purchased pursuant to paragraph
6.2 hereof, the Shareholder may sell such shares to any person named in the
Notice at the price specified in the Notice or at a higher price, provided that
such sale or transfer is consummated within six (6) months of the date of the
Notice to the Company, and provided, further, that any such sale is in
accordance with all terms and conditions hereof.
7. Legends. All certificates representing any shares of Stock of the
Company subject to the provisions of this Agreement shall have endorsed thereon
the following legends or substantially similar legends to the extent that the
particular legend applies:
(a) "THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO AN OPTION
SET FORTH IN AN EMPLOYEE STOCK RESTRICTION AGREEMENT BETWEEN THE COMPANY AND
THE REGISTERED HOLDER, OR HIS PREDECESSOR IN INTEREST, A COPY OF WHICH, IS ON
FILE AT THE PRINCIPAL OFFICE OF THE COMPANY"
(b) "THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A RIGHT OF
FIRST REFUSAL OPTION IN FAVOR OF THE COMPANY OR ITS ASSIGNEE SET FORTH IN AN
EMPLOYEE STOCK RESTRICTION AGREEMENT BETWEEN THE COMPANY AND THE REGISTERED
HOLDER, OR HIS PREDECESSOR IN INTEREST, A COPY OF WHICH IS ON FILE AT THE
PRINCIPAL OFFICE OF THIS COMPANY"
(c) "THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER SAID
ACT OR AN OPTION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION
IS NOT REQUIRED"
8. No Transfer of Stock Subject to Purchase Option. Shareholder shall not
sell or transfer any shares of the Stock still subject to the Purchase Option,
provided that Shareholder may transfer up to 500 shares of such Stock to a
trust for the benefit of one or more of his children.
9. No Transfer of Stock on Company Books. The Company shall not be
required (i) to transfer on its books any shares of Stock of the Company which
shall have been sold or transferred in violation of any of the provisions set
forth in this Agreement or (ii) to treat as owner of such shares or to accord
the right to vote as such owner or to pay dividends to any transferee to whom
such shares shall have been so transferred.
10. Further Action. The parties agree to execute such further instruments
and to take such further action as may reasonably be necessary to carry out the
intent of this Agreement.
11. Notices. Any notice required or permitted hereunder shall be given in
writing and shall be deemed effectively given upon personal delivery or three
days after deposit in the United States Post Office, by registered or certified
mail, return receipt requested, with postage and fees prepaid, addressed to the
other party hereto at his address hereinafter shown below his signature
4 of 5
<PAGE> 30
or at such other address as such party may designate by ten days' advance
written notice to the other party hereto.
12. Successors and Assigns. Subject to the restrictions on transfer and
assignment specifically set forth herein, this Agreement shall inure to the
benefit of the executors, administrators, heirs, successors and assigns of the
parties.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
ENVIRONMENTAL PRODUCTS & TECHNOLOGIES CORPORATION
By
----------------------------
Title:
------------------------
SHAREHOLDER
- ------------------------------
Address:
---------------------------
---------------------------
OPTIONEE'S SPOUSE
- ------------------------------
5 of 5
<PAGE> 1
EXHIBIT 10.14
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (this "Agreement") is made as of the 15th day of
April, 1988, by and between Environmental Products Technologies Corporation, a
Delaware corporation (the "Company"), and Marvin Mears, an individual
("Employee"), and is made with respect to the following facts:
R E C I T A L S
A. The Company and the Employee wish to ensure that the Company will
receive the benefit of Employee's loyalty and service.
B. In order to help ensure that the Company receives the benefit of
Employee's loyalty and service, the parties desire to enter into this formal
Employment Agreement to provide Employee with appropriate compensation
arrangements and to assure Employee of employment stability.
C. The parties have entered into this Agreement for the purpose of
setting forth the terms of employment of the Employee by the Company.
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, THE PARTIES HERETO AGREE AS FOLLOWS:
1. EMPLOYMENT OF EMPLOYEE AND DUTIES. The Company hereby hires Employee
and Employee hereby accepts employment upon the terms and conditions described
in this Agreement. The Employee shall be the Chief Executive Officer of the
Company with all of the duties, privileges and authorities usually attendant
upon such office, including but not limited to responsibility for the
day-to-day management and oversight of the Company and its subsidiaries.
Subject to (a) the general supervision of the Board of Directors of the
Company, and (b) the Employee's duty to report to the Board of Directors
periodically, as specified by it from time-to-time, Employee shall have all of
the authority and discretion in the conduct of the Company's business and
affairs that can lawfully be delegated by the Board of Directors. The Employee
will serve as Chairman and Chief Executive Officer of the Company for as long
as he is employed.
2. TIME AND EFFORT. Employee agrees to devote his full working time and
attention to the management of the Company's business affairs, the
implementation of its strategic plan, as determined by the Board of Directors,
and the fulfillment of his duties and responsibilities as the Company's primary
representative. Expenditure of a reasonable amount of time for personal matters
and business and charitable activities shall not be deemed to be a breach of
this Agreement, provided that those activities do not materially interfere with
the services required to be rendered to the Company under this Agreement.
3. THE COMPANY'S AUTHORITY. Employee agrees to comply with the Company's
rules and regulations as adopted by the Company's Board of Directors regarding
performance of his duties, and to carry out and perform those orders,
directions and policies established by the Company with respect to his
engagement. Employee shall promptly notify the Company's Board of Directors of
any objection he has to the Board's directives and the reasons for such
objection.
4. Noncompetition by Employee. During the term of this Agreement and
during any period in which Employee is receiving severance benefits, if any,
the Employee shall not, directly or
-1-
<PAGE> 2
indirectly, either as an employee, employer, consultant, agent, principal,
partner, stockholder (in a private company), corporate officer, director, or in
any other individual or representative capacity, engage or participate in any
business that is in competition with the business of the Company or its
affiliates.
5. TERM OF AGREEMENT. This Agreement shall commence to be effective on
the date first above written and shall continue until April 14, 2002, unless
terminated sooner as provided in Section 14 hereof.
6. COMPENSATION. Commencing on April 15, 1998 and during the balance
of the term of this Agreement thereafter, the Company shall pay the following
compensation to Employee:
6.1 ANNUAL COMPENSATION. Employee shall be paid a fixed salary of
$96,000 for the 1st twelve months. There shall be two equal installments per
month on the 15th and last day of each month.
6.2 ADDITIONAL COMPENSATION. In addition to the compensation set
forth in Section 6.1 of this Agreement, Employee may be paid a bonus or bonuses
during each year, as determined at the sole discretion of the Company's Board of
Directors based on the Board's evaluation of the Employee's definable efforts,
accomplishments and similar contributions.
6.3 ANNUAL RAISES. The Employee will receive $120,000 for a
twelve month period commencing April 15, 1999. The Employee will receive
$144,000 for a twelve month period commencing April 15, 2000. The Employee will
receive $168,000 for a twelve month period commencing April 15, 2001. All
payments will be made in two equal installments per month on the 15th and last
day of each month.
7. FRINGE BENEFITS. Employee shall be entitled to all fringe benefits
which the Company or its subsidiaries may make available from time-to-time for
persons with comparable positions and responsibilities. Without limitation,
such benefits shall include participation in any life and disability insurance
programs, profit incentive plans, pension or retirement plans, and bonus plans
as are maintained or adopted from time-to-time by the Company.
The Company shall also provide Employee with medical group insurance
coverage or equivalent coverage for Employee and his dependents. The
medical insurance coverage shall begin on December 31, 1998 and
shall continue throughout the term of this Agreement.
8. REIMBURSEMENT OF EXPENSES. The Company shall reimburse Employee for
all reasonable travel, mobile telephone, promotional and entertainment expenses
incurred in connection with the performance of Employee's duties hereunder, and
subject to Section 10 of this Agreement with respect to automobile expenses.
Employee's reimbursable expenses shall be paid promptly by the Company upon
presentment by Employee of an itemized list of invoices describing such
expenses. All compensation provided in Sections 6, 7, 9 and 10 of this
Agreement shall be subject to customary withholding tax and other employment
taxes, to the extent required by law.
9. AUTOMOBILE. Notwithstanding anything else herein to the contrary,
the Company shall pay to the Employee a fixed amount equal to $750.00 per month
on the last day of each month during the term of this Agreement as
reimbursement to the Employee on a nonaccountable basis of all
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<PAGE> 3
expenses incurred by the Employee for the use of his automobile for Company
business purposes, including but not limited to depreciation, repairs,
maintenance, gasoline and insurance. Employee shall not be entitled to any
other reimbursement for the use of his automobile for business purposes.
10. VACATION. Employee shall be entitled to two weeks of paid vacation
per year or pro rata portion of each year of service by Employee under this
Agreement. The Employee shall be entitled to the holidays provided in the
Company's established corporate policy for employees with comparable duties and
responsibilities.
11. RIGHTS IN AND TO INVENTIONS AND PATENTS.
11.1 DESCRIPTION OF PARTIES' RIGHTS. The Employee agrees that with
respect to any inventions made by him or the Company during the term of this
Agreement, solely or jointly with others, (i) which are made with the Company's
equipment, supplies, facilities, trade secrets or time, or (ii) which relate to
the business of the Company or the Company's actual or demonstrably anticipated
research or development, or (iii) which result from any work performed by the
Employee for the Company, such inventions shall belong to the Company. The
Employee also agrees that the Company shall have the right to keep such
inventions as trade secrets, if the Company chooses.
11.2 DISCLOSURE REQUIREMENTS. For purposes of this Agreement, an
invention is deemed to have been made during the term of this Agreement if,
during such period, the invention was conceived or first actually reduced to
practice. The Employee agrees that any patent application filed within one year
after termination of his employment shall be presumed to relate to an invention
made during the term of this Agreement unless he can provide evidence to the
contrary. In order to permit the Company to claim rights to which it may be
entitled, the Employee agrees to disclose to the Company in confidence all
inventions which the Employee makes during the term of this Agreement and all
patent applications filed by the Employee within one year after termination of
this Agreement.
12. ARBITRATION Any disputes arising under this Agreement will be
resolved in accordance with the rules of the American Arbitration Association
as they apply in the County of Los Angeles, State of California. The decision
of the arbitrator shall be binding on all parties to this Agreement.
13. TERMINATION. This Agreement may be terminated in the following
manner and not otherwise:
13.1 MUTUAL AGREEMENT. This Agreement may be terminated by the
mutual written agreement of the Company and Employee to terminate.
13.2 TERMINATION BY EMPLOYEE FOR BREACH. Employee may at his
option and in his sole discretion terminate this Agreement for the material
breach by the Company of the terms of this Agreement. In the event of such
termination, Employee shall give the Company 30 days' prior written notice.
13.3 TERMINATION BY THE COMPANY FOR BREACH.
a. The Company may at its option immediately terminate this
Agreement in the event Employee commits gross negligence in the
performance of his duties under this Agreement, or breaches his
fiduciary duty to the Company, to the Board of Directors or to the
Company's shareholders.
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<PAGE> 4
b. The Company may at its option terminate this Agreement
in the event that the Employee does not perform his duties in
accordance with the direction or policies of the Company's Board
of Directors or otherwise materially breaches this Agreement;
provided, however, that the Company shall give the Employee
written notice of specific instances for the basis of any
termination of this Agreement by the Company. Employee shall
have a period of 30 days after said notice in which to cease the
alleged violations before the Company may terminate this
Agreement. If Employee ceases to commit the alleged violations
within said 30 day period, the Company may not terminate this
Agreement pursuant to this Section. If Employee continues to
commit the alleged violations after said 30 day period, the
Company may terminate this Agreement immediately upon written
notification to Employee.
13.4 TERMINATION UPON DEATH. This Agreement shall terminate upon the
death of the Employee.
13.5 TERMINATION UPON THE DISABILITY OF THE EMPLOYEE. This agreement
shall terminate upon the disability of the Employee. As used in the previous
sentence, the term "disability" shall mean the complete disability to discharge
Employee's duties and responsibilities for a continuous period of not less than
six months during any calendar year. Any physical or mental disability which
does not prevent Employee from discharging his duties and responsibilities in
accordance with usual standards of conduct as determined by the Company in its
reasonable opinion shall not constitute a disability under this Agreement.
If the Employee is disabled to a degree that he is unable to
fulfill his duties then the Company will pay his full salary for
the first 12 months of his disability, 75% of salary, as defined
in Section #6, for the second twelve months and 50% of salary,
as defined in Section #6, for the next twenty-four months. These
will end April 14, 2002, regardless of when the disability
commences.
13.6 TERMINATION FOR OTHER THAN CAUSE UPON A CHANGE OF
CONTROL. If there is an attempt to terminate this agreement, then the Employee
will be entitled to receive a severance bonus of $250,000 and all of the
employee's stock options issued, any and all restrictions on the exercise of
stock grants or stock options will end. Additionally all stock options or
grants will become fully vested. The Company will immediately be required to
pay a bonus over and above the severance bonus to Employee to cover the cost of
exercising all options and payment of all taxes, if any, resulting from the
payment of this bonus or the vesting of any stock or stock options.
14. IMPROPER TERMINATION. If this Agreement is terminated by
Employee pursuant to Section 13.2 herein or by the Company in any manner except
as specifically provided in Section 13 herein, the Company shall continue to
pay to Employee all of Employee's benefits provided in this Agreement
including, but not limited to, those benefits provided in Sections 6, 7 and 9 of
this Agreement for the remaining term of this Agreement. It is specifically
agreed that in such event Employee shall have no duty to mitigate his damages
by seeking comparable, inferior, or different employment.
15. INDEMNIFICATION OF EMPLOYEE. Pursuant to the provisions and
subject to the limitations of the Delaware Corporations Law and, if applicable,
the California Corporations Code, the Company
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<PAGE> 5
shall indemnify and hold Employee harmless as provided in Sections 15.1 and
15.2 of this Agreement. The Company shall, upon the request of Employee, assume
the defense and directly bear all of the expense of any action of proceedings
which may arise for which Employee is entitled to indemnification pursuant to
this Section.
15.1 INDEMNIFICATION OF EMPLOYEE FOR ACTIONS BY THIRD PARTIES. The
Company agrees to indemnify and hold Employee harmless from any liability,
claims, fines, damages, losses, expenses, judgments or settlements actually
incurred by him, including but not limited to reasonable attorneys' fees and
costs actually incurred by him as they are incurred, as a result of Employee
being made at any time a party to, or being threatened to be made a party to,
any proceeding (other than an action by or in the right of the Company, which
is addressed in Section 15.2 of this Agreement), relating to actions Employee
takes within the scope of his employment as the President of the Company or in
his role as a director of the Company, provided that Employee acted in good
faith and in a manner he reasonably believed to be in the best interest of the
Company and, in the case of a criminal proceeding, had no reasonable cause to
believe his conduct was unlawful.
15.2 INDEMNIFICATION OF EMPLOYEE FOR ACTIONS IN THE RIGHT OF THE
COMPANY. The Company hereby agrees to indemnify and hold Employee harmless
from any liability, claims, damages, losses, expenses, judgments or settlements
actually incurred by him, including but not limited to reasonable attorneys'
fees and costs actually incurred by him as they are incurred, as a result of
Employee being made a party to, or being threatened to be made a party to, any
proceeding by or in the right of the Company to procure a judgment in its favor
by reason of any action taken by Employee as an officer, director or agent of
the Company, provided that Employee acted in good faith in a manner he
reasonably believed to be in the best interests of the Company and its
shareholders, and provided further, that no indemnification by the Company
shall be required pursuant to this Section 15.2 (i) for acts or omissions that
involve intentional misconduct or a knowing and culpable violation of law,
(ii) for acts or omissions that Employee believed to be contrary to the best
interests of the Company or its shareholders or that involve the absence of
good faith on the part of Employee, (iii) for any transaction from which
Employee derived an improper personal benefit, (iv) for acts or omissions that
show a reckless disregard by Employee of his duties to the Company or its
shareholders in circumstances in which Employee was aware, or should have been
aware, in the ordinary course of performing his duties, of a risk of serious
injury to the Company or its shareholders, or (v) for acts or omissions that
constitute an unexcused pattern of inattention that amounts to an abdication of
Employee's duties to the Company or its shareholders.
15.3 REIMBURSEMENT. In the event that it is determined that
Employee is not entitled to indemnification by the Company pursuant to Sections
15.1 or 15.2 of this Agreement, then Employee is obligated to reimburse the
Company for all amounts paid by the Company on behalf of Employee pursuant to
the indemnification provisions of this Agreement. In the event that Employee is
successful on the merits in the defense of any proceeding referred to in
Sections 15.1 or 15.2 of this Agreement, or any related claim, issue or matter,
then the Company will indemnity and hold Employee harmless from all fees, costs
and expenses actually incurred by him in connection with the defense of any
such proceeding, claim, issue or matter.
16. ASSIGNABILITY OF BENEFITS. Except to the extent that this provision
may be contrary to law, no assignment, pledge, collateralization or attachment
of any of the benefits under this Agreement shall be valid or recognized by the
Company. Payment provided for by this Agreement shall not be subject to seizure
for payment of any debts or judgments against the Employee, nor shall the
Employee have any right to transfer, modify, anticipate or encumber any rights
or benefits hereunder; provided that
- 5 -
<PAGE> 6
any stock issued by the Company to the Employee pursuant to this Agreement
shall not be subject to Section 16 of this Agreement.
17. DIRECTORS' AND OFFICERS' LIABILITY INSURANCE. The Company will review
in good faith the prospect of purchasing directors' and officers' liability
insurance for the officers and directors of the Company, which would include the
same coverage for Employee, provided, that any decision was to whether or not
the Company purchases such insurance coverage will be in the sole discretion of
the Company's Board of Directors.
18. NOTICE. Except as otherwise specifically provided, any notices to be
given hereunder shall be deemed given upon personal delivery, air courier or
mailing thereof, if mailed by certified mail, return receipt requested, to the
following addresses (or to such other address or addresses as shall be specified
in any notice given):
IN CASE OF THE COMPANY:
5380 Sterling Center Drive
Westlake Village, CA 91361
Attention: Morris Lerner, Secretary
IN CASE OF THE EMPLOYEE:
Marvin Mears
The address listed below Mr. Mears's
signature to this Agreement.
19. ATTORNEYS' FEES. In the event that any of the parties must resort to
legal action in order to enforce the provisions of this Agreement or to defend
such suit, the prevailing party shall be entitled to receive reimbursement from
the nonprevailing party for all reasonable attorneys' fees and all other costs
incurred in commencing or defending such suit.
20. ENTIRE AGREEMENT. This Agreement embodies the entire understanding
among the parties and merges all prior discussions or communications among them,
and no party shall be bound by any definitions, conditions, warranties, or
representations other than as expressly stated in this Agreement or as
subsequently set forth in a writing signed by the duly authorized
representatives of all of the parties hereto.
21. NO ORAL CHANGE; AMENDMENT. This Agreement may only be changed or
modified and any provision hereof may only be waived by a writing signed by the
party against whom enforcement of any waiver, change or modification is sought.
This Agreement may be amended only in writing by mutual consent of the parties.
22. SEVERABILITY. In the event that any provision of this Agreement shall
be void or unenforceable for any reason whatsoever, then such provision shall be
stricken and of no force and effect. The remaining provisions of this Agreement
shall, however, continue in full force and effect, and to the extent required,
shall be modified to preserve their validity.
-6-
<PAGE> 7
23. APPLICABLE LAW. This Agreement shall be construed as a whole and in
accordance with its fair meaning. This Agreement shall be interpreted in
accordance with the laws of the State of California, and venue for any action or
proceedings brought with respect to this Agreement shall be in the County of
Ventura in the State of California.
24. SUCCESSORS AND ASSIGNS. Each covenant and condition of this Agreement
shall inure to the benefit of and be binding upon the parties hereto, their
respective heirs, personal representatives, assigns and successors in interest.
Without limiting the generality of the foregoing sentence, this Agreement shall
be binding upon any successor to the Company whether by merger, reorganization
or otherwise.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
date first above written.
COMPANY: ENVIRONMENTAL PRODUCTS &
TECHNOLOGIES CORPORATION.
a Delaware corporation
Attest:
By: ___________________________
Morris Lerner, Secretary
____________________________
Marvin Mears, Director
____________________________
Morris Lerner, Director
____________________________
Alvin A. McCullom, Director
EMPLOYEE:
____________________________
Marvin Mears
2739 Shields Court
Thousand Oaks, CA 91360
-7-
<PAGE> 1
EXHIBIT 10.16
PROMISSORY NOTE
At Thousand Oaks, California November 13, 1997.
For value received, Morris L. Lerner hereafter ("Borrower") promises to pay, on
or before November 12, 1999 to Environmental Products & Technologies corporation
("EPTC") up to the principal sum of twelve thousand one hundred fifteen dollars
and eighty eight cents ($12,115.88) with interest from November 13, 1997 on the
principal owed Environmental Products & Technologies Corporation at the rate of
nine per cent (9%) per annum. Any payment shall be credited first to the
interest owed, with the remainder to the principal owed. This note will have no
prepayment penalty.
In Witness Borrower has caused this Note to be executed on November 13, 1997.
Borrower
By /s/ MORRIS L. LERNER
--------------------------------------
Morris L. Lerner
<PAGE> 1
EXHIBIT 10.17
$35,000-NOTE
At Thousand Oaks, CA November 1, 1995
For value received, Combined Assets, Inc. (hereafter "Borrower") promises to
pay, on or before November 1, 1998 to Environmental Products & Technologies
Corporation ("EPTC") up to the principal sum of thirty five thousand dollars
($35,000) with interest from November 1, 1998 on the amounts of principal owned
Environmental Products & Technologies Corporation at the rate of nine percent
(9%) per annum. Any payment shall be credited first to the interest owed, with
the remainder to the principal owed. This note will have no prepayment penalty.
In witness, Borrower has caused this Note to be executed on November 1, 1995.
Borrower
By: /s/ MARVIN MEARS
--------------------------
Marvin Mears, President
Combined Assets, Inc.
<PAGE> 1
EXHIBIT 10.18
PROMISSORY NOTE
$125,000.00 August 1, 1996
FOR VALUE RECEIVED, the undersigned Environmental Products and
Technologies Corporation, a Delaware Corporation, hereby promises to pay to
Ronald E. Knudsen, an individual at 19 Pier Pointe, New Bern, North Carolina or
other such place as Payee may direct in writing, the principal sum of One
Hundred Twenty Five Thousand Dollars ($125,000.00) in lawful money of the United
States of America, which sum shall be due and payable, interest only, in twenty
four installments with the principal amount to be paid with the twenty fourth
installment or as provided for below, commencing on the first day of the month
following the date of this promissory note and payable thereafter on the first
of each month, in the amount of One Percent of the unpaid balance, One thousand
Two Hundred Fifty Dollars, or a less amount if the principal is reduced during
the term of this Note. This Note may be prepaid at any time in whole or in part,
upon payment in such amount accompanied by payment in full of all interest
accrued and principal.
Upon the occurrence of any of the following specified Events of Default:
(i) Interest: The Issuer shall default in the due and punctual payment
of any interest on this Note and such default shall continue unremedied for more
than fifteen (15) days after the date of receipt of written notice of default
and demand for payment by Payee, which notice shall be made by certified or
registered mail only;
(ii) Principal: The Issuer shall default in the due and punctual
payment of the principal on this Note and such default shall continue unremedied
for more than fifteen (15) days after the date of receipt of written notice of
default and demand for payment by Payee, which notice shall be made by certified
or registered mail only; If default occurs all sums are then due and payable.
It is understood and agreed between the parties that at the time the
Company completes a secondary offering to the public in an amount of Three
Million Dollars or more this Note will be accelerated and be due and payable
within ten (10) business days following the closing of the Offering.
The parties hereto stipulate and agree that any question to the
validity, construction or enforceability hereof shall be governed by the laws of
the State of North Carolina, and Issuer agrees that it shall be subject to the
jurisdiction of the courts of North Carolina in any action brought on this Note
by payee.
"Issuer"
ENVIRONMENTAL PRODUCTS &
TECHNOLOGIES CORPORATION
By: /s/ MARVIN MEARS
-----------------------------
Marvin Mears, President
<PAGE> 1
Exhibit 10.19
ENVIRONMENTAL PRODUCTS AND TECHNOLOGIES CORPORATION
5380 NORTH STERLING CENTER DRIVE, WESTLAKE VILLAGE, CA 91361
LETTER OF UNDERSTANDING
This Letter of Understanding between Environmental Products and Technologies
Corporation, a Delaware Corporation, hereafter "EPTC", and Lifeline Enterprises
L.L.C., a Utah Limited Liability Company, hereafter "LE", is dated May 18, 1998.
WHEREAS, EPTC desires to conclude the acquisition of the Aerobic Bioreactor for
oxygenation reduction of organic waste, the Anaerobic System for bio-catalytic
remediation of agricultural wastes, and the biologicals used with each;
WHEREAS LE desires to transfer to EPTC all right, title, and interest in and to
the Aerobic Bioreactor, the Anaerobic System, and the biologicals used
therewith, for the following consideration:
NOW THEREFORE:
1. LE has received 50,000 shares (post-split 100,000 shares) per our
Letter of Understanding date November 5, 1997;
2. EPTC shall issue 50,000 shares to LE upon assignment to EPTC of all
patents to the Aerobic Bioreactor.
3. EPTC shall issue 80,000 shares to LE on October 15, of each of the
years 1999, 2000, 2001, and 2002.
In the event of breach by EPTC of the obligations of paragraphs 2 or 3 above,
all patents shall be re-assigned to LE.
/s/ R. MARVIN MEARS /s/ GARY D. ROBERTS
- -------------------------------- -----------------------------------
R. Marvin Mears, President Gary D. Roberts, General Manager
Environmental Products & Lifeline Enterprises L.L.C.
Technologies Corporation
<PAGE> 2
ENVIRONMENTAL PRODUCTS AND TECHNOLOGIES CORPORATION
5380 NORTH STERLING CENTER DRIVE, WESTLAKE VILLAGE, CA 91361
LETTER OF UNDERSTANDING
This Letter of Understanding between Environmental Products and Technologies
Corporation, a Delaware Corporation, hereafter "EPTC", and Lifeline Enterprises
L.L.C., a Utah Limited Liability Company, hereafter "LE", is dated May 18, 1998.
WHEREAS EPTC desires to purchase from LE Paramutual Inductively Coupled
Generators to be employed as components of the EPTC Closed-loop Waste Management
System, from LE.
It is agreed that EPTC shall have the exclusive right to use the Paramutual
Inductively Coupled Generator when driven by a dual-fuel, diesel/methane engine
in the EPTC Closed-loop Waste Management System.
It is understood that the Paramutual Inductively Coupled Generator will be a
significant component of the EPTC Closed-loop Waste Management System and
EPTC's inducement to buy this product from LE is the fact that it is the
expectation of both parties that LE will defend the patents, when issued as and
if required.
EPTC and LE agree that the purchase price of the Paramutual Inductively Coupled
Generator with class H insulation and dyno-tested to full load, will be as
follows:
60KW - 100 hp frame - $C 14,400 - $US 9,950
95KW - 100 hp frame - $C 18,225 - $US 12,500
150KW - 100 hp frame - $C 20,300 - $US 14,000
/s/ R. MARVIN MEARS /s/ GARY D. ROBERTS
- --------------------------------- ---------------------------------
R. Marvin Mears, President Gary D. Roberts, General Manager
Environmental Products & Lifeline Enterprises L.L.C.
Technologies Corporation
<PAGE> 1
EXHIBIT 23.2
INDEPENDENT AUDITOR'S CONSENT
We consent to the use in this Registration Statement of Environmental Products
& Technologies Corporation on Form SB-2 of our report dated December 18, 1997
for the financial statements as of September 30, 1997 and September 30, 1996
and the years ended September 30, 1997 and 1996 appearing in the Prospectus,
which is part of this Registration Statement.
We also consent to the reference to us under the heading "Experts" in such
Prospectus.
/s/ Clumeck, Stern, Phillips & Schenkelberg
August 18, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINACIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS WITH FISCAL YEARS ENDED SEPTEMBER 30, 1997 AND 1996 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 12-MOS
<FISCAL-YEAR-END> SEP-30-1997 SEP-30-1996
<PERIOD-END> SEP-30-1997 SEP-30-1996
<CASH> 271,360 11,871
<SECURITIES> 0 0
<RECEIVABLES> 0 0
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 275,689 231,943
<PP&E> 1,093 0
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 312,332 272,993
<CURRENT-LIABILITIES> 222,708 36,016
<BONDS> 0 0
0 0
0 0
<COMMON> 38,035 36,980
<OTHER-SE> 51,589 86,997
<TOTAL-LIABILITY-AND-EQUITY> 312,332 272,993
<SALES> 0 0
<TOTAL-REVENUES> 0 0
<CGS> 0 0
<TOTAL-COSTS> 388,382 275,109
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 18,310 0
<INCOME-PRETAX> (403,735) (273,737)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (403,735) (273,737)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (403,735) (273,737)
<EPS-PRIMARY> (.06) (.04)
<EPS-DILUTED> (.06) (.04)
</TABLE>
