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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10
GENERAL FORM FOR REGISTRATION OF SECURITIES
PURSUANT TO SECTION 12(B) OR (G) OF THE SECURITIES EXCHANGE ACT OF 1934
Safe Alternatives Corporation of America, Inc.
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(Exact name of registrant as specified in its charter)
Florida 06-1413994
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
27 Governor Street, Ridgefield, Connecticut 06877
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (203) 438-8144
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Securities to be registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which
to be so registered each class is to be registered
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Securities to be registered pursuant to Section 12(g) of the Act:
Common Stock, $.0001 par value per share
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(Title of Class)
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(Title of Class)
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AVAILABLE INFORMATION
Subsequent to the date of this Registration Statement the Company will be
subject to the information requirements of the Securities Exchange Act of 1934,
as amended ("Exchange Act") and in accordance therewith will file reports and
other information with the Securities and Exchange Commission (the
"Commission"). Reports and other information filed by the Company with the
Commission can be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington
D.C. 20549, and at the Commission's New York Regional Office at Seven World
Trade Center, Suite 1300, New York, New York 10048. Copies of such material can
also be obtained from the Public Reference Section of the Commission,
Washington, D.C. 20549 at prescribed rates.
The Company has filed with the Commission this Registration Statement on
Form 10 (together with all amendments and exhibits filed or to be filed in
connection herewith, the "Registration Statement") under the Securities Act of
1934, as amended, with respect to the Company's common stock, $.0001 par value
per share (the "Common Stock"). Statements contained herein as to the contents
of any document are necessarily summaries of such documents and, in each
instance, reference is hereby made to the copy of such document filed as an
exhibit to the Registration Statement, and each such statement is qualified in
all respects by such reference. The Registration Statement may be inspected and
copied at the places set forth above.
In addition to the foregoing, the Company will furnish to registered
holders of its Common Stock annual reports containing audited financial
statements, with an opinion expressed by the Company's independent auditors.
Such audited financial statements will be prepared in conformity with generally
accepted accounting principals ("GAAP"). The Company intends to furnish to
registered holders of its Common Stock unaudited financial statements on a
quarterly basis, such unaudited financial statements to be prepared in
conformity with GAAP. The Company will also furnish to registered holders all
notices of stockholder's meetings and other reports and communications of the
Company.
The Company's principal executive offices are located at 27 Governor
Street, Ridgefield, Connecticut 06877, and its telephone number is (203) 438-
8144.
As of October 1, 1996 there were 1,152 holders of record of shares of
Common Stock of the Company.
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ITEM 1. BUSINESS
THE COMPANY
The Company was organized in 1976, under the name Knight Airlines, Inc., to
engage in the commuter airline business. In October, 1978 the Company engaged in
an initial public offering of its Common Stock in Florida, pursuant to an
exemption from registration under Regulation A promulgated under the Securities
Act of 1933, as amended (the "Act"). No market for trading of the Common Stock
has ever developed. The Company operated as a commuter airline from its
inception through April, 1983, when it ceased operations and all of the assets
of the Company were sold to satisfy all outstanding indebtedness. From April
1983 through September 1995 the Company was dormant. In May, 1994, the name of
the Company was changed to Portsmouth Corporation. In September, 1995, pursuant
to the Reorganization, the Company acquired all of the assets of SAC-Delaware
and commenced operations. On March 4, 1996 the Company changed its name to Safe
Alternatives Corporation of America, Inc. (a Florida corporation).
Since the Reorganization, the Company has changed its focus from being a
"public shell", without assets or a business, to a company concentrating its
resources on the research, development and commercial exploitation of certain
technologies (the "Technologies") which it either owns, exclusively licenses, or
in which it has exclusive marketing rights. The products which the Company has
developed and/or intends to develop, as the case may be, from the Technologies
are primarily in the areas of (i) paint stripping chemicals (world-wide
license), (ii) water-based foams for insulation material (continental United
States license), (iii) radon barrier and flame retardant coatings (continental
United States license), (iv) recycling solvents (continental United States
license), and (v) sealants (continental United States license). Although the
Company is currently actively marketing its paint stripping product, only
nominal revenues have been generated as of the date of this Registration
Statement. Certain of the Technologies are unpatented proprietary technologies
and in certain cases neither the inventor nor the Company believes that seeking
patent protection is prudent. The Company markets and sells the paint stripping
product under the name "AmeriStrip". AmeriStrip is a product used to remove
lead-based paints, latex, alkyd, varnish, polyurethane, and epoxy resin coatings
from structural metal, cement, fiberglass, wood, mica and plaster. AmeriStrip is
applied using an airless spray gun, paint brush or spatula. For most
applications, the Company believes that the stripper will remove substantially
all of the paint, exposing the bare surface within a 24-hour period. The
AmeriStrip line of paint strippers are biodegradable, water washable, non-
caustic, and methylene chloride free. Management currently believes that the
Company will be ready to bring a flame retardant polyurethane-type foam to
market during the next twelve months, which would be marketed as an insulation
material to the construction market, as well as the retro-fit market. Subject
to raising additional capital, the Company believes that certain of the other
coatings, sealants, solvents and foams should be ready for marketing in 1997.
BACKGROUND
On September 15, 1995 (the "Closing Date"), pursuant to the terms of an
Asset Purchase Agreement and Plan of Reorganization dated as of August 21, 1995
(the "Agreement") between Safe Alternatives Corporation of America, Inc., a
Delaware corporation ("SAC-Delaware") and Safe Alternatives Corporation of
America, Inc., a Florida corporation, then operating under the name Portsmouth
Corporation (the "Company"), the Company purchased the business (the
"Business"), including, without limitation, all of the assets of SAC-Delaware,
and assumed all of the liabilities of SAC-Delaware (the "Reorganization"). Prior
to the Reorganization, the Company had no meaningful operations.
Immediately prior to the closing of the Reorganization (the "Closing"), the
Company undertook a
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28 for 1 reverse stock split; consequently, all of the calculations included
herein reflect this split. The Agreement provided for the Company's purchase of
all of SAC-Delaware's assets in consideration for, among other things, (i) the
assumption of all of SAC-Delaware's liabilities, (ii) the issuance and delivery
to SAC-Delaware of 8,000,000 shares of the Common Stock, representing
approximately 94% of the then issued and outstanding shares of Common Stock as
of the date of the Closing; and (iii) a six percent royalty (the "Royalty") on
the gross revenues of the Company attributable to the assets acquired by the
Company pursuant to the terms of the Agreement, payable on a pro rata basis to
the stockholders of SAC-Delaware. The Royalty is payable on a quarterly basis
during the sixty months immediately following the Closing Date, and the
cumulative total of all Royalty payments is limited to a maximum of $8,500,000.
The Royalty does not apply to the revenues generated by the sale of AmeriStrip
which technology was acquired after the Reorganization.
RESEARCH AND DEVELOPMENT
The Company has not completed its research and development on all potential
products from the Technologies, and therefore, there can be no assurances that
these products will be developed or that they will perform as intended.
Management believes that the next marketable product to follow the AmeriStrip
product will be a fire retardant foam insulation. Considerable time and
resources have been devoted to developing and exploiting this technology and
management believes that sometime in 1997 the Company will be in a position to
bring the Company's foam product to market.
All of the Company's research and development efforts are conducted at the
Company's laboratory facility in Brookfield, Connecticut. The Company leases
12,000 square feet in a building located at 91 Commerce Drive in Brookfield,
Connecticut. The term of the lease is for five (5) years, commencing March 1,
1993 and ending February 28, 1998. The Company has the option to renew the
lease for an additional five (5) year period. The base rent on an annual basis
is $55,350 for the period through February 28, 1994, $73,800 the next twelve
months, $76,752 for the twelve months thereafter, $79,822 for the next twelve
months and $83,015 until the lease expires or is renewed.
The Company continues to conduct research with respect to the Technologies
in order to develop marketable products. The Company believes that, in addition
to AmeriStrip and the Company's foam products, the Company may develop products
available for marketing within the next twelve months, although there can be no
assurances.
TECHNOLOGIES
PAINT STRIPPING CHEMICALS
-------------------------
The Company has obtained worldwide marketing rights to a proprietary
paint stripping compound. The proprietary compound is not patented but is
protected by trade secrets. The Company markets and sells the paint stripping
product under the name "AmeriStrip". AmeriStrip is effective in removing lead-
based paints, latex, alkyd, varnish, polyurethane, and epoxy resin coatings from
structural metal, cement, fiberglass, wood, mica and plaster. AmeriStrip is
applied using an airless spray gun, paint brush or spatula. For most
applications, the Company believes that the stripper will remove substantially
all of the paint, exposing the bare surface within a 24-hour period. The
AmeriStrip line of paint strippers are biodegradable, water washable, non-
caustic, and methylene chloride free. The compound has begun to gain acceptance
in the marketplace, and has been sold in various quantities to a contractor for
the New York City Housing Authority, to the New York Port Authority, to Sherwin
Williams, and to other major industrial customers.
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FOAM
----
The Company has a license from Mrs. Kathleen Kennedy, Mr. Richard J.
Fricke, a director and secretary of the Company, and Mr. Patrick J. Crehan, to
commercially exploit the foam Technologies in the continental United States.
The foam Technologies are protected by a patent, which patent is valid through
December 4, 1999. The Company believes that with its foam Technology it will be
able to manufacture foam insulation product for the construction industry
containing no chlorofluorocarbohydrants ("CFCs"). Additionally, the foam
Technology is water-based, unlike most foam products currently on the market.
As of January 1, 1996, federal law prohibits the sale of products containing
CFCs due to their damaging effect on the earth's ozone layer. Assuming that the
Company completes its research with respect to the foam Technology, the foam
products will be water-based, and therefore, management believes, comply with
the government's mandate. Management also expects these products to be less
expensive to produce than comparable products containing CFCs. The Company
believes that its foam products will conform to substantially the same
performance standards as other foam products. The Company believes that there
may be other derivative uses for the foam Technology as well. Combining the foam
Technology with the proprietary coating described below, management believes
that the foam could be fire retardant.
COATINGS AND SEALANTS
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The Company has an exclusive license from Mrs. Kathleen Kennedy to
commercially exploit certain chemical compounds which management believes can be
used to manufacture the following products: (i) a fire retardant coating, (ii) a
vapor barrier and (iii) a radon barrier. Based upon the Company's analysis and
testing, it believes that (i) the fire retardant coating should be able to be
used with a regular paint brush or paint gun and should be effective in
preventing against fire with most building surfaces, (ii) the vapor barrier
viscous plastic coating should be an effective water tight coating for use on
cement foundations, and (iii) the radon barrier should effectively encapsulate
radon.
RECYCLING SOLVENTS
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The Company has an exclusive license from Mrs. Kathleen Kennedy to
commercially exploit certain chemical compounds in the continental United States
which management believes can be used to recycle polyurethane, plastics,
polystyrene and possibly disposable diapers.
STERILIZATION TECHNOLOGIES
--------------------------
The Company has the proprietary rights to a photo-ozone sterilization
Technology. The Company has completed the initial phase of development of the
photo-ozone system, and has received a patent from the U.S. patent office.
Although management of the Company believes that the prospects for its photo-
ozone system may be significant, without substantial additional financing,
further research is too costly to continue. Consequently, the Company does not
intend to devote time or resources to this project for the foreseeable future.
Except for the AmeriStrip product line, the Company has no other currently
marketable products. Each of the other Technologies represents an opportunity
which the Company is exploring through further research and development. There
can be no assurances that the Company will develop any other commercializable
products from the Technologies and/or that even if it does that the Company will
be able to effectively market such products and/or that a market will develop.
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PROPRIETARY RIGHTS
Many of the Technologies which the Company licenses are protected by a
patent or have a patent pending. Most of the Technologies involve trade secrets
which are considered proprietary to the respective licensors of the
Technologies. The Company takes all reasonable measures to protect the
Technologies, including the timely update of patent related innovations to the
respective processes, if applicable, compliance with the terms of each license
agreement and through the requirement that each employee or consultant execute a
confidentiality and nondisclosure agreement.
LICENSES
The following is a summary of certain of the Company's material licenses
with Mrs. Kathleen Kennedy, the successor-in-interest to the estate of Mr.
Richard B. Kennedy. Each such license has substantially the same terms and
conditions and each is valid until April 17, 2050, unless the Company fails to
pay a royalty of four percent (4%) of the gross sales derived from the
exploitation of the respective Technology, with certain limitations for sales
derived from inter-company transfers or transactions with subsidiaries. The
Company has also agreed to pay all maintenance fees and fees for filing and
prosecuting patent applications pending at the time the licenses were executed.
All rights under the licenses are freely assignable by the Company. The
licenses were amended on August 23, 1993 to collectively provide for a required
minimum monthly payment of $5,000, in the aggregate, and a required weekly
payment of $1,200 to Mrs. Kathleen Kennedy during her lifetime in lieu of
progressive sales minimums due beginning in 1993. The royalty payments
described above nonetheless survive. Failure by the Company to pay the minimum
weekly and/or monthly payments when due may result in the loss of exclusivity
of such licenses. Failure to pay royalties due under any license may result in
the termination of such license.
PAINT STRIPPING
---------------
The Company's paint stripping products are proprietary in nature, with the
Company having a worldwide marketing license with the manufacturer of the
products. Under the terms of the supply agreement (the "Supply Agreement")
dated January 5, 1996 between the Company and Samax Enterprises, Inc. (the
"Supplier"), the Supplier has agreed to sell to the Company all of the
AmeriStrip product. necessary to fill the Company's orders with respect to
AmeriStrip. In addition, the Supplier has granted the Company a right of first
refusal to market any other products developed by the Supplier. Pursuant to the
terms of the Supply Agreement, the Supplier has agreed not to sell its products
to any direct competitor of the Company, although the Supplier retains the right
to sell its products to distributors, which may ultimately sell to competitors
of the Company. The paint stripping products are not patented, but are covered
by trade secrets. It has been determined by the Company and the manufacturer
that it is preferable not to seek patent protection, but rather to protect this
Technology through trade secrets.
FOAMS
-----
The Company entered into a license agreement, dated December 9, 1992, by
and between Richard B. Kennedy, (Mr. Kennedy has since deceased and his wife has
succeeded in interest) Richard J. Fricke and Patrick J. Crehan (collectively
referred to therein as "Licensor") and the Company, as licensee, whereby the
Licensor granted the Company: (i) an exclusive right to exploit within the
continental United States certain inventions, technology, know-how and patent
rights relating to fire retardant urethane foam with reduced smoke toxicity, and
improvements thereto, excluding those applications which are utilized in the
packaging foam industry and (ii) the joint patent rights to manufacture, use,
sell and sublicense the Technology.
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COATINGS AND SEALANTS
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The Company entered into a license agreement, dated December 9, 1992, by
and between Richard B. Kennedy, as licensor (Mr. Kennedy has since deceased and
his wife has succeeded in interest), and the Company, as licensee, whereby the
licensor granted to the Company: (i) an exclusive right to exploit within the
continental United States, certain inventions, technology, know-how and patent
rights relating to a fire retardant urethane coating which provides a vapor
barrier, and improvements thereto, and (ii) the joint patent rights to
manufacture, use, sell and sublicense the Technology.
RECYCLING SOLVENTS
------------------
The Company entered into a license agreement, dated December 9, 1992, by
and between Richard B. Kennedy, as licensor (Mr. Kennedy has since deceased and
his wife has succeeded in interest), and the Company, as licensee, whereby the
licensor has granted the Company: (i) an exclusive right to exploit within the
continental United States certain inventions, technology, know-how and patent
rights relating to the disposal and reuse of plastic bags, polyurethane,
plastics, polystyrene, diapers and the like, and improvements thereto, and (ii)
the joint patent rights to manufacture, use, sell and sublicense the Technology.
MARKETING AND SALES
PAINT STRIPPING CHEMICALS.
-------------------------
The Company is focusing its sales and marketing efforts on a product-by-
product basis, with its paint stripping product being the first product to be
offered in the marketplace. The Company is approaching the marketplace with a
combination of in-house sales, sales representatives and direct sales to target
traditional networks of distribution of the AmeriStrip product. The Company has
sold limited quantities of the AmeriStrip product to a national paint store
chain. Additionally, the Company is seeking to establish direct sales to
subcontractors who are bidding on municipal, state and federal governmental
projects. The Company is actively pursuing sales and marketing efforts to the
City of New York Department of Education for use in the removal of lead based
paint in the New York public school system. Although the Company has had modest
sales to subcontractors seeking these projects, the Company believes that this
is a targeted niche for the AmeriStrip product. The Company has established
connections with several superintendents of these schools and is providing them
with samples of the Company's products for use in teaching lead abatement
workers and lead abatement supervisors. Additionally, the Company is directly
approaching lead specifiers, who specify the product to be used in lead
abatement work at all levels.
The Company currently has a director of sales, five (5) salesmen and three
representatives who are actively seeking customers not only in governmental
markets but also in the private sector. In connection with such efforts, the
Company and its representatives are contacting major chains such as Sherwin
Williams and providing them with literature, samples and demonstrations.
Sherwin Williams has begun to place orders for the Company's products, and the
number of Sherwin Williams stores stocking the Company's products has been
increasing. As of October 1996, Sherwin Williams offered AmeriStrip at twenty
one (21) stores.
The Company has placed advertisements in several magazines, including
magazines intended for commercial contractors as well as the do-it-yourself
market. The Company is in the process of establishing a direct sales unit where
orders will be taken by a telephone representative of the Company and shipped to
the end-user.
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FOAMS.
-----
Since the Company is still experimenting with and conducting research on
the foam Technology, the Company does not actively market its foam product. The
Company intends to begin marketing the foams through direct sales to contractors
involved in the construction industry. It is, however, possible that the
Company will engage in one or more joint ventures or similar strategic alliances
with major manufacturers and distributors in order to produce and market its
foam products.
OTHER TECHNOLOGIES.
------------------
Until the other Technologies have been fully researched and
commercializable products have been developed the Company will not establish
marketing strategies for the sale of these possible products.
SUPPLY ARRANGEMENTS
Paint stripping -- the Company purchases all of the AmeriStrip product it
needs to satisfy orders from the inventor who licenses this Technology to the
Company. Under the terms of the license agreement, the inventor reserved for
itself the right to engage in direct sales of the paint stripping product,
although it may not use the "AmeriStrip" name. Although the Company believes
that the inventor's facilities have sufficient capacity to satisfy the existing
and future needs of the Company for the next twelve months, there can be no
assurances thereof. In the event that the inventor experiences any financial
difficulties and/or does not fill the Company's orders in a timely manner, the
Company believes that it would be materially adversely effected. Furthermore,
the Company may not purchase the product elsewhere since the paint stripping
product is the proprietary property of the inventor.
Foam -- the foam products require large amounts of MDI, the base chemical
(polyisocyanate) of which is manufactured and distributed by several large
companies, including BASF and W.R. Grace & Co. The Company does not anticipate
any difficulties obtaining the necessary amounts of MDI or production equipment,
although there can be no assurances thereof.
Coatings and Sealants -- the Company does not anticipate any difficulties
obtaining the necessary chemicals and materials for the various potential
coating products. The Company believes that there are many suppliers of these
chemicals, available on reasonable terms.
COMPETITION
There are many other companies that offer similar or competitive products
to the products either developed or under development by the Company. The
industries in which the Company intends to market its products are characterized
by substantial and intense competition. Almost all of the companies offering
similar or competitive products, both domestic and foreign, are substantially
larger and have substantially greater resources, distribution capabilities and
experience than the Company. It is also likely that there will be other
competitors in the future. The following is a list of certain of the companies
with which the Company will be competing: Paint Stripping Chemicals- Peel-A-Way
-------------------------
Corp., Minnesota Mining and Manufacturing ("3M") and Thomas Back to Nature; and
Foams; Coatings and Sealants- Sealed Air Corporation, Carpenter Foam, Thompson's
- ----------------------------
Water Sealer and miscellaneous radon venting companies.
The Company's objective is to develop environmentally-friendly products
which will compete with the existing paint stripping, coatings, sealants,
recycling solvents, foams and sterilization technologies available that are
produced by competitors of the Company. The Company cannot provide any
assurances
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that the Company will develop competitive products, that a market for such
products (assuming that they are developed), will develop, that the Company will
be able to develop marketing or distribution channels, or that competitors
having greater financial and other resources will not, or have not, devoted
those resources to the research and development of new or existing products
which will compete with the Company's products. There can be no assurance that
the Company will effectively compete against any competitor.
GOVERNMENT REGULATIONS
The manufacture and sale of paint stripping chemicals, coatings, sealants
and sterilization equipment are subject, to varying degrees, to federal, state
and local regulation. The predominance of the regulatory burden however is
imposed upon the manufacturer, such as the inventor/supplier, of the AmeriStrip
product and not the Company. The Company must comply with federal labeling
requirements for the AmeriStrip product, which require a description of the
various chemicals included in the product and the hazards attendant to the use
thereof. The foam, for construction purposes, is regulated by state and local
building codes. Failure to properly comply with all regulations applicable to
the Company's products could result in the Company incurring substantial costs
in order to comply or cessation of manufacture of the offending products and the
possible imposition of civil and criminal penalties.
INTELLECTUAL PROPERTY
The Company's business is dependent upon its ability to commercially
exploit certain patented and unpatented proprietary technologies which it has
licensed from inventors. The ability of the Company to exploit the Technologies
depends on many circumstances beyond its control. No assurances can be given
that the Company will be able to commercially exploit such intellectual property
rights and develop marketable products. The inability of the Company to satisfy
the terms and conditions of the licenses with the holders of the proprietary
Technology rights would have a materially adverse effect on the Company. The
Company has an exclusive arrangement with respect to the paint stripping
chemical used in the AmeriStrip products, except for the supplier of the
chemicals who also maintains the right to market such product. The Company does
not pay any license fees in connection with this license but agrees to purchase
the chemicals from the supplier thereof. Under the revised terms of the various
license agreements relating to the foams, coatings and solvents, the Company is
obligated to make minimum monthly payments of $5,000 and minimum weekly payments
of $1,200, in the aggregate, to Mrs. Kathleen Kennedy. The failure by the
Company to make such minimum weekly and monthly payments to Mrs. Kennedy may
result in the licenses becoming non-exclusive to the Company. The failure of
the Company to make royalty payments due under any license may result in
termination of such license.
EMPLOYEES
As of October 1, 1996, the Company had thirteen (13) employees, including
five (5) salespeople and three (3) officers. The Company has also engaged the
services of three (3) consultants.
None of the Company's employees is represented by a labor organization and
the Company considers its relationship with employees to be satisfactory.
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ITEM 2. FINANCIAL INFORMATION
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected financial data, as of and for the fiscal years ended
December 31, 1995, 1994 and 1993, are derived from the audited financial
statements of the Company, certain of which are included herein. The selected
financial data for the six month periods ended June 30, 1996 and 1995 are
derived from the unaudited financial statements of the Company. The unaudited
financial statements include all adjustments, consisting only of normal
recurring accruals, which the Company considers necessary for a fair
presentation of the financial position and results of operations for these
periods. Operating results for the six months ended June 30, 1996 are not
necessarily indicative of the results that may expected for the year ended
December 31, 1996. This information should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Plan of
Operations" and the financial statements of the Company, including the notes
thereto, appearing elsewhere herein.
<TABLE>
<CAPTION>
SIX MONTHS ENDED FISCAL YEAR ENDED
JUNE 30 DECEMBER 31
1996 1995 1995 1994 1993
------------------------ ----------------------------------------
<S> <C> <C> <C> <C> <C>
STATEMENT OF
OPERATIONS DATA
Sales................ $ 37,661 $ 17,762 $ 38,359 $ 16,425 $ -----------
Net loss............. 1,296,756 1,536,551 2,441,613 2,994,619 1,946,294
Net loss per
share of Common
Stock............... (0.16) (0.24) (0.36) (0.49) (0.36)
Weighted average
number of shares
of Common Stock
outstanding......... 7,920,238 6,515,153 6,862,688 6,137,128 5,380,597
BALANCE SHEET
DATA
Total Assets......... $ 280,851 $ 793,923 $ 223,706 $ 271,598 $ 442,319
Total Liabilities.... 429,339 392,653 574,023 316,840 114,957
Total Stockholders'
Equity (Deficit)... (148,488) 401,270 (350,317) (45,242) 327,362
</TABLE>
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND PLAN OF OPERATIONS.
GENERAL
Since the Reorganization and during the next twelve (12) months, management
of the Company anticipates that the Company will concentrate a significant
portion of its efforts on the marketing and sale of the AmeriStrip paint
stripping compound and possibly the introduction of the foam insulation product.
Additionally, management believes that certain of the coatings, sealants, and
solvents could be ready for marketing within the next twelve (12) months,
although no assurances thereof can be given. The Company does not intend to
dedicate any resources to the further development of the sterilization
technology in the foreseeable future.
The report of the Company's independent auditors with respect to the
financial statements of the Company for the three years in the period ended
December 31, 1995 contains a paragraph as to the Company's ability to continue
as a going concern. Among the factors cited by the auditors ( See note 1 to
the financial statements) as raising substantial doubt as to the Company's
ability to continue as a going concern are (i) the Company has incurred
recurring operating losses and (ii) the Company has a working capital
deficiency.
COMPARISON OF THE SIX MONTH PERIOD ENDED JUNE 30, 1996 AND JUNE 30, 1995
Sales and Net Losses. For the six month period ended June 30, 1996, sales
--------------------
increased to $37,661 from $17,762 in the same period of the prior year, an
increase of 112% due to continued growth in the AmeriStrip product line. For
the six month period ended June 30, 1996, the Company reported net losses of
$1,296,756 compared to $1,536,551 in the prior period, a decreased loss of 16%,
due primarily to the decrease in selling, general, and administrative expenses
and a decrease in research and development expenses as described below.
Selling, General and Administrative. For the six month period ended June
-----------------------------------
30, 1996, the Company incurred selling, general and administrative expenses of
$1,174,355 compared to $1,311,650 in the same period of the prior year, a
decrease of 10% due primarily to the following: a $142,000 decrease in officers'
salaries, a decrease of $124,000 in royalties due to the termination of one of
the license agreements, and an increase of $65,000 in commissions, offset by
various increases in other selling related accounts, as the Company continues to
increase its sales efforts related to the AmeriStrip product line. Calculations
with respect to the percentage of selling, general and administrative expenses
relative to sales are not meaningful.
Research and Development. For the six month period ended June 30, 1996,
------------------------
research and development expenses decreased to $113,284 from $212,571 in the
same period of the prior year, a decrease of 47%, due primarily to the
following: a decrease of $16,000 in laboratory fees, a decrease of $24,000 in
research and development consulting expenses, a decrease of $11,000 in research
and development related rent expense, and a decrease of $29,000 in research and
development salaries. As the AmeriStrip product line has come to market, and
other product lines are further along in their development, research and
development expenses have continued to decrease. Calculations with respect to
the percentage of research and development expenses relative to sales are not
meaningful.
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COMPARISON OF YEARS ENDED DECEMBER 31, 1995 AND 1994
Sales and Net Losses. For the year ended December 31, 1995, sales
--------------------
increased to $38,359, from $16,425 in the prior year, an increase of 134% due to
the continued growth of the AmeriStrip product line. For the year ended
December 31, 1995, the Company reported net losses of $2,441,613 from
$2,994,619 in the prior year, a decreased loss of 18%, due primarily to
decreases in selling, general and administrative expenses, and research and
development expenses described below.
Selling, General and Administrative. For the year ended December 31,
-----------------------------------
1995, the Company incurred selling, general and administrative expenses of
$2,131,560 as compared to $2,578,653 in the prior year, a decrease of $17%, due
primarily to a $517,000 decrease in non-cash compensation and commission
expenses, related to the fewer number and value of shares of Common Stock issued
as compensation. Calculations with respect to the percentage of selling,
general and administrative expenses relative to sales are not meaningful.
Research and Development. For the year ended December 31, 1995, research
------------------------
and development expenses decreased to $273,150 as compared to $369,791 in the
prior year, a decrease of 26%, due primarily to the following; a decrease of
$18,000 in laboratory fees, a decrease of $41,000 in research and development
consulting expenses, and a decrease of $36,000 in research and development
salaries. As the AmeriStrip product line has come to market, and other product
lines are further along in their development, research and development fees have
continued to decrease. Calculations with respect to the percentage of research
and development expenses relative to sales are not meaningful.
COMPARISON OF YEARS ENDED DECEMBER 31, 1994 AND 1993
Sales and Net Losses. For the year ended December 31, 1994, the Company
--------------------
recognized revenues of $16,425 due to initial sales of the AmeriStrip product
line. There were no revenues in 1993. For the year ended December 31, 1994,
the Company reported net losses of $2,994,619 up from $1,946,294 in the prior
year, an increased loss of 54%, due primarily to increases in selling, general
and administrative expenses, and research and development expenses as described
below.
Selling, General and Administrative. For the year ended December 31,
-----------------------------------
1994, the Company incurred selling, general and administrative expenses of
$2,578,653 up from $1,566,492 in the prior year, an increase of 65% due
primarily to a $669,000 increase in non-cash compensation and commission
expenses, related to the greater number of shares of Common Stock issued as
compensation. In addition, in 1993, the Company received $385,000 pursuant to a
contract for funding of marketing efforts for their products. This funding was
used to offset the related expenses. The contract for funding was mutually
terminated in 1993. The balance of the increases is due to Royalty payments of
$247,000 which began in 1994, a decrease of $122,000 in officers salaries,
offset by various decreases to other selling, general and administrative
expenses. Calculations with respect to the percentage of selling, general and
administrative expenses relative to sales are not meaningful.
Research and Development. For the year ended December 31, 1994, research
------------------------
and development expenses increased to $369,791 up from $342,867 in the prior
year, an increase of 8%. Calculations with respect to research and development
expenses relative to sales are not meaningful.
12
<PAGE>
LIQUIDITY
The Company has never generated sufficient revenues to finance its operations
and has been able to remain in business solely as a result of raising capital.
The Company's ability to continue as a going concern in the near term is
dependent upon obtaining additional financing.
OFFERING
The Company intends to raise up to Five Million Dollars ($5,000,000), at an
offering price per share to be determined by the Company, in a private offering
of shares of Common Stock pursuant to an exemption from registration under the
Securities Act under Regulation D promulgated thereunder.
ITEM 3. PROPERTIES
The Company owns no real property. The Company has entered into two office
leases.
The Company leases 12,000 square feet in a building located at 91 Commerce
Drive in Brookfield, Connecticut (the "Brookfield Lease"). The Brookfield Lease
was executed by and between a trustee acting on behalf of Brookfield Commerce, a
Connecticut partnership, as lessor, and the Company, as lessee, on February 22,
1993. The Company uses this facility for research and development of products,
marketing meetings and shipment of chemicals. The term of the lease is for five
(5) years, commencing March 1, 1993 and ending February 28, 1998. The Company
has the option to renew the lease for an additional five (5) year period. The
base rent on an annual basis is $55,350 for the period through August 31, 1993,
$73,800 the next twelve months, $76,752 for the twelve months thereafter,
$79,822 for the next twelve months and $83,015 until the lease expires or is
renewed.
The Company's corporate headquarters are located in approximately 6,000
square feet of space leased by the Company in a building located at 27 Governor
Street, Ridgefield, Connecticut (the "Ridgefield Lease"). The Ridgefield Lease
was executed by and between a trustee acting on behalf of the Joseph H. and
Ellen Ann Donnelly Trust, as lessor, and the Company, as lessee, on September
30, 1992. The term of the Ridgefield Lease is for three years, commencing
October 1, 1995 and ending September 30, 1998. The base rent on an annual basis
is $40,517 for the first twelve months, $42,543 the next twelve months and
$44,500 for the twelve months thereafter until the lease expires or is renewed.
13
<PAGE>
ITEM 4. SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of October 1, 1996
known to the Company regarding beneficial ownership of the Company's Common
Stock by the officers and directors and any shareholder of more than ten percent
(10%) of the Company's issued and outstanding Common Stock, and the total number
of shares of Common Stock owned by the directors and officers of the Company as
a group.
<TABLE>
<CAPTION>
=================================================================
Name and address Number of Shares Percent
of owner Owned(1) of Class
=================================================================
<S> <C> <C>
Stephen J. Thompson 1,278,081(2) 14.09%
- -----------------------------------------------------------------
Robert F. Thompson 82,080 0.90%
- -----------------------------------------------------------------
Richard J. Fricke 185,250(3) 2.04%
- -----------------------------------------------------------------
Penny Fricke 1,105,882(4) 12.19%
- -----------------------------------------------------------------
Officers and Directors as a
group 1,445,161(5) 15.93%
=================================================================
</TABLE>
(1) Beneficial ownership as reported in the table above has been determined in
accordance with Rule 13d-3 promulgated under the Securities Exchange Act of
1934. Accordingly, except as noted, all of the Company's securities over
which the officers and directors named, or as a group, directly or
indirectly have, or share voting or investment power, have been deemed
beneficially owned.
(2) Does not include (i) 197,850 shares which are owned by his wife and The
Thompson Family Trust. Mr. Thompson disclaims beneficial ownership of such
shares. Includes 100,250 shares which are owned by The Ridge Group, a
Connecticut general partnership in which Richard J. Fricke and Stephen
J.Thompson each own a 50% equity interest.
(3) Does not include (i) 1,105,882 shares which are owned by his wife, Penny
Fricke, (ii) 41,040 shares owned by his daughter, Laura J. Fricke and
(iii) 41,040 shares owned by his daughter, Amanda C. Fricke. Mr. Fricke
disclaims beneficial ownership of such shares. Includes 100,250 shares
which are owned by The Ridge Group, a Connecticut general partnership in
which Richard J. Fricke and Stephen J.Thompson each own a 50% equity
interest.
(4) Does not include (i) 167,080 shares owned by her husband, Richard J.
Fricke, (ii) 41,040 shares owned by her step-daughter, Laura J. Fricke,
(iii) 41,040 shares owned by her step-daughter, Amanda C. Fricke, (iv)
183,073 shares owned by the Fricke Family Trust and (v) 720,142 shares
which are owned by The Ridge Group, a Connecticut general partnership in
which Richard J. Fricke and Stephen J.Thompson each own a 50% equity
interest.. Mrs. Fricke disclaims beneficial ownership of such shares.
(5) Does not include (i) 197,850 shares which are owned by Stephen Thompson's
wife and The Thompson Family Trust, (ii) 1,105,882 shares which are owned
by Richard J. Fricke's wife, Penny Fricke, (iii) 41,040 shares owned by
his Mr. Fricke's daughter, Laura J. Fricke and (iv) 41,040 shares owned by
Mr. Fricke's daughter, Amanda C. Fricke. Includes 100,250 shares which
are owned by The Ridge Group, a Connecticut general partnership in which
Richard J. Fricke and Stephen J.Thompson each own a 50% equity interest.
14
<PAGE>
ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS
The following sets forth certain information with respect to the directors
and executive officers of the Company.
<TABLE>
<CAPTION>
Name Age Position(s)
- ---- --- -----------
<S> <C> <C>
Stephen J. Thompson 42 President, Chief Executive
Officer and Director
Richard J. Fricke 51 Secretary and Director
Robert F. Thompson 66 Executive Vice President,
Chief Operating Officer
and Chief Financial Officer
</TABLE>
Stephen J. Thompson began his career in the government in 1977 as the
Mayor's Aide for the Municipality of Ridgefield, Connecticut. Mr. Thompson
served in several positions having broad exposure to State and Federal
Government Regulatory Agencies, including the Department of Energy ("DOE"),
Housing and Urban Development ("HUD") and the Department of Environmental
Protection ("DEP"). In 1979, Mr. Thompson was elected to the position of
Municipal Treasurer of the Town of Ridgefield, Connecticut. As Treasurer, he
managed the disbursement of tax proceeds, payroll and accounts payable and was
responsible for audits. In 1981, Mr. Thompson was retained by Perkin Elmer
Corporation as a consultant on issues of inventory audit and control for their
Micro-lithography Division. In 1982, Mr. Thompson worked at the Northeastern
Division of BMW of America as an in-house new business consultant, handling
franchise relations, floor plan finance and supervising department managers. In
1986, Mr. Thompson and a partner formed Olympic Enterprises, Inc. to conduct
business in land development and commercial construction, including zoning and
DEP issues. In 1993, a property holding company, Olympic of Venice Place &
Evers, Inc., a Connecticut corporation in which Mr. Thompson had been involved
as president and treasurer, voluntarily petitioned for bankruptcy protection
under Chapter 11 of the Federal bankruptcy laws. Mr. Thompson graduated from
Ridgefield High School and attended the University of Miami from 1972-1973 and
Western Connecticut State College, Ancell School of Business from 1977-1979.
Mr. Thompson's wife is an employee of the Company.
Richard J. Fricke has been a practicing general practice attorney in the
State of Connecticut since 1970 and was admitted to the bar the same year. From
1970-73, he worked with the law firm of Gregory & Adams, in Wilton, Connecticut.
From 1973 to 1990, he was a partner in the Law Firm of Crehan & Fricke, in
Ridgefield, Connecticut. Mr. Fricke filed for protection under Chapter 7 of the
federal bankruptcy laws in 1996. In addition to private practice, Mr. Fricke
was Town Counsel for the town of Ridgefield, Connecticut. From 1973-81, he
served as Director of Village Bank & Trust Company and for the Ridgefield
Community Center and the Ridgefield Montessori School. Mr. Fricke received his
undergraduate and law degrees from Cornell University in 1967 and 1970,
respectively. Mr. Fricke's biographies can be found in Marquis Who's Who in
--------------------
America, Who's Who in the World, Who's Who in Business and Finance, and Who's
- ------- ---------------------- --------------------------------- -----
Who in the East.
- ---------------
Robert F. Thompson is Executive Vice President, Chief Financial Officer and
Chief Operating Officer of the Company. Mr. Thompson is a retired Corporate
Officer of American Can Co. He completed twenty-nine years with American Can
Co. and at retirement in 1988 was Assistant Treasurer and Chief Credit Officer
with functional responsibility for Credit, Payroll, Real Estate and Claims
within the Treasury Department. Mr. Thompson served as President of the Credit
Research Foundation, Columbia, Maryland,
15
<PAGE>
from 1989 to 1993. The Foundation is an education and research organization
affiliated with the National Association of Credit Management. He directed the
Foundation's formal program activities at Dartmouth College and Stanford
University and all research projects in the area of credit and financial
management. Mr. Thompson serves as a director of Morgan Foods, Inc., Austin,
Indiana, and the New York Credit and Financial Management Association, New York,
New York. He has served as a Trustee of the Credit Research Foundation and as a
Director of the National Association of Credit Management. Mr. Thompson holds a
B.A. degree in Economics from St. Francis College, the Executive Award from the
Graduate School of Credit and Financial Management, Dartmouth College, and
attended the Graduate School of Business at New York University.
Currently all directors hold office until the next annual meeting of
shareholders and until their successors have been duly elected and qualified.
Officers are elected by and serve at the discretion of the Board of
Directors. Other than Stephen J. Thompson and Robert F. Thompson, who are father
and son, there are no family relationships among the directors or officers of
the Company.
BOARD COMMITTEES
Audit Committee. The Audit Committee of the Board of Directors was formed
in December 1995 to review the results and scope of the annual audit and other
services provided by the Company's independent accountants, to review and
evaluate the Company's control functions and to monitor transactions between the
Company and its employees, officers and directors. Stephen J. Thompson, Richard
J. Fricke and Robert F. Thompson are the members of the Audit Committee.
Compensation Committee. The Compensation Committee of the Board of
Directors reviews and approves the compensation and benefits for the Company's
executive officers. Stephen J. Thompson, Richard J. Fricke and Robert F.
Thompson are the members of the Compensation Committee.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company's Compensation Committee was formed in October, 1996, to review
and approve the compensation and benefits of the Company's executive officers
and make recommendations to the Board of Directors regarding such matters.
Stephen J. Thompson, Richard J. Fricke and Robert F. Thompson are the members of
the Compensation Committee. No interlocking relationship exists between any
member of the Company's Board of Directors or Compensation Committee and any
member of the board of directors or compensation committee of any other company,
nor has any such interlocking relationship existed in the past. In the year
ended December 31, 1995, the full Board of Directors participated in
deliberations concerning executive officer compensation.
DIRECTOR COMPENSATION
The Company's directors do not receive any fees for their services as Board
members and committee members, but are reimbursed for expenses incurred in
connection with attending Board and committee meetings.
16
<PAGE>
ITEM 6. EXECUTIVE COMPENSATION
The following table sets forth aggregate annual remuneration of the
three directors and officers of the Company, as a group, during the Company's
last fiscal year.
<TABLE>
<CAPTION>
======================================================================================================
Aggregate Aggregate
remuneration remuneration
for fiscal for fiscal
Capacities in year ended year ended
Name of which remuneration December December
individual or identity of group was received 31, 1995 31, 1996
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Stephen J. Thompson President, Chief Executive $50,000(1) $300,000(1)
and Director (2)(3) (2)(3)(4)(5)
Richard J. Fricke Secretary and Director $50,000(1) $300,000(1)
(2)(3) (2)(3)(4)(5)
Robert F. Thompson Chief Operating Officer and $83,444 (1) $125,000(1)
Chief Financial Officer (2)(3) (2)(3)
All directors and officers as a Directors and Officers $183,444(1) $725,000(1)
group (3 individuals) (2)(3) (2)(3)(4)(5)
======================================================================================================
</TABLE>
____________________
(1) Although the employment contracts for Stephen J. Thompson and Richard J.
Fricke each call for compensation of $300,000 plus incentive bonuses for
the year ended December 31, 1995, these amounts were not actually paid
through December 31, 1995. In 1995 Mr. Thompson and Mr. Fricke each
received $50,000 in compensation, and to date in 1996 Stephen J. Thompson
and Richard F. Fricke have each received $24,000 in compensation.
Additionally, Robert F. Thompson received $83,444 in compensation during
1995, and to date in 1996 Robert F. Thompson has received $56,000. Each of
these executive officers have waived their rights with respect to salary
arrearages prior to January 1, 1996.
(2) In addition to their base salaries, the Company has established a Medical
and Dental Reimbursement Plan for each of Stephen J Thompson and Richard J.
Fricke providing for reimbursement of up to $10,000 of medical and dental
expenses annually incurred by such officers. As of the date of this
Memorandum, the Company has not received any requests for reimbursements
under this plan.
(3) The Company pays $5,381 and $9,921 for the health insurance premiums of
each of Stephen J. Thompson, and Richard J. Fricke, respectively .
(4) Does not include 85,000 shares of Common Stock issued as additional
compensation to each of Mr. Richard J. Fricke and Mr. Stephen J. Thompson
for the year ended December 31, 1996.
(5) Under the terms of their respective employment agreements, each of Stephen
J. Thompson and Richard J. Fricke are granted (i) an annual bonus equal to
ten percent (10%) of the Company's net income, and (ii) an annual Common
Stock option bonus of stock options exercisable for ten years at an
exercise price of $.01 per share for one percent (1%) of the number of
shares of Common Stock. issued and outstanding as of the end of the fiscal
year for which such options are granted.
17
<PAGE>
EMPLOYMENT AGREEMENTS
Each of the officers of the Company has executed an employment contract
with substantially similar provisions concerning covenants not to compete and
confidentiality.
Stephen J. Thompson's employment agreement was executed on August 13, 1991
(the "Thompson Employment Agreement") and provides, other than the standard
provisions described above, that he will be Chief Executive Officer of the
Company for an undetermined term. Since the execution of the Thompson Employment
Agreement, the Board of Directors appointed Mr. Thompson to the additional
position of President and Director. Pursuant to the terms of the Thompson
Employment Agreement, in addition to his stated salary, Mr. Thompson is entitled
to a bonus of ten percent (10%) of the annual net income of the Company and an
annual stock option bonus of options to purchase 1% of the number of shares of
Common Stock. issued and outstanding as of the end of the fiscal year for which
such options are granted, exercisable for ten years at an exercise price of $.01
per share. The Thompson Employment Agreement also provides that the Company
shall pay for Mr. Thompson's automobile, health and major medical insurance and
life insurance.
Richard J. Fricke's employment agreement was executed on August 13, 1991
(the "Fricke Employment Agreement") and provides, other than the standard
provisions described above, that he will be Corporate Counsel for an
undetermined term. Since the execution of the Fricke Employment Agreement, the
Board of Directors appointed Mr. Fricke to the additional position of Secretary
and Director. Pursuant to the terms of the Fricke Employment Agreement, in
addition to his salary, Mr. Fricke is entitled to a bonus of ten percent (10%)
of the annual net income of the Company and an annual stock option bonus of
options to purchase 1% of the number of shares of Common Stock. issued and
outstanding as of the end of the fiscal year for which such options are granted,
exercisable for ten years at an exercise price of $.01 per share. The Fricke
Employment Agreement also provides that the Company shall pay for Mr. Fricke's
automobile, health and major medical insurance and life insurance.
Robert F. Thompson's employment agreement was executed on January 31, 1996
and provides, other than the standard provisions described above, that he will
serve as the Company's Chief Operating Officer and Chief Financial Officer.
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
The Company's By-Laws provide for the indemnification, to the full extent
allowed by Florida law, of its directors, officers, employees and agents who are
or were a party, or are threatened to be made a party to any threatened, pending
or completed legal action, suit or proceeding by reason of the fact that he or
she is or was serving a director, officer, employee or agent of the Company or
is or was serving in such capacity at another entity at the Company's request.
The extent, amount and eligibility for such indemnification are determined by a
majority vote of a quorum of disinterested directors, or by a majority vote of a
quorum of disinterested shareholders.
Section 607.0850 of the Florida Business Corporation Act empowers a Florida
corporation to indemnify any person who is a party to any proceeding (other than
an action by or in the right of such corporation) by reason of the fact that
such person is or was a director, officer, employee or agent of such
corporation, or is or was serving at the request of such corporation as a
director, officer, employee or agent of another corporation or enterprise,
provided that he acted in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the corporation, and, with respect
to any criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful. A Florida corporation
18
<PAGE>
may indemnify any person who is a party to any proceeding by or in the right of
the corporation under the same conditions, except that no indemnification is
permitted without judicial approval if the officer or director is adjudged to be
liable in the proceeding. Where an officer, director, employee or agent of a
corporation is successful on the merits or otherwise in the defense of any
action referred to above, the corporation must indemnify him against the
expenses which he actually and reasonably incurred in connection therewith.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended (the "Securities Act") may be permitted to directors,
officers and controlling persons of the Company pursuant to the foregoing
provisions, or otherwise, the Company 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.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company has agreed to provide Richard J. Fricke, a Director and
Secretary to the Company, with office space, facilities, fixtures, equipment and
supplies and to allow him to operate and maintain a legal practice independent
of the Company.
Mr. Fricke is one of the licensors under the foam Technology license. See
"Business - Licenses"
The Company employs Stephen J. Thompson as the President and Chief
Executive Officer of the Company; Richard J. Fricke as Secretary and General
Counsel of the Company; and Mr. Thompson's father, Robert F. Thompson, as Chief
Financial Officer and Chief Operating Officer of the Company. See "Management".
Mrs. Kathleen Kennedy, a holder of a substantial number of the issued and
outstanding shares of Common Stock, is licensor under the Technology licenses
for the Company's foam, coatings and sealants, and recycling solvents
Technologies.
ITEM 8. LEGAL PROCEEDINGS
There are no legal actions pending against the Company nor to the knowledge
of the Company are any such proceedings contemplated.
19
<PAGE>
ITEM 9. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
MARKET
The Company's Common Stock is an over the counter "pink sheets" security.
To the best of the Company's knowledge, there is no public market for the
Company's Common Stock, and the Company is not aware of any trading activity in
the Common Stock.
DIVIDEND POLICY
It is the policy of the Board of Directors to retain earnings for use in
the maintenance and expansion of the Company's business. The Company has not
declared any cash dividends to the shareholders of its capital stock and does
not intend to declare such dividends in the foreseeable future.
ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES
Since the Reorganization, the Company issued approximately 1,700,000 shares
of Common Stock, constituting approximately 19% of the issued and outstanding
shares of Common Stock as of October 1, 1996, to approximately 276 individuals,
for the aggregate consideration of approximately $1,650,000. Such issuances were
made to such individuals without registration of such shares pursuant to the
Securities Act of 1933.
20
<PAGE>
ITEM 11. DESCRIPTION OF REGISTRANT'S SECURITIES TO BE REGISTERED
COMMON STOCK
The Company is authorized to issue Two Hundred Million (200,000,000) shares
of Common Stock, $.0001 par value per share, of which Nine Million Seventy One
Thousand Two Hundred Twenty Seven (9,071,227) shares are issued and outstanding
as of the date of this Registration Statement. All of the issued and outstanding
shares of Common Stock are fully paid, validly issued and non-assessable.
Five Hundred Thousand (500,000) shares of Common Stock are freely
transferable by the holders thereof because they are either subject to the
exemption from registration provided in the original Regulation A offering or
the holders have been holding such shares for longer than the two year statutory
holding period described in Rule 144 under the Securities Act of 1933, as
amended. Additionally, all of the Eight Million (8,000,000) shares of Common
Stock issued to SAC-Delaware and subsequently distributed to SAC-Delaware's
stockholders will be available for transfer two years from the date of
acquisition pursuant to the exemptions from registration pursuant to Rule 144 of
the Securities Act of 1933, as amended.
Holders of shares of Common Stock of the Company are entitled to share
equally on a per share basis in such dividends as may be declared by the Board
of Directors out of funds legally available therefor. There are presently no
plans to pay dividends with respect to the Common Stock. See "Market Price of
and Dividends on the Registrant's Common Equity and Related Stockholder Matters
- -Dividend Policy." Upon liquidation, dissolution or winding up of the Company,
after payment of creditors and the holders of any senior securities of the
Company, the assets of the Company will be divided pro rata on a per share basis
among the holders of the shares of Common Stock. The Common Stock is not
subject to any liability for further assessments. There are no conversion or
redemption privileges nor any sinking fund provisions with respect to the Common
Stock and the Common Stock is not subject to call. The holders of Common Stock
do not have any preemptive or other subscription rights. See "Directors and
Executive Officers" for a discussion of the Company's Board of Directors.
Holders of shares of Common Stock are entitled to cast one vote for each
share held at all stockholders' meetings including the Annual Meeting, for all
purposes, including the election of directors. The Common Stock does not have
cumulative voting rights.
SHARES ELIGIBLE FOR FUTURE SALE
RULE 144 As of the date of this Registration Statement, there are Eight
Million Five Hundred Thousand (8,500,000) shares of Common Stock issued and
outstanding. Of these shares, Five Hundred Thousand (500,000) shares of Common
Stock are freely tradeable without restrictions under the Securities Act. The
remaining Eight Million (8,000,000) shares of Common Stock are "restricted
securities" within the meaning of Rule 144 and are eligible for sale in public
markets subject to the resale limitations of Rule 144.
In general, under Rule 144, a person (or persons whose shares are
aggregated) including persons who may be deemed to be "affiliates" of the
Company, as that term is defined under the Securities Act, is entitled to sell
within any three (3) month period, the amount of shares beneficially owned for
at least two (2) years that does not exceed the greater of (i) 1% of the then
outstanding shares of Common Stock, or (ii) the average weekly trading volume in
the Common Stock in the four calendar weeks preceding such sale. Sales under
Rule 144 are also subject to certain requirements as to the manner of sale,
notice and availability of certain public information about the Company. A
person who has not been an affiliate of the Company for the three months prior
to any proposed sale, and has beneficially owned such shares for at least three
years is entitled to sell all such shares without regard to the volume, manner
of sale, notice
21
<PAGE>
requirements or any restrictions.
No predictions can be made as to the effect, if any, that sales of shares
under Rule 144 or the availability of shares for sale will have on the market,
if any, prevailing from time to time. Sales of substantial amounts of Common
Stock pursuant to Rule 144 may adversely affect the market price of the Common
Stock, assuming any such market develops.
TRANSFER AGENT AND REGISTRAR
The Company serves as its own transfer agent and registrar for the Common
Stock.
ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 607.0850 of the Florida Business Corporation Act provides as
follows:
(1) A corporation shall have power to indemnify any person who was or is a
party to any proceeding (other than an action by, or in the right of, the
corporation), by reason of the fact that he is or was a director, officer,
employee,or agent of the corporation or is or was serving at the request of the
corporation as a director, officer, employee, or agent of another
corporation,partnership, joint venture, trust,or other enterprise against
liability incurred in connection with such proceeding, including any appeal
thereof, if he acted in good faith and in a manner he reasonably believed to be
in, or not opposed to, the best interests of the corporation and, with respect
to any criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful. The termination of any proceeding by judgement, order,
settlement, or conviction or upon a plea of nolo contendere or its equivalent
shall not, of itself, create a presumption that the person did not act in good
faith and in a manner which he reasonably believed to be in, or not opposed to,
the best interests of the corporation or, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
(2) A corporation shall have power to indemnify any person who was or is a
party to any proceeding by or in the right of the corporation to procure a
judgment in its favor by reason of the fact that he is or was a director,
officer, employee, or agent of the corporation or is or was serving at the
request of the corporation as a director, officer, employee, or agent of another
corporation , partnership, joint venture, trust, or other enterprise, against
expenses and amounts paid in settlement not exceeding, in the judgment of the
board of directors, the estimated expense of litigating the proceeding to
conclusion, actually and reasonably incurred in connection with the defense or
settlement of such proceeding, including any appeal thereof. Such
indemnification shall be authorized if such person acted in good faith and in a
manner he reasonably believed to be in, or not opposed to, the best interests of
the corporation, except that no indemnification shall be made under this
subsection in respect of any claim, issue, or matter as to which such person
shall have been adjudged to be liable unless, and only to the extent that, the
court in which such proceeding was brought, or any other court of competent
jurisdiction, shall determine upon application, that, despite the adjudication
of liability but in view of all circumstances of the case, such person is fairly
and reasonably entitled to indemnity for such expenses which such court shall
deem proper.
(3) To the extent that a director, officer, employee, or agent of a
corporation has been successful on the merits or otherwise in defense of any
proceeding referred to in subsection (1) or subsection (2), or in defense of
any claim, issue, or matter therein, he shall be indemnified against expenses
actually and reasonably incurred by him in connection therewith.
(4) Any indemnification under subsection (1) or subsection (2), unless
pursuant to a determination by a court, shall be made by the corporation only as
authorized in the specific case upon a determination that indemnification of the
director, officer, employee, or agent is proper in the circumstances because he
22
<PAGE>
has met the applicable standard of conduct set forth in subsection (1) or (2).
Such determination shall be made:
(a) By the board of directors by a majority vote of a quorum consisting of
directors who were not parties to such proceeding;
(b) If such a quorum is not obtainable or, even if obtainable, by majority
vote of a committee duly designated by the board of directors (in which
directors who are parties may participate) consisting solely of two or more
directors not at the time parties to the proceeding;
(c) By independent legal counsel:
1. Selected by the board of directors prescribed in paragraph (a) or
the committee prescribed in paragraph (b); or
2. If a quorum of the directors cannot be obtained for paragraph (a)
and the committee cannot be designated under paragraph (b), selected by majority
vote of the full board of directors (in which directors who are parties may
participate); or
(d) By the shareholders by a majority vote of a quorum consisting of
shareholders who were not parties to such proceeding or, if no such quorum is
obtainable, by a majority vote of shareholders who were not parties to such
proceeding.
(5) Evaluation of the reasonableness of expenses and authorization of
indemnification shall be made in the same manner as the determination that
indemnification is permissible. However, if the determination of permissibility
is made by independent legal counsel, persons specified by paragraph (4)(c)
shall evaluate the reasonableness of expenses and may authorize indemnification.
(6) Expenses incurred by an officer or director in defending a civil or
criminal proceeding may be paid by the corporation in advance of the final
disposition of such proceeding upon receipt of an undertaking by or on behalf of
such director or officer to repay such amount if he is ultimately found not to
be entitled to indemnification by the corporation pursuant to this section.
Expenses incurred by other employees and agents may be paid in advance upon such
terms or conditions that the board of directors deems appropriate.
(7) The indemnification and advancement of expenses provided pursuant to
this section are not exclusive, and a corporation may make any other or further
indemnification or advancement of expenses of any of its directors, officers,
employees, or agents, under any bylaw, agreement, vote of shareholders or
disinterested directors, or otherwise, both as to action in his official
capacity and as to action in another capacity while holding such office.
However, indemnification or advancement of expenses shall not be made to or on
behalf of any director, officer, employee, or agent if a judgment or other final
adjudication establishes that his actions, or omissions to act, were material to
the cause of action so adjudicated and constitute:
(a) A violation of the criminal law, unless the director, officer,
employee, or agent had reasonable cause to believe his conduct was lawful or had
no reasonable cause to believe his conduct was unlawful;
(b) A transaction from which the director, officer, employee, or agent
derived an improper personal benefit;
23
<PAGE>
(c) In the case of a director, a circumstance under which the
liability provisions of s. 607.0834 are applicable;
(d) Willful misconduct or a conscious disregard for the right of the
corporation to procure a judgment in its favor or in a proceeding by or in the
right of a shareholder.
(8) Indemnification and advancement of expenses as provided in this section
shall continue as, unless otherwise provided when authorized or ratified, to a
person who has ceased to be a director, officer, employee, or agent and shall
inure to the benefit of the heirs, executors, and administrators of such a
person, unless otherwise provided when authorized or ratified.
(9) Unless the corporation's articles of incorporation provide otherwise,
notwithstanding the failure of a corporation to provide indemnification, and
despite any contrary determination of the board or of the shareholders in the
specific case, a director, officer, employee, or agent of the corporation who is
or was a party to a proceeding may apply for indemnification or advancement of
expenses, or both, to the court, or to another court of competent jurisdiction.
On receipt of an application, the court, after giving any notice that it
considers necessary, may order indemnification or advancement of expenses, if it
determines that:
(a) The director, officer, employee, or agent is entitled to mandatory
indemnification under subsection (3), in which case the court shall also order
the corporation to pay the director reasonable expenses incurred in obtaining
court-ordered indemnification or advancement of expenses;
(b) The director, officer, employee, or agent is entitled to
indemnification or advancement of expenses, or both, by virtue of the exercise
by the corporation of its power pursuant to subsection (7); or
(c) The director, officer, employee, or agent is fairly and reasonably
entitled to indemnification or advancement of expenses, or both, in view of all
the relevant circumstances, regardless of whether such person met the standard
of conduct set forth in subsection (1), subsection (2), or subsection (7).
(10) For purposes of this section, the term "corporation" includes, in
addition to the resulting corporation, any constituent corporation (including
any constituent of a constituent) absorbed in a consolidation or merger, so that
any person who is or was a director, officer, employee, or agent of a
constituent corporation, or is or was serving at the request of a constituent
corporation as a director, officer, employee, or agent of another corporation,
partnership, joint venture, trust, or other enterprise, is in the same position
under this section with respect to the resulting or surviving corporation as he
would have been with respect to such constituent corporation if its separate
existence had continued.
(11) For purposes of this section:
(a) The term "other enterprises" includes employee benefit plans;
(b) The term "expenses" includes counsel fees, including those for
appeal;
(c) The term "liability" includes obligations to pay a judgment,
settlement, penalty, fine (including an excise tax assessed with respect to any
employee benefit plan), and expenses actually and reasonably incurred with
respect to a proceeding;
(d) The term "proceeding" includes any threatened, pending, or
completed action, suit, or other type of proceeding, whether civil, criminal,
administrative, or investigative and whether formal or
24
<PAGE>
informal;
(e) The term "agent" includes a volunteer;
(f) The term "serving at the request of the corporation" includes any
service as a director, officer, employee, or agent of the corporation that
imposes duties on such persons, including duties relating to an employee benefit
plan and its participants or beneficiaries; and
(g) The term "not opposed to the best interest of the corporation"
describes the actions of a person who acts in good faith and in a manner he
reasonably believes to be in the best interests of the participants and
beneficiaries of an employee benefit plan.
(12) A corporation shall have power to purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee, or agent of
the corporation or is or was serving at the request of the corporation as a
director, officer, employee, or agent of another corporation, partnership, joint
venture, trust, or other enterprise against any liability asserted against him
and incurred by him in any such capacity or arising out of his status as such,
whether or not the corporation would have the power to indemnify him against
such liability under the provisions of this section.
Article IX of the Bylaws of the Company provides as follows:
The Corporation shall indemnify any person:
(1) Who was or is a party, or is threatened to be made a party, to any
threatened, pending, or completed action, suit, or proceeding, whether civil,
criminal, administrative, or investigative (other than an action by, or in the
right of, the corporation) by reason of the fact that he is or was a director,
officer, employee, or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee, or agent of another
corporation, partnership, joint venture, trust, or other enterprise against such
costs and expenses, and to the extent and in the manner provided under Florida
Law.
(2) Who was or is a party, or is threatened to be made a party, to any
threatened, pending, or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that he is
or was a director, officer, employee, or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer, employee, or
agent of another corporation, partnership, joint venture, trust, or other
enterprise against such costs and expenses, and to the extent and in the manner
provided under Florida law.
The extent, amount, and eligibility for the indemnification provided herein
will be made by the Board of Directors. Said determinations will be made by a
majority vote to a quorum consisting of directors who were not parties to such
action, suit, or proceeding or by the shareholders by a majority vote of a
quorum consisting of shareholders who were not parties to such action, suit, or
proceeding.
The corporation will have the power to make further indemnification as
provided under Florida Law except to indemnify any person against gross
negligence or willful misconduct.
The corporation is further authorized to purchase and maintain insurance
for indemnification of any person as provided herein and to the extent provided
under Florida Law.
25
<PAGE>
AUDITED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Report of Independent Auditors
To the Board of Directors and Stockholders
Safe Alternatives Corporation of America, Inc.
We have audited the accompanying balance sheet of Safe Alternatives Corporation
of America, Inc., as of December 31, 1995 and 1994, and the related statements
of operations, changes in stockholders' equity (deficit) and cash flows for each
of the three years in the period ended December 31, 1995. 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 Safe Alternatives Corporation
of America, Inc. at December 31, 1995 and 1994, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1995, in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As more fully described in Note 1, the
Company has incurred recurring operating losses and has a working capital
deficiency. These conditions raise substantial doubt about the Company's ability
to continue as a going concern. The financial statements do not include any
adjustments to reflect the possible future effects on the recoverability and
classification of assets or the amounts and classification of liabilities that
may result from the outcome of this uncertainty.
/s/ Ernst & Young LLP
Stamford, CT
September 27, 1996
F-1
<PAGE>
Safe Alternatives Corporation of America, Inc.
Balance Sheet
<TABLE>
<CAPTION>
DECEMBER 31
1995 1994
---------------------------
<S> <C> <C>
ASSETS
Current assets
Cash $ 12,331 $ 21,622
Accounts receivable 11,209 15,888
Inventories 3,968 14,128
Prepaid expenses and other current
assets 10,722 1,244
---------------------------
Total current assets 38,230 52,882
Fixed assets
Equipment 93,775 74,387
Leasehold improvements 64,722 61,315
Furniture and fixtures 102,217 101,344
---------------------------
260,714 237,046
Less accumulated depreciation 119,570 72,027
---------------------------
141,144 165,019
Other assets
Organization costs, less accumulated
amortization of $40,548 and
$28,384 in 1995 and 1994, respectively 20,274 32,439
Deposits and other noncurrent assets 24,058 21,258
---------------------------
44,332 53,697
---------------------------
Total assets $ 223,706 $ 271,598
===========================
LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT)
Current liabilities
Accounts payable and other accrued
expenses $ 99,723 $ 69,340
Stockholders' loans 474,300 247,500
---------------------------
Total liabilities 574,023 316,840
Stockholders' equity (deficit)
Common stock, $.0001 par value,
200,000,000 shares authorized:
Issued (including shares in treasury)
8,500,000 shares in 1995 and
7,163,811 in 1994 850 717
Additional paid-in capital 7,413,260 5,156,835
Accumulated deficit (7,766,480) (5,324,867)
Subscriptions issuable 2,160 122,160
---------------------------
(350,210) (45,155)
Common stock in treasury at par
value--1,065,066 shares in 1995
and 862,005 shares in 1994 (107) (87)
---------------------------
Total stockholders' equity (deficit) (350,317) (45,242)
---------------------------
Total liabilities and stockholders'
equity $ 223,706 $ 271,598
===========================
</TABLE>
See accompanying notes.
F-2
<PAGE>
Safe Alternatives Corporation of America, Inc.
Statement of Operations
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
1995 1994 1993
<S> <C> <C> <C>
Sales $ 38,359 $ 16,425 $ --
Costs and expenses:
Cost of goods sold 15,554 9,170 -
Selling, general and administrative 2,131,560 2,578,653 1,566,492
Research and development 273,150 369,791 342,867
Depreciation and amortization 59,708 53,430 36,935
-----------------------------------------
2,479,972 3,011,044 1,946,294
-----------------------------------------
Net loss $(2,441,613) $(2,994,619) $(1,946,294)
=========================================
Net loss per common share $(.36) $(.49) $(.36)
=========================================
Average number of common shares
outstanding 6,862,688 6,137,128 5,380,597
=========================================
</TABLE>
See accompanying notes.
F-3
<PAGE>
Safe Alternatives Corporation of America, Inc.
Statement of Changes in Stockholders' Equity (Deficit)
<TABLE>
<CAPTION>
Common Additional
Stock Paid-in Accumulated Subscriptions Treasury Stock
----------------------- --------------------------------------
Shares Amount Capital Deficit Issuable Shares Amount Total
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1992 5,281,106 $530 $ 875,757 $ (383,954) $ 492,333
Issuance of common stock
to treasury 820,800 82 (820,800) $ (82) --
Proceeds from sale of
common stock, net of
expenses of $20,030 234,858 23 790,747 790,770
Common stock held for
issuance (91,200 shares) $ 250,000 250,000
Issuance of common stock
as compensation 280,358 28 740,525 740,553
Net loss (1,946,294) (1,946,294)
---------------------------------------------------------------------------------------------------------
Balance at December 31,
1993 6,617,122 663 2,407,029 (2,330,248) 250,000 (820,800) (82) 327,362
Issuance of common stock
to treasury 273,600 27 (273,600) (27) --
Proceeds from sale of
common stock, net of
expenses of $35,700 44,478 4 1,090,682 136,142 13 1,090,699
Issuance of common stock
previously subscribed 91,200 9 249,991 (250,000) --
Common stock held for
issuance (27,557 shares) 122,160 122,160
Issuance of common stock
as compensation 137,411 14 1,409,133 96,253 9 1,409,156
Net loss (2,994,619) (2,994,619)
---------------------------------------------------------------------------------------------------------
Balance at December 31,
1994 7,163,811 717 5,156,835 (5,324,867) 122,160 (862,005) (87) (45,242)
Issuance of common stock
to treasury 498,678 50 (498,678) (50) --
Proceeds from sale of
common stock, net of 223,557 22 1,244,668 77,063 8 1,244,668
expenses of $46,500
Issuance of common stock
previously subscribed 119,997 (120,000) 27,360 3 --
Issuance of common stock
as compensation 113,954 11 891,810 191,194 19 891,840
Shares issued related to
business acquisition 500,000 50 (50) --
Net loss (2,441,613) (2,441,613)
---------------------------------------------------------------------------------------------------------
Balance at December 31,
1995 8,500,000 $850 $7,413,260 $(7,766,480) $ 2,160 (1,065,066) $(107) $ (350,317)
=========================================================================================================
</TABLE>
See accompanying notes.
F-4
<PAGE>
Safe Alternatives Corporation of America, Inc.
Statement of Cash Flows
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
1995 1994 1993
----------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(2,441,613) $(2,994,619) $(1,946,294)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 59,708 53,430 36,935
Write-off of obsolete inventory 10,802
Non-cash compensation and commission 891,840 1,409,156 740,553
Changes in operating assets and
liabilities:
Accounts receivable 4,679 (15,888)
Inventories (642) (14,128)
Prepaid expense and other current assets (9,478) 26,250
Deposits and other noncurrent assets (2,800) (15,425)
Accounts payable and accrued expenses 30,383 28,883 35,134
----------------------------------------
Net cash used in operating activities (1,457,121) (1,533,166) (1,122,847)
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to fixed assets (23,668) (39,019) (128,127)
----------------------------------------
Net cash used by investing activities (23,668) (39,019) (128,127)
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from (repayments of) 226,800 173,000 74,500
stockholders' loans
Proceeds from issuance of common stock
and subscriptions 1,291,198 1,248,559 1,060,800
Less expenses from sale of common stock (46,500) (35,700) (20,030)
----------------------------------------
Net cash provided by financing
activities 1,471,498 1,385,859 1,115,270
Net decrease in cash (9,291) (186,326) (135,704)
Cash at beginning of year 21,622 207,948 343,652
----------------------------------------
Cash at end of year $ 12,331 $ 21,622 $ 207,948
=========================================
Supplemental disclosure of cash paid:
State income taxes paid $ 760 $ 703 $ 1,017
=========================================
</TABLE>
See accompanying notes.
F-5
<PAGE>
Safe Alternatives Corporation of America, Inc.
Notes to Financial Statements
December 31, 1995
1. REORGANIZATION AND BASIS OF PRESENTATION
On September 15, 1995, the stockholders of Safe Alternatives Corporation of
America, Inc., a Delaware corporation, ("SAC Delaware") approved an Asset
Purchase Agreement and Plan of Reorganization (the "Reorganization") whereby the
assets of SAC Delaware were sold to Safe Alternatives of America, Inc., a
Florida corporation then operating under the name Portsmouth Corporation (the
"Company"), in exchange for 8,000,000 shares of the Common Stock of the Company
and the assumption of SAC Delaware's liabilities. Subsequent to the
Reorganization, SAC Delaware was liquidated. Pursuant to such liquidation, SAC
Delaware distributed to each stockholder 0.2736 shares of the Company's Common
Stock for each share of SAC Delaware that was owned. As a result of the
Reorganization and subsequent liquidation of SAC Delaware, the stockholders of
SAC Delaware controlled 94% of the issued and outstanding Common Stock of the
Company and therefore, the Reorganization has been accounted for as the
acquisition of the Company by SAC Delaware. The financial statements presented
are, therefore, the historical financial statements of SAC Delaware. Prior to
the Reorganization, the Company had been an inactive public entity with no
assets, liabilities, or net worth. The costs of this transaction have been
charged to expense.
In addition, as part of the Reorganization, the Company agreed to pay a six
percent royalty (the "Royalty") on the gross revenues of the Company
attributable to the assets of the Company acquired in the Reorganization,
payable to the stockholders of SAC Delaware of record as of September 15, 1995
(representing 8,000,000 of the 8,500,000 common shares outstanding as of
December 31, 1995). The Royalty is payable on a quarterly basis during the sixty
months beginning September 28, 1995, and the cumulative total of all royalty
payments is limited to $8,500,000. No Royalty payments have been made as of
December 31, 1995.
The issuance of 8,000,000 shares of the Company's Common Stock in connection
with the Reorganization has been treated as a reverse stock split and the shares
of issued and outstanding Common Stock of the Company prior to the
Reorganization have been restated for all periods presented.
Subsequent to the Reorganization, the Company changed its name to Safe
Alternatives Corporation of America, Inc.
OPERATIONS
The Company has secured exclusive manufacturing, marketing, and distribution
rights to certain patented, patent pending and application-in-process
technologies in the chemical and biosterilization fields.
The Company has incurred significant losses since inception and expects to incur
additional losses in 1996. The Company plans to continue to finance its
operations with a combination of sales of common stock and, in the longer term,
borrowings and revenues from product sales. The Company's ability to continue as
a going concern, in the near term, is dependent upon obtaining additional
financing. The accompanying financial statements have been prepared assuming the
Company will continue as a going concern, and do not include any adjustments
that might result from the outcome of this uncertainty.
F-6
<PAGE>
Safe Alternatives Corporation of America, Inc.
Notes to Financial Statements (Continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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 amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are carried at cost. Depreciation is computed on a
straight-line basis over the following estimated useful lives: furniture and
fixtures, 5 years; machinery and equipment, 7 years.
Leasehold improvements are depreciated over the shorter of the lease term or
economic life of the related improvement.
ORGANIZATION COSTS
Organization costs are amortized over 60 months using the straight-line method.
NET INCOME PER COMMON SHARE
Net income per common share is based on the weighted average number of shares of
Common Stock outstanding in each period.
INVENTORIES
Inventories, primarily finished goods, are stated at the lower of cost (first-
in, first-out) or market value.
SHAREHOLDERS' LOANS
Shareholders' loans are unsecured, non-interest bearing, demand notes.
3. LEASES
The Company maintains its headquarters at offices that are leased under a
noncancelable operating lease expiring on September 30, 1998. In addition, the
Company is leasing a laboratory and testing facility under a noncancelable
operating lease expiring on February 28, 1998.
F-7
<PAGE>
Safe Alternatives Corporation of America, Inc.
Notes to Financial Statements (continued)
3. LEASES (CONTINUED)
The following is a schedule of future minimum rental payments under the
Company's operating leases as of December 31, 1995:
<TABLE>
<CAPTION>
Year ending December 31 Amount
- -----------------------------------
<S> <C>
1996 $126,768
1997 116,268
1998 44,181
</TABLE>
Rental expenses were $113,885, $111,009, $98,236 for 1995, 1994 and 1993,
respectively.
4. STOCKHOLDERS' EQUITY
TREASURY STOCK
In 1995, 1994 and 1993, respectively, the Company issued 498,678, 273,600, and
820,800 shares of Common Stock to Richard J. Fricke, trustee. Mr. Fricke is also
an officer of the Company. The shares (recorded at par value) are being held in
trust to be used for future issuance to employees, investors, and other
potential funding sources. As the Company directly benefits from the sales of
the shares in the trust, these shares (1,065,066 at December 31, 1995) have been
recorded as treasury stock.
REDUCTION IN PAR VALUE AND INCREASE IN NUMBER OF AUTHORIZED SHARES
In connection with the Transaction, the shareholders of the Company approved an
amendment to the Certificate of Incorporation (the "Amendment") reducing the par
value of the Common Stock from $.00025 per share to $.0001 per share, and
increasing the number of authorized shares of Common Stock from 30,000,000 to
200,000,000. As a result of the reduction in par value, the Common Stock account
was reduced by $4,385, the treasury stock account was reduced by $607, and the
additional paid in capital account was increased by $3,778. All share and per
share amounts presented herein reflect the Amendment.
SHARES ISSUED AS COMPENSATION AND COMMISSION
During 1995, 1994 and 1993, respectively, 305,148, 233,664 and 280,358 fully
vested shares of the Company's Common Stock were issued to certain employees and
outside consultants. The fair value of shares awarded; based upon the value of
Common Stock sold during those periods, was $891,840, $1,409,156, and $740,553
for 1995, 1994 and 1993, respectively, and has been recorded as compensation
expense.
5. INCOME TAXES
At December 31, 1995 and 1994, the Company had deferred tax assets relating
primarily to net operating loss carryforwards of $5,600,000, and $3,100,000,
respectively, offset by a valuation allowance.
The Company has reported net operating loss carryforwards for federal income tax
purposes of approximately $5,600,000 expiring during the period from 2007 to
2010. As a result of changes in ownership of the Company, the future tax
benefits from its net operating loss will be limited.
F-8
<PAGE>
Safe Alternatives Corporation of America, Inc.
Notes to Financial Statements (continued)
6. MARKETING RIGHTS
In January 1993 the Company entered into a joint marketing, operating and
research and development agreement with Integrated Labs, Inc. ("Integrated").
Integrated agreed to fund the Company's operating costs based upon pre-agreed
operating budgets. In return, the Company agreed to grant Integrated an
exclusive right and license to exploit the Company's technologies including the
sale, marketing and distribution of products. The initial funding, $55,000 per
month, continued for a period of seven months (total $385,000) at which time the
agreement was mutually terminated. These amounts have been recorded in the
December 31, 1993 statement of operations as a reduction of the related
expenses.
7. LICENSE AGREEMENTS
The Company maintains four significant licensing agreements. Each such license
has substantially the same terms and conditions and each is valid until April
17, 2050, unless the Company fails to pay a royalty of four percent of the gross
sales derived from the exploitation of the respective technology, with certain
limitations for sales derived from intercompany transfers or transactions with
subsidiaries. The Company has also agreed to pay all maintenance fees and fees
for filing and prosecuting patent applications pending at the time the licenses
were executed. All rights under the licenses are freely assignable by the
Company. The licenses were amended on August 23, 1993 to collectively provide
for a required minimum monthly payment of $5,000, in the aggregate, and a
required weekly payment of $1,200 to Mrs. Kathleen Kennedy during her lifetime
in lieu of progressive sales minimums due beginning in 1993. The royalty
payments described above however, would nonetheless survive.
8. RELATED PARTY TRANSACTIONS
The three officers of the Company have employment contracts entitling them to
aggregate cash compensation of $725,000 plus incentive bonuses. Amounts actually
paid to the officers in 1995, 1994, and 1993 amounted to $183,000, $244,000, and
$366,000 in each of the years, respectively. Each of the officers has waived his
rights with respect to salary arrearages. No bonuses have been paid out in any
of the years. Beginning January 1, 1996, two officers are entitled to options to
purchase (at par value) 1% of the outstanding Common Stock of the Company at
December 31 of the prior year in accordance with their employment agreements.
In addition to the above, two executives were each given 169,500 shares of the
Company's Common Stock in 1995, resulting in additional compensation expense to
officers of $417,000.
An officer of the Company has an interest in one of the licenses discussed
above. Through December 31, 1995 there have been no payments to such officer
under the aforementioned agreements.
F-9
<PAGE>
Safe Alternatives Corporation of America, Inc.
Balance Sheet (Unaudited)
<TABLE>
<CAPTION>
JUNE 30
1996
-------------
ASSETS
Current assets
<S> <C>
Cash $ 26,834
Accounts receivable 17,725
Inventories 17,865
Prepaid expenses and other current
assets 38,166
Total current assets 100,590
Fixed assets
Equipment 111,161
Leasehold improvements 64,722
Furniture and fixtures 102,526
-------------
278,409
Less accumulated depreciation 136,398
-------------
142,011
Other assets
Organization costs, less accumulated
amortization of $46,631 14,192
Deposits and other noncurrent assets 24,058
-------------
38,250
-------------
Total assets $ 280,851
=============
LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT)
Current liabilities
Accounts payable and other accrued
expenses $ 110,039
Stockholders' loans 319,300
-------------
Total liabilities 429,339
Stockholders' equity (deficit)
Common stock, $.0001 par value,
200,000,000 shares authorized: Issued
(including shares in treasury)
8,500,000 shares 850
Additional paid-in capital 8,911,757
Accumulated deficit (9,063,236)
Subscriptions issuable 2,160
-------------
(148,469)
Common stock in treasury at par
value--182,282 shares (19)
-------------
Total stockholders' equity (deficit) (148,488)
-------------
Total liabilities and stockholders'
equity $ 280,851
=============
</TABLE>
See accompanying notes.
F-10
<PAGE>
Safe Alternatives Corporation of America, Inc.
Statement of Operations (Unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30
1996 1995
---------------------------
<S> <C> <C>
Sales $ 37,661 $ 17,762
Costs and expenses:
Cost of goods sold 23,868 7,182
Selling, general and administrative 1,174,355 1,311,650
Research and development 113,284 212,571
Depreciation and amortization 22,910 22,910
---------------------------
1,334,417 1,554,313
---------------------------
Net loss $(1,296,756) $(1,536,551)
===========================
Net loss per common share $(.16) $(.24)
===========================
Average number of common shares
outstanding 7,920,238 6,515,153
===========================
</TABLE>
See accompanying notes.
F-11
<PAGE>
Safe Alternatives Corporation of America, Inc.
Statement of Cash Flows (Unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30
1996 1995
----------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(1,296,756) $(1,536,551)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 22,910 22,910
Non-cash compensation and commission 689,313 880,275
Changes in operating assets and
liabilities:
Accounts receivable (6,516) 5,298
Inventories (13,897) (5,047)
Prepaid expense and other current assets (27,444) (8,000)
Accounts payable and accrued expenses 10,316 (31,187)
----------------------------
Net cash used in operating activities (622,074) (672,302)
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to fixed assets (17,695) (2,149)
----------------------------
Net cash used by investing activities (17,695) (2,149)
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from (repayments of)
stockholders' loans (155,000) 107,000
Proceeds from issuance of common stock
and subscriptions 875,200 1,116,588
Expenses for sale of common stock (65,928) (13,800)
----------------------------
Net cash provided by financing
activities 654,272 1,209,788
Net increase in cash 14,503 535,337
Cash at beginning of period 12,331 21,622
----------------------------
Cash at end of period $ 26,834 $ 556,959
============================
</TABLE>
See accompanying notes.
F-12
<PAGE>
Safe Alternatives Corporation of America, Inc.
Notes to Unaudited Financial Statements
June 30, 1996
1. BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial information.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the six-month period ended June 30, 1996 are not
necessarily indicative of the results that may be expected for the year ended
December 31, 1996.
2. STOCKHOLDER'S EQUITY
In accordance with employment contracts for the Company's two executive
officers, the Company issued 85,000 shares of common stock from treasury to each
of these officers and recorded a pro rata portion of the annual compensation
expense which approximated $167,000 during the period. In addition to the
aforementioned issuance, the Company issued 266,384 shares of common stock to
various individuals and recognized $522,086 as compensation for services.
During the period the Company sold from treasury 446,400 shares of common stock
and received gross proceeds of $875,200.
F-13
<PAGE>
ITEM 14. CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not Applicable.
27
<PAGE>
ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS
INDEX TO AUDITED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
AUDITED FINANCIAL STATEMENTS
Report of Independent Auditors F-1
Balance Sheet at December 31, 1995 and 1994 F-2
Statement of Operations for the years
ended December 31, 1995, 1994, and 1993 F-3
Statement of Changes in Stockholders' Equity
(Deficit) for the years ended December 31,
1995, 1994, and 1993 F-4
Statement of Cash Flows for the years ended
December 31, 1995, 1994, and 1993 F-5
Notes to Financial Statements F-6
UNAUDITED FINANCIAL STATEMENTS
Balance sheet at June 30, 1996 F-10
Statement of Operations for the six months
ended June 30, 1996 and 1995 F-11
Statement of Cash Flows for the six months
ended June 30, 1996 and 1995 F-12
Notes to Unaudited Financial Statements F-13
</TABLE>
28
<PAGE>
INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION PAGE NO.
- ----------- ----------- --------
3.1 Certificate of Incorporation of the Company
3.2 By-Laws of the Company
4 Copy of specimen certificate representing
shares of common stock, $.0001 par
value per share, of the Company
10.1 Asset Purchase Agreement and
Plan of Reorganization between
the Company and SAC Delaware
dated August 21, 1995
10.2 Lease Agreement between Nicholas
R. Dinapoli, Jr., as Trustee for
Brookfield Commerce and the
Company for property located at
27 Governor Street, Ridgefield, Connecticut,
dated February 22, 1993
10.3 Lease Agreement between Nicholas R. Dinapoli,
as trustee for Brookfield Commerce,
and the Company for property located at
91 Commerce Drive, Brookfield, Connecticut,
dated February 22, 1993
10.4 Supply Agreement for paint stripping
products between Samax Enterprises, Inc.
and the Company dated January 5, 1996
10.5 License Agreement for coatings and sealants
Technologies between Richard B.Kennedy
and the Company as licensee dated
December 9, 1992
10.6 License Agreement for packaging applications
of foam Technologies between Richard B.
Kennedy, Patrick J. Crehan and Richard J.
Fricke as licensors and the Company as
licensee dated December 9, 1992
29
<PAGE>
10.7 License Agreement for fire retardant applications
of foam Technologies between Richard B.
Kennedy, Patrick J. Crehan and Richard J.Fricke
as licensors and the Company as licensee dated
December 9, 1992
10.8 Amendment to Technology License Agreements
of foam Technologies between Richard B.Kennedy,
Patrick J. Crehan and Richard J.Fricke as licensors
and the Company as licensee dated August 23, 1993
10.9 Employment Agreement between
the Company and Mr. Stephen J.
Thompson dated August 13, 1991,
as amended.
10.10 Employment Agreement between
the Company and Mr. Richard J.
Fricke dated August 13, 1991, as
amended.
10.11 Employment Agreement between
the Company and Mr. Robert F.
Thompson dated January 31, 1996.
27 Financial Data Schedule
30
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized.
SAFE ALTERNATIVES CORPORATION OF AMERICA, INC.
Date October 25, 1996 By: s/Stephen J. Thompson
------------------------- -------------------------------
Stephen J. Thompson
President and Chief Executive Officer
31
<PAGE>
EXHIBIT 3.1
ARTICLES OF INCORPORATION
OF
KNIGHT AIRLINES, INC.
WE, THE UNDERSIGNED, HEREBY ASSOCIATE TOGETHER FOR THE PURPOSE OF
BECOMING A CORPORATION UNDER THE LAWS OF FLORIDA, BY AND UNDER THE PROVISIONS OF
THE STATUES OF THE STATE OF FLORIDA, PROVIDING FOR THE FORMATION, LIABILITIES,
RIGHTS, PRIVILEGES AND IMMUNITIES OF CORPORATION FOR PROFIT.
ARTICLE I.
---------
The name of the corporation shall be:
KNIGHT AIRLINES, INC.
ITS BUSINESS SHALL BE CARRIED ON AT 2650 BISCAYNE BOULEVARD, MIAMI,
FLORIDA, AND AT SUCH OTHER PLACES OR POINTS IN THE STATE OF FLORIDA, AND IN THE
UNITED STATES AND FOREIGN COUNTRIES AS MAY FROM TIME TO TIME BE AUTHORIZED BY
THE BOARD OF DIRECTORS. ITS PRINCIPAL OFFICE SHALL BE AT 2650 BISCAYNE
BOULEVARD, MIAMI, FLORIDA.
ARTICLE II.
----------
The general nature of the business or businesses to be transacted, is
as follows:
SECTION I.
- ---------
To own, operate, manage an airline catering to the public generally
for the purpose of carrying passengers and cargo and to do all lawful
things necessary and incidental thereto.
SECTION II. That of purchasing, leasing renting, selling, holding and otherwise
- ----------
acquiring and disposing of real estate and personal property, both tangible and
intangible, and choses in
<PAGE>
action, either as owner, broker, agent or factor.
SECTION III. In the purchase or acquisition of property business rights or
- -----------
franchise, or for additional working capital, or for any other object in or
about its business affairs, and without limit as to the amount, to incur debts,
and to raise, borrow and secure the payment of money in any lawful manner,
including the issue and sale or other dispositions of bonds, warrants,
debentures, obligations, negotiable and transferable instruments and evidences
of indebtedness of all kinds whether secured by mortgage, pledge, deed or trust
or otherwise.
SECTION IV. This corporation shall have all the general powers together with
- ----------
all of the additional and specific powers granted by the laws of the State of
Florida, as well as all implied powers in carrying out the foregoing expressed
powers.
SECTION V. THE FOREGOING CLAUSES SHALL BE CONSTRUED BOTH AS OBJECTS AND POWERS,
- ---------
BUT NO RECITATION, EXPRESSION OR DECLARATION OR SPECIFIC OR SPECIAL POWERS OR
PURPOSES HEREIN ENUMERATED SHALL BE DEEMED TO BE EXCLUSIVE, BUT IT IS HEREBY
EXPRESSLY DECLARED THAT OTHER LAWFUL POWERS NOT INCONSISTENT THEREWITH ARE
HEREBY INCLUDED.
ARTICLE III.
-----------
THE MAXIMUM NUMBER OF SHARES OF STOCK THIS CORPORATION IS AUTHORIZED
TO HAVE OUTSTANDING AT ANY TIME SHALL BE 2,000,000 SHARES OF $.005c PAR VALUE
EACH.
ARTICLE IV.
----------
THIS CORPORATION SHALL BEGIN BUSINESS WITH A CAPITAL OF NOT LESS THAN
TEN ($10.00) DOLLARS.
ARTICLE V.
---------
THIS CORPORATION SHALL EXIST PERPETUALLY.
ARTICLE VI.
----------
THE PRINCIPAL PLACE OF BUSINESS OF THIS CORPORATION SHALL BE LOCATED
IN MIAMI, FLORIDA, AND IT MAY HAVE SUCH OTHER PLACES OF BUSINESS, BOTH WITHIN
AND WITHOUT THE STATE OF FLORIDA, AND IN FOREIGN COUNTRIES, AS MAY BE NECESSARY
OR CONVENIENT.
ARTICLE VII.
-----------
<PAGE>
Names and post office addresses of the First Board of Directors of
this corporation, which shall not be less than three, who shall hold office
until the organization meeting of this corporation, and until their successors
are elected, and have qualified, are:
Frank Freeman, 2650 Biscayne Boulevard, Miami, Florida 33137
Garland Brown, 2650 Biscayne Boulevard, Miami, Florida 33137
Robert McWilliams, 2650 Biscayne Boulevard, Miami, Florida 33137
THE OFFICERS OF THIS CORPORATION ARE:
President Frank Freeman
Secretary and Treasurer Garland Brown
ARTICLE VIII.
------------
Names and post office addresses of each subscriber to these Articles
of Incorporation, and a statement of the number of shares of stock which each
agrees to take and the consideration thereof, is as follows:
Frank Freeman, 2650 Biscayne Boulevard, Miami, Florida 33137 2000 shares
The subscribers to the above stock do hereby certify that the above
subscriptions amount to at lease $10.00, and that said sum has been paid to the
corporation.
ARTICLE IX.
----------
The provisions of this Charter, and each and every article and section
hereof, and by the By-laws of this corporation shall be considered a part of
every contract and transaction to which the corporation shall be a party.
<PAGE>
IN WITNESS WHEREOF, we have hereunto set our hands and seal the first
day of November, 1976.
s/ Frank Freeman (SEAL)
------------------------------
(SEAL)
------------------------------
(SEAL)
------------------------------
STATE OF FLORIDA )
: ss:
COUNTY OF DADE )
I HEREBY CERTIFY that on this day personally appeared before
me, the undersigned Notary Public, FRANK FREEMAN, to me well known and known to
be the person described in and who executed and subscribed to the foregoing
Articles of Incorporation, and they acknowledged before me that they executed
and subscribed to the same for the purposes therein expressed.
WITNESS my signature and official seal at Miami, said County and
State, this 1st day of November, 1976.
------------------------------
Notary Public, State of Florida
at Large
My Commission Expires:
June 19, 1979
Bonded thru Gen'l Ins. Underwriters
-----------------------------------
<PAGE>
CERTIFICATE DESIGNATING PLACE OF BUSINESS OR DOMICILE FOR THE SERVICE
OF PROCESS WITHIN FLORIDA, NAMING AGENT UPON WHOM PROCESS MAY BE SERVED
IN COMPLIANCE WITH SECTION 48.091, FLORIDA STATUES, THE FOLLOWING IS
SUBMITTED:
FIRST--THAT KNIGHT AIRLINES, INC.
-------------------------------
NAME OF CORPORATION
DESIRING TO ORGANIZE OR QUALIFY UNDER THE LAWS OF THE STATE OF FLORIDA, WITH ITS
PRINCIPAL PLACE OF BUSINESS AT CITY OF MIAMI
-----
City
STATE OF FLORIDA, HAS NAMED FRANK FREEMAN ,
------- -----------------------
State Name of Resident Agent
LOCATED AT 2650 BISCAYNE BOULEVARD ,
--------------------------------------------------
(Street Address and Number of Building, Post Office
Box Address are not acceptable)
CITY OF MIAMI , STATE OF FLORIDA, AS ITS AGENT TO ACCEPT SERVICE
--------
City
OF PROCESS WITHIN FLORIDA.
SIGNATURE s/Frank Freeman
--------------------------------
(Corporate Officer
TITLE President
-------------------------------
DATE 12TH November, 1976
--------------------------------
HAVING BEEN NAMED TO ACCEPT SERVICE OF PROCESS FOR THE ABOVE STATED
CORPORATION, AT THE PLACE DESIGNATED IN THIS CERTIFICATE, I HEREBY AGREE TO ACT
IN THIS CAPACITY, AND I FURTHER AGREE TO COMPLY WITH THE PROVISIONS OF ALL
STATUTES RELATIVE TO THE PROPER AND COMPLETE PERFORMANCE OF MY DUTIES.
SIGNATURE s/Frank Freeman
-------------------------------
(Resident Agent)
DATE 12TH November, 1976
-------------------------------
<PAGE>
AMENDMENT TO ARTICLES OF INCORPORATION
OF
KNIGHT AIRLINES, INC.
The undersigned, President and Secretary of KNIGHT AIRLINES, INC., due
hereby certify that at a joint meeting of the Directors and Stockholders, of
KNIGHT AIRLINES, INC., (all of said Directors and Stockholders being present)
held at the company's office in Miami, Florida at 12:00 Noon on the 3rd day of
May, 1994, said meeting having been duly noticed and properly called, in
accordance with the By-Laws of the corporation. The following resolutions
amending the Articles of Incorporation were unanimously passed:
On motion duly made and seconded it was unanimously resolved that Article I
of the Articles of Incorporation be and is hereby amended so that the name of
the corporation is changed to PORTSMOUTH CORPORATION.
On motion duly made and seconded it was unanimously resolved that Article
IV of the Articles of Incorporation being the same are hereby amended so that
the former ARTICLE IV is stricken and replaced as follows:
"The aggregate number of shares of stock which the corporation shall have
authority to issue is Two Hundred Million (200,000,000) shares of common
stock, par value $.0001."
CERTIFIED this 17th day of November, 1994.
s/Frank Freeman
------------------------------
President
Attested:s/Michelle Augustine
--------------------
Secretary
<PAGE>
STATE OF FLORIDA )
: ss:
COUNTY OF DADE )
BEFORE ME that the foregoing Amendment to Articles of Incorporation of
KNIGHT AIRLINES, INC., a Florida corporation was executed by FRANK FREEMAN and
MICHELLE AUGUSTINE, as President and Secretary, respectfully of KNIGHT AIRLINES,
INC., a Florida corporation, who are personally known to me, and who have read
the foregoing Amendment and state that the facts contained herein are true and
correct to the best of their knowledge.
SWORN AND AVERS as follows this 17th day of November, 1994 in Miami, Dade
County, Florida.
s/Bernadette Keiper
------------------------------
BERNADETTE KEIPER, Notary Public
Commission No: CC 083484
Commission Expires: 3/10/95
<PAGE>
ARTICLES OF AMENDMENT
OF
PORTSMOUTH CORPORATION
To the Department of State
State of Florida
Pursuant to the provisions of Section 607.1006 of the Florida Business
Corporation Act, the corporation hereinafter named (the "Corporation") does
hereby adopt the following Articles of Amendment.
1. The name of the Corporation is Portsmouth Corporation.
2. Article 1 of the Articles of Incorporation of the Corporation is hereby
amended so as henceforth to read as follows:
"The name of the Corporation is SAFE ALTERNATIVES CORPORATION OF
AMERICA, INC."
3. The date of adopt of the aforesaid amendment was as of September 15,
1995.
4. The number of votes cast for the said amendment by the shareholders was
sufficient for the approval thereof.
Executed as of the 15th day of September, 1995.
Portsmouth Corporation
By:___________________________
Richard J. Fricke
Secretary
<PAGE>
EXHIBIT 3.2
PORTSMOUTH CORP.
CORPORATE BYLAWS
ARTICLE I. MEETINGS OF SHAREHOLDERS
Section 1. Annual Meeting. The annual shareholder meeting of this
--------------------------
corporation will be held on the 3rd day of May, of each year or at such other
time and place as designated by the Board of Directors of the corporation
provided that if said day falls on a Sunday or legal holiday, then the meeting
will be held on the first business day thereafter. Business transacted at said
meeting will include the election of directors of the corporation.
Section 2. Special Meetings. Special meetings of the shareholders will be
----------------------------
held when directed by the President, Board of Directors, or the holders of not
less than 10 percent of all the shares entitled to be cast on any issue proposed
to be considered at the proposed special meeting; provided that said persons
sign, date and deliver to the corporation one or more written demands for the
meeting describing the purpose(s) for which it is to be held. A meeting
requested by shareholders of the corporation will be called for a date not less
than 10 nor more than 60 days after the request is made, unless the shareholders
requesting the meeting designate a later date. The call for the meeting will be
issued by the Secretary, unless the President, Board of Directors or
shareholders requesting the meeting designate another person to do so.
Section 3. Place. Meetings of shareholders will be held at the principal
-----------------
place of business of the corporation or at such other place as is designated by
the Board of Directors.
Section 4. Record Date and List of Shareholders. The Board of Directors
------------------------------------------------
of the corporation shall fix the record date; however, in no event may a record
date fixed by the Board of Directors be a date prior to the date on which the
resolution fixing the record date is adopted.
After fixing a record date for a meeting, the Secretary shall prepare an
alphabetical list of the names of all the corporation's shareholders who are
entitled to notice of a shareholders meeting, arranged by voting group with the
address of and the number and class and series, if any, of shares held by each.
Said list shall be available for inspection in accordance with Florida Law.
Section 5. Notice. Written notice stating the place, day and hour of the
------------------
meeting, and the purpose(s) for which said special meeting is called, will be
delivered not less than 10 nor more than 60 days before the meeting, either
personally or by
<PAGE>
first class mail, by or at the direction of the President, the Secretary or the
officer or persons calling the meeting to each shareholder of record entitled to
vote at such meeting. If mailed, such notice will be deemed to be effective
when deposited in the United States mail and addressed to the shareholder at the
shareholder's address as it appears on the stock transfer books of the
corporation, with postage thereon prepaid.
The corporation shall notify each shareholder, entitled to a vote at the
meeting, of the date, time and place of each annual and special shareholders'
meeting no fewer than 10 nor more than 60 days before the meeting date. Notice
of a special meeting shall describe the purpose(s) for which the meeting is
called. A shareholder may waive any notice required hereunder either before or
after the date and time stated in the notice; however, the waiver must be in
writing, signed by the shareholder entitled to the notice and be delivered to
the corporation for inclusion in the minutes or filing in the corporate records.
Section 6. Notice of Adjourned Meeting. When a meeting is adjourned to
---------------------------------------
another time or place, it will not be necessary to give any notice of the
adjourned meeting provided that the time and place to which the meeting is
adjourned are announced at the meeting at which the adjournment is taken. At
such an adjourned meeting, any business may be transacted that might have been
transacted on the original date of the meeting. If, however, a new record date
for the adjourned meeting is made or is required, then, a notice of the
adjourned meeting will be given on the new record date as provided in this
Article to each shareholder of record entitled to notice of such meeting.
Section 7. Shareholder Quorum and Voting. A majority of the shares
-----------------------------------------
entitled to vote, represented in person or by proxy, will constitute a quorum at
a meeting of shareholders.
If a quorum, as herein defined, is present, the affirmative vote of a
majority of the shares represented at the meeting and entitled to vote on the
subject matter thereof will be the act of the shareholders unless otherwise
provided by law.
Section 8. Voting of Shares. Each outstanding share will be entitled to
----------------------------
one vote on each matter submitted to a vote at a meeting of shareholders.
Section 9. Proxies. A shareholder may vote either in person or by proxy
-------------------
provided that any and all proxies are executed in writing by the shareholder or
his duly authorized attorney-in-fact. No proxy will be valid after the duration
or 11 months from the date thereof unless otherwise provided in the proxy.
Section 10. Action by Shareholders Without a Meeting. Any action required
-----------------------------------------------------
or permitted by law, these bylaws, or the Articles of Incorporation of this
corporation to be taken at any annual or special meeting of shareholders may be
taken without a
<PAGE>
meeting, without prior notice and without a vote, provided that the action is
taken by the holders of outstanding stock of each voting group entitled to vote
thereon having not less than the minimum number of votes with respect to each
voting group that would be necessary to authorize or take such action at a
meeting at which all voting groups and shares entitled to vote thereon were
present and voted, as provided by law. The foregoing action(s) shall be
evidenced by written consents describing the action taken, dated and signed by
approving shareholders having the requisite number of votes of each voting group
entitled to vote thereon and delivered to the corporation in accordance with
Florida Law. Within 10 days after obtaining such authorization by written
consent, notice shall be given to those shareholders who have not consented in
writing or who are not entitled to vote. Said notice whall fairly summarize the
material features of the authorized action and if the action requires the
providing of dissenters' rights, said notice shall comply with the disclosure
requirements pertaining to dissenters' rights of Florida Law.
ARTICLE II. DIRECTORS
----------------------
Section 1. Function. All corporate powers, business, and affairs will be
--------------------
exercised, managed and directed under the authority of the Board of Directors.
Section 2. Qualification. Directors must be natural persons of 18 years
-------------------------
of age or older but need not be residents of this state and need not be
shareholders of this corporation.
Section 3. Compensation. The Board of Directors will have authority to
------------------------
fix the compensation for directors of this corporation.
Section 4. Presumption of Assent. A director of the corporation who is
---------------------------------
present at a meeting of the Board of Directors at which action on any corporate
matter is taken will be presumed to have assented to the action taken unless
such director votes against such action or abstains from voting in respect
thereto because of an asserted conflict of interest.
Section 5. Number. This corporation will have 1 to 9 director(s).
------------------
Section 6. Election and Term. Each person named in the Articles of
-----------------------------
Incorporation as a member of the initial Board of Directors will hold office
until said directors will have been qualified and elected at the first annual
meeting of shareholders, or until said directors earlier resignation, removal
from office or death.
At the first annual meeting of shareholders and at each annual meeting
thereafter; the shareholders will elect directors
<PAGE>
to hold office until the next annual meeting. Each director will hold office
for a term for which said director is elected until said director's successor
will have been qualified and elected, said director's prior resignation, said
director's removal from office or said director's death.
Section 7. Vacancies. Any vacancy occurring in the Board of Directors
---------------------
will be filled by the affirmative vote of a majority of the shareholders or of
the remaining directors even though less than a quorum of the Board of
Directors. A director elected to fill a vacancy will hold office only until the
next election of directors by the shareholders.
Section 8. Removal and Resignation of Directors. At a meeting of
------------------------------------------------
shareholders called expressly for that purpose, any director or the entire Board
of Directors may be removed, with or without cause, by a vote of the holders of
a majority of the shares then entitled to vote at an election of directors.
A director may resign at any time by delivering written notice to the Board
of Directors or its chairman or to the corporation by and through one of its
officers. Such a resignation is effective when the notice is delivered unless a
later effective date is specified in said notice.
Section 9. Quorum and Voting. A majority of the number of directors fixed
-----------------------------
by these bylaws shall constitute a quorum for the transaction of business. The
act of a majority of the directors present at a meeting at which a quorum is
present will be the act of the Board of Directors.
Section 10. Executive and Other Committees. A resolution, adopted by a
-------------------------------------------
majority of the full Board of Directors, may designate from among its members an
executive committee and/or other committee(s) which will have and may exercise
all the authority of the Board of Directors to the extent provided in such
resolution, except as is provided by law. Each committee must have two or more
members who serve at the pleasure of the Board of Directors. The board may, by
resolution adopted by a majority of the full Board of Directors, designate one
or more directors as alternate members of any such committee who may act in the
place and stead of any absent member or members at any meeting of such
committee.
Section 11. Place of Meeting. Special or regular meetings of the Board of
-----------------------------
Directors will be held within or without the State of Florida.
Section 12. Notice, Time and Call of Meetings. Regular meetings of the
----------------------------------------------
Board of Directors will be held without notice on such dates as are designated
by the Board of Directors. Written notice of the time and place of special
meetings of the Board of Directors will be given to each director by either
personal delivery, telegram or cablegram at least two (2) days before the
<PAGE>
meeting or by notice mailed to the director at least five (5) days before the
meeting.
Notice of a meeting of the Board of Directors need not be given to any
director who signs a waiver of notice either before or after the meeting.
Attendance of a director at a meeting will constitute a waiver of notice of such
meeting and waiver of any and all objections to the place of the meeting, the
time of the meeting, or the manner in which it has been called or convened,
except when a director states, at the beginning of the meeting, any objection to
the transaction of business because the meeting is not lawfully called or
convened.
Neither the business to be transacted nor the purpose of, regular or
special meetings of the Board of Directors need be specified in the notice or
waiver of notice of such meeting.
A majority of the directors present, whether or not a quorum exists, may
adjourn any meeting of the Board of Directors to another time and place. Notice
of any such adjourned meeting will be given to the directors who were not
present at the time of the adjournment.
Meetings of the Board of Directors may be called by the Chairman of the
Board, the President of the corporation or any two directors.
Members of the Board of Directors may participate in a meeting of such
board by means of a conference telephone or similar communications equipment by
means of which all persons Participating by such means shall constitute presence
in person at a meeting.
Section 13. Action without a Meeting. Any action required to be taken at
-------------------------------------
a meeting of the Board of Directors, or any action which may be taken at a
meeting of the Board of Directors or a committee thereof, may be taken without a
meeting if a consent in writing, setting forth the action to be so taken, signed
by all the directors, or all the members of the committee, as the case may be,
is filed in the minutes of the proceedings of the board or of the committee.
Such consent will have the same effect as a unanimous vote.
ARTICLE III. OFFICERS
Section 1. Officers. The officers of this corporation will consist of a
--------------------
president, a vice president, a secretary and a treasurer, each of whom will be
elected by the Board of Directors. Such other officers and assistant officers
and agents as may be deemed necessary may be elected or appointed by the Board
of Directors from time to time. Any two or more offices may be held by the same
person.
<PAGE>
Section 2. Duties. The officers of this corporation will have the
------------------
following duties:
The President will be the chief executive officer of the corporation, who
generally and actively manages the business and affairs of the corporation
subject to the directions of the Board of Directors. Said officer will preside
at all meetings of the shareholders and Board of Directors.
The Vice President will, in the event of the absence or inability of the
President to exercise his office, become acting president of the organization
with all the rights, privileges and powers as if said person had been duly
elected president.
The Secretary will have custody of, and maintain all of the corporate
records except the financial records. Furthermore, said person will record the
minutes of all meetings of the shareholders and Board of Directors, send all
notices of meetings and perform such other duties as may be prescribed by the
Board of Directors or the President. Furthermore, said officer shall be
responsible for authenticating records of the corporation.
The Treasurer shall retain custody of all corporate funds and financial
records, maintain full and accurate accounts of receipts and disbursements and
render accounts thereof at the annual meetings of shareholders and whenever else
required by the Board of Directors or the President, and perform such other
duties as may be prescribed by the Board of Directors or the Preesident.
Section 3. Removal and Resignation of Officers. An officer or agent
-----------------------------------------------
elected or appointed by the Board of Directors may be removed by the Board of
Directors whenever in the Board's judgment the best interests of the corporation
will be served thereby.
Any officer may resign at any time by delivering notice to the corporation.
Said resignation is effective upon delivery unless the notice specifies a later
effective date.
Any vacancy in any office may be filled by the Board of Directors.
ARTICLE IV. STOCK CERTIFICATES
-------------------------------
Section 1. Issuance. Every holder of share(s) in this corporation will be
--------------------
entitled to have a certificate representing all share(s) to which he is holder.
No certificate representing share(s) will be issued until such share(s) is/are
fully paid.
Section 2. Form. Certificates representing share(s) in this corporation
----------------
will be signed by the President or Vice
<PAGE>
President and the Secretary or any Assistant Secretary and will be sealed with
the seal of this corporation.
Section 3. Transfer of Stock. The corporation will register a stock
-----------------------------
certificate presented for transfer if the certificate is properly endorsed by
the holder of record or by his duly authorized agent.
Section 4. Lost, Stolen, or Destroyed Certificates. If a shareholder
---------------------------------------------------
claims that a stock certificate representing shares issued and recorded by the
corporation has been lost or destroyed, a new certificate will be issued to said
shareholder, provided that said shareholder presents an affidavit claiming the
certificate of stock to be lost, stolen or destroyed. At the discretion of the
Board of Directors, said shareholder may be required to deposit a bond or other
indemnity in such amount and with such sureties, if any, as the board may
require.
ARTICLE V. BOOKS AND RECORDS
-----------------------------
Section 1. Books and Records. The corporation shall keep as permanent
-----------------------------
records minutes of all meetings of its shareholders and Board of Directors, a
record of all actions taken by the shareholders or Board of Directors without a
meeting, and a record of all actions taken by a committee of the Board of
Directors in place of the Board of Directors on behalf of the corporation.
Furthermore, the corporation shall maintain accurate accounting records.
Furthermore, the corporation shall maintain the following:
(i) A record of its shareholders in a form that permits preparation of a
list of the names and addresses of all shareholders in alphabetical order by
class of shares showing the number and series of shares held by each;
(ii) The corporation's Articles or Restated Articles of Incorporation and
all amendments thereto currently in effect;
(iii) The corporations's Bylaws or Restated Bylaws and all amendments
thereto currently in effect;
(iv) Resolutions adopted by the Board of Directors creating one or more
classes or series of shares and fixing their relative rights, preferences and
limitations if shares issued pursuant to those resolutions are outstanding;
(v) The minutes of all shareholders' meetings and records of all actions
taken by shareholders without a meeting for the past 3 years;
(vi) Written communications to all shareholders generally or all
shareholders of a class or series within the past 3 years
<PAGE>
including the financial statements furnished for the past 3 years to
shareholders as may be required under Florida Law;
(vii) A list of the names and business street addresses of the
corporation's current directors and officers; and
(viii) A copy of the corporation's most recent annual report delivered to
the Department of State.
Any books, records and minutes may be in written form or in any other form
capable of being converted into written form.
Section 2. Shareholder's Inspection Rights. A shareholder of the
-------------------------------------------
corporation (including a beneficial owner whose shares are held in a voting
trust or a nominee on behalf of a beneficial owner) may inspect and copy, during
regular business hours at the corporation's principal office, any of the
corporate records required to be kept pursuant to Section 1, of this Article of
these Bylaws, if said shareholder gives the corporation written notice of such
demand at least 5 business days before the date on which the shareholder wishes
to inspect and copy. The foregoing right of inspection is subject however to
such other restrictions as are applicable under Florida Law, including, but not
limited to, the inspection of certain records being permitted only if the demand
for inspection is made in good faith and for a proper purpose (as well as the
shareholder describing with reasonable particularity the purpose and records
desired to be inspected and such records are directly connected with the
purpose).
Section 3. Financial Information. Unless modified by resolution of the
---------------------------------
shareholders within 120 days of the close of each fiscal year, the corporation
shall furnish the shareholders annual financial statements which may be
consolidated or combined statements of the corporation and one or more of its
subsidiaries as appropriate, that include a balance sheet as of the end of the
fiscal year, an income statement for that year, and a statement of cash flow for
that year. If financial statements are prepared on the basis of generally
accepted accounting principles, the annual financial statements must also be
prepared on that basis. If the annual financial statements are reported on by a
public accountant, said accountant's report shall accompany said statements. If
said annual financial statements are not reported on by a public accountant,
then the statements shall be accompanied by a statement of the president or the
person responsible for the corporation's accounting records (a) stating his
reasonable belief whether the statements were prepared on the basis of generally
accepted accounting principles and if not, describing the basis of preparation;
and (b) describing any respects in which the statements were not prepared on a
basis of accounting consistent with the statements for the preceding year. The
annual financial statements shall be mailed to each shareholder of the
corporation within 120 days after the close of each fiscal year or within such
additional time as is reasonably necessary to enable the corporation to prepare
----------
same, if, for
<PAGE>
reasons beyond the corporation's control, said annual financial statement cannot
be prepared within the prescribed period.
Section 4. Other Reports to Shareholders. The corporation shall report
-----------------------------------------
any indemnification or advanced expenses to any director, officer, employee, or
agent (for indemnification relating to litigation or threatened litigation) in
writing to the shareholders with or before the notice of the next shareholders'
meeting, or prior to such meeting if the indemnification or advance occurs after
the giving of such notice but prior to the time such meeting is held, which
report shall include a statement specifying the persons paid, the amounts paid,
and the nature and status, at the time of such payment, of the litigation or
threatened litigation.
Additionally, if the corporation issues or authorizes the issuance of
shares for promises to render services in the future, the corporation shall
report in writing to the shareholders the number of shares authorized or issued
and the consideration received by the corporation, with or before the notice of
the next shareholders' meeting.
ARTICLE VI. DIVIDENDS
----------------------
The Board of Directors of this corporation may, from time to time declare
dividends on its shares in cash, property or its own shares, except when the
corporation is insolvent or when the payment thereof would render the
corporation insolvent, subject to Florida Law.
ARTICLE VII. CORPORATE SEAL
----------------------------
The board of Directors will provide a corporate seal which will be in
circular form embossing in nature and stating "Corporate Seal", "Florida", year
of incorporation and name of said corporation.
ARTICLE VIII. AMENDMENT
------------------------
These Bylaws may be altered, amended or repealed, and altered, amended or
new Bylaws may be adopted by a majority vote of the full Board of Directors.
ARTICLE IX. CORPORATE INDEMNIFICATION PLAN
-------------------------------------------
The corporation shall indemnify any person:
<PAGE>
(1) Who was or is a party, or is threatened to be made a party, to any
threatened, pending, or completed action, suit, or proceeding, whether civil,
criminal, administrative, or investigative (other than an action by, or in the
right of, the corporation) by reason of the fact that he is or was a director,
officer, employee, or agent of the corporation or is or was serving at the
request of the corporation as a director, officer, employee, or agent of another
corporation, partnership, joint venture, trust, or other enterprise against such
costs and expenses, and to the extent and in the manner provided under Florida
Law.
(2) Who was or is a party, or it threatened to be made a party, to any
threatened, pending, or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that he is
or was a director, officer, employee, or agent of the corporation or is or was
serving at the request of the corporation as a director, officer, employee, or
agent of another corporation, partnership, joint venture, trust or other
enterprise against such costs and expenses, and to the extent and in the manner
provided under Florida Law.
The extent, amount, and eligibility for the indemnification provided herein
will be made by the Board of Directors. Said determinations will be made by a
majority vote to a quorum consisting of directors who were not parties to such
action, suit, or proceeding or by the shareholders by a majority vote of a
quorum consisting of shareholders who were not parties to such action, suit, or
proceeding.
The corporation will have the power to make further indemnification as
provided under Florida Law except to indemnify any person against gross
negligence or willful misconduct.
The corporation is further authorized to purchase and maintain insurance
for indemnification of any person as provided herein and to the extent provided
under Florida Law.
<PAGE>
EXHIBIT 4
BORDER GRAPHIC
NUMBER SHARES
(GRAPHIC) (GRAPHIC)
GRAPHIC
See Reverse for Certain
Definitions
INCORPORATED UNDER THE LAWS OF THE STATE OF FLORIDA
SAFE ALTERNATIVES CORPORATION OF AMERICA, INC.
OPEN CORPORATION
AUTHORIZED CAPITAL STOCK 200,000,000 SHARES PAR VALUE $0.0001 EACH
THIS is to Certify that is the owner of
----------------------------------------
- --------------------------------------------------------------------------------
FULLY PAID AND NON-ASSESSABLE SHARES OF COMMON STOCK OF
SAFE ALTERNATIVES CORPORATION OF AMERICA, INC.
transferable on the books of the Corporation by the holder hereof in person
or by duly authorized Attorney upon surrender of this Certificate
properly endorsed.
Witness, the seal of the Corporation and the signatures of its duly authorized
officers.
Dated
GRAPHIC
- ------------------------------ ------------------------------
Secretary President
<PAGE>
The following abbreviations, when used in the inscription on the face of this
certificate, shall be construed as though they were written out in full
according to applicable law or regulations:
TEN COM: as tenants in common
TEN ENT: as tenants by the entireties
JT TEN: as joint tenants with right of survivorship and
not as tenants in common
UNIF GIFT ACT: Custodian under
--------------- --------
(cust) (minor)
Uniform Gifts to Minors Act
-----------
(state)
Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED, hereby sell, assign and transfer unto
--------------------
Please insert social security or other
identifying number of assignee - -
----------- ---------- --------
- --------------------------------------------------------------------------------
(please print or typewrite name and address including postal zip code of
assignee)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Shares represented by the within Certificate, and do hereby irrevocably
constitute and appoint Attorney
-----------------------------------------------
to transfer the said Shares on the books of the within named Corporation with
full power of substitution in the premises.
Dated 19 .
------------------------------------- -------
- -------------------- ----------------------
In the presence of Signed
NOTICE: THE SIGNATURE OF THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS
WRITTEN UPON THE FACE OF THE CERTIFICATE, IN EVERY PARTICULAR, WITHOUT
ALTERATION OR ENLARGEMENT, OR ANY CHANGE WHATEVER.
"The securities represented by this certificate have not been registered under
the Securities Act of 1933 (the Act), as amended, and may not be sold, assigned,
pledged or otherwise transferred unless (a) such transfer of such securities
shall be registered under the Act pursuant to a currently effective registration
statement and all steps necessary to qualify such securities for sale under any
applicable state law shall have been taken or, (b) such transfer shall be exempt
from the registration requirements of the Act and any applicable state
securities laws, and the Company shall have received an opinion satisfactory to
the Company from other counsel satisfactory to it to that effect."
<PAGE>
EXHIBIT 10.1
ASSET PURCHASE AGREEMENT AND PLAN OF REORGANIZATION
ASSET PURCHASE AGREEMENT AND PLAN OF REORGANIZATION made as of the 21st day
of August, 1995, by and between SAFE ALTERNATIVES CORPORATION OF AMERICA, INC.,
a Delaware corporation having its principal place of business at 27 Governor
Street, Ridgefield, CT 06877 ("Seller"), and PORTSMOUTH CORPORATION, a Florida
corporation having its principal place of business at 10 Brickett's Mill Road,
Hampstead, New Hampshire 03841 ("Purchaser").
W I T N E S S E T H :
WHEREAS, Seller desires to sell and assign to Purchaser substantially all
of the assets of Seller as described herein, upon the terms and conditions
hereinafter set forth, and Purchaser desires to purchase and acquire such assets
from Seller, upon the terms and conditions hereinafter set forth;
WHEREAS, upon the consummation of the sale of substantially all of the
assets of Seller to Purchaser as contemplated herein, Seller desires to dissolve
and liquidate pursuant to the General Corporation Law of the State of Delaware;
and
WHEREAS, Seller and Purchaser intend for the transactions contemplated
hereby to constitute a tax free reorganization under Section 368(a)(1)(C) of the
Internal Revenue Code of 1986, as amended (the "Code"); and
NOW, THEREFORE, in consideration of the respective representations and
warranties hereinafter set forth and of the mutual covenants and agreements
contained herein, and for other valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
ARTICLE I: SALE AND PURCHASE OF ASSETS
---------------------------------------
1.1 Sale and Purchase. Subject to the terms and conditions contained in
-----------------
this Agreement, Seller hereby agrees to sell, transfer, assign, convey and
deliver to Purchaser, and Purchaser hereby agrees to purchase and accept from
Seller, all of Seller's rights, title and interest in and to all of the assets
and properties of Seller of every kind and description wherever located, at the
Closing Date (as hereinafter defined) except those disposed of in the ordinary
course of business prior to the Closing Date (the assets of Seller to be sold
herein referred to as the "Assets").
<PAGE>
Without limiting the foregoing, the Assets which are to be sold hereunder
shall include the following assets:
a. Machinery and Equipment -- all of the machinery, equipment, vehicles,
-----------------------
furniture, tools and other similar personal properties and fixtures owned by
Seller located at Seller's offices at 27 Governor Street, Ridgefield, CT 06877,
including, but not limited to, the machinery, equipment, vehicles, furniture and
other personal properties and fixtures listed in Exhibit 1.1(a) attached hereto.
b. Inventories -- all inventories of raw materials, work in process,
-----------
spare parts, supplies, and finished products.
c. Cash -- all cash on hand and in banks, cash equivalents, short term
----
investments, and prepaid expenses of Seller at the Closing Date.
d. Scrap, Surplus and Left-Over Materials -- all scrap, surplus and left-
--------------------------------------
over materials of Seller at the Closing Date.
e. Accounts Receivable -- the accounts receivable of Seller including the
-------------------
accounts receivable listed on Exhibit 1.1(e) attached hereto which are
outstanding at the Closing Date.
f. Miscellaneous Current Assets -- miscellaneous assets including
----------------------------
contracts and arrangements for work to be performed, rights under agreements and
leases, which are listed on Exhibit 1.1(f) attached hereto.
g. Records -- all files, data, software and records of Seller including
-------
machinery and equipment records, production records, contract records, purchase
and sale records, supplier lists, customer lists, price lists, customer files,
account histories, assembly drawings, schematics and other drawings and
documentation relating to current and past products and services of Seller.
h. Patents, Trademarks and Proprietary Information -- all Seller's right
-----------------------------------------------
to and interest in, any and all patents, patent applications, the name of the
Seller and all variants thereof, trade names, trademarks, trademark applications
and all confidential and proprietary information held and used by Seller,
including without limitation, specifications, designs, drawings, models, molds,
know-how, strategic and technical data, product research and development data,
manufacturing techniques and trade secrets, which are listed on Exhibit 1.1(h)
attached hereto.
1.2 Assumption of Liabilities. Subject to the Closing (as hereinafter
-------------------------
defined), Purchaser shall assume, pay or discharge or in every respect be liable
for any and all liability, obligation, commitment or expense of Seller (whether
absolute, contingent, disclosed or undisclosed), including without limitation
tax liabilities of any nature whatsoever.
2
<PAGE>
1.3 Purchase Price. At the Closing, Purchaser shall issue and deliver to
--------------
Seller as payment of the purchase price for the sale of the Assets hereunder
("Purchase Price"), (i) good and marketable title to eight million (8,000,000)
fully paid, validly issued and non-assessable shares of common stock of
Purchaser, par value $.0001 which shares immediately after the issuance thereof
represent ninety-four (94%) of the issued and outstanding shares of capital
stock of Purchaser, on a fully diluted basis, free and clear of any and all
liens, claims, charges or encumbrances of any nature whatsoever, and Seller
shall deliver to Purchaser the Assets.
ARTICLE II: CLOSING
-------------------
2.1 Closing. The closing of the transactions contemplated hereby (the
-------
"Closing") shall be held on September 28, 1995 (the "Closing Date") at the
offices of Seller or at such other time and place upon which the parties shall
mutually agree. At Closing, all steps shall be taken and documents and
instruments shall be delivered, in form reasonably acceptable to counsel for the
party to whom delivered, which are necessary or appropriate to consummate the
transactions provided for herein.
2.2 Conditions to Purchaser's Obligations. Purchaser's obligation
-------------------------------------
hereunder to purchase and pay for the Assets is subject to the satisfaction, on
or before the Closing Date, of the following conditions, any of which may be
waived, in whole or in part, by Purchaser in its sole discretion, and Seller
shall use its best efforts to cause such conditions to be fulfilled:
(a) No action or proceeding before any court or other governmental body
shall have been instituted or threatened to restrain, prohibit or
invalidate the transactions contemplated by this Agreement or which might
affect the right of Purchaser to own, operate or control the Assets after
the Closing Date.
(b) All corporate and other proceedings taken or required to be taken by
Seller in connection with the transactions contemplated hereby and all
documents incident thereto shall have been taken and shall be satisfactory
in form and substance to Purchaser.
(c) Seller shall have duly obtained all authorizations, consents, rulings,
approvals, licenses, franchises, permits and certificates, or exemptions
therefrom, by or of all governmental authorities and non-governmental
administrative or regulatory agencies having jurisdiction over the parties
hereto, this Agreement, the Assets, or the transactions contemplated
hereby.
(d) Seller shall have delivered to Purchaser such consents, agreements,
schedules, documents and exhibits required by this Agreement to be
delivered or reasonably requested by the Purchaser at or before Closing.
3
<PAGE>
(e) All representations and warranties of Seller contained in this
Agreement shall be true and correct as of the Closing Date as though such
representations and warranties were made as of such date.
(f) Seller shall have performed and complied with all agreements and
conditions required by this Agreement to be performed or complied with by
it prior to or at the Closing.
(g) There shall not be any material adverse change in the Assets from the
date hereof to the Closing Date and, during that period, there shall have
been no material loss by fire or casualty.
2.3 Conditions to Seller's Obligations. Seller's obligation hereunder
----------------------------------
to sell the Assets is subject to the satisfaction, on or before the Closing
Date, of the following conditions, any of which may be waived, in whole or in
part, by Seller in its sole discretion, and Purchaser shall use its best efforts
to cause such conditions to be fulfilled:
(a) No action or proceeding before any court or other governmental body
shall have been instituted or threatened to restrain, prohibit or
invalidate the transactions contemplated by this Agreement.
(b) All corporate and other proceedings taken or required to be taken by
Purchaser in connection with the transactions contemplated hereby and all
documents incident thereto shall have been taken and shall be satisfactory
in form and substance to Seller.
(c) Purchaser shall have duly obtained all authorizations, consents,
rulings, approvals, licenses, franchises, permits and certificates, or
exemptions therefrom, by or of all governmental authorities and non-
governmental administrative or regulatory agencies having jurisdiction over
the parties hereto, this Agreement, the Assets, or the transactions
contemplated hereby.
(d) Purchaser shall have delivered to Seller such consents, agreements,
schedules, documents and exhibits required by this Agreement to be
delivered or reasonably requested by the Seller at or before Closing.
(e) All representations and warranties of Purchaser and Paul Grillo
contained in this Agreement shall be true and correct as of the Closing
Date as though such representations and warranties were made as of such
date.
(f) Purchaser shall have performed and complied with all agreements and
conditions required by this Agreement to be performed or complied with by
it prior to or at the Closing.
(g) The Purchase Price due hereunder shall have been fully paid by
Purchaser pursuant to Section 1.3 hereof.
4
<PAGE>
(h) The Purchaser shall pay a six percent revenue-based royalty of (the
"Royalty"), in a pro rata amount in accordance with stockholders equity
percentage interest in the Seller, of the amount of all gross revenues,
less returns and discounts, generated by the Purchaser from the commercial
exploitation of all assets (including, but not limited to, intellectual
property, licenses, patents, patent applications, copyrights or the like)
acquired by the Purchaser from the Seller, during the sixty (60) month
period immediately following the Closing Date. Computation and payment of
the Royalty shall be made quarterly and the cumulative total of all Royalty
payments made pursuant to the Royalty shall not exceed the maximum total of
$8,500,000.
ARTICLE III: SELLER'S REPRESENTATIONS AND WARRANTIES
----------------------------------------------------
Seller hereby represents and warrants to Purchaser as follows:
3.1 Corporate Organization. Seller is a corporation duly organized,
----------------------
validly existing and in good standing under the laws of the State of Delaware
and has the corporate power to carry on all the business conducted by it, and is
qualified to do business in all jurisdictions where the failure to so qualify
would have a material adverse effect on its business.
3.2 Corporate Authority. As of the Closing Date, Seller will have taken
-------------------
all corporate action and other proceedings necessary to enable Seller to enter
into and carry out its obligations under this Agreement and this Agreement when
executed and delivered by Seller will constitute a valid and binding obligation
of Seller.
3.3 Litigation. (i) Seller is not engaged in, or to the best of Seller's
----------
knowledge threatened with, any litigation, governmental investigation or other
proceeding or controversy which may materially adversely affect Seller's
obligation to consummate this Agreement, title to the Assets and (ii) Seller is
not subject to any outstanding judgment, order, decree or injunction of any
court or governmental body.
3.4 Books and Records. Seller has maintained its books and records in a
-----------------
manner that accurately and fairly reflect in reasonable detail transactions
relating to the Assets.
3.5 No Employee Benefit Plans. There are no employee benefit plans, as
-------------------------
defined in Section 3.3 of Employee Retirement Income Security Act of 1974, as
amended, in effect with respect to the Seller's business.
3.6 Taxes. The Seller has timely filed all federal, state and local tax
-----
returns and other tax returns which are required to be filed, and all taxes due
from Seller have been timely paid and adequate reserves have been maintained for
the timely payment of taxes not yet due. The income tax returns of Seller have
never been audited by any authority empowered to do so.
5
<PAGE>
3.7 No Violation. The execution and delivery by Seller of this Agreement
------------
and the consummation of the transactions contemplated hereby do not and will not
conflict with or violate any contract or agreement to which Seller is a party or
by which it is bound and are not contrary to the Certificate of Incorporation or
By-laws of Seller and are not contrary to any order of any court to which Seller
is subject.
3.8 No Subsidiaries. Seller has, and on the Closing Date will have, no
---------------
subsidiaries.
3.9 Financial Information. The unaudited financial statements dated as of
---------------------
December 31, 1994 (the "Unaudited Financial Statements") of Seller has been
prepared by the certified public accounting firm of Lyons & Lyons and to the
best of Seller's knowledge fairly presents the financial position and other
information purported to be shown therein of Seller at the date referenced
therein. The Unaudited Financial Statements have been prepared in accordance
with Statements on Standards for Accounting and Review Services issued by the
American Institute of Certified Public Accountants.
3.10 No Material Advance Charge. Since the date of the Unaudited
--------------------------
Financial Statements, the business of Seller has only been operated in the
ordinary course. There has not been since the date of the Unaudited Financial
Statements, and on the Closing Date there will not have been, in the aggregate
any material adverse change in the condition, financial or otherwise, of Seller
from that set forth in the Unaudited Financial Statements.
3.11 No Liabilities. There are, and on the Closing Date will be, no
--------------
liabilities (including, but not limited to tax liabilities) or claims against
Seller (whether such liabilities or claims are contingent or absolute, direct or
indirect, matured or unmatured) not appearing on the Unaudited Financial
Statements other than liabilities incurred in the ordinary course of business
and disclosed in accordance with Section 3.13 or taxes incurred on earnings
since the date of the Unaudited Financial Statements.
3.12 Assets. Except as set forth in the Unaudited Financial Statements,
------
Seller has, and on the Closing Date will have, good and marketable title to all
of Assets, free and clear of all security interests, pledges, liens,
restrictions and encumbrances of every kind and nature. The Assets to be
conveyed pursuant to this Agreement are all the assets of Seller necessary to
enable Purchaser to continue operating the business in the manner conducted by
Seller as of the date hereof.
3.13 Accounts Receivable and Accounts Payable. The accounts receivable
----------------------------------------
and accounts payable as set forth in Exhibit 1.1(e) represent amounts due and
owed, as the case may be, for goods sold or services rendered or received by
Seller in the ordinary course of business and are collectable in the ordinary
course of business.
3.14 Contracts. All agreements, contracts and arrangements, whether
---------
written or oral (collectively, "Contracts"), to which Seller is, or on the
Closing Date will be, a party, or from
6
<PAGE>
which Seller will receive substantial benefits, and which are material to Seller
are not, and on the Closing Date will not, be in material default under any such
Contract.
3.15 No Affiliated Transactions. Except as otherwise disclosed in the
--------------------------
Unaudited Financial Statements, there have been, and through the Closing Date
will have been (i) no bonuses or extraordinary compensation to any of the
officers or directors of Seller, (ii) no loans made to or any other transactions
with any of the officers or directors or shareholders of Seller or their
families, (iii) no dividends or other distributions declared or paid by Seller,
and (iv) no purchase by Seller of any of its capital shares.
3.16 Insurance. Seller has, and on the Effective Date will have,
---------
maintained casualty and liability policies and other insurance policies with
respect to its business which are appropriate and customary for businesses
similar to Seller in size, industry and risk profile. Copies of all of the
policies of insurance and bonds presently in force with respect to Seller,
including without limitation those covering properties, buildings, machinery,
equipment, worker's compensation, officers and directors and public liability,
have been delivered to Purchaser. All such insurance policies are in full force
and effect, with all premiums thereon duly paid and Seller has not received any
notice of cancellation with respect to any such policies.
3.17 Patents and Trademarks. Seller has, and on the Closing Date will
----------------------
have, no patents, patent applications, trademarks, trademark registrations or
applications therefor, trade names, copyrights, copyright registrations or
applications therefor, or other intellectual property, except as described in
Exhibit 1.1(h) attached hereto.
3.18 Compliance with Law. Since its inception, Seller has, and on the
-------------------
Closing Date, will have in all material respects operated its business and
conducted its affairs in compliance with all applicable laws, rules and
regulations, except where the failure to so comply did not have and would not be
expected to have a material adverse effect on Seller's business or property.
ARTICLE IV: PURCHASER'S REPRESENTATIONS AND WARRANTIES
------------------------------------------------------
Purchaser and Paul Grillo hereby represent and warrant to Seller as
follows:
4.1 Corporate Organization. Purchaser is a corporation duly organized,
----------------------
validly existing and in good standing under the laws of the State of Florida and
has the corporate power to carry on all business conducted by it. There are no
states or jurisdictions in which the character and location of any of the
properties owned or leased by the Purchaser, or the conduct of its business,
makes it necessary for it to qualify to do business as a foreign corporation
except where the failure to so qualify would not have a material adverse effect
on purchaser. Copies of the Certificate of Incorporation and of the By-laws of
Purchaser, and all amendments thereto, and stock records of Purchaser have been
furnished to Seller and are complete and correct. Purchaser's minute books
heretofore furnished to Seller contain complete and accurate records
7
<PAGE>
of all meetings and other corporate actions of Purchaser's stockholders and
Board of Directors and committees thereof.
4.2 Capitalization. The authorized capital stock of Purchaser consists of
--------------
200,000,000 shares of Common Stock, par value $.0001 per share, of which five
hundred thousand (500,000) shares are issued and outstanding, no shares of which
are issued but not outstanding, and 199,500 shares of which are authorized and
unissued. All shares of the Company's Common Stock issuable to Seller in
payment of the Purchase Price, will upon issuance, be duly and validly issued,
fully paid and nonassessable and will be free and clear of any liens, claims,
charges or encumbrances of any nature whatsoever, and represent ninety-four
percent (94%) of the issued and outstanding shares of capital stock of
Purchaser, on a fully diluted basis. Except as set forth in Schedule 4.2
attached hereto, there are no outstanding options, warrants, rights, puts,
calls, commitments, conversion rights, plans or other agreements of any
character to which the Purchaser is a party or otherwise bound which provide for
the acquisition, disposition or issuance of any issued but not outstanding,
outstanding, or authorized and unissued shares of capital stock of Purchaser.
There are no preemptive or similar rights attached to Purchaser's capital stock.
No holders of any of the Purchaser's securities has any rights, "demand,"
"piggy-back' or otherwise, to have such securities registered under the
Securities Act of 1933, as amended.
4.3 Corporate Authority. As of the Closing Date, Purchaser will have
-------------------
taken all corporate action and other proceedings necessary to enable it to carry
out its obligations under this Agreement and this Agreement when executed and
delivered by Seller will constitute a valid and binding obligation of Seller.
4.4 Litigation. (i) Purchaser is not engaged in, or threatened with, any
----------
litigation, governmental investigation, including but not limited to, the
Securities and Exchange Commission or the National Association of Securities
Dealers, Inc., or other proceeding or controversy which may materially adversely
affect Purchaser's obligation to consummate this Agreement, (ii) no consent,
approval or authorization of or designation, declaration or filing with any
governmental authority is required in connection with the execution and delivery
of this Agreement or the consummation of the transactions contemplated hereby,
and (iii) Purchaser is not operating its business in violation of any federal,
state or local law or ordinance so as to have any material adverse effect on
Purchaser's purchase of the Assets.
4.5 No Violation. The execution and delivery by Purchaser of this
------------
Agreement and the consummation of the transactions contemplated hereby do not
and will not conflict with or violate any contract or agreement to which
Purchaser is a party or by which it is bound and are not contrary to the
Certificate of Incorporation or By-laws of Purchaser and are not contrary to any
order of any court to which Purchaser subject.
4.6 Not Investment Company or Investment Advisor. The business of
--------------------------------------------
Purchaser does not require it to be registered as an investment company or
investment adviser as such terms are defined under the Investment Company Act
and the Investment Advisers Act of 1940, each as amended.
8
<PAGE>
4.7 No Liabilities. There are, and on the Closing Date will be, no
--------------
liabilities (including, but not limited to tax liabilities) or claims against
Purchaser (whether such liabilities or claims are contingent or absolute, direct
or indirect, matured or unmatured) not appearing on the audited financial
statements of the Purchaser as of September 30, 1994 (the "Audited Financial
Statements") other than liabilities incurred in the ordinary course of business
and disclosed in accordance with Section 4.7 or taxes incurred on earnings since
the date of the Audited Financial Statements.
4.8 No Material Advance Charge. Since the date of the Audited Financial
--------------------------
Statements, the business of Purchaser has only been operated in the ordinary
course. There has not been since the date of the Audited Financial Statements,
and on the Closing Date there will not have been, in the aggregate any material
adverse change in the condition, financial or otherwise, of Purchaser from that
set forth in the Audited Financial Statements.
4.9 Contracts. The Purchaser has no existing agreements, contracts and
---------
arrangements, whether written or oral (collectively, "Contracts") other than
this agreement.
ARTICLE V: DISSOLUTION AND LIQUIDATION OF SELLER
------------------------------------------------
Subject to the approval of Seller's stockholders and the consummation of
the sale of Assets to Purchaser, Seller and Purchaser, as the case may be, shall
within 90 days of the Closing Date (i) file a Certificate of Dissolution
pursuant to Section 275 of the Delaware General Corporation Law with the
Secretary of State of the State of Delaware; (ii) file within 90 days
thereafter [Form 966] with the Internal Revenue Service, together with certified
copies of board and stockholders' resolutions of Seller, if required; and (iii)
distribute to the stockholders of Seller shares of Common Stock of Purchaser
whereupon the stockholders of Seller shall surrender all of their shares of
capital stock of Seller for cancellation.
ARTICLE VI: AFFIRMATIVE COVENANTS
---------------------------------
6.1 Affirmative Covenants of Seller. Seller shall, as soon as
------------------------------------
practicable but in no event later than the Closing Date, (i) cause a special
meeting of its stockholders to be called to consider and vote upon the sale of
the Assets by Seller to Purchaser and the dissolution and liquidation of Seller,
on the terms and conditions hereinafter set forth, or (ii) obtain such written
consent of its stockholders as is necessary under applicable state corporate law
to approve the sale of the Assets by Seller to Purchaser and the dissolution and
liquidation of Seller, on the terms and conditions hereinafter.
6.2 Affirmative Covenants of Purchaser. Purchaser shall, as soon as
----------------------------------
practicable but in no event later than the Closing Date, (i) (a) cause a special
meeting of its stockholders to be called to consider and vote upon the amendment
of the Certificate of Incorporation of Purchaser to change its name to Safe
Alternatives Corporation of America, Inc., effective upon the
9
<PAGE>
consummation of the sale of the Assets by Seller to Purchaser, or (b) obtain
such written consent of its stockholders as is necessary as is necessary under
applicable state corporate law to approve the amendment of the Certificate of
Incorporation of Purchaser to change its name to Safe Alternatives Corporation
of America, Inc., effective upon the consummation of the sale of the assets by
Seller to Purchaser, and (ii) (a) cause all of the existing members of the board
of directors to resign effective immediately upon the consummation of the
transactions contemplated hereunder and (b) (1) cause a special meeting of its
board of directors to nominate each of Stephen J. Thompson and Richard J. Fricke
to be nominated to the slate of the proposed board of directors of the Purchaser
and (2) cause a special meeting of the stockholders of the Purchaser to be
called to consider and approve the election of Messrs. Thompson and Fricke as
the sole members of the board of directors of the Purchaser, subject only to the
consummation of the transactions contemplated hereby.
ARTICLE VII: SURVIVAL; BULK SALES; SALES TAX
---------------------------------------------
7.1 Survival. The representations and warranties set forth herein shall
--------
survive and remain in effect following the Closing Date.
7.2 Bulk Sale Compliance Waiver. Purchaser hereby waives compliance with
---------------------------
the provisions of any law relating to bulk transfers insofar as it may be
applicable to the purchase and sale of the Assets. If by reason hereof, any
claims are asserted by creditors of Seller, they shall be the responsibility of
Purchaser.
7.3 Sales Tax. Purchaser shall at the Closing, or thereafter, upon
---------
request of Seller, execute and deliver to Seller all requisite sales, use and
transfer tax returns and related certificates and affidavits, which must be
filed by reason of the transactions contemplated by this Agreement. Seller also
shall execute all such returns and related certificates and affidavits and shall
timely file the same and pay all sales, use and transfer taxes payable by reason
of the sale of the Assets when due and payable. Purchaser shall pay to Seller
at the Closing an amount in cash equal to all sales, use and transfer taxes
payable by reason of the sale of the Assets.
ARTICLE VIII: MISCELLANEOUS
---------------------------
8.1 Expenses. Except as otherwise agreed in writing by the parties, each
--------
party shall pay its own expenses incident to the preparation and consummation of
this Agreement.
8.2 Benefit and Assignments. This Agreement shall be binding upon and
-----------------------
inure to the benefit of the parties hereto and their respective successors and
assigns; provided that no party shall assign or transfer all or any portion of
this Agreement without the prior written consent of the other party, and any
such attempted assignment shall be null and void and of no force or effect.
10
<PAGE>
8.3 Broker. The parties represent and warrant to each other that all
------
negotiations relating to this Agreement and the transactions contemplated hereby
have been carried on between them directly and without the intervention of any
other party in such manner as to give rise to any valid claim against any of the
parties for a brokerage commission, finder's fee or other like payment except
for the one hundred thousand dollar ($100,000) obligation to Mr. Paul Grillo,
payable at Closing, for his introduction and facilitation of the transactions
herein. In addition, assuming that the transactions are consummated, the
Purchaser shall enter into a consulting agreement with Mr. Grillo for a period
of Two (2) years (the "Consulting Agreement"). The Consulting Agreement shall
provide for a payment of $12,500 a month commencing July 1, 1996.
8.4 Further Assurances. Purchaser and Seller each agrees to take such
------------------
action and to execute and deliver such documents and instruments as any party
may reasonably request in order to effectuate the terms of this Agreement and
the transactions contemplated hereby, and the parties agree to fully cooperate
with each other and with their respective counsel and accountants in connection
with any steps required to be taken as part of their respective obligations
under this Agreement.
8.5 Waiver. Any party hereto shall have the right to waive compliance by
------
the other of any term, condition or covenant contained herein. Such waiver
shall not constitute a waiver of any subsequent failure to comply with the same
or any different term, condition or covenant.
8.6 Applicable Law. Connecticut law, other than choice of law, shall
--------------
govern the validity, construction, interpretation and effect of this Agreement.
8.7 Headings. The paragraph headings of this Agreement are for
--------
convenience of reference only and do not form a part of the terms and conditions
of this Agreement or give full notice thereof.
8.8 Severability. Any provision hereof that is prohibited or
------------
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability, without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
8.9 Entire Agreement. This Agreement and the Exhibits and Schedules
----------------
hereto contain the entire understanding between the parties, no other
representations, warranties or covenants having induced either party to execute
this Agreement, and supersedes all prior or contemporaneous agreements with
respect to the subject matter hereof. This Agreement may not be amended or
modified in any manner except by a written agreement duly executed by the party
to be charged, and any attempted amendment or modification to the contrary shall
be null and void and of no force or effect.
11
<PAGE>
8.10 Notices. All notices or other communications to be sent by any party
-------
to this Agreement to any other party to this Agreement shall be sent by
certified mail, nationwide overnight delivery service or by personal delivery to
the addresses hereinbefore designated, or such other addresses as may hereafter
be designated in writing by a party. Courtesy copies of any such notices shall
be sent to: counsel for Seller, Feldman & Ellenoff, 200 Madison Avenue, Suite
1900, New York, N.Y. 10016 attn. Douglas S. Ellenoff, Esq. and counsel for
Purchaser, Frank Freeman, Esq., c/o Purchaser.
8.11 Counterparts. This Agreement may be executed by the parties hereto
------------
in one or more counterparts, each of which shall be deemed an original and which
together shall constitute one and the same instrument.
8.12 Abandonment. This Agreement and the transactions contemplated herein
-----------
may be abandoned (a) by either party, acting by its Board of Directors, at any
time prior to its adoption by the shareholders as provided by law, or (b) by the
mutual consent of the parties, acting each by its Board of Directors, at any
time after such adoption by such shareholders and prior to the Closing Date. In
the event of abandonment of this Agreement, the same shall become wholly void
and of no effect and there shall be no further liability or obligation hereunder
on the part of either party, its Board of Directors or any other party to this
Agreement.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
the day and date first above written.
SAFE ALTERNATIVES CORPORATION
OF AMERICA, INC.
By:_________________________________________
PORTSMOUTH CORPORATION
By:_________________________________________
I hereby acknowledge and accept personal
responsibility with respect to the accuracy of the representations in
ARTICLE IV: PURCHASER'S REPRESENTATIONS
AND WARRANTIES.
By: _____________________________________
Paul Grillo
12
<PAGE>
<TABLE>
<CAPTION>
SAC OF AMERICA, INC.
ACCOUNTS RECEIVABLE 9/1/95
--------------------------
INVOICE INVOICE
NUMBER DATE CUSTOMER AMOUNT
- ------ ----
<S> <C> <C> <C>
B10166 06/21/95 H&S Environmental Co. $3,850.00
B10168 06/28/95 H&S Environmental Co. $2,894.50
B10171 07/12/95 W.A. Crandall & Sons, Inc. 2,894.50
B10172 07/18/95 H&S Environmental Co. 1,925.00
B10173 07/19/95 H&S Environmental Co. 770.00
B10174 07/24/95 USCG Support Center New 1,035.00
York
B10175 08/30/95 Bayway Lumber 256.00
Distributors, Inc.
B10176 08/30/95 The Potomac Edison 185.00
Company
B10177 08/30/95 Master Craft Paper 1,000.00
Company
B10178 08/30/95 I&OA Slutsky, Inc. 50.22
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SAC OF AMERICA, INC.
ACCOUNTS PAYABLE 9/1/95
------------------------
INVOICE
DATE VENDOR AMOUNT
---- ------
<C> <S> <C>
06/28/95 Total Comfort Co., Inc. $ 68.90
07/26/95 Quill Corp. 93.98
08/01/95 State of Connecticut 2,697.03
08/07/95 Building Blocks 50.00
08//95 Fisher Scientific Co. 524.77
08/09/95 SNET 1,543.49
08/11/95 Pinchbeck Co. 81.95
08/13/95 AT&T 444.28
08/15/95 ARC, Inc. 67.00
08/16/95 Selectform, Inc. 90.35
08/17/95 Brown Chemical co. 644.00
08/17/95 Angus Chemical co. 1,322.24
08/19/95 UPS 77.18
08/22/95 Sprint Tele. 95.17
08/23/95 Security Solutions, Inc. 31.80
08/23/95 DEX Business Credit 104.94
08/23/95 Quill Corp. 562.74
08/23/95 Corporate Staffing Solutions 844.29
08/24/95 CL&P 722.77
08/24/95 Airborne Express 163.71
08/24/95 ITT Hartford Co. 247.84
08/25/95 SNET 603.31
08/25/95 AWD, Inc. 306.08
08/26/95 CompuServe, Inc. 256.84
08/26/95 American Express Co. 5,527.29
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SAC OF AMERICA, INC.
ACCOUNTS PAYABLE 9/1/95
--------------------------
INVOICE
DATE VENDOR AMOUNT
---- ------
<S> <C> <C>
08/28/95 Quill Corp. 14.61
08/28/95 Pitney Bowes 66.30
08/30/95 Corporate Staffing Solutions 508.81
08/31/95 Sherwin Williams Co. 19.46
08/31/95 Crystal Rock Co. 131.06
</TABLE>
<PAGE>
Assets of Safe Alternatives Corporation
of America, Inc.
Richard Kennedy Exclusive License to SAC 2/26/92
------------------------------------------------
- Foaming and disposal of organic sludge
Richard Kennedy Exclusive License to SAC 7/17/91
------------------------------------------------
- Foaming and disposal of organic sludge
Richard Kennedy Exclusive License to SAC 12/9/92
------------------------------------------------
- Disposal and reuse of expanded polystyrene through the use of liquid
mixture
Richard Kennedy Exclusive License to SAC 12/9/92
------------------------------------------------
- Disposal and reuse of plastic bags polyurethane plastic polystyrene
diapers and the like
Richard Kennedy Exclusive License to SAC 12/9/92
------------------------------------------------
- Disposal of oil through the use of foam
Richard Kennedy Exclusive License to SAC 12/9/92
------------------------------------------------
- Fire retarded hollow core doors
Richard Kennedy Exclusive License to SAC 12/9/92
------------------------------------------------
- Fire retarded urethane coating which provided a vapor barrier
Richard Kennedy Exclusive License to SAC 12/9/92
------------------------------------------------
- Fire retarded water blown urethane foam
Richard Kennedy Exclusive License to SAC 8/23/93
------------------------------------------------
- Packaging foam
- Foaming and disposal of organic sludge
- Fire retarded water blown urethane foam with reduced smoke toxicity
Stevens/SAC 11/15/93
--------------------
- Chemical paint stripping technology
<PAGE>
S.A.C. INVENTORY AS OF FEBRUARY 22, 1995
RIDGEFIELD
<TABLE>
<CAPTION>
DATE COST
ACQUIRED BASIS EST. FAIR MARKET VALUE
-------- ----- ----------------------
Lobby
- -----
<S> <C> <C> <C>
Furniture Matched Set
2-Wingback chairs 1994 598 400
1-Loveseat 1994 399 300
1-Endtable 1994 200 150
1-Brass lamp 1994 100 50
1-Glass top display table 1994 450 400
1-Coffee Table 1994 250 175
2-Paintings - on loan
1-Plant stand 1994 50 25
Sams' Conference Room
- ---------------------
1-Conference table, rectangular, 1993 1000 800
1-Steel chair 1993 150 150
1-Small file cabinet (white) 1993 50 40
1-MLS-12 Phone 1993 200 200
1-Tenex 410 garbage container 1993 12 6
SUB-TOTAL 3459 2696
SUB-TOTAL FORWARD 3459 2696
</TABLE>
1
<PAGE>
<TABLE>
<CAPTION>
DATE COST
ACQUIRED BASIS EST. FAIR MARKET VALUE
------------------- ------ ----------------------
<S> <C> <C> <C>
Supply Room
- -----------
1-Sanyo Refrigerator model # SR-1282-4X 1994 299 250
Serial # 870500833
1-Sanyo Microwave Serial# 38705370 1994 225 200
1-Quil Paper cutter model # 754318 1993 115 100
1-Heavy duty stapler "Stanley" 1993 35 30
Model # B310 HDS
1-Ring binder GBC Image Maker 2000 1993 499 450
Serial # DL01769
1-Velobinder punch 1994 299 250
Stair Case
- ----------
1-Table with lamp 1994 150 125
Womens Room Mens Room
- -----------
1-Table 1-Tenex 410 garbage 1993 12 6
container
Frank's Office
- --------------
1-Desk, black top with
ext., 6 drawers 1993 700 500
1-Desk small with 2 drawers 1993 400 300
1-Three drawer file cabinet 1994 399 300
1-Wooden executive style 1993 299 250
1-MLS-12 Phone 1993 200 200
SUB-TOTAL THIS PAGE 3632 2961
SUB-TOTAL FORWARD 7091 5657
DATE COST
ACQUIRED BASIS EST. FAIR MARKET VALUE
------------------- ------ ----------------------
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
Frank's Office cont'd
- ---------------------
<S> <C> <C> <C>
1-Bostich B660 stapler 1993 15 7
1-Steel chair 1993 250 225
Cannon NP 20155 8 copier, model # F12080 1993 3500 2500
Serial # CGR04310
Closet
- ------
2-Ruddermaid Toughbeck 32 gallon garbage cans 1993 30 20
Receptionist Office
- -------------------
1-Desk (litton business line) 1993 550 500
1-MLS-34D phone 1993 1100 1100
1-AT&T answering machine, model # 1323, serial # 1994 95 50
1-Computer - upgrade 2M RAM, Modem w/Fax Card
*1-486 Microgeneration 486 computer Serial #301149 1994 3799 4300
1-Fujitsu Keyboard Serial#H7158346 -
1-Gateway crystal scan monitor, wo24MI,
serial# TB1814035732
1-Fellows Mesh glare screen 1994 70 60
*1-HP IIP plus laser printer Serial# 3136J32LIZ 1399 1699
1-HOM black filing cabinet, 4 drawer 1993 299 250
1-Panasonic electric pencil sharpener 1993 75 60
1-C40 Scotch tape dispenser\ 1-Bates 520 Stapler 1993 25 20
1-3 drawer file cabinet with Formica top 1993 499 450
SUB-TOTAL THIS PAGE 11,686 11,241
SUB-TOTAL FORWARD 18,777 16,898
</TABLE>
*Denotes Upgrades or Improvements
3
<PAGE>
<TABLE>
<CAPTION>
DATE COST
ACQUIRED BASIS EST. FAIR MARKET VALUE
------------------- ------ ----------------------
<S> <C> <C> <C>
1-Royal 2325 copier, CopyStar w/document 1993 11,000 9,000
Feeder & Sorter, Serial# 009736H
1-Tenex 415 garbage pail 1993 12 6
1-EtherNet Connector 1993 200 200
Large Conference Room
- ---------------------
1-Round conference table 3,000 2,500
1-Small rolling stand 100 80
2-MLS-12 phones 400 400
9-Fabric armchairs, swivel 2,025 1,800
3-Standing floor lamps 300 200
2-Dry ease boards 150 100
1-Rubbermaid tool box 30 20
SUB-TOTAL THIS PAGE 17,217 14,306
SUB-TOTAL FORWARD 35,994 31,204
</TABLE>
*Improvements and/or Upgrades Made
4
<PAGE>
<TABLE>
<CAPTION>
DATE COST
ACQUIRED BASIS EST. FAIR MARKET VALUE
-------- ------ ----------------------
<S> <C> <C> <C>
Sheryls' Office
- ---------------
1-Desk (litton business line) with keyboard attachment 1994 750 650
1-C40 scotch tape dispenser 1993 12 6
1-Black Desk Lamp 1994 60 50
2-AT&t MLS-12 phones 1993 400 400
1-Sony M2000 transcriber micro cassette serial # 47142 1994 399 350
1-brown file cabinet 2 drawers with wood veneer top 1994 299 250
1-Wood veneer table with 2 shelves 1993 150 100
1-Mini tower computer micro generation 486
2-Meg Ram & Local B., Card, serial# 301148* 1994 2995 3400
1-Z nix mouse
1-MAG Computer monitor model# PMV1448
serial # TB9D63195
1-Keyboard 2001 serial# 920909044
1-HP IIP plus laser printer serial # 3136J32L21, 2MG Ram* 1994 1399 1699
1-3drawer file cabinet with wood veneer top
1-Fujitsu Fax machine model # Dex Express 2500 1993 550 450
serial # 332893940
1-Linder quartz clock 1994 30 20
1-Speed-O-Print cabinet with sliding doors 1994 250 150
1-Acco-30 stapler 1993 20 15
2-Steelmaster index card drawers 1993 60 50
1-Punchodex P-49 3 hole punch 1993 20 15
1-Tenex 410 garbage pail 1993 12 6
SUB-TOTAL THIS PAGE 7,406 7,611
SUB-TOTAL FORWARD 43,400 38,815
</TABLE>
*Denotes Upgrade or Improvements
5
<PAGE>
<TABLE>
<CAPTION>
DATE COST
ACQUIRED BASIS EST. FAIR MARKET VALUE
------------------- ------ ----------------------
<S> <C> <C> <C>
Steves' Office
- --------------
1-Cherry veneer desk, 2 sections with 5 drawers 1993 2700 2500
1-File cabinet black with wood veneer top 1994 650 600
1-Sony dictator transcriber model# M2020, 1994 299 250
serial # 0503119
1-C-41 scotch tape dispenser 1993 12 6
1-Toshiba surveillance camera CCD, Model K537A 1994 450 400
1-Halogen torch lamp, black 1994 150 100
1-Halogen desk lamp, brass and black
2-Pelco video switcher model # VS5104, serial # 7177 4A 1994 125 125
1-Panasonic monitor b/w model # TR930B, 1994 399 350
serial # K3A46I075
1-Eleletrek power strip 1994 129 100
1-APC Power Backup 1995 499 499
1-stapler 1993 12 6
1-MLS-12 D phone serial # 921292707 1993 275 275
1-C38 scotch tape dispenser 1993 12 6
1-Cherry finish cabinet/desk 1993 1500 1300
4-Fabric covered chairs 1993 1200 1000
1-Executive style chair, high back 1994 899 800
1-Round table (36") 1994 299 250
1994 150 150
1994 499 400
serial number# 31230521
1-Cherry wood pendulum clock 1994 150 125
1-Spectra Viewframe LCD Computer projection Panel 1994 4500 4500
model Viewframe spectra c, serial # 119453
SUB-TOTAL THIS PAGE 14,909 13,742
SUB-TOTAL FORWARD 58,309 52,557
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
DATE COST
ACQUIRED BASIS EST. FAIR MARKET VALUE
-------- ------ ----------------------
<S> <C> <C> <C>
Steve's Office Cont'd
- ---------------------
1-NEC Versa Ultralite laptop* 1994 3800 4600
486SX 33MHz
12MB RAM
14.4 PCMCIA Fax modem
2x 170 Mb Hard drives 1994 2995 3600
1MCW 486/66 W/ CD Rom
NEC Multi-System XP17 Monitor*
Ricks office
- ------------
1- phone MLS-12 1993 400 400
1-wood Desk (Fancy) #84436 on Side 1993 1100 900
1-end table with drawer and cabinet 1994 150
1 Packard Bell PK Mate 486 computer 1994 1299
model pb-400
serial # 17A2C11327T
1-IBM keyboard model 139401
1-Packard Bell monitor model PB8538SVGA
serial # 73591171
1-Hitachi CD-Rom drive 1993 1700 1500
model CDR-1700s
serial# K1L053970
SUB-TOTAL THIS PAGE 11,444 12,200
SUB-TOTAL FORWARD 69,753 64,757
</TABLE>
*Denotes Upgrades or Improvements
7
<PAGE>
<TABLE>
<CAPTION>
DATE COST
ACQUIRED BASIS EST. FAIR MARKET VALUE
------------------- ------ ----------------------
<S> <C> <C> <C>
Rick's Office Cont'd
- --------------------
1-FyreFyter safe model FF 250 1993 699 699
1-Tenex 410 garbage pail 1993 12 6
1-Panasonic surveillance camera 1994 250 250
Gerard's office
- ---------------
1-AT&T MLS-12 phone 1993 200 200
1-Bostich 660 stapler 1993 12 6
1-C38 Scotch Tape Dispenser 1993 12 6
1-desk w/2 drawers (litton business line) 1993 650 550
1-desk, particle board with simulated wood veneer 1994 200 200
1-Tenex 410 garbage pail 1993 12 6
Sam's office
- ------------
1-AT&T phone MLS-12 1993 200 200
1-desk w/4 drawers (litton business line) 1993 600 500
1-Steelcase black filing cabinet w/2 drawers 1994 125 100
SUB-TOTAL THIS PAGE 2,972 2,723
SUB-TOTAL FORWARD 72,725 67,480
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
DATE COST
ACQUIRED BASIS EST. FAIR MARKET VALUE
-------- ------ ----------------------
<S> <C> <C> <C>
PAULA'S OLD OFFICE
- ------------------
1 desk, with 4 drawers (litton business line) 1993 750 650
1 filing cabinet w/3 drawers 399 300
2 AT&T MLS-12 phones 1993 400 400
1 Sony foot control unit - dictating machine
model FS-25 1994 399 350
1 Black steel chair 1993 225 150
1 Black T-legged table 1994 300 200
1 Fujitsu DEX 760 Fax/copier serial #34620259 1994 1750 1600
COMPUTER ROOM UPSTAIRS
- ----------------------
2 AT&T MLS-12 phones 1993 400 400
1 desk w/4 drawers (litton business line) 1993 750 650
1 desk w/2 drawers (litton business line) 1994 650 550
1 Black steel file cabinet w/4 drawers 1994 700 600
1 Fellows mesh anti-glare screen 1994 60 50
2 Tenex 410 garbage pails 1993 24 12
1 Gateway 2000 computer 486 SX 2 Meg Ram
and Video Accelerator * 1994 2100 2700
1 UMAX scanner model UC840 serial # A2205047 1994 2600 3000
1 Sony Trinitron monitor model CPD-1604S
serial # 2501586 1994 1600 1600
2 power strips (expensive) 1994 100 75
SUB-TOTAL THIS PAGE 13,307 13,362
</TABLE>
* Denotes Upgrades or Improvements
<PAGE>
<TABLE>
<CAPTION>
DATE COST
ACQUIRED BASIS EST. FAIR MARKET VALUE
-------- ------ ----------------------
<S> <C> <C> <C>
COMPUTER ROOM CONT'D
- --------------------
Many misc. computer & video cables
1 Sony Camcorder, charge and battery model 1994 900 800
CCD-TR101 serial 230567
1 Panasonic SVHS deck model AG1960 1994 2400 2400
serial # E2TA00665
1 Symphonic TV/VCR model TVCR13B1C Serial # V38326714 1993 299 250
1Matox PC card model ILM16/AT/2MA/S serial # 1565 1994 700 700
1 Editlink controler card model 6766, SN LA010559 1994 1100 1100
1 Clip-on lamp 1994 29 15
MARIE'S OFFICE
- --------------
2 leather armchairs (plain) 1993 798 550
1 leather armchair (fancy) 1994 300 300
SET - 1 Desk 1993 1700 1500
1 computer table
both particle board with simulated wood veneer
1 AT&T MLS-12 phone 1993 200 200
1 C38 scotch tape dispenser 1993 12 6
1 Bostich 660 Stapler, serial # 82375710 1993 12 6
1 Casio adding machine model FR-1255Bk 1994 69 50
1 Linden Wall Clock 1993 15 7
1 Filex File Cabinet w/4 drawers 1994 700 700
1 Tenex 410 and 415 garbage pails 1993 24 12
SUB-TOTAL THIS PAGE 9,258 8,596
SUB-TOTAL FORWARD 95,290 89,438
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
DATE COST
ACQUIRED BASIS EST. FAIR MARKET VALUE
------------------- ------- ----------------------
<S> <C> <C> <C>
MARIE'S OFFICE CONT'D
- ---------------------
1 wood in/out stacking trays 1994 29 15
1 HP laserjet 4P printer * - 4 Meg Ram 1993 1299 1600
LEE'S OFFICE
- ------------
1 desk (litton business line) 1993 800 700
1 folding table 1994 150 100
1 halogen floor lamp 1994 79 60
1 halogen swing arm desk lamp 1994 59 40
1 black desk lamp 1994 59 40
3 expensive power strips 1994 117 117
1 AT&T MLS-12 phone 1993 200 200
1 calculator 1994 30 30
1 large tabel against the wall 1993 250 200
2 rolodex files 1993 30 20
1 swingline 646 stapler 1993 15 7
1 MAG monitor PVM1448 model serial TB9D63204 1995 2190 2190
1 Envision handheld scanner serial # M03114618 1995 499 499
and interface (paralell) serial # MR9303820
1 NEC Mutisync Monitor 21" 1995 2600 2600
model JC-2143UMA, serial # 4Y00469CB
Many misc. cables 1995 400 400
1 Teac 5 1/4" disk drive 1994 300 300
1 unnamed 250 MB tape backup drive 1994 400 400
SUB-TOTAL THIS PAGE 9,606 9,518
SUB-TOTAL FORWARD 104,896 98,956
</TABLE>
* Denotes upgrades or improvement
<PAGE>
<TABLE>
<CAPTION>
DATE COST
ACQUIRED BASIS EST. FAIR MARKET VALUE
-------- ------- ----------------------
<S> <C> <C> <C>
LEE'S OFFICE CONT'D
- -------------------
1 HP Scanjet Scanner model 9190A Serial # 2709J03930 1994 1,500 1,500
1 Microgeneration 486 computer * serial # 35228 1993 11,000 16,000
1 HP Laserjet 4 model C2007A * serial #JPBH040907 1994 1,399 1,599
1 Gateway Handbook model HB486SX-25 Serial #08U1M030 1994 25 25
1 NEC multi-spin cd rom model 3xp * serial # 3Z041534B 1994 799 799
1 data switch 4:1
1 Textronix Phaser III color printer * 1994 8,000 11,200
model 4698Pxi, seril # B102782 (on small table)
UPSTAIRS HALLWAY
- ----------------
1 Royal Copystar 2325 copier, serial 009739H 1993 11,000 9,000
w/rolling stand and cabinet
1 AT&T MLS-12 phone 1992 200 200
1 TI 5032 calculator serial c-0693 1994 69 50
1 Acosta 3 holr punch 1993 12 6
1 bostich 660 stapler 1993 12 6
1 Tenex 410 garbage pail 1993 12 6
1 metal desk and attached typewriter table 1994 399 350
1 speedoprint metal table with shelf 1994 100 80
SUB-TOTAL THIS PAGE 34,527 40,821
SUB TOTAL FORWARD 139,423 139,777
</TABLE>
* Denotes upgrade or improvement
<PAGE>
<TABLE>
<CAPTION>
DATE COST
ACQUIRED BASIS EST. FAIR MARKET VALUE
-------- ----- ----------------------
<S> <C> <C> <C>
UPSTAIRS HALLWAY CONT'D
- -----------------------
1 cork board 1993 39 25
1 Boston electric pencil sharpener model 18 serial #6533078 1993 69 50
BOB'S OFFICE
- ------------
1 bookcase in closet 1994 79 70
1 executive chair with fabric in closet 1994 600 500
1 AT&T MLS-12 phone 1993 200 200
SET
1 desk and credenza 1994 1200 1500
5 matching leather arm chairs 1994 750 1000
1 round wood table 1994 200 300
1 file cabinet w/2 drawers 1994 399 350
1 Tenex 410 garbage pail 1994 12 6
STEVE'S CONFERENCE ROOM
- -----------------------
1 Linden wall clock 1993 29 20
1 Tenex 410 garbage pail 1993 12 6
1 large oval conference table 1994 600 600
FIRST FLOOR HALLWAY
- -------------------
1 small plant table 1994 25 20
3 Tenex 410 garbage pails 1993 36 18
1 small wood table with glass top 1994 100 80
1 dish rack and drainer 1993 10 5
SUB-TOTAL THIS PAGE 4,360 4,750
SUB-TOTAL FORWARD 143,783 144,527
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
DATE COST
ACQUIRED BASIS EST. FAIR MARKET VALUE
-------- ------ ----------------------
<S> <C> <C> <C>
FIRST FLOOR HALLWAY CONT'D
- --------------------------
11 unsigned prints 1993 220 200
1 Toshiba CCD camera Model K537A 1994 450 400
BASEMENT
- --------
Telephone System 1993 26,000 26,000
1 AT&T Partner II Phone switcing system
4 AT&T 206 Partner modules, model 103E
Serial #'s 92237.0671
92237.0673
92237.0210
92237.1325
1 Partner II processor module
ALL ARUOND OFFICE
- -----------------
29 All steel #231 office chairs, tilt and swivel 1993/1994 5,075 7,500
SUB-TOTAL THIS PAGE 31,745 34,100
GRAND TOTAL 175,528 178,627
</TABLE>
<PAGE>
SAFE ALTERNATIVES OF AMERICA, INC.
(Developmental Stage Company)
Financial Statements and
Accountant's Compilation Report
December 31, 1994
<PAGE>
SAFE ALTERNATIVES OF AMERICA, INC.
(Development Stage Company)
FINANCIAL STATEMENTS
December 31, 1994
Accountant's Compilation Report................................1
Financial Statements
Balance Sheet..............................................2
Statement of Income and Deficit Accumulated
During the Development Stage..........................3
Statement of Cash Flows....................................4
Notes to Financial Statements..............................5
Schedule I-Analysis of Selling, General and
Administrative Expenses...............................8
Schedule II-Analysis of Research and Development...........9
<PAGE>
Accountant's Compilation Report
Board of Directors
Safe Alternatives of America, Inc.
We have compiled the accompanying balance sheet of Safe of December 31, 1994,
and the related statements of income and deficit accumulated during development
stage and cash flows for the year then ended and for the period from January 1,
1992 (inception) to December 31, 1994, and the accompanying supplementary
information contained in schedules I and II, which are presented only for
supplementary analysis purposes, in accordance with Statements on Standards for
Accounting and Review Services issued by the American Institute of Certified
Public Accountants.
A compilation is limited to presenting in the form of financial statements
information that is the representation of management. We have not audited or
reviewed the accompanying financial statements and, accordingly, do not express
an opinion or any other form of assurance on them.
We are not independent with respect to Safe Alternatives of America, Inc.
/Lyons & Lyons
Ridgefield, Connecticut
July 31, 1995
<PAGE>
SAFE ALTERNATIVES OF AMERICA, INC.
(Developmental Stage Company)
<TABLE>
<CAPTION>
BALANCE SHEET
<S> <C>
December 31, 1994
ASSETS
CURRENT ASSETS
Cash $ 21,622
Accounts Receivable 15,888
Inventories 14,128
Prepaid Expenses 1,244
----------
TOTAL CURRENT ASSETS 52,882
FIXED ASSETS
Equipment 74,387
Leasehold improvements 61,315
Furniture and fixtures 101,344
----------
237,046
Less accumulated depreciation 58,696
----------
178,350
OTHER ASSETS
Organization costs, less amortization of $28,384 32,439
License agreement, less amortization of $3,333 46,667
Deposits and advances 21,258
----------
100,364
----------
$ 331,596
============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 39,877
Shareholders' loans 112,500
Accrued State income tax 453
----------
TOTAL CURRENT LIABILITIES 152,830
SHAREHOLDERS' EQUITY
Common stock, $.00025 par value, 30,000,000
shares authorized, 26,204,500 shares issued
and outstanding 6,551
Additional paid-in capital 3,314,326
Deficit accumulated during developmental stage (3,142,111
----------
178,766
----------
$ 331,596
============
</TABLE>
See accompanying notes and accountant's compilation report.
2
<PAGE>
SAFE ALTERNATIVES OF AMERICA, INC.
(Developmental Stage Company)
STATEMENT OF INCOME AND DEFICIT
ACCUMULATED DURING THE DEVELOPMENT STAGE
<TABLE>
<CAPTION>
Period
For the year Jan. 1, 1992
ended (inception) to
Dec. 31, 1994 Dec. 31, 1994
-------------- ---------------
<S> <C> <C>
REVENUES
Sales $ 16,425 $ 16,425
Marketing rights 385,000
------------ ------------
16,425 401,425
COSTS AND EXPENSES
Cost of goods sold 9,170 9,170
Selling, general and
administrative 959,335 2,220,167
Research and development 617,191 1,230,035
Depreciation and amortization 47,459 90,414
------------ ------------
1,633,155 3,549,786
------------ ------------
OPERATING LOSS ( 1,616,730) ( 3,148,361)
OTHER INCOME (EXPENSE)
Interest 8,718
------------
LOSS BEFORE INCOME TAXES ( 1,616,730) ( 3,139,643)
INCOME TAX
State 250 2,468
------------ ------------
NET LOSS ( 1,616,980) $( 3,142,111)
=============
Deficit accumulated during the
development stage at beginning
of year ( 1,525,131)
------------
DEFICIT ACCUMULATED DURING THE
DEVELOPMENT STATE AT DEC. 31,1994 ( 3,142,111)
============
</TABLE>
See accompanying notes and accountant's compilation report.
3
<PAGE>
SAFE ALTERNATIVES OF AMERICA, INC.
(Developmental Stage Company)
<TABLE>
<CAPTION>
STATEMENT OF CASH FLOWS
Period
For the year Jan. 1, 1992
ended (inception) to
Dec. 31, 1994 Dec. 31, 1994
-------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $( 1,616,980) $( 3,142,111)
Add (deduct) adjustments to cash basis:
Depreciation and amortization 47,459 90,413
Increase in accounts receivable ( 15,888) ( 15,888)
Increase in inventories ( 14,128) ( 14,128)
Increase in prepaid expense ( 1,244)
Increase in other assets ( 71,258)
Increase in accounts payable 30,920 39,877
Decrease in income taxes payable ( 250) 453
------------ ------------
NET CASH USED BY
OPERATING ACTIVITIES ( 1,568,867) ( 3,113,886)
CASH FROM INVESTING ACTIVITIES
Additions to fixed assets ( 39,018) ( 237,046)
Additions to intangible assets ( 60,823)
------------ ------------
NET CASH USED BY
INVESTING ACTIVITIES ( 39,018) ( 297,869)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from shareholders' loans 112,500 112,500
Proceeds from issuance of stock 1,309,059 3,320,877
------------ ------------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 1,421,559 3,433,377
------------ ------------
NET DECREASE IN CASH ( 186,326) 21,622
Cash at beginning of year 207,948
------------
Cash at end of year $ 21,622 $ 21,622
============ ============
Supplemental disclosure of cash paid:
Taxes paid $ 703 $ 1,720
</TABLE>
See accompanying notes and accountant's compilation report.
4
<PAGE>
SAFE ALTERNATIVES OF AMERICA, INC.
(Developmental Stage Company)
NOTES TO FINANCIAL STATEMENTS
December 31, 1994
NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Operations: Safe Alternatives Corporation of America, Inc. (SAC) (a development
- -----------
stage company) is a Connecticut-based Delaware corporation that has developed
patented new products and high-technology solutions for problems related to
environmental contamination. SAC has secured exclusive manufacturing,
marketing, and distribution rights to nineteen patented, patent pending and
application-in-process technologies in the Chemical and Biosteralization fields.
Basis of Presentation and Financing Activities: In the course of development
- -----------------------------------------------
activates, SAC has incurred significant losses since inception and expects
additional losses in 1995. SAC plans to continue to finance its operations with
a combination of stock sales and, in the longer term, revenues from product
sales. SAC's ability to continue as a going concern, in the near term, is
dependent upon obtaining additional financing. The accompanying financial
statements have been prepared assuming SAC will continue as a going concern, and
do not include any adjustments that might result from the outcome of this
uncertainty.
Property, Plant and Equipment: Property, plant and equipment are carried at
- ------------------------------
cost. Depreciation is computed for financial purposes on a straight-line basis
over the estimated useful lives of the related assets.
Organization Costs: Organization costs are amortized over 60 months using the
- -------------------
straight-line method.
Inventories: Inventories are stated at the lower of cost (first-in, first out)
- ------------
or market value.
Research and Development Expenses: Research and development expenses are
- ----------------------------------
charged to operations as incurred.
Shareholders' Loans: Shareholders' loans are unsecured, not-interest bearing,
- --------------------
demand notes.
Income Taxes: At December 31, 1994 the Company had net operating loss
- -------------
carryforwards for financial reporting purposes and tax purposes of approximate
$3,120,000 which will expire in 2007--$380,000, 2008--$1,140,000, 2009--
$1,600,000. These carryforwards are available for the reduction of future
federal and state taxable income and income taxes, if any.
5
<PAGE>
SAFE ALTERNATIVES OF AMERICA, INC.
(Developmental Stage Company)
NOTES TO FINANCIAL STATEMENTS--continued
Licenses: Certain costs incurred to acquire exclusive lenses of patentable
- ---------
technology are capitalized and amortized over a five year period.
Marketing Rights Revenue: In January 1993, SAC entered into a joint
- -------------------------
marketing, operating and research and development agreement with Integrated
Labs, Inc. Integrated agreed to fund operating costs of SAC in development,
marketing and sales of its products based upon per-agreed operating budgets. In
return, SAC agreed to grant Integrated and exclusive right and license to
exploit the SAC technologies including the sale, marketing and distribution of
products. The initial funding, $55,000 per month, continue for a period of
seven months (total $385,000) at which time the agreement was mutually
terminated.
NOTE B--LEASES
SAC maintains its headquarters at offices that are leased under a noncancelable
operating lease expiring on September 30, 1995.
In addition, SAC is leasing a QC laboratory and testing facility under a
noncancelable operating lease expiring on February 28, 1998.
The following is a schedule of future minimum rental payments under the above
operating leases as of December 31, 1994:
<TABLE>
<CAPTION>
Year ending
December 31 Amount
----------- --------
<S> <C>
1995 105,201
1996 79,312
1997 82,484
1998 13,836
</TABLE>
NOTE C--STOCKHOLDERS' EQUITY
On April 8, 1993 the number of authorized shares of common stock was increased
from 7,500,000 to 30,000,000 shares and par value was changed from $.01 to
$.00025 per share.
During 1992 and 1993, 3,409,333 and 21,494,789 shares of common stock were
issued, respectively. In 1994, 1,300,378 shares of common stock were issued.
6
<PAGE>
SAFE ALTERNATIVES OF AMERICA, INC.
(Developmental Stage Company)
NOTES TO FINANCIAL STATEMENTS--continued
In addition, on December 31, 1993 Region II was merged into SAC. The
shareholders of Region II were issued one and one half shares of SAC common
stock in exchange for one share of Region II common stock.
NOTE D--OTHER
SAC many not be in compliance with certain provisions of the federal and certain
state securities laws with respect to issuance of its securities, from time to
time in the past, not conducted in accordance with applicable private offering
exemptions. There can be no assurances that the Commission of the applicable
state securities authorities would not take enforcement action against SAC with
respect to these provisions. Consequently, SAC may incur liabilities with
respect to such past activities which could have a material adverse effect on
SAC.
7
<PAGE>
(Developmental Stage Company)
<TABLE>
<CAPTION>
SCHEDULE I-ANALYSIS OF SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES
Period
For the year Jan. 1, 1992
ended (inception) to
Dec. 31, 1994 Dec. 31, 1994
------------------------------
<S> <C> <C>
Advertising $ 11,958 $ 15,142
Bank charges 186 618
Commissions 57,250
Consulting fees 144,342 215,848
Contributions 8,905 13,580
Dues and fees 6,342 15,772
Insurance 29,068 48,663
Meals and entertainment 11,413 31,472
Miscellaneous 2,596 3,303
Payroll taxes 31,135 76,702
Postage and shipping 17,330 27,594
Professional fees 115,592 241,678
Publications 9,249 21,810
Rent 37,209 81,397
Repairs and maintenance 6,149 27,077
Salaries 375,128 1,017,316
Supplies 62,846 130,164
Taxes-other 2,807 4,052
Telephone 33,318 84,667
Travel and entertainment 43,875 90,374
Utilities 9,887 15,688
-------- ----------
$959,335 $2,220,167
======== ==========
</TABLE>
See accompanying notes and accountant's compilation report.
8
<PAGE>
SAFE ALTERNATIVES OF AMERICA, INC.
(Developmental Stage Company)
SCHEDULE II-ANALYSIS OF RESEARCH AND DEVELOPMENT EXPENSES
<TABLE>
<CAPTION>
Period
For the year Jan. 1, 1992
ended (inception) to
Dec. 31, 1994 Dec. 31, 1994
------------- --------------
<S> <C> <C>
Consulting Fees $ 67,313 $ 384,366
Dues and fees 1,300 9,900
Insurance 1,913 3,738
Laboratory fees 50,120 82,841
Licenses and patents 22,351
Supplies 6,976 11,500
Professional fees 9,902 53,874
Rent 73,800 116,850
Repairs and maintenance 5,391 11,130
Royalties 247,400 247,400
Salaries 126,128 243,391
Payroll taxes 10,469 18,391
Telephone 8,628 10,639
Utilities $ 7,851 $ 13,664
-------- ----------
$617,191 $1,230,035
======== ==========
</TABLE>
See accompanying notes and accountant's compilation report.
9
<PAGE>
PORTSMOUTH CORPORATION
FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1994
10
<PAGE>
TABLE OF CONTENTS
-----------------
PAGE NO.
--------
Auditors' Report 1
Balance Sheet 2
Statement of Income
and Retained Earnings 3
Statement of Cash Flows 4
Notes to the Financial Statements 5-6
11
<PAGE>
To the Board of Directors and Stockholders
of Portsmouth Corporation
We have audited the accompanying balance sheet of Portsmouth Corporation (a
Florida corporation) as of September 30, 1994, and the related statements of
income and retained earnings and cash flows for the nine months then ended.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Portsmouth Corporation as of
September 30, 1994, and the results of its operations and its cash flows for the
nine months then ended in conformity with generally accepted accounting
principles.
Alan H. Leff, C.P.A.
November 10, 1994
12
<PAGE>
PORTSMOUTH CORPORATION
BALANCE SHEET
SEPTEMBER 30, 1994
<TABLE>
<CAPTION>
ASSETS
------
<S> <C> <C>
Current Assets
Deposits (Note 2) $115,000
Prepaid legal fees 5,000
--------
Total Current Assets $120,000
--------
Total Assets $120,000
========
<CAPTION>
LIABILITIES AND STOCKHOLDER'S EQUITY
------------------------------------
Liabilities $ ---
----------
Total Liabilities $ ---
Stockholders' Equity
Common stock, $.0001 par value;
200,000,000 shares authorized,
14,085,000 shares issued and
outstanding (Note 3) 1,409
Paid in capital in excess of par value 727,091
Retained earnings (deficit) ( 608,500 )
---------
Total Stockholders' Equity 120,000
-------
Total Liabilities and
Stockholders' Equity $120,000
========
</TABLE>
The accompanying notes are an integral part of these financial statements.
13
<PAGE>
PORTSMOUTH CORPORATION
STATEMENT OF INCOME AND RETAINED EARNINGS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1994
Sales $ ---
Expenses ---
----------
Net Income ---
Retained Earnings (Deficit)
Beginning of Year ( 608,500)
----------
End of Year ($ 608,500)
==========
The accompany notes are an integral part of these financial statements
14
<PAGE>
PORTSMOUTH CORPORATION
STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1994
Net Income $ ---
Cash Flows from Investing Activities
Deposit on purchase of common stock ( 115,000)
----------
Net Cash used by
Investing Activities ( 115,000)
----------
Cash Flows from Financing Activities
Proceeds from sale of common stock 120,000
Payments of prepaid legal fees ( 5,000)
----------
Net Cash Provided by
Financing Activities 115,000
-----------
Net Increase in Cash ---
Cash
Beginning of Year ---
-----------
End of Year $ ---
============
The accompanying notes are an integral part of these financial statements
15
<PAGE>
PORTSMOUTH CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
SEPTEMBER 30, 1994
1. ORGANIZATION
------------
The Company was originally formed in 1976 to engage in a commuter
aircraft operation. The ordinal company was known as Knight Airlines,
Inc..
In April, 1983, the company went out of business and all assets of the
company were used to payoff any outstanding indebtedness. From April, 1983
to May, 1994, the company remained dormant. On May 3, 1994, the Board of
Directors authorized that the name of the corporation be changed to
Portsmouth Corporation. The Company, as a result, was reorganized to
engage in the petroleum recycling, reclamation, and water separation
industries.
2. DEPOSITS
--------
The company has made a deposit to Sandton Associates, L.L.C. of
$115,000 for the purchase of Devon Oil and Energy Corporation. The closing
is expected to occur in the near future.
3. COMMON STOCK
------------
Prior to May, 1994, the company had total authorized common shares of
2,000,000 with issued and outstanding shares of 1,945,000. The par value
of the stock was $.005.
On May 3, 1994 the board of directors authorized the issuance of
common stock to be increased to 200,000,000 shares at a par value of
$.0001. It was further resolved that the outstanding shares of common
stock be split two for one, thereby, increasing the outstanding shares of
stock to 3,890,000.
On August 31, 1994, the board of directors authorized the issuance of
10,195,000 restricted common shares in exchange for $120,000. The
restricted shares cannot be sold prior to August 31, 1996.
16
<PAGE>
PORTSMOUTH CORPORATION
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1994
4. SUBSEQUENT EVENT
----------------
On October 5, 1994, the Company entered into an agreement to purchase
all 100 shares of the outstanding common stock of Devon Oil and Energy
Corporation from Sandton Associates, L.L.C., in exchange for $600,000 in
cash and 500,000 shares of Portsmouth Corporation's restricted stock.
As a condition of the purchase, the Portsmouth Corporation has agreed
to assume the cost of an environmental cleanup at Devon Oil and Energy
Corporation's plant facility. The Sandton Associates, L.L.C. has warranted
that the cost will not exceed $500,000.
17
<PAGE>
Schedule of approximately 285 shareholders of Safe Alternatives of America
Corporation, Inc., a Delaware corporation ("SAC Delaware") holding in the
aggregate 14,085,000 shares of the common stock of SAC Delaware.
21
<PAGE>
EXHIBIT 10.2
THIS LEASE, dated this 22nd day of FEBRUARY, 1993, by and between NICHOLAS
-----
R. DINAPOLI, JR., TRUSTEE FOR BROOKFIELD COMMERCE, a Connecticut Partnership
with a place of business in the Town of Ridgefield, County of Fairfield, and
State of Connecticut (hereinafter called "LESSOR") and SAFE ALTERNATIVES
CORPORATION OF AMERICA, INC., a Delaware corporation having its principle place
of business at 27 Governor Street, Ridgefield, Connecticut, acting herein by
Stephen Thompson, its President (hereinafter called "LESSEE"), collectively the
"PARTIES",
W I T N E S S E T H:
WHEREAS, the Lessor is the owner of certain Property known as Parcel 8,91
Commerce Drive in the Town of Brookfield, County of Fairfield and State of
Connecticut, and the Lessor is desirous of renting the Premises; and
WHEREAS, the Lessee is desirous of leasing the Premises upon the terms and
conditions hereinafter set forth;
NOW THEREFORE, in consideration for the mutual covenants herein contained and
other valuable considerations, the Parties agree as follows:
1. LEASED PREMISES:
In consideration of the rents and covenants herein reserved and contained on the
part of the Lessee to be paid, performed and observed, the Lessor does hereby
demise and lease unto the Lessee a building shown on the attached floor plan
consisting of approximately 12,000 sq. ft. marked as Schedule B ("Premises"),
which plans are part of a building located on Property in the said Town of
Brookfield and more particularly described on Schedule A attached hereto and
made a part hereof, 27 Governor Street, Ridgefield, Connecticut consisting of
the first and second floors, together with access and egress therefrom within
the parking lot located thereon ("Property").
The Lessee shall have exclusive possession and quiet enjoyment of the leased
Premises during the term of the Lease.
2. TERM:
The aforesaid Premises are leased for a term of FIVE (5) years commencing on the
1st day of March, 1993 ("Commencement Date") and terminating on the 28th day of
February, 1998 ("Term").
3. RENT:
The Lessee shall pay rent as follows:
<PAGE>
<TABLE>
<CAPTION>
YEARS YEARLY RENTAL MONTHLY RENTAL
<S> <C> <C>
1st $55,350.00 $3,075.00(3/1/93-8/31/93)
6,150.00(9/1/93-2/28/94)
2nd 73,800.00 6,150.00
3rd 76,752.00 6,396.00
4th $79,822.00 $6,652.00
5th 83,015.00 6,918.00
</TABLE>
which amounts will be paid as a matter of convenience in monthly installments,
in advance, on the 1st day of each and every month throughout the term without
set-off or deduction of any kind, provided the Lessor has complied with the
terms of this Lease. In the event the term of this Lease shall commence on any
day other than the first day of a month, the rent for the remaining portion of
such month shall be prorated on a daily basis, until the first day of the next
month. All payments to the Lessor shall be made by check or bank draft, payable
to the order of the Lessor, or the Lessor's designated payee, and shall be
mailed or delivered to such payee at its office at P.O. Box 2006, 27 Governor
Street, Ridgefield, Connecticut 06877, or at such other address as the Lessor
may direct by written notice.
4. ADDITIONAL RENT - FIRE INSURANCE PREMIUM:
Any increase in fire insurance of the Building as a result of Lessee's use or
occupancy resulting in an extraordinary risk or hazard that increases the
insurance costs on the entire building shall be borne by Lessee.
5. SECURITY DEPOSIT:
The Lessee shall deposit with the Lessor the sum of TWELVE THOUSAND THREE
HUNDRED ($12,300.00) DOLLARS as security for the faithful performance by the
Lessee of its obligations under this Lease. The deposit will be returned to the
Lessee within thirty (30) days after the expiration of the term of this Lease
provided that the Lessee has complied with all of its obligations under the
terms of this Lease or unless the Lessee renews this Lease for another term,
either expressly in writing or at the Lessor's election, in which case the
security deposit shall be retained until the expiration of such extended period.
In no event shall the security deposit be applied by the Lessee against the last
three (3) months' rent installment.
6. USE:
The Lessee shall maintain the Premises and the Premises shall be used and
occupied for office/research and development and shipping of chemicals and the
Lessee covenants and agrees that it shall not use the Premises for any use other
than as is set forth
<PAGE>
above.
7. SUBROGATION:
Notwithstanding any other provisions herein, Lessor and Lessee each releases the
other, and on behalf of its insurers, waives its right to recovery against the
other from loss or damage to the waiving party and its property to the extent
that the loss or damage was insured.
8. INDEMNITY:
Lessee agrees to indemnify, protect, defend and hold Lessor, its employees and
agents, harmless from and against all claims, actions, losses, damages, costs,
expenses, and liabilities (except those caused solely be negligence of Lessor)
arising out of actual or alleged injury to or death of any person or loss of or
damage to property in or upon the Premises including the person and property of
Lessor, its employees, agents, licensees or others.
9. LESSOR'S RIGHT OF ENTRY:
The Lessor, its agents and representatives, at all reasonable times during
business hours, by appointment, may enter the Premises for the purpose of (a)
inspection thereof; (b) making repairs or replacements or additions to the
Premises and (c) exhibiting the Premises to prospective tenants, purchasers or
other persons within the last ninety (90) day period of the term of this Lease.
Should the Lessee abandon the Premises or otherwise is in default of the terms
of the Lease, the Lessor may enter and remodel, repair or decorate or otherwise
prepare the Premises for reletting.
10. REPAIRS:
The Lessor at its sole cost and expense, shall repair and keep in good condition
the roof, exterior and supporting walls, parking area and walks, and shall
effectuate major maintenance and repairs on the heating system and air
conditioning system within the building, provided, however, that the cost of any
such repairs required as the result of the negligence or willful act of the
Lessee, its customers, licensees, agents, servants or employees, shall be borne
by the Lessee. The Lessee, at its sole cost and expense, shall promptly repair
and at all times maintain in good condition the interior of the Premises,
excepting those items above to be repaired and maintained by the Lessor.
All building code and fire code alterations or compliance as a result of
Lessee's occupancy shall be the responsibility of the Lessee.
11. INTERIOR ALTERATIONS:
<PAGE>
The Lessee may, at its expense, make such alterations and improvements to the
demised Premises and install interior partitions as it may require, provided
that the written approval of the Lessor be first obtained and that such
improvements and alterations are done in a workmanlike manner in keeping with
all building codes and regulations which in no way harm the structure of the
Premises, provided that at the expiration of this Lease or any extension
thereof, the Lessee, at its expense, restores the Premises to its original
condition and repairs of any damage to the Premises resulting from the
installation or removal of such partitions, fixtures, or equipment as may have
been installed by the Lessee if requested to do so by the Lessor.
The Lessee agrees to hold Lessor harmless from the payment of any claims, either
by way of damages or liens for labor or materials resulting from any
alterations. All of such changes, additions, or alterations shall be made
solely at the expense of the Lessee; and the Lessee agrees to protect, indemnify
and save harmless the Lessor on account of any injury to third persons or
property, by reason of any such changes, additions, or alterations.
12. FIRE CLAUSE:
If the Premises shall be made untenantable, in whole, or a substantial part, by
fire or other casualty, the Lessor, if it so elects, may (a) terminate the term
of this Lease effective as of the date of such fire or casualty, by written
notice given to the Lessee fifteen (15) days after such date, or (b) repair,
restore or rehabilitate the Premises at the lessor's expense, in which event the
term hereof shall not terminate, but any fixed rent herein reserved shall be
abated on a per diem basis in proportion to the area of the Premises rendered
untenantable by such fire or casualty. The Lessee shall give to the Lessor
prompt written notice of any fire, damage or casualty occurring in, about or to
the Premises. In the event the Lessor elects to rehabilitate the Premises, and
the Lessor has not substantially completed the rehabilitation within one hundred
eighty (180) days from the date of such fire or casualty, the Lessee shall have
the option, upon written notice to the Lessor, to cancel and terminate this
Lease, and all rent due hereunder shall be prorated up to and including the date
of receipt of the notice of termination to the Lessor.
13. INSURANCE (LIABILITY):
The Lessee agrees that it will indemnify and save harmless the Lessor from
any loss, liability or damage sustained by person or property on the Premises
walkways and parking lot and will procure and pay for, during the term of this
Lease, general commercial liability policies from standard liability or
indemnity companies acceptable to the Lessor, insuring the Lessor against all
loss or damage to persons or property arising out of the Lessees use or
occupancy of the Premises and appurtenant walkway and parking lot, which
policies or certificates thereof with the Lessor as an additional insured, shall
be placed in
<PAGE>
possession of the Lessor at the commencement of and throughout the term,
together with evidence of payment of premiums. Policies shall be payable in an
amount not less than $1,000,000.00 for each loss or damage sustained by any one
person,a nd not less than $2,000,000.00 for all losses or damages sustained in
connection with each act, accident, or occurrence and $100,000.00 for all losses
or damages to property.
The Lessee agrees to replace all broken glass damaged or destroyed in any manner
whatever.
14. SIGNS:
The Lessee shall not permit, allow or cause to be erected, installed,
maintained, painted or displayed on, in or at the Premises, any exterior signs,
lettering, placards, announcements, decoration or advertising media, visible
from the exterior of the Premises, WITHOUT THE PRIOR WRITTEN APPROVAL OF THE
LESSOR. The Lessee shall not permit any advertising media with excessively
bright lights, changing, flashing, flickering or moving lights, or lighting
devices, the effect of which shall be visible or audible from the exterior of
the Premises. In all respects, the Lessee shall comply with any and all
applicable rules and regulations concerning the erection and maintenance of
signs within the Town of Brookfield and shall pay all costs concerned with the
obtaining of any such necessary permits.
15. ACCEPTANCE OF PREMISES:
The Lessee shall examine the Premises before taking possession, and the Lessee's
entry into possession shall constitute conclusive evidence that as of the date
thereof the Premises were in good order and satisfactory condition. Any Lessee
exceptions will be noted in writing to the Lessor upon taking possession.
16. MAINTENANCE OF PREMISES AND ABUTTING AREAS:
The Lessee shall not permit, allow or cause any act or deed to be performed or
any practice to be adopted or followed in or about the Premises which shall
cause or be likely to cause injury or damage to any person or to the Premises or
to the sidewalks and pavements adjoining the Premises. The Lessee at all times
shall maintain and keep the Premises and its appurtenances including walkways in
a neat and orderly condition and clean and free from rubbish, dirt, snow, ice
and other miscellaneous items.
The Lessor shall pay for the cost of outside maintenance, including lawn,
landscaping, parking area cleanup, snow removal of walks and parking areas. The
Lessee will procure and pay for maintenance contracts on the heating and air
conditioning equipment during the term of this lease. Current maintenance
contract is $350.00 per annum.
17. NUISANCES:
<PAGE>
The Lessee shall not permit, allow, or cause any noxious, disturbing or
offensive odors, fumes, gas, toxic waste, dangerous chemicals, environmental
pollution, dangerous products or processes, noise or any smoke, dust, steam or
vapors, or allow sound or vibration to originate in or to be emitted from the
Premises. The parties hereby acknowledge that there shall be storing and
shipping of chemicals.
18. HOUSEKEEPING:
The Lessee shall not use or permit the use of any portion of the Premises as
living quarters or keep or harbor therein any live animals, fish or birds, or
use the same for any illegal purpose. The Lessee shall not permit or allow the
sinks, toilets or urinals in the Premises to be used for any purpose except that
for which they were designed and installed, and the expense of repairing any
breakage or damage or removal of any stoppage resulting from a contrary use
thereof shall be paid by the Lessee. The Lessee shall maintain the windows in a
clean, neat and orderly condition, and the glass thereof clean, and shall store
all trash and rubbish within the Premises and shall provide for the prompt and
regular removal of same from the Premises. The Lessee shall not burn or
otherwise dispose of any trash, waste, rubbish or garbage in or about the
Premises. The Lessee agrees not to use any form of heating except as provided
by the Lessor. The Lessee agrees to permit no waste of the property, but on the
contrary, to surrender possession of same, make all repairs necessary to
preserve the Premises in good order, which repairs shall be in quality and
class, equally to the original work; and promptly pay the expense of such
repairs without notice, in as good condition as at the commencement of the term
or as they may be put in during the term, as reasonable use thereof will permit.
19. UTILITIES:
The Lessee shall procure for its own account and shall pay the cost of all
electric, telephone, power, and other utilities consumed at the Premises.
The Lessor shall pay the cost of heat and trash removal.
20. LESSOR'S AND LESSEE'S COVENANT:
The Lessor and Lessee covenant and warrant that each have full and exclusive
right and authority to execute and perform this Lease and to grant the estate
leased herein and the lessee covenants upon performance of its obligations
hereunder, shall peaceably and quietly hold and enjoy the Premises through the
term or any holdover.
21. EMINENT DOMAIN:
<PAGE>
The parties agree that if the Premises be substantially taken or condemned by
public authority, this Lease shall cease and the rent shall be paid up to the
time of actual taking. The Lessee shall not be entitled to any part of any
award, except for its fixtures and moving expenses and the rent differential
between market rents and rent reserved herein.
22. CONDUCT OF LESSEE:
The Lessee, at all times, shall fully and promptly comply with all laws,
ordinances, orders and regulations of any lawful authority having jurisdiction
of the Premises, including but not limited to, such as shall relate to the
cleanliness, safety, fire codes, environmental, occupation and use of the
Premises and the nature, character and manner and operation of the business
conducted in or at the Premises. If within the Lessee's control, the Lessee
shall comply with all regulations and recommendations of the Board of Fire
Underwriters.
23. ASSIGNMENT AND SUBLETTING:
The Lessee shall not assign, or in any manner, transfer this Lease or any
estate, interest or benefit therein, or sublet the Premises, or any part or
parts thereof, or permit the use of the same, or any part thereof, by anyone
other than the Lessee, its subsidiaries or parent corporations, without the
prior written consent of the Lessor, which consent shall not be unreasonably
withheld. A transfer of the controlling interest of the stock of a corporate
Lessee shall be considered an assignment of this Lease. After receipt of a
written request to assign or sublet, the Lessor shall respond within fifteen
(15) days of receipt. Consent by the Lessor to any assignment or transfer of
any interest under this Lease or subletting of the Premises, or any part
thereof, shall be limited to the instance stated, and such written consent shall
not constitute consent to any other assignment, transfer of interest or
subletting, nor shall such consent relieve the Lessee of any of its obligations
hereunder. Any excess rent or monetary benefit received by the Lessee directly
or indirectly over the rent reserved herein shall be paid to the Lessor.
24. LESSEE'S DEFAULT:
In addition to the terms provided in this Lease, the occurrence of any of the
following shall constitute a default in the terms of this Lease:
A. The failure to pay rent by the 10th of the month.
B. The failure to substantially comply with the terms of this Lease after
thirty (30) days written notice of the provision in default and a failure to
cure, excepting rent payments.
C. The filing of a petition in bankruptcy or the appointment of a receiver or
an assignment for the benefit of creditors.
<PAGE>
25. LESSOR'S REMEDY:
Upon the happening of any event of default, the Lessor may elect to either:
A. Terminate this Lease by giving fifteen (15) days notice of such election,
or,
B. Re-enter the Premises and Lessor shall re-lease the Premises and apply the
rental proceeds owed by the Lessee. The Lessee shall remain liable to the
Lessor for any deficiency in rent including reasonable attorney's fees incurred
to enforce this Lease and disbursements, cost of cleanup, if any, and cost to
re-lease, including but not limited to advertising costs and real estate
commission and the Lessee fix up costs.
26. HOLDING OVER:
In the event the Lessee shall remain in the Premises after the expiration of the
term of this Lease without executing a new lease with the Lessor, such holding
over shall not constitute a renewal or extension of this Lease and the Lessee
shall pay to the Lessor, as liquidated damages, double the monthly rent due in
the last month of the term of the Lease for the period the Lessee remains in
unauthorized possession, and no holding over by the Lessee shall operate to
renew this lease, nor to create any tenancy whatsoever.
27. NOTICE:
Any and all notices called for or required by any provision of this Lease,
unless specifically described therein, shall be delivered to the respective
parties by certified mail, return receipt requested, at the following addresses:
A. To the Lessor:
Joseph H. & Ellen Ann Donnelly Trust
27 Governor Street
Ridgefield, Connecticut 06877
To the Lessor:
Brookfield Commerce
c/o Nicholas R. DiNapoli, Jr.
90 Grove Street, Suite 102
Ridgefield, Connecticut 06877
copy to:
Donnelly, McNamara & Gustafson, P.C.
150 Danbury Road, P.O. Box 2006
Ridgefield, Connecticut 06877
B. To the Lessee:
Safe Alternatives Corporation of America, Inc.
27 Governor Street
Ridgefield, Connecticut 06877
<PAGE>
Such addresses may be changed by either party by notifying the other party in
the manner required for notice.
28. WAIVER:
The failure of the Lessor or the Lessee to insist upon strict performance of any
of the covenants or conditions of this lease, or to exercise any option herein
conferred in any one or more instances, shall not be construed as a waiver or
relinquishment of any such covenants, conditions or options, but the same shall
be and remain in full force and effect.
29. NOTICE OF LEASE:
A Notice of lease, in recordable form, conforming to the requirements of the
General Statutes of the State of Connecticut concerning "Notice of Lease", shall
be executed by the parties. Either party at his expense, may record the same.
This Lease shall not be recorded by either party.
30. CONSENTS:
All consents and approvals required hereunder shall not be unreasonably
withheld.
31. BROKERAGE
The Lessee represents that RYER ASSOCIATES (Edwin Allan) AND GOODFELLOW ASHMORE
(Abe Carvalio) is the sole broker who negotiated this Lease of Premises and the
Lessor agrees to pay a commission, as agreed, which brokerage commission shall
be due and payable in accordance with said agreement, only upon the actual
execution of this Lease. This Lease is executed by the Lessor in reliance upon
the representation by the Lessee that no broker or agent other than recited
herein brought the Premises to the Lessee's attention or was in any way the
procuring cause of this Lease.
32. SUBORDINATION:
This Lease and any appurtenant rights shall be subject and subordinate at all
times to the lien of the mortgages now on the Premises, if any, and to all
advances made or hereafter to be made upon the security thereof, and subject and
subordinate to the lien of any future mortgage (s) or easement which at any time
may be an encumbrance upon the Premises, provided these mortgages or easements
do not render the use of the Premises untenable. The Lessee will execute and
deliver such further instruments subordinating this Lease to the lien of any
such mortgages) or easement as shall be desired by any mortgagee or grantee of
any easement. The Lessee hereby appoints the Lessor the attorney-in-fact of the
Lessee, irrevocable, to execute and deliver any such instruments on the Lessee's
behalf.
<PAGE>
33. SEVERABILITY:
It is agreed that any provisions of this Lease deemed void by a court of
competent jurisdiction shall not affect any other provisions of this Lease. The
Laws of the State of Connecticut shall govern the terms of this Lease.
34. LITIGATION:
In the event the Lessor, without fault on its part, becomes involved, through or
on account of the terms of this Lease, or through or on account of the occupancy
of the Premises by the Lessee, or the conduct of the Lessee's business upon the
Premises, in any controversy or litigation with a third party, the Lessee shall
upon notice from the Lessor or its agents, immediately take all necessary steps,
and do whatever may be necessary to remove the Lessor's connection with, or
liability under such controversy or litigation, and particularly if such
controversy or litigation throws any cloud or encumbrance upon the title of the
Lessor to its Real Estate; provided, that if the Lessee believes it has a good
and valid defense, or claim, in such controversy or litigation [which the Lessee
desires to set up and maintain by and throughout court procedure and
litigation,] the Lessee shall have the right to do so, provided it first
executes and delivers to the Lessor an indemnifying bond with surety that will
discharge any and all final judgments, liens, costs, damages, expenses and
obligations of the Lessor whatsoever, in, or arising out of the controversy or
litigation involving the Lessor or its agents, including all costs, expenses and
attorney's fees incurred by the Lessor or its agents in protecting their
interest or defending themselves in such controversy or litigation.
37. PARKING:
It is agreed that the Lessee shall have adequate parking on the Property
described in Schedule A as shown on the approved site plan.
38. ENTIRE AGREEMENT:
It is agreed that the Lessor has not made any statement, promise or agreement,
or taken upon itself any engagement whatsoever, verbally or in writing in
conflict with the terms of this Lease, or that in any way modifies, varies,
alters, enlarges or invalidates any of its provisions, and that no obligations
of the Lessor shall be implied in addition to the obligations herein expressed.
39. BINDING EFFECT:
This Lease, together with any and all addendum or amendments thereto, shall
inure to the benefit of the respective parties hereto, their successors, heirs,
personal representatives or assigns, (provided that any assignment by the Lessee
shall be
<PAGE>
effective only if made in strict accordance with the terms of this Lease).
<PAGE>
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands and seals
this day of February, 1993.
Signed, sealed and delivered (LESSOR)
in the presence of: BROOKFIELD COMMERCE
s/ By s/Nicholas R. DiNapoli, Jr.
- ------------------------- ------------------------------------
Nicholas R. DiNapoli, Jr., Trustee.
s/ Partner
- -------------------------
(LESSEE)
SAFE ALTERNATIVES CORPORATION OF
AMERICA, INC.
s/ By s/Stephen Thompson
- ------------------------- -----------------------------------
Stephen Thompson
s/ its President
- -------------------------
STATE OF CONNECTICUT
ss. Ridgefield April 30, 1993
COUNTY OF FAIRFIELD
Personally appeared Nicholas R. DiNapoli, Jr., Trustee, Partner of BROOKFIELD
COMMERCE, a Connecticut Partnership, signer and sealer of the foregoing
instrument and acknowledged the same to be his free act and deed and the free
act and deed of said Partnership, before me.
s/ Linda A. Pawlak
--------------------------------------
Linda A. Pawlak
Notary Public
My Commission Expires: Feb. 28, 1998
STATE OF CONNECTICUT
ss. Ridgefield February 22, 1993
COUNTY OF FAIRFIELD
Personally appeared Stephen Thompson, duly authorized President of SAFE
ALTERNATIVES OF AMERICA, INC., a corporation, signer and sealer of the foregoing
instrument and acknowledged the same to be his free act and deed and the free
act and deed of said corporation, before me.
s/ Sharlet S. Wirzulis
--------------------------------------
Sharlet S. Wirzulis
Notary Public
My Commission Expires: Feb. 28, 1997
<PAGE>
SCHEDULE A
ALL THAT CERTAIN PIECE OR PARCEL OF LAND, TOGETHER WITH THE BUILDINGS AND
- -------------------------------------------------------------------------
IMPROVEMENTS THEREON, SITUATED IN THE TOWN OF BROOKFIELD, COUNTY OF FAIRFIELD,
- ------------------------------------------------------------------------------
STATE OF CONNECTICUT, SHOWN AND DESIGNATED AS LOT 8 ON THAT CERTAIN MAP ENTITLED
- --------------------------------------------------------------------------------
"'COSSUTO INDUSTRIAL PARK' SUBDIVISION MAP PREPARED FOR LEONARD & JOSEPH
- ------------------------------------------------------------------------
COSSUTO, BROOKFIELD, CONNECTICUT IL 80 ZONE", SURVEY DATE MAY 10, 1972, REVISED
- -------------------------------------------------------------------------------
SEPTEMBER 13, 1972, REVISED OCTOBER 27, 1972, CERTIFIED "SUBSTANTIALLY CORRECT"
- -------------------------------------------------------------------------------
HENRICIS' DAVID L. RYAN, L.S. #8175, WHICH MAP IS ON FILE IN THE OFFICE OF THE
- ------------------------------------------------------------------------------
TOWN CLERK OF BROOKFIELD IN MAP BOOK 9, PAGE 3 & 4; AND
- -------------------------------------------------------
ALL THAT CERTAIN PIECE OR PARCEL OF LAND, SITUATED IN THE TOWN OF BROOKFIELD,
- -----------------------------------------------------------------------------
COUNTY OF FAIRFIELD, AND STATE OF CONNECTICUT SHOWN AND DESIGNATED AS LOT 8A ON
- -------------------------------------------------------------------------------
THAT CERTAIN MAP ENTITLED "TOWN OF BROOKFIELD, FAIRFIELD COUNTY, CONNECTICUT -
- ------------------------------------------------------------------------------
FINAL SUBDIVISION MAP ... 'COSSUTO INDUSTRIAL PARK' IL-80 ZONE TOTAL AREA-8.579
- --------------------------------------------------------------------------------
- - ACRES...LEONARD & JOSEPH COSSUTO, ROUTE 133, BROOKFIELD, CONNECTICUT ...MAP
- -----------------------------------------------------------------------------
PREPARED BY THE OFFICE OF DAVID L. RYAN, 5 ALMAR DRIVE, BETHEL, CONNECTICUT ...
- -------------------------------------------------------------------------------
CERTIFIED SUBSTANTIALLY CORRECT CLASS A-2 SURVEY DATE MAY 19, 1976 BY DAVID L.
- ------------------------------------------------------------------------------
RYAN, L.S. #8175", WHICH MAP IS ON FILE IN THE OFFICE OF THE TOWN CLERK OF
- --------------------------------------------------------------------------
BROOKFIELD IN MAP BOOK 10, PAGE 90.
- -----------------------------------
<PAGE>
SCHEDULE B
----------
(Attach Map to Schedule B)
<PAGE>
EXHIBIT 10.3
THIS LEASE, dated this 30th day of SEPTEMBER, 1992, by and between JOSEPH
-----
H. & ELLEN ANN DONNELLY TRUST, acting herein by the Trustees (hereinafter called
"LESSOR") and SAFE ALTERNATIVES CORPORATION OF AMERICA, INC., a Delaware
corporation having an office in the Town of Ridgefield, County of Fairfield,
State of Connecticut, acting herein by Stephen Thompson, its President
(hereinafter called "LESSEE"), collectively the "PARTIES",
W I T N E S S E T H:
WHEREAS, the Lessor is the owner of certain Premises known as 27 Governor Street
in the Town of Ridgefield, County of Fairfield and State of Connecticut, and the
Lessor is desirous of renting the Premises; and
WHEREAS, the Lessee is desirous of leasing a portion of the Premises upon the
terms and conditions hereinafter set forth;
NOW THEREFORE, in consideration for the mutual covenants herein contained and
other valuable considerations, the Parties agree as follows:
1. LEASED PREMISES:
In consideration of the rents and covenants herein reserved and contained on the
part of the Lessee to be paid, performed and observed, the Lessor does hereby
demise and lease unto the Lessee a portion of the building at 27 Governor
Street, Ridgefield, Connecticut consisting of the first and second floors,
together with access and egress therefrom within the parking lot located thereon
("Premises").
The Lessee shall have exclusive possession and quiet enjoyment of the leased
Premises during the term of the Lease.
2. TERM:
The aforesaid Premises are leased for a term of THREE (3) years commencing on
the 1st day of October, 1992 ("Commencement Date") and terminating on the 30th
day of September, 1997 ("Term").
<TABLE>
<CAPTION>
<S> <C>
3. RENT:
</TABLE>
The Lessee shall pay rent as follows:
<TABLE>
<CAPTION>
YEARS YEARLY RENTAL MONTHLY RENTAL
<S> <C> <C>
1st $35,000.00 $2,916.67
2nd 36,750.00 3,062.50
3rd 38,587.50 3,215.63
</TABLE>
which amounts will be paid as a matter of convenience in monthly
<PAGE>
installments, in advance, on the 1st day of each and every month throughout the
term without set-off or deduction of any kind, provided the Lessor has complied
with the terms of this Lease. In the event the term of this Lease shall
commence on any day other than the first day of a month, the rent for the
remaining portion of such month shall be prorated on a daily basis, until the
first day of the next month. All payments to the Lessor shall be made by check
or bank draft, payable to the order of the Lessor, or the Lessor's designated
payee, and shall be mailed or delivered to such payee at its office at 27
Governor Street, Ridgefield, Connecticut 06877, or at such other address as the
Lessor may direct by written notice.
The Lessee has agreed to deposit with Lessor one (1) years rent.
4. ADDITIONAL RENT - TAXES:
Lessee agrees to pay as additional rent, a sum equal to EIGHTY-FIVE (85%)
PERCENT of any increase in taxes over the base year on the property of which the
demised Premises is a part. The base year is the Grand List of October 1, 1991.
Any sum due as aforesaid shall be the additional rent for the tax year
commencing July 1st payable in four equal quarterly installments (excepting
insofar as the first tax year may be less than a twelve month period) commencing
the following July 1st, but in any event, not more than thirty (30) days after
notice of such tax increase has been delivered to the Lessee by the Lessor, in
writing, pursuant to the provisions for notice hereinafter described, and which
notice shall contain a computation arrived at hereunder and utilized in arriving
at such tax rental.
It is understood and agreed, however, that if, at any time during the term of
this Lease, the methods of taxation prevailing at the commencement of the term
hereof shall be altered so as to cause the whole or any part of the taxes,
assessments levied, impositions or charges now or hereafter levied, assessed or
imposed on real estate and the improvements thereon, or to be levied, assessed
and imposed wholly or partially as a capital levy, or otherwise, on the rents
received therefrom, or if any tax, assessment, levy (including but not limited
to any municipal, state or federal levy), imposition, or charge, or any part
thereof, shall be measured by or based in whole or in part upon the value of the
leased Premises and shall be imposed upon the Lessor, then all such taxes,
assessments, levies, impositions or charges, or the part thereof so measured or
based shall be prorated in the manner specified above in the most equitable
manner possible, as if such new or substituted levee or tax shall be part of any
such tax in existence at the commencement of the term of this Lease, and the
Lessee shall pay and discharge such portion thereof as set forth above.
5. SECURITY DEPOSIT:
<PAGE>
The Lessee shall deposit with the Lessor the sum of FIVE THOUSAND EIGHT HUNDRED
THIRTY-THREE & 34/100 ($5,833.34) DOLLARS as security for the faithful
performance by the Lessee of its obligations under this Lease. The deposit will
be returned to the Lessee within thirty (30) days after the expiration of the
term of this Lease provided that the Lessee has compiled with all of its
obligations under the terms of this Lease or unless the Lessee renews this Lease
for another term, either expressly in writing or at the Lessor's election, in
which case the security deposit shall be retained until the expiration of such
extended period. In no event shall the security deposit be applied by the
Lessee against the last two (2) months' rent installment.
6. USE:
The Lessee shall maintain the Premises and the Premises shall be used and
occupied for office and the Lessee covenants and agrees that it shall not use
the Premises for any use other than as is set forth above.
7. SUBROGATION:
Notwithstanding any other provisions herein, Lessor and Lessee each releases the
other, and on behalf of its insurers, waives its right to recovery against the
other form loss or damage to the waiving party and its property to the extent
that the loss or damage was insured.
8. INDEMNITY:
Lessee agrees to indemnify, protect, defend and hold Lessor, its employees and
agents, harmless from and against all claims, actions, losses, damages, costs,
expenses, and liabilities (except those caused solely be negligence of Lessor)
arising out of actual or alleged injury to or death of any person or loss of or
damage to property in or upon the Premises including the person and property of
Lessor, its employees, agents, licensees or others.
9. LESSOR'S RIGHT OF ENTRY:
The Lessor, its agents and representatives, at all reasonable times during
business hours, by appointment, may enter the Premises for the purpose of (a)
inspection thereof; (b) making repairs or replacements or additions to the
Premises and (c) exhibiting the Premises to prospective tenants, purchasers or
other persons within the last ninety (90) day period of the term of this Lease.
Should the Lessee abandon the Premises or otherwise is in default of the terms
of the Lease, the Lessor may enter and remodel, repair or decorate or otherwise
prepare the Premises for reletting.
10. REPAIRS:
<PAGE>
The Lessor at its sole cost and expense, shall repair and keep in good condition
the roof, exterior and supporting walls, parking area and walks, and shall
effectuate major maintenance and repairs on the heating system and air
conditioning system within the building, provided, however, that the cost of any
such repairs required as the result of the negligence or willful act of the
Lessee, its customers, licensees, agents, servants or employees, shall be borne
by the Lessee. The Lessee, at its sole cost and expense, shall promptly repair
and at all times maintain in good condition the interior of the Premises,
excepting those items above to be repaired and maintained by the Lessor.
All building code and fire code alterations or compliance as a result of
Lessee's occupancy shall be the responsibility of the Lessee.
11. INTERIOR ALTERATIONS:
The Lessee may, at its expense, make such alterations and improvements to the
demised Premises and install interior partitions as it may require, provided
that the written approval of the Lessor be first obtained and that such
improvements and alterations are done in a workmanlike manner in keeping with
all building codes and regulations which in no way harm the structure of the
Premises, provided that at the expiration of this Lease or any extension
thereof, the Lessee, at its expense, restores the Premises to its original
condition and repairs of any damage to the Premises resulting from the
installation or removal of such partitions, fixtures, or equipment as may have
been installed by the Lessee if requested to do so by the Lessor.
The Lessee agrees to hold Lessor harmless from the payment of any claims, either
by way of damages or liens for labor or material resulting from any alterations.
All of such changes, additions, or alterations shall be made solely at the
expense of the Lessee; and the Lessee agrees to protect, indemnify and save
harmless the Lessor on account of any injury to third persons or property, by
reason of any such changes, additions, or alterations.
12. FIRE CLAUSE:
If the Premises shall be made untenantable, in whole, or a substantial part, by
fire or other casualty, the Lessor, if it so elects, may (a) terminate the term
of this Lease effective as of the date of such fire or casualty, by written
notice given to the Lessee fifteen (15) days after such date, or (b) repair,
restore or rehabilitate the Premises at the Lessor's expense, in which event the
term hereof shall not terminate, but any fixed rent herein reserved shall be
abated on a per diem basis in proportion to the area of the Premises rendered
untenantable by such fire or casualty. The Lessee shall give to the Lessor
prompt written notice of any fire, damage or casualty occurring in, about or to
the Premises. In the event the Lessor elects to rehabilitate the Premises, and
the Lessor has not substantially completed the
<PAGE>
rehabilitation within one hundred eighty (180) days from the date of such fire
or casualty, the Lessee shall have the option, upon written notice to the
Lessor, to cancel and terminate this Lease, and all rent due hereunder shall be
prorated up to and including the date of receipt of the notice of termination to
the Lessor.
13. INSURANCE (LIABILITY):
The Lessee agrees that it will indemnify and save harmless the Lessor from
any loss, liability or damage sustained by person or property on the Premises
walkways and parking lot and will procure and pay for, during the term of this
Lease, general commercial liability policies from standard liability or
indemnity companies acceptable to the Lessor, insuring the Lessor against all
loss or damage to persons or property arising out of the Lessee's use or
occupancy of the Premises and appurtenant walkway and parking lot, which
policies or certificates thereof with the Lessor as an additional insured, shall
be placed in possession of the Lessor at the commencement of and throughout the
term, together with evidence of payment of premiums. Policies shall be payable
in an amount not less than $1,000,000.00 for each loss or damage sustained by
any one person, and not less than $2,000,000.00 for all losses or damages
sustained in connection with each act, accident, or occurrence and $100,000.00
for all losses or damages to property.
The Lessee agrees to replace all broken glass damaged or destroyed in any manner
whatever.
14. SIGNS:
The Lessee shall not permit, allow or cause to be erected, installed,
maintained, painted or displayed on, in or at the Premises, any exterior signs,
lettering, placards, announcements, decoration or advertising media, visible
from the exterior of the Premises, WITHOUT THE PRIOR WRITTEN APPROVAL OF THE
LESSOR. The Lessee shall not permit any advertising media with excessively
bright lights, changing, flashing, flickering or moving lights, or lighting
devices, the effect of which shall be visible or audible from the exterior of
the Premises. In all respects, the Lessee shall comply with any and all
applicable rules and regulations concerning the erection and maintenance of
signs within the Town of Ridgefield and shall pay all costs concerned with the
obtaining of any such necessary permits.
15. ACCEPTANCE OF PREMISES:
The Lessee shall examine the Premises before taking possession, and the Lessee's
entry into possession shall constitute conclusive evidence that as of the date
thereof the Premises were in good order and satisfactory condition. Any Lessee
exceptions will be noted in writing to the Lessor upon taking possession.
16. MAINTENANCE OF PREMISES AND ABUTTING AREAS:
<PAGE>
The Lessee shall not permit, allow or cause any act or deed to be performed or
any practice to be adopted or followed in or about the Premises which shall
cause or be likely to cause injury or damage to any person or to the Premises or
to the sidewalks and pavements adjoining the Premises. The Lessee at all times
shall maintain and keep the Premises and its appurtenances including the lawn
mowing, parking area, shrubbery, and walkways in a neat and orderly condition
and clean and free from rubbish, dirt, snow, ice and other miscellaneous items.
The Lessor shall pay for the cost of outside maintenance, including lawn,
landscaping, parking area cleanup, snow removal of walks and parking areas.
17. NUISANCES:
The Lessee shall not permit, allow, or cause any noxious, disturbing or
offensive odors, fumes, gas, toxic waste, dangerous chemicals, environmental
pollution, dangerous products or processes, noise or any smoke, dust, steam or
vapors, or allow sound or vibration to originate in or to be emitted from the
Premises.
18. HOUSEKEEPING:
The Lessee shall not use or permit the use of any portion of the Premises as
living quarters or keep or harbor therein any live animals, fish or birds, or
use the same for any illegal purpose. The Lessee shall not permit or allow the
sinks, toilets or urinals in the Premises to be used for any purpose except that
for which they were designed and installed, and the expense of repairing any
breakage or damage or removal of any stoppage resulting from a contrary use
thereof shall be paid by the Lessee. The Lessee shall maintain the windows in a
clean, neat and orderly condition, and the glass thereof clean, and shall store
all trash and rubbish within the Premises and shall provide for the prompt and
regular removal of same from the Premises. The Lessee shall not burn or
otherwise dispose of any trash, waste, rubbish or garbage in or about the
Premises. The Lessee agrees not to use any form of heating except as provided
by the Lessor. The Lessee agrees to permit no waste of the property, but on the
contrary, to surrender possession of same, make all repairs necessary to
preserve the Premises in good order, which repairs shall be in quality and
class, equally to the original work; and promptly pay the expense of such
repairs without notice, in as good condition as at the commencement of the term
or as they may be put in during the term, as reasonable use thereof will permit.
19. UTILITIES:
The Lessee shall procure for its own account and shall pay the cost of all
electric, telephone, power, and other utilities consumed at the Premises.
<PAGE>
The Lessor shall pay the cost of heat and trash removal.
20. LESSOR'S AND LESSEE'S COVENANT:
The Lessor and Lessee covenant and warrant that each have full and exclusive
right and authority to execute and perform this Lease and to grant the estate
leased herein and the Lessee covenants upon performance of its obligations
hereunder, shall peaceably and quietly hold and enjoy the Premises through the
term or any holdover.
21. EMINENT DOMAIN:
The parties agree that if the Premises be substantially taken or condemned by
public authority, this Lease shall cease and the rent shall be paid up to the
time of actual taking. The Lessee shall not be entitled to any part of any
award, except for its fixtures and moving expenses and the rent differential
between market rents and rent reserved herein.
22. CONDUCT OF LESSEE:
The Lessee, at all times, shall fully and promptly comply with all laws,
ordinances, orders and regulations of any lawful authority having jurisdiction
of the Premises, including, but not limited to, such as shall relate to the
cleanliness, safety, fire codes, environmental, occupation and use of the
Premises and the nature, character and manner and operation of the business
conducted in or at the Premises. If within the Lessee's control, the Lessee
shall comply with all regulations and recommendations of the Board of Fire
Underwriters.
23. ASSIGNMENT AND SUBLETTING:
The Lessee shall not assign, or in any manner, transfer this Lease of any
estate, interest or benefit therein, or sublet the Premises, or any part or
parts thereof, or permit the use of the same, or any part thereof, by anyone
other than the Lessee, its subsidiaries or parent corporations, without the
prior written consent of the Lessor, which consent shall not be unreasonably
withheld. A transfer of the controlling interest of the stock of a corporate
Lessee shall be considered an assignment of this Lease. After receipt of a
written request to assign of sublet, the Lessor shall respond within fifteen
(15) days of receipt. Consent by the Lessor to any assignment or transfer of
interest under this Lease or subletting of the Premises, or any part thereof,
shall be limited to the instance stated, and such written consent shall not
constitute consent to any other assignment, transfer of interest or subletting,
nor shall such consent relieve the Lessee of any of its obligations hereunder.
Any excess rent or monetary benefit received by the Lessee directly or
indirectly over the rent reserved herein shall be paid to the Lessor.
<PAGE>
24. LESSEE'S DEFAULT:
In addition to the terms provided in this Lease, the occurrence of any of the
following shall constitute a default in the terms of this Lease:
A. The failure to pay rent by the 10th of the month.
B. The failure to substantially comply with the terms of this Lease after
thirty (30) days written notice of the provision in default and a failure to
cure, excepting rent payments.
C. The filing of a petition in bankruptcy or the appointment of a receiver or
an assignment for the benefit of creditors.
25. LESSOR'S REMEDY:
Upon the happening of any event of default, the Lessor may elect to either:
A. Terminate this Lease by giving fifteen (15) days notice of such election,
or,
B. Re-enter the Premises and Lessor shall re-lease the Premises and apply the
rental proceeds owed by the Lessee. The Lessee shall remain liable to the
Lessor for any deficiency in rent including reasonable attorney's fees incurred
to enforce this Lease and disbursements, cost of cleanup, if any, and cost to
re-lease, including but not limited to advertising costs and real estate
commission and the Lessee fix up costs.
26. HOLDING OVER:
In the event the Lessee shall remain in the Premises after the expiration of the
term of this Lease without executing a new lease with the Lessor, such holding
over shall not constitute a renewal or extension of this Lease and the Lessee
shall pay to the Lessor, as liquidated damages, double the monthly rent due in
the last month of the term of the Lease for the period the Lessee remains in
unauthorized possession, and no holding over by the Lessee shall operate to
renew this Lease, nor to create any tenancy whatsoever.
27. NOTICE:
Any and all notices called for or required by any provision of this Lease,
unless specifically described therein, shall be delivered to the respective
parties by certified mail, return receipt requested, at the following addresses:
A. To the Lessor:
Joseph H. & Ellen Ann Donnelly Trust
27 Governor Street
Ridgefield, Connecticut 06877
copy to:
Donnelly, McNamara & Gustafson, P.C.
<PAGE>
150 Danbury Road, P.O. Box 2006
Ridgefield, Connecticut 06877
B. To the Lessee:
Safe Alternatives Corporation of America, Inc.
27 Governor Street
Ridgefield, Connecticut 06877
Such addresses may be changed by either party by notifying the other party in
the manner required for notice.
28. WAIVER:
The failure of the Lessor or the Lessee to insist upon strict performance of any
of the covenants or conditions of this Lease, or to exercise any option herein
conferred in any one or more instances, shall not be construed as a waiver or
relinquishment of any such covenants, conditions or options, but the same shall
be and remain in full force and effect.
29. NOTICE OF LEASE:
A Notice of Lease, in recordable form, conforming to the requirements of the
General Statutes of the State of Connecticut concerning "Notice of Lease", shall
be executed by the parties. Either party at his expense, may record the same.
This Lease shall not be recorded by either party.
30. CONSENTS:
All consents and approvals required hereunder shall not be unreasonably
withheld.
31. BROKERAGE
The Lessee represents that DICK WINNES is the sole broker who negotiated this
Lease of Premises and the Lessor agrees to pay a commission, as agreed, which
brokerage commission shall be due and payable in accordance with said agreement,
only upon the actual execution of this Lease. This Lease is executed by the
Lessor in reliance upon the representation by the Lessee that no broker or agent
other than recited herein brought the Premises to the Lessee's attention or was
in any way the procuring cause of this Lease.
32. SUBORDINATION:
This Lease and any appurtenant rights shall be subject and subordinate at all
times to the lien of the mortgages now on the Premises, if any, and to all
advances made or hereafter to be made upon the security thereof, and subject and
subordinate to the lien of any future mortgage (s) or easement which at any time
may be an encumbrance upon the Premises, provided these mortgages or easements
do not render the use of the Premises untenantble.
<PAGE>
The Lessee will execute and deliver such further instruments subordinating this
Lease to the lien of any such mortgage(s) or easement as shall be desired by any
mortgagee or grantee of an easement. The Lessee hereby appoints the Lessor the
attorney-in-fact of the Lessee, irrevocable, to execute and deliver any such
instruments on the Lessee's behalf.
33. SEVERABILITY:
It is agreed that any provisions of this Lease deemed void by a court of
competent jurisdiction shall not affect any other provisions of this Lease. The
Laws of the State of Connecticut shall govern the terms of this Lease.
34. LITIGATION:
In the event the Lessor, without fault on its part, becomes involved, through or
on account of the terms of this Lease, or through or on account of the occupancy
of the Premises by the Lessee, or the conduct of the Lessee's business upon the
Premises, in any controversy or litigation with a third party, the Lessee shall
upon notice from the Lessor or its agents, immediately take all necessary steps,
and do whatever may be necessary to remove the Lessor's connection with, or
liability under such controversy or litigation, and particularly if such
controversy or litigation throws any cloud or encumbrance upon the title of the
Lessor to its real estate; provided, that if the Lessee believes it has a good
and valid defense, or claim, in such controversy or litigation which the Lessee
desires to set up and maintain by and throughout court procedure and litigation,
the Lessee shall have the right to do so, provided it first executes and
delivers to the Lessor an indemnifying bond with surety that will discharge any
and all final judgments, liens, costs, damages, expenses and obligations of the
Lessor whatsoever, in, or arising out of the controversy or litigation involving
the Lessor or its agents, including all costs, expenses and attorney's fees
incurred by the Lessor or its agents in protecting their interest or defending
themselves in such controversy or litigation.
35. PARKING:
It is agreed that the Lessee shall have adequate parking on the Premises.
36. ENTIRE AGREEMENT:
It is agreed that the Lessor has not made any statement, promise or agreement,
or taken upon itself any engagement whatsoever, verbally or in writing in
conflict with the terms of this Lease, or that in any way modifies, varies,
alters, enlarges or invalidates any of its provisions, and that no obligations
of the Lessor shall be implied in addition to the obligations herein expressed.
<PAGE>
37. BINDING EFFECT:
This Lease, together with any and all addendum or amendments thereto, shall
inure to the benefit of the respective parties hereto, their successors, heirs,
personal representatives or assigns, (provided that any assignment by the Lessee
shall be effective only if made in strict accordance with the terms of this
Lease).
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands and seals
this day of September, 1992.
Signed, sealed and delivered (LESSOR)
in the presence of: JOSEPH H. & ELLEN ANN DONNELLY TRUST
s/Linda A. Pawlak By s/Joseph Gavin Donnelly
- ------------------------- -------------------------------
Joseph Gavin Donnelly, Trustee
s/Candace E. Schull
- -------------------------
s/Linda A. Pawlak By s/Joellen P. Murphy
- ------------------------- -------------------------------
Joellen P. Murphy, Trustee
s/Candace E. Schull
- -------------------------
s/ By s/
- ------------------------- ---
<PAGE>
EXHIBIT 10.4
SUPPLY AGREEMENT
AGREEMENT, made this 5th day of January, 1996, between SAMAX
SELLER ENTERPRISES, INC., a New York Corporation trading as Pyrock,
having an office at 62 Woolsey Street, Irvington, New Jersey 07111
(hereinafter called "Seller"),
BUYER and SAFE ALTERNATIVES CORPORATION OF AMERICA, INC.,
with a place of business at 27 Governor Street, Ridgefield,
Connecticut 06877 (hereinafter called "Buyer"):
1. Seller agrees to sell to Buyer in any minimum quantities but
will not ship product to Seller's Customers in less than
quantities of 150 gallons per shipment, and Buyer agrees to
purchase from Seller, upon the terms and conditions hereinafter
stated, the following material or materials:
. 566 Gel . Bio-Degradable Paint Brush Cleaner
. 576 Paste . Graffiti Remover
In addition to the above, Seller agrees to make available to Buyer
all products currently being manufactured by Seller and any
products that are manufactured by Seller in the future.
DURATION 2. Delivery shall commence on January 6, 1996 and shall
continue until terminated pursuant to Paragraph 10 hereof.
QUALITY 3. Seller shall maintain quality standards in accordance with
its current standards.
TIME OF 4. Seller shall be ready to ship to Buyer within two weeks of
DELIVERY order of the aforesaid product under normal conditions.
<PAGE>
PRICE 5. The price of the product shall be FOB Seller's plant as
follows:
The current price for 566 Gel is $16.90 per gallon in five gallon
containers.
The current price for 576 Paste is $18.50 per gallon in five
gallon containers.
These prices are subject to adjustment as provided in Paragraph 7
of this agreement.
The price of products shall include raw product, container,
liability insurance coverage, palletizing of product and service
of shipping contractors. Labels shall be supplied by the Buyer in
compliance with all specifications necessary under the law.
Buyer and seller will agree to an acceptable price for the
additional products currently being manufactured by Seller, as
well as any new products Seller manufactures in the future.
BUYER'S 6. Buyer shall maintain its own product liability insurance
INSURANCE with a per claim maximum of at least $1,000,000.00.
PRICE 7. Seller may adjust any price hereunder in the event the cost
of the raw materials necessary to produce the product increases by
the amount of the increase of the raw materials. In the event the
price is increased in accordance herewith and Buyer no longer
wishes to purchase, the Buyer may terminate this agreement in
accordance with Paragraph 11 thereof.
In the event the cost of raw materials for the products discussed
herein decreases, Seller agrees to decrease the price of said
products to Buyer on a dollar for dollar basis accordingly. The
same will hold true for any other products that Buyer agrees to
purchase.
PAYMENT 8. Payment shall be on demand without discount unless otherwise
mutually agreed.
<PAGE>
EXCLUSI- 9. It is agreed between the parties that as long as this
VITY agreement is in effect, Seller will not private label any
products being marketed and purchased by Buyer for any other
entity. Additionally, Seller agrees that during the period of
exclusivity of this agreement, Seller shall not sell to direct
competitors of Buyer (e.g., Peel Away and Tom's Back to Nature).
This provision shall not apply to Seller's sales to distributors
and paint stores. It is specifically understood that if the Seller
sells its product to a distributor and that distributor
subsequently sells to a competitor of the Buyer, it shall not be
considered a breach of this agreement by the Seller. It is agreed
that Seller and Buyer shall meet and agreed to a minimum quantity
of product which will be purchased by Buyer on or before April 15,
1996. This paragraph shall remain in effect for as long as the
aforesaid minimums are met by the Buyer. In the event Buyer and
Seller cannot agree upon minimums, this agreement shall continue,
but this paragraph shall be of no further effect whatsoever. This
paragraph shall not become effective until aforesaid minimum has
been established and met by the Buyer.
FIRST 10. Both parties agree that in addition to the current product
REFUSAL line of the Seller, Buyer shall have the right of first refusal
to private label any future products that Seller shall add to his
line in accordance with the terms thereof with the price for said
products to be agreed upon at said time. Buyer must advise Seller
in writing of its intention to avoid itself of its right of first
refusal within five weeks of receipt of written notice from Seller
of its intention to produce said new line. It is agreed between
the parties that should Buyer add any synergistic products to its
line, i.e., products which require blending such as degreasers and
the like, Seller shall be notified of Buyer's intention to sell
said product. Seller shall be given a 90 day right of first
refusal to manufacture said product at equal quantities in writing
by another manufacturer to Buyer for the same quantities. The
quality of the blending of the product shall be the same or better
than quoted by any other potential manufacturer.
<PAGE>
TERMI- 11. Buyer and Seller agree that this agreement may only be
NATION terminated for the following situations:
a. by mutual written agreement;
b. As to Buyer: Should this product fail to perform as specified
in Seller's literature, should the price be increased in
accordance with Paragraph 5 hereof such that Buyer no longer
wishes to purchase the product; or failure of Seller to otherwise
comply with the terms of this agreement;
c. As to Seller: Failure of Buyer to meet the financial
obligations set forth herein or failure to otherwise comply with
the terms of this agreement.
In the event of a default, the aggrieved party shall provide
written notice of said default, calling for a 30 day period in
which to cure said default.
The parties agree that during the period of exclusivity of the
agreement, should the Buyer terminate this agreement without
cause, the Buyer shall be barred from using the name "Ameri
Strip".
INTER- 12. Seller hereby grants Buyer the rights to market and sell
NATIONAL internationally without limitation any and all products currently
being manufactured by Seller or any products in the future that
are manufactured by Seller.
NON- 13. In the event Seller breaches this agreement, then Seller
COMPETE agrees that it shall not do any business with any customer of
Buyer for three (3) years from the date of the last sale to said
customer by Buyer. The term "customer" is defined as any entity to
whom Buyer has sold product or sent samples to in a period of two
(2) years from the date of said Breach. Buyer shall notify Seller
of all said customers and provide proof of said sales. This
paragraph shall not take effect until Paragraph 9 hereof becomes
effective.
<PAGE>
FORCE 14. Neither party shall be liable for its failure to perform
MAJEURE hereunder if said performance is made impracticable due to any
occurrence beyond its reasonable control, including acts of God,
fires, floods, wars, sabotage, accidents, labor disputes or
shortages, governmental laws, ordinances, rules and regulations,
whether valid or invalid (including, but not limited to,
priorities, requisitions, allocations, and price adjustments
restrictions), inability to obtain material, equipment or
transportation, and any other similar or different occurrences.
The party whose performance is made impracticable by any such
occurrences shall have the right to omit during the period of such
occurrence all or any portion of the quantity deliverable during
such period, whereupon the total quantity delivered upon this
Agreement shall be reduced by the quantity so omitted. If, due to
any such occurrence, Seller is unable to supply the total demands
for any material specified in this Agreement, Seller shall have
the right to allocate its available supply among its customers and
its department and divisions in a fair and equitable manner. In no
event shall Seller be obligated to purchase material from others
in order to enable it to deliver material to Buyer hereunder.
MISCEL- 15. The validity, interpretation and performance of this
LANEOUS Agreement with respect to any material delivered or to be
delivered hereunder shall be governed by the laws of the State of
New York. This Agreement contains all of the representations and
agreements between the parties hereto. Seller warrants that
material delivered hereunder meets Seller's specification for the
material or such other specifications as have been expressly made
a part of this Agreement and that such material is adequately
obtained, packaged and labeled and conforms to the promises and
affirmations of fact made on the container and label. This
Agreement shall be binding upon and inure to the benefit of the
respective successors and assigns of each of the parties hereto,
but any assignment thereof by either party without the prior
written consent of the other party shall be void. No modification
of this Agreement or waiver of the terms or conditions thereof
shall be binding upon Seller unless approved in writing by an
authorized representative, or shall be effected by the
acknowledgement or acceptance of purchase order forms containing
other different terms or conditions whether or not signed by an
authorized representative of Seller.
<PAGE>
IN WITNESS HEREOF, the parties have hereunto set their hands and seals as of the
date and year first above written.
SAMAX ENTERPRISES, INC.,
A/K/A PYROCK CHEMICAL
BY: __________________________
SAMUEL FLEISCHMAN
SAFE ALTERNATIVES CORPORATION
OF AMERICA, INC.
BY:__________________________
KENNETH C. GREENBERG
CHIEF OPERATING OFFICER
<PAGE>
EXHIBIT 10.5
LICENSE AGREEMENT
This License Agreement, entered into as of this 9th day of December, 1992, by
and between RICHARD B. KENNEDY, of Ridgefield, Connecticut (hereinafter
referred to as "Kennedy") and SAFE ALTERNATIVES CORPORATION OF AMERICA, INC., a
Delaware Corporation having a principal place of business in Ridgefield,
Connecticut (hereinafter referred to as "SAC");
WITNESSETH
----------
WHEREAS, Kennedy owns the entire right, title and interest in and to
certain inventions and technology and know-how relating to fire retarded
urethane coating which provides a vapor barrier (hereinafter referred to as
"Kennedy Technology and Know-How") and;
WHEREAS, Kennedy has or shall apply for certain United States Letters
Patent (hereinafter referred to as "Kennedy Patent Rights") and;
WHEREAS, SAC is engaged in the commercialization of new technologies
dealing with the treatment of sludge, land-fill and waste materials, and
hazardous waste (especially medical waste) and has developed and owns
considerable expertise, technology and know-how in this field; and;
WHEREAS, SAC is desirous of acquiring from Kennedy an exclusive license to
practice said patents and trade secrets within the Continental United States of
America under Kennedy Patent Rights and related Kennedy Technology and Know-How,
and Kennedy is willing to grant SAC such an exclusive license;
NOW, THEREFORE, in consideration of the mutual covenants and premises set
<PAGE>
forth herein and subject to the terms and conditions hereinafter recited, it is
hereby agreed as follows;
I. DEFINITIONS
--------------
1.01 The fire retarded urethane coating which provides a vapor barrier
means any product produced pursuant to Kennedy Technology and Know-How sale of
which would otherwise entitle Kennedy to relief under 35 U.S.C. section 271).
1.02 "Kennedy Patent Rights" means any issued or to be issued patents and
pending patent applications relating to the fire retarded urethane coating which
provides a vapor barrier owned or controlled by Kennedy.
1.03 "Kennedy Technology and Know-How" means the technical information
and/or technology, either oral or written, relating to methods, products and
apparatus described or claimed in Patent Rights or other information patentable
or unpatentable made known during the term of this agreement by Kennedy to SAC,
SAC's agents or SAC's authorized representatives.
1.04 "Licensed Territory" means the Continental United States of America
in which Kennedy Patent Rights exist and/or in which Kennedy Technology and
Know-How has application.
1.05 "Kennedy Improvement" means any new invention, improvement or
addition to Kennedy Patent Rights or Kennedy Technology and Know-How made,
acquired or owned by Kennedy or any member thereof, during the term of this
Agreement.
1.06 "Joint Improvement" means any new invention, improvement or
development relating to this technology made jointly by Kennedy and SAC during
the term of this Agreement.
<PAGE>
II. WARRANTIES
--------------
2.01 Kennedy warrants that it is the owner of all Kennedy Patent Rights
and Kennedy Technology and Know-How and has the full rights and authority to
make this Agreement and to grant the exclusive rights provided for herein.
2.02 Kennedy warrants that it is not aware of any prior patents or
publications, prior public uses or sales, or other material facts which
adversely affect the validity of the Kennedy Patent Rights.
2.03 Kennedy warrants that it is not aware of an patent or other
proprietary rights of any party which would be infringed upon by SAC's
performance under any provision hereof.
2.04 Kennedy warrants that the exclusive rights granted to SAC herein will
not conflict with any prior agreement, understanding or obligation of Kennedy or
otherwise relating to the Kennedy Patent Rights and/or Kennedy Technology and
Know-How.
III. EXCLUSIVE LICENSE
----------------------
3.01 Kennedy hereby grants to SAC an exclusive license under the Kennedy
Patent Rights to practice said patent and trade secrets within the Continental
United States of America, Kennedy Technology and Know-How and Joint Patent
Rights to manufacture, use and sell and to sublicense.
3.02 The initial term of this exclusive license shall be the full term of
the Kennedy Patent Rights and Joint Patent Rights.
3.03 SAC shall pay to Kennedy a continuing royalty of four (4%) per cent
of the gross sales by SAC of the product licensed hereunder. Only one royalty
shall be paid on any particular sale hereunder, e.g. inter-company transfers or
sales by SAC to a subsidiary or by a
<PAGE>
subsidiary to SAC or another subsidiary for subsequent resale shall be deemed to
be one sale. The "one" royalty payment, at all times, shall be based upon the
highest gross dollar amount generated from the sale of the product which shall
include all resales and/or transfers in determining the gross amount. If
resales and/or transfers are delayed, for any reason, royalty payments will
still be made on the highest gross dollar amount generated from the sale of the
product. Royalty payments will then be adjusted accordingly at the time of each
additional resale and/or transfer.
3.04 Continuing royalty payments hereunder shall be made quarterly within
thirty (30) days after the end of each calendar quarter. SAC shall pay Kennedy
four (4%) percent of all payment made by any sublicensee in accordance with this
paragraph.
3.05 SAC agrees to maintain complete records in accordance with generally
accepted accounting principals which accurately reflect the activities of SAC
under this Agreement as are pertinent to an accurate calculation of continuing
royalties. Kennedy shall have the right, at its own expense, to have the
records maintained by SAC hereunder inspected by a firm of nationally recognized
certified public accounts for the purpose of verifying the amounts of continuing
royalties due and payable hereunder, but such rights of inspection shall be
limited to no more than two inspections per calendar year, and all information
provided or obtained by such certified public accountant, except the total
amount of continuing royalties accruing in each calendar quarter, shall be held
by them in strict confidence including as to Kennedy.
IV. PATENTS
-----------
4.01 Kennedy represents to SAC that it has already filed or shall file for
United States Letters Patent covering this technology. Kennedy and SAC agree
that it is important to
<PAGE>
this Agreement that the Kennedy Patent Rights be maintained.
4.02 For and in consideration of the right and license, SAC agrees to pay
all maintenance fees, all fees for filing and prosecuting pending patent
applications, etc., for those Kennedy Patent Rights and Kennedy Improvements
including any Joint Patents which Kennedy and SAC agree are important to this
agreement. Kennedy and SAC agree to cooperate fully with each other in such
filing and maintenance.
4.03 Kennedy and SAC shall cooperate in the licensing of any Joint Patent
Rights to others and shall share equally any royalties or other licensing income
equally between them. Kennedy and SAC agree to provide the other with quarterly
reports of any licensing income from Joint Patent Rights and to accompany such
reports with payment of their share of such licensing income. Such reports and
payments shall be made within forty-five (45) days of the end of each calendar
quarter.
4.04 Kennedy Patent Rights and Improvements shall remain the sole property
of Kennedy and SAC's only right therein are those granted by Kennedy herein.
4.05 Joint Improvements and Joint Patent right shall remain equally the
property of Kennedy and SAC.
4.06 Similarly, Kennedy and SAC shall cooperate in the enforcement of any
Kennedy Patent Right or any Joint Patent Right. In the event of such
infringement of any patent Rights, SAC shall have the right but shall not be
obligated to bring suit against the infringer. All costs of the litigation
shall be the responsibility of SAC. Any recoveries from such litigation, or
any settlement thereof, shall go to SAC, with the provision that should the
recoveries exceed the outlays for such litigation, then SAC will pay to Kennedy
four (4%) percent of such excess. SAC will keep Kennedy fully and promptly
informed of the progress
<PAGE>
of such litigation. SAC shall have the power at its option to enter into any
settlement of such litigation; provided, however, that any such settlement must
uphold the existence of all the Patent Rights and this Agreement. If SAC
refuses or fails to enforce any patent Rights within a reasonable time after
notice, Kennedy may do so in his own name, at this sole expense and for his sole
benefit.
V. TERMINATION
--------------
5.01 In the event that Kennedy is in default of any substantial
obligation, or any warranty or material representation is breached or is untrue,
then commencing ninety (90) days after written notice to that effect SAC,
without limiting any rights or remedies SAC may have under this Agreement or at
law or in equity, all royalties accruing under this agreement shall be paid
into escrow for the time that Kennedy is in default. In the event Kennedy cures
such default, the royalties paid into escrow shall be paid to Kennedy and
royalties accruing after the date on which the default was cured shall be paid
to Kennedy immediately. Quarterly royalty payments will continue as provided
for herein. Kennedy shall pay to SAC any and all costs and damages caused by
such breach.
5.02 In the event SAC fails to make a payment for any reason after such
payment is due, or if it is in default of any other substantial obligation under
this Agreement, then Kennedy may terminate this Agreement to be effective after
ninety (90) days from a written notice to that effect given by Kennedy to SAC
specifying the default; provided, however, that if SAC makes such payment or
cures such default within the notice period, this Agreement shall remain in full
force and effect as it would have had such notice not been given and provided
further that SAC shall pay to Kennedy any and all costs and damages caused by
<PAGE>
such breach.
5.03 In the event of termination of this Agreement pursuant to paragraphs
5.01 or 5.02, SAC shall: (a) have the right to fill all outstanding orders upon
payment of the royalty due thereon, provided such sale is completed within six
(6) months after the date of termination; (b) return to Kennedy all confidential
information furnished to SAC by Kennedy and all Kennedy Patent Rights and all
Kennedy Technology and Know-How (c) Kennedy is to be paid any royalties which
have been paid into escrow, including any interest or other income earned
thereby.
5.04 In the event of any termination of this Agreement, Kennedy and SAC
shall be joint owners of any Join Patent Rights will all rights and privileges
attendant thereto. Any other existing licenses under such Joint Patent Rights
shall survive any termination hereof and the provisions of this Agreement
relating to the division of royalties from such other licenses shall likewise
survive termination hereof.
5.05 Notwithstanding anything to the contrary, in the event this License
does not generate $20,000.00 per annum within two (2) years of the date of this
License, it shall become automatically a non-exclusive License. If, however,
said License generates the sum of $20,000.00 in any one of the two (2) years,
the License shall continue as an exclusive License.
VI. DISPUTE RESOLUTION
----------------------
Any dispute arising between Kennedy and SAC with respect to any provision
of this Agreement or any matter relating to the Agreement shall be resolved if
at all possible by good faith negotiation between the parties hereto. If such
negotiation fails to resolve such dispute,
<PAGE>
Kennedy and SAC agree to submit the dispute to binding arbitration conducted in
Danbury, Connecticut, pursuant to the rules of the American Arbitration
Association.
VII. NO CONTINUING WAIVER
-------------------------
Any waiver of any breach of this Agreement must be by notice in accordance
with Article X and any waiver of any breach shall not be deemed a waiver of any
breach of a continuing nature or any other breach of either the same of
different character.
VIII. FORCE MAJEURE
--------------------
The performance by the parties of their respective obligations under this
Agreement shall be suspended for such period of time as they are prevented from
performing such obligations by reason of acts of God, fire, flood, explosion,
insurrection, riot, enemy attack, malicious mischief, order of court or other
governmental authority, inability to secure or delay in securing rights of way,
privileges, franchises, permits equipment, and other events reasonably beyond
the control of the party subject thereto.
IX. ASSIGNMENT
--------------
This Agreement shall be assignable by the SAC without the prior written
consent of the other party. This Agreement shall be binding upon and apply,
extend to, and inure to the benefit of the successors, heirs and assigns of the
respective parties hereunder.
X. NOTICES
----------
All notices required or permitted to be given pursuant to this Agreement
shall be in writing and shall be deemed adequately given if delivered in person
or sent by registered or certified mail, return receipt requested, to the
following address:
SAFE ALTERNATIVES CORPORATION
c/o Richard J. Fricke, Esq.
<PAGE>
27 Governor Street
Ridgefield, CT 06877
RICHARD B. KENNEDY
519 Branchville Road
Ridgefield, CT 06877
or such other address as may be designated by a party, by a notice in
compliance with this Article X.
X1. GOVERNING LAW
-----------------
This Agreement shall be governed by and construed in accordance with the
laws of the State of Connecticut.
X11. COMPLETE AGREEMENT
-----------------------
This Agreement represents the complete agreement of the parties with
respect to the subject matter hereof, and all prior agreements and negotiations
are merged herein. This Agreement may be amended or changed only by a written
document purporting to do so and signed by the parties.
XIV. SEVERABILITY
-----------------
If it shall at any time appear that any right or obligation provided in
this Agreement is contrary to any law, treaty or regulation of a government to
which any party is subject, such right or obligation shall be deemed annulled,
or shall be modified to the extent required to comply with such law, treaty or
regulation.
XV. MARKING
-----------
SAC agrees to permanently and legibly mark or cause to be marked in the
manner prescribed by title 35, Section 287, of the United States Code, or
appropriate foreign requirements all Kennedy Technology marketed by SAC or its
sublicensees, with the number or numbers of the patents of the Kennedy Patent
Rights insofar as it is reasonably practical.
<PAGE>
XVI. CONFIDENTIALITY
--------------------
Except to the extent permitted under and necessary to enjoy the full
benefits of this Agreement, it is agreed that without the prior written approval
of the other party, neither party will during the term of this Agreement
disclose or permit to be disclosed to others or used for, its own benefit, any
know-how and unpublished information relating to the business, engineering,
research activities or trade secrets of the other acquired by the party during
the term of this Agreement, provided that such know-how and unpublished
information has been designated and marked as "CONFIDENTIAL" by the party to
whom the know-how and information belongs prior to its acquisition by the
receiving party; and provided further that the know-how or unpublished
information has not fallen into the public domain through no fault of the
receiving party and has not been received by the receiving party from another
source.
XVIII. DUPLICATE ORIGINALS
--------------------------
This Agreement is being executed in duplicate original form, each of
which shall serve and function as an original agreement for all purposes.
XIX. RESERVATION OF KENNEDY RIGHTS
----------------------------------
Kennedy represents, and based thereon SAC acknowledges, that Richard
B. Kennedy has expertise in numerous other areas. It is agreed by SAC that any
discoveries or inventions of Richard B. Kennedy which are not related to the
Kennedy Patent Rights, Technology and Know-How and which do not come within the
purview of the definitions contained in Article 1 hereof shall remain the sole
property of Richard B. Kennedy.
<PAGE>
THIS SPACE IS SPECIFICALLY LEFT EMPTY
-------------------------------------
<PAGE>
XX. ROYALTY PAYMENTS
--------------------
Notwithstanding anything in this License Agreement to the contrary,
the royalty payments called for herein shall, at all times, be based upon the
Fair Market Value of the sale of the product. If there is a dispute about the
Fair Market Value of the product, said dispute shall be resolved in accordance
with the License Agreement.
IN WITNESS WHEREOF, Kennedy has executed this Agreement under his
hand and seal and SAC has caused this Agreement to be executed by its duly
authorized representative as of the date and year first above written.
Signed, Sealed and Delivered
in the presence of:
_________________________________ ___________________________________
Richard B. Kennedy
_________________________________ SAFE ALTERNATIVES CORPORATION
OF AMERICA, INC.
_________________________________
_________________________________ ___________________________________
Stephen J. Thompson, Its President
<PAGE>
STATE OF CONNECTICUT )
) SS. Ridgefield
COUNTY OF FAIRFIELD )
Personally appeared RICHARD B. KENNEDY, Signer and Sealer of the foregoing
Instrument, and acknowledged the same to be his free act and deed, before me.
__________________________
STATE OF CONNECTICUT )
) SS. Ridgefield
COUNTY OF FAIRFIELD )
Personally appeared STEPHEN J. THOMPSON, President of SAFE ALTERNATIVES
CORPORATION OF AMERICA, INC., and acknowledged the same to be his free act and
deed, and the free act and deed of said corporation, before me.
__________________________
<PAGE>
EXHIBIT 10.6
LICENSE AGREEMENT
This Lincense Agreement, entered into as of this 9th day of December, 1992, by
and between RICHARD B. KENNEDY, of Ridgefield, Connecticut, PATRICK J. CREHAN of
Ridgefield, Connecticut (hereinafter referred to as "Kennedy") and SAFE
ALTERNATIVES CORPORATION OF AMERICA, INC., a Delaware Corporation having a
principal place of business in Ridgefield, Connecticut (hereinafter referred to
as "SAC");
W I T N E S S E T H
-------------------
WHEREAS, Kennedy owns the entire right, title and interest in and to
certain inventions and technology as set forth in the following United States
Patents:
U.S. Patent # Dated
4,520,139 5/28/85
4,530,777 7/23/85
4,515,638 5/7/85
4,521,544 6/4/85
RC 31-757
reissue of 4,291,129 12/4/84
4,417,998 11/29/83
4,400,475 8/23/83
4,291,129 9/22/81
patent application
07,490,136 3/13/90
Said technology is, however, exclusive of the right to use said technology
as packaging foam, which right is currently licensed to Sealed Air Corporation.
WHEREAS, the interests of Richard B. Kennedy, Patrick J. Crehan and Richard
J. Fricke in and to said technology are set forth in an Agreement dated February
26, 1992; and
WHEREAS, Kennedy has or shall apply for certain United States Letters
Patent
<PAGE>
(hereinafter referred to as "Kennedy Patent Rights") and;
WHEREAS, SAC is engaged in the commercialization of new technologies and;
WHEREAS, SAC is desirous of acquiring from Kennedy an exclusive license to
practice said patents and trade secrets withing the Continental United States of
America under Kennedy Patent Rights and related Kennedy Technology and Know-How,
and Kennedy is willing to grant SAC such ans exclusive license; /1/
NOW, THEREFORE, in consideration of the mutual covenants and premises set
forth herein and subject to the terms and conditions hereinafter recited, it is
hereby agreed as follows:
I. DEFINITIONS
--------------
1.01 The patents defined herein are proposed pursuant to Kennedy Technology
and Know-How and is or may be covered by Kennedy Patent Rights (i.e., the
manufacture, use and sale of which would otherwise entitle Kennedy to relief
under 35 U.S.C. section 271).
1.02 "Kennedy Patent Rights" means any issued or to be issued patents and
pending patent applications.
1.03 "Kennedy Technology and Know-How" means the technical information
and/or technology, either oral or written, relating to methods, products and
apparatus described or claimed in Patent Rights or other information patentable
or unpatentable made know during the term of this agreement by Kennedy to SAC,
SAC's agents or SAC's authorized representatives.
1.04 "Licensed Territory" means the Continental United States of America in
which
- ---------------
/1/ Any licensing of Technology herein shall specifically exclude use in the
packaging foam industry.
<PAGE>
Kennedy Patent Rights exist and/or in which Kennedy Technology and Know-How has
application.
1.05 "Kennedy Improvement" means any new invention, improvement or
addition to Kennedy Patent Rights or Kennedy Technology and Know-How made,
acquired or owned by Kennedy or any member thereof, during the term of this
Agreement.
1.06 "Joint Improvement" means any new invention, improvement or
development relating to this technology made jointly by Kennedy and SAC during
the term of this Agreement.
II. WARRANTIES
--------------
2.01 Kennedy warrants that it is the owner of all Kennedy Patent Rights and
Kennedy Technology and Know-How and has the full rights and authority to make
this Agreement and to grant the exclusive rights provided for herein.
2.02 Kennedy warrants that it is not aware of any prior patents or
publications, prior public uses or sales, or other material facts which
adversely affect the validity of the Kennedy Patent Rights.
2.03 Kennedy warrants that it is not aware of an patent or other propietary
rights of any party which would be infringed upon by SAC's performance under any
provision hereof.
2.04 Kennedy warrants that the exclusive rights granted to SAC herein will
not conflict with any prior agreement, understanding or obligation of Kennedy or
otherwise relating to the Kennedy Patent Rights and/or Kennedy Technology and
Know-How.
III. EXCLUSIVE LICENSE
----------------------
3.01 Kennedy hereby grants to SAC an exclusive license under the Kennedy
Patent
<PAGE>
Rights to practice said patent and trade secrets within the Continental United
States of America, Kennedy Technology and Know-How and Joint Patent Rights to
manufacture, use and sell and to sublicense.
3.02 The initial term of this exclusive license shall be the full term of
the Kennedy Patent Rights and Joint Patent Rights.
3.03 SAC shall pay Kennedy a continuing royalty of four (4%) per cent of
the gross sales by SAC of the product licensed hereunder. Only one royalty
shall be paid on any particular sale hereunder, e.g. inter-company transfers or
sales by SAC to a subsidiary or by a subsidiary to SAC or another subsidiary for
subsequent resale shall be deemed to be one sale. The "one" royalty payment, at
all times, shall be based upon the highest gross dollar amount generated from
the sale of the product which shall include all resales and/or transfers in
determining the gross amount. If resales and/or transfers are delayed, for any
reason, royalty payments will still be made on the highest gross dollar amount
generated from the sale of the product. Royalty payments will then be adjusted
accordingly at the time of each additional resale and/or transfer.
3.04 Continuing royalty payments hereunder shall be made quarterly within
thirty (30) days after the end of each calendar quarter. SAC shall pay Kennedy
four (4%) percent of all payments made by any sublicensee in accordance with
this paragraph.
3.05 SAC agrees to maintain complete records in accordance with generally
accepted accounting principals which accurately reflect the activities of SAC
under this Agreement as are pertinent to an accurate calculation of continuing
royalties. Kennedy shall have the right, at its own expense, to have the
records maintained by SAC hereunder inspected by a firm of nationally recognized
certified public accounts for the purpose of verifying the amount of
<PAGE>
continuing royalties due and payable hereunder, but such rights of inspection
shall be limited to no more than two inspections per calendar year, and all
information provided or obtained by such certified public accountant, except the
total amount of continuing royalties accruing in each calendar quarter, shall be
held by them in strict confidence including as to Kennedy.
IV. PATENTS
-----------
4.01 Kennedy represents to SAC that it has already filed or shall file for
United States Letters Patent covering this technology. Kennedy and SAC agree
that it is important to this Agreement that the Kennedy Patent Rights be
maintained.
4.02 For and in consideration of the right and license, SAC agrees to pay
all maintenance fees, all fees for filing and prosecuting pending patent
applications, etc., for those Kennedy Patent Rights and Kennedy Improvements
including any Joint Patents which Kennedy and SAC agree are important to this
agreement. Kennedy and SAC agree to cooperate fully with each other in such
filings and maintenance.
4.03 Kennedy and SAC shall cooperate in the licensing of any Joint Patent
Rights to others and shall share equally any royalties or other licensing income
equally between them. Kennedy and SAC agree to provide the other with quarterly
reports of any licensing income from Joint Patent Rights and to accompany such
reports with payment of their share of such licensing income. Such reports and
payments shall be made within forty-five (45) days of the end of each calendar
quarter.
4.04 Kennedy Patent Rights and Improvements shall remain the sole property
of Kennedy and SAC's only right therein are those granted by Kennedy herein.
4.05 Joint Improvements and Joint Patent right shall remain equally the
property of
<PAGE>
Kennedy and SAC.
4.06 Similarly, Kennedy and SAC shall cooperated in the enforcement of any
Kennedy Patent Right or any Joint Patent Right. In the event of such
infringement of any patent Rights, SAC shall have the right but shall not be
obligated to bring suit against the infringer. All costs of the litigation
shall be the responsibility of SAC. Any recoveries from such litigation, or any
settlement thereof, shall go to SAC, with the provision that should the
recoveries exceed the outlays for such litigation, then SAC will pay to Kennedy
four (4%) percent of such excess. SAC will keep Kennedy fully and promptly
informed of the progress of such litigation. SAC shall have the power at its
option to enter into any settlement of such litigation; provided, however, that
any such settlement must uphold the existence of all the Patent Rights and this
Agreement. If SAC refuses or fails to enforce any patent Rights within a
reasonable time after notice, Kennedy may do so in his own name, at his sole
expense and for his sole benefit.
V. TERMINATION
--------------
5.01 In the event Kennedy is in default of any substantial obligation, or
any warranty or material representation is breached or is untrue, then
commencing ninety (90) days after written notice to that effect SAC, without
limiting any rights or remedies SAC may have under this Agreement or at law or
in equity, all royalties accruing under this Agreement, shall be paid into
escrow for the time that Kennedy is in default. In the event Kennedy cures such
default, the royalties paid into escrow shall be paid to Kennedy and royalties
accruing after the date on which the default was cured shall be paid to Kennedy
immediately. Quarterly royalty payments will continue as provided for herein.
Kennedy shall pay to SAC any and all
<PAGE>
costs and damages caused by such breach.
5.02 In the event SAC fails to make a payment for any reason after such
payment is due, or it is in default of any other substantial obligation under
this Agreement, then Kennedy may terminate this Agreement to be effective after
ninety (90) days from a written notice to that effect given by Kennedy to SAC
specifying the default; provided, however, that if SAC makes such payment or
cures such default within the notice period, this Agreement shall remain in full
force and effect as it would have had such notice not been given and provided
further that SAC shall pay to Kennedy any and all costs and damages caused by
such breach.
5.03 In the event of termination of this Agreement pursuant to paragraphs
5.01 or 5.02, SAC shall: (a) have the right to fill all outstanding orders upon
payment of the royalty due thereon, provided such sale is completed within six
(6) months after the date of termination; (b) return to Kennedy all confidential
information furnished to SAC by Kennedy and all Kennedy Patent Rights and all
Kennedy Technology Know-How (c) Kennedy is to be paid any royalties which have
been paid into escrow, including any interest or other income earned thereby.
5.04 In the event of any termination of this Agreement, Kennedy and SAC
shall be joint owners of any Joint Patent Rights with all rights and priveleges
attendant thereto. Any other existing licenses under such Join Patent Rights
shall survive any termination hereof and the provisions of this Agreement
relating to the division of royalties from such other licenses shall likewise
survive termination hereof.
5.05 Notwithstanding anything to the contrary, in the event this License
does not generate $20,000.00 per annum within two (2) years of the date of this
License, it shall become automatically a non-exclusive License. If, however,
said License generates the sum
<PAGE>
of $20,000.00 in any one of the two (2) years, the License shall continue as an
exclusive License.
VI. DISPUTE RESOLUTION
----------------------
Any dispute arising between Kennedy and SAC with respect to any provision
of this Agreement or any matter relating to the Agreement shall be resolved if
at all possible by good faith negotiation between the parties hereto. If such
negotiation fails to resolve such dispute, Kennedy and SAC agree to submit the
dispute to binding arbitration conducted in Danbury, Connecticut, pursuant to
the rules of the American Arbitration Association.
VII. NO CONTINUING WAIVER
-------------------------
Any waiver of any breach of this Agreement must be by notice in accordance
with Article X and any waiver of any breach shall not be deemed a waiver of any
breach of a continuing nature or any other breach of either the same of
different character.
VIII. FORCE MAJEURE
-------------------
The performance by the parties of their respective obligations under this
Agreement shall be suspended for such period of time as they are prevented from
performing such obligations by reason of acts of God, fire, flood, explosion,
insurrection, riot, enemy attack, malicious mischief, order of court or other
governmental authority, inability to secure or delay in securing rights of way,
privileges, franchises, permits equipment, and other events reasonably beyond
the control of the party subject thereto.
<PAGE>
IX. ASSIGNMENT
--------------
This Agreement shall be assignable by the SAC without the prior written
consent of the other party. This Agreement shall be binding upon and apply,
extend to, and inure to the benefit of the successors, heirs and assigns of the
respective parties hereunder.
X. NOTICES
----------
All notices required or permitted to be given pursuant to this Agreement
shall be in writing and shall be deemed adequately given if delivered in person
or sent by registered or certified mail, return receipt requested, to the
following address:
SAFE ALTERNATIVES CORPORATION
c/o Richard J. Fricke, Esq.
27 Governor Street
Ridgefield, CT 06877
RICHARD B. KENNEDY
519 Branchville Road
Ridgefield, CT 06877
or such other address as may be designated by a party, by a notice in
compliance with this Article X.
XI. GOVERNING LAW
-----------------
This Agreement shall be governed by and construed in accordance with the
laws of the State of Connecticut.
XII. COMPLETE AGREEMENT
-----------------------
This Agreement represents the complete agreement of the parties with merged
herein. This Agreement may be amended or changed only by a written document
purporting to do so
<PAGE>
and signed by the parties.
XIV. SEVERABILITY
-----------------
If it shall at any time appear that any right or obligation provided in
this Agreement is contrary to any law, treaty or regulation of a government to
which any party is subject, such right or obligation shall be deemed annulled,
or shall be modified to the extent required to comply with such law, treaty or
regulation.
XV. MARKING
-----------
SAC agrees to permanently and legibly mark or cause to be marked in the
manner prescribed by title 35, Section 287, of the United States Code, or
appropriate foreign requirements all Kennedy Technology marketed by SAC or its
sublicensees, with the number or numbers of the patents of the Kennedy Patent
Rights insofar as it is reasonably practical.
XVI. CONFIDENTIALITY
--------------------
Except to the extent permitted under and necessary to enjoy the full
benefits of this Agreement, it is agreed that without the prior written approval
of the other party, neither party will during the term of this Agreement
disclose or permit to be disclosed to others or used for, its own benefit, any
know-how and unpublished information relating to the business, engineering,
research activites or trade secrets of the other acquired by the party during
the term of this Agreement, provided that such know-how and unpublished
information has been designated and marked as "CONFIDENTIAL" by the party to
whom the know-how and information belongs prior to its acquisition by the
receiving party; and provided further that
<PAGE>
the know-how or unpublished information has not fallen into the public domain
through no fault of the receiving party and has not been received by the
receiving party from another source.
XVIII. DUPLICATE ORIGINALS
--------------------------
This Agreement is being executed in duplicate original form, each of which
shall serve and function as an original agreement for all purposes.
XIX. RESERVATION OF KENNEDY RIGHTS
----------------------------------
Kennedy represents, and based thereon SAC acknowledges, that Richard B.
Kennedy has expertise in numerous other areas. It is agreed by SAC that any
discoveries or inventions of Richard B. Kennedy which are not related to the
Kennedy Patent Rigths, Technology and Know-How and which do not come within the
purview of the definitions contained in Article I hereof shall remain the sole
property of Richard B. Kennedy.
XX. ROYALTY PAYMENTS
--------------------
Notwithstanding anything in this License Agreement to the contrary, the
royalty payments called for herein shall, at all times, be based upon the Fair
Market Value of the sale of the product. If there is a dispute about the Fair
Market Value of the product, said dispute shall be resolved in accordance with
the License Agreement.
<PAGE>
under his hand and seal and SAC has caused this Agreement to be executed by its
duly authorized representative as of the date and year first above written.
Signed, Sealed and Delivered
In the presence of:
s/Jo Ellyn K. S. s/Richard B. Kennedy
- -------------------------------------- --------------------
Richard B. Kennedy
s/Sharlet S. Wirzulis s/Richard J. Fricke
- -------------------------------------- -----------------------
Richard J. Fricke
s/Sharlet S. Wirzulis s/Patrick J. Crehan
- -------------------------------------- -----------------------
Patrick J. Crehan
- -------------------------------------- SAFE ALTERNATIVES CORPORATION
OF AMERICA, INC.
s/Sharlet S. Wirzulis s/Stpehen J. Thompson
- -------------------------------------- ---------------------------------------
Stephen J. Thompson, Its President
<PAGE>
STATE OF CONNECTICUT )
) SS. Ridgefield
COUNTY OF FAIRFIELD )
Personally appeared RICHARD B. KENNEDY, Signer and Sealer of the foregoing
Instrument, and acknowledged the same to be his free act and deed, before me.
s/Sharlet S. Wirzulis
---------------------------------------------
STATE OF CONNECTICUT )
) SS. Ridgefield
COUNTY OF FAIRFIELD )
Personally appeared RICHARD F. FRICKE, Signer and Sealer of the foregoing
Instrument, and acknowledged the same to be his free act and deed, before me.
s/Sharlet S. Wirzulis
---------------------------------------------
STATE OF CONNECTICUT )
) SS. Ridgefield
COUNTY OF FAIRFIELD )
Personally appeared PATRICK J. CREHAN, Signer and Sealer of the foregoing
Instrument, and acknowledged the same to be his free act and deed, before me.
s/Sharlet S. Wirzulis
---------------------------------------------
STATE OF CONNECTICUT )
) SS. Ridgefield
COUNTY OF FAIRFIELD )
Personally appeared STEPHEN J. THOMPSON, President of SAFE ALTERNATIVES
COPORATION OF AMERICA, INC. and acknowledged the same to be his free act and
deed, and the free act and deed of said corporation, before me.
s/Sharlet S. Wirzulis
--------------------------------------------
<PAGE>
EXHIBIT 10.7
LICENSE AGREEMENT
This License Agreement, entered into as of this 9th day of December, 1992, by
and between RICHARD B. KENNEDY, of Ridgefield, Connecticut, PATRICK J. CREHAN of
Ridgefield, Connecticut (hereinafter referred to as "Kennedy") and SAFE
ALTERNATIVES CORPORATION OF AMERICA, INC., a Delaware Corporation having a
principal place of business in Ridgefield, Connecticut (hereinafter referred to
as "SAC");
W I T N E S S E T H
-------------------
WHEREAS, Kennedy owns the entire right, title and interest in and to
certain inventions and technology and know-how relating to fire retarded water
blown urethane foam and reduced smoke toxicity (herinafter referred to as
"Kennedy Technology and Know-How") and;
WHEREAS, Kennedy has or shall apply for certain United States Letters
Patent (hereinafter referred to as "Kennedy Patent Rights") and;
WHEREAS, SAC is engaged in the commercialization of new technologies
dealing with the treatment of sludge, land-fill and waste materials, and
hazardous waste (especially medical waste) and has developed and owns
considerable expertise, technology and know-how in this field; and;
WHEREAS, SAC is desirous of acquiring from Kennedy an exclusive license to
practice said patents and trade secrets within the Continental United States of
America under Kennedy Patent Rights and related Kennedy Technology and Know-How,
and Kennedy is
<PAGE>
willing to grant SAC such an exclusive license; /1/
NOW, THEREFORE, in consideration of the mutual covenants and premises set
forth herein and subject to the terms and conditions hereinafter recited, it is
hereby agreed as follows:
I. DEFINITIONS
--------------
1.01 The entire retarded water blown urethane foam with reduced smoke
toxicity means any foam produced pursuant to Kennedy Technology and Know-How and
is or may be covered by Kennedy Patent Rights (i.e., the manufacture, use and
sale of which would otherwise entitle Kennedy to relief under 35 U.S.C. section
271).
1.02 "Kennedy Patent Rights" means any issued or to be issued patents and
pending patent applications relating to the fire retarded smoke blown urethane
foam with reduced smoke toxicity owned or controlled by Kennedy.
1.03 "Kennedy Technology and Know-How" means the technical information
and/or technology, either oral or written, relating to methods, products and
apparatus described or claimed in Patent Rights or other information patentable
or unpatentable made know during the term of this agreement by Kennedy to SAC,
SAC's agents or SAC's authorized representatives.
1.04 "Licensed Territory" means the Continental United States of America in
which Kennedy Patent Rights exist and/or in which Kennedy Technology and Know-
How has application.
- ---------------------
/1/ Any licensing of Technology herein shall specifically exclude use in the
packaging foam industry.
<PAGE>
1.05 "Kennedy Improvement" means any new invention, improvement or
addition to Kennedy Patent Rights or Kennedy Technology and Know-How made,
acquired or owned by Kennedy or any other member thereof, during the term of
this Agreement.
1.06 "Joint Improvement" means any new invention, improvement or
development relating to this technology made jointly by Kennedy and SAC during
the term of this Agreement.
II. WARRANTIES
--------------
2.01 Kennedy warrants that it is the owner of all Kennedy Patent Rights and
Kennedy Technology and Know-How and has the full rights and authority to make
this Agreement and to grant the exclusive rights provided for herein.
2.02 Kennedy warrants that it is not aware of any prior patents or
publications, prior public uses or sales, or other material facts which
adversely affect the validity of the Kennedy Patent Rights.
2.03 Kennedy warrants that it is not aware of an patent or other
proprietary rights of any party which would be infringed upon by SAC's
performance under any provision hereof.
2.04 Kennedy warrants that the exclusive rights granted to SAC herein will
not conflict with any prior agreement, understanding or obligation of Kennedy or
otherwise relating to the Kennedy Patent Rights and/or Kennedy Technology and
Know-How.
III. EXCLUSIVE LICENSE
----------------------
3.01 Kennedy hereby grants to SAC an exclusive license under the Kennedy
Patent Rights to practice said patent and trade secrets within the Continental
United States of America, Kennedy Technology and Know-How and Joint Patent
Rights to manufacture, use
<PAGE>
and sell and to sublicense.
3.02 The initial term of this exclusive license shall be the full term of
the Kennedy Patent Rights and Joint Patent Rights.
3.03 SAC shall pay Kennedy a continuing royalty of four (4%) per cent of
the gross sales by SAC of the product licensed hereunder. Only one royalty
shall be paid on any particular sale hereunder, e.g. inter-company transfers or
sales by SAC to a subsidiary to SAC or another subsidiary for subsequent resale
shall be deemed to be one sale. The "one" royalty payment, at all times, shall
be based upon the highest gross dollar amount generated from the sale of the
product which shall include all resales and/or transfers in determining the
gross amount. If resales and/or transfers are delayed, for any reason, royalty
payments will still be made on the highest gross dollar amount generated from
the sales of the product. Royalty payments will then be adjusted accordingly
at the time of each additional resale and/or transfer.
3.04 Continuing royalty payments hereunder shall be made quarterly within
thirty (30) days after the end of each calendar quarter. SAC shall pay Kennedy
four (4%) percent of all payments made by any sublicensee in accordance with
this paragraph.
3.05 SAC agrees to maintain complete records in accordance with generally
accepted accounting principals which accurately reflect the activities of SAC
under this Agreement as are pertinent to an accurate calculation of continuing
royalties. Kennedy shall have the right, at its own expense, to have the
records maintained by SAC hereunder inspected by a firm of nationally recognized
certified public accounts for the purpose of verifying the amount of continuing
royalties due and payable hereunder, but such rights of inspection shall be
limited to no more than two inspections per calendar year, and all information
provided or obtained
<PAGE>
by such certified public accountant, except the total amount of continuing
royalties accruing in each calendar quarter, shall be held by them in strict
confidence including as to Kennedy.
IV. PATENTS
-----------
4.01 Kennedy represents to SAC that it has already filed or shall file for
United States Letters Patent covering this technology. Kennedy and SAC agree
that it is important to this Agreement that the Kennedy Patent Rights be
maintained.
4.02 For and in consideration of the right and license, SAC agrees to pay
all maintenance fees, all fees for filing and prosecuting pending patent
applications, etc., for those Kennedy Patent Rights and Kennedy Improvements
including any Joint Patents which Kennedy and SAC agree are important to this
agreement. Kennedy and SAC agree to cooperate fully with each other in such
filings and maintenance.
4.03 Kennedy and SAC shall cooperate in the licensing of any Joint Patent
Rights to others and shall share equally any royalties or other licensing income
equally between them. Kennedy and SAC agree to provide the other with quarterly
reports of any licensing income from Joint Patent Rights and to accompany such
reports with payment of their share of such licensing income. Such reports and
payments shall be made within forty-five (45) days of the end of each calendar
quarter.
4.04 Kennedy Patent Rights and Improvements shall remain the sole property
of Kennedy and SAC's only right therein are those granted by Kennedy herein.
4.05 Joint Improvements and Joint Patent right shall remain equally the
property of Kennedy and SAC.
4.06 Similarly, Kennedy and SAC shall cooperate in the enforcement of any
Kennedy
<PAGE>
Patent Right or any Joint Patent Right. In the event of such infringement of
any patent Rights, SAC shall have the right but shall not be obligated to bring
suit against the infringer. All costs of the litigation shall be the
responsibility of SAC. Any recoveries from such litigation, or any settlement
thereof, shall go to SAC, with the provision that should the recoveries exceed
the outlays for such litigation, then SAC will pay to Kennedy four (4%) percent
of such excess. SAC will keep Kennedy fully and promptly informed of the
progress of such litigation. SAC shall have the power at its option to enter
into any settlement of such litigation; provided, however, that any such
settlement must uphold the existence of all the Patent Rights and this
Agreement. If SAC refuses or fails to enforce any patent Rights within a
reasonable time after notice, Kennedy may do so in his own name, at his sole
expense and for his sole benefit.
V. TERMINATION
--------------
5.01 In the event Kennedy is in default of any substantial obligation, or
any warranty or material representation is breached or is untrue, then
commencing ninety (90) days after written notice to that effect SAC, without
limiting any rights or remedies SAC may have under this Agreement or at law or
in equity, all royalties accruing under this Agreement, shall be paid into
escrow for the time that Kennedy is in default. In the event Kennedy cures
such default, the royalties paid into escrow shall be paid to Kennedy and
royalties accruing after the date on which the default was cured shall be paid
to Kennedy immediately. Quarterly royalty payments will continue as provided
for herein. Kennedy shall pay to SAC any and all costs and damages caused by
such breach.
5.02 In the event SAC fails to make a payment for any reason after such
payment is
<PAGE>
due, or it is in default of any other substantial obligation under this
Agreement, then Kennedy may terminate this Agreement to be effective after
ninety (90) days from a written notice to that effect given by Kennedy to SAC
specifying the default; provided, however, that if SAC makes such payment or
cures such default within the notice period, this Agreement shall remain in
full force and effect as it would have had such notice not been given and
provided further that SAC shall pay to Kennedy any and all costs and damages
caused by such breach.
5.03 In the event of termination of this Agreement pursuant to paragraphs
5.01 or 5.02, SAC shall: (a) have the right to fill all outstanding orders upon
payment of the royalty due thereon, provided such sale is completed within six
(6) months after the date of termination; (b) return to Kennedy all confidential
information furnished to SAC by Kennedy and all Kennedy Patent Rights and all
Kennedy Technology Know-How (c) Kennedy is to be paid any royalties which have
been paid into escrow, including any interest or other income earned thereby.
5.04 In the event of any termination of this Agreement, Kennedy and SAC
shall be joint owners of any Joint Patent Rights with all rights and privileges
attendant thereto. Any other existing licenses under such Join Patent Rights
shall survive any termination hereof and the provisions of this Agreement
relating to the division of royalties from such other licensees shall likewise
survive termination hereof.
5.05 Notwithstanding anything to the contrary, in the event this License
does not generate $20,000.00 per annum within two (2) years of the date of this
License, it shall become automatically a non-exclusive License. If, however,
said License generates the sum of $20,000.00 in any one o the two (2) years, the
License shall continue as an exclusive License.
<PAGE>
VI. DISPUTE RESOLUTION
----------------------
Any dispute arising between Kennedy and SAC with respect to any provision
of this Agreement or any matter relating to the Agreement shall be resolved if
at all possible by good faith negotiation between the parties hereto. If such
negotiation fails to resolve such dispute, Kennedy and SAC agree to submit the
dispute to binding arbitration conducted in Danbury, Connecticut, pursuant to
the rules of the American Arbitration Association.
VII. NO CONTINUING WAIVER
-------------------------
Any waiver of any breach of this Agreement must be my notice in accordance
with Article X and any waiver of any breach shall not be deemed a waiver of any
breach of a continuing nature or any other breach of either the same of
different character.
VIII. FORCE MAJEURE
-------------------
The performance of their respective obligations under this Agreement shall
be suspended for such period of time as they are prevented from performing such
obligations by reason of acts of God, fire, flood, explosion, insurrection,
riot, enemy attack, malicious mischief, order of court or other governmental
authority, inability to secure or delay in securing rights of way, privileges,
franchises, permits equipment, and other events reasonably beyond the control
of the party subject thereto.
IX. ASSIGNMENT
--------------
This Agreement shall be assignable by the SAC without the prior written
consent of the other party. This Agreement shall be binding upon an apply,
extend to, and inure to the
<PAGE>
benefit of the successors, heirs and assigns of the respective parties
hereunder.
X. NOTICES
----------
All notices required or permitted to be given pursuant to this Agreement
shall be in writing and shall be deemed adequately given if delivered in person
or sent by registered or certified mail, return receipt requested, to the
following address:
SAFE ALTERNATIVES CORPORATION
c/o Richard J. Fricke, Esq.
27 Governor Street
Ridgefield, CT 06877
RICHARD B. KENNEDY
519 Branchville Road
Ridgefield, CT 06877
or such other address as may be designated by a party, by a notice in
compliance with this Article X.
XI. GOVERNING LAW
-----------------
This Agreement shall be governed by and construed in accordance with the
laws of the State of Connecticut.
XII. COMPLETE AGREEMENT
-----------------------
This Agreement represents the complete agreement of the parties with
respect to the subject matter hereof, and all prior agreements and negotiations
are merged herein. This Agreement may be amended or changed only by a written
document purporting to do so and signed by the parties.
<PAGE>
XIV. SEVERABILITY
-----------------
If it shall at any time appear that any right or obligation provided
in this Agreement is contrary to any law, treaty or regulation of a government
to which any party is subject, such right or obligation shall be deemed
annulled, or shall be modified to the extent required to comply with such law,
treaty or regulation.
XV. MARKING
-----------
SAC agrees to permanently and legibly mark or cause to be marked in
the manner prescribed by title 35, Section 287, of the United States Code, or
appropriate foreign requirements all Kennedy Technology marketed by SAC or its
sublicensees, with the number or numbers of the patents of the Kennedy Patent
Rights insofar as it is reasonably practical.
XVI. CONFIDENTIALITY
--------------------
Except to the extent permitted under and necessary to enjoy the full
benefits of this Agreement, it is agreed that without the prior written approval
of the other party, neither party will during the term of this Agreement
disclose or permit to be disclosed to others or used for, its own benefit, any
know-how and unpublished information relating to the business, engineering,
research activities or trade secrets of the other acquired by the party during
the term of this Agreement, provided that such know-how and unpublished
information has been designated and marked as "CONFIDENTIAL" by the party to
whom the know-how and information belongs prior to its acquisition by the
receiving party; and provided further that the know-how or unpublished
information has not fallen into the public domain through no fault of the
receiving party and has not been received by the receiving party from another
<PAGE>
source.
XVIII. DUPLICATE ORIGINALS
--------------------------
This Agreement is being executed in duplicate original form, each of
which shall serve and function as an original agreement for all purposes.
XIX. RESERVATION OF KENNEDY RIGHTS
----------------------------------
Kennedy represents, and based thereon SAC acknowledges, that Richard
B. Kennedy has expertise in numerous other areas. It is agreed by SAC that any
discoveries or inventions of Richard B. Kennedy which are not related to the
Kennedy Patent Rights, Technology and Know-How and which do not come within the
purview of the definitions contained in Article I hereof shall remain the sole
property of Richard B. Kennedy.
XX. ROYALTY PAYMENTS
--------------------
Notwithstanding anything in the License Agreement to the contrary, the
royalty payments called for herein shall, at all times, be based upon the Fair
Market Value of the sale of the product. If there is a dispute about the Fair
Market Value of the product, said dispute shall be resolved in accordance with
the License Agreement.
<PAGE>
IN WITNESS WHEREOF, Kennedy has executed this Agreement under his hand
and seal and SAC has caused this Agreement to be executed by its duly authorized
representative as of the date and year first above written.
Signed, Sealed and Delivered
In the presence of:
s/Sharlet S. Wirzulis s/Richard J. Fricke
- --------------------------------- --------------------------------------
Richard J. Fricke
s/Sharlet S. Wirzulis s/Patrick J. Crehan
- --------------------------------- --------------------------------------
Patrick J. Crehan
s/Jo Ellyn K. S. s/Richard B. Kennedy
- --------------------------------- --------------------------------------
Richard B. Kennedy
- --------------------------------- SAFE ALTERNATIVES CORPORATION
OF AMERICA, INC.
s/Sharlet S. Wirzulis s/Stephen J. Thompson
- --------------------------------- --------------------------------------
Stephen J. Thompson, Its President
<PAGE>
STATE OF CONNECTICUT)
) SS. Ridgefield
COUNTY OF FAIRFIELD )
Personally appeared RICHARD B. KENNEDY, Signer and Sealer of the foregoing
Instrument, and acknowledged the same to be his free act and deed, before me.
s/Sharlet S. Wirzulis
-------------------------------------------
STATE OF CONNECTICUT)
) SS. Ridgefield
COUNTY OF FAIRFIELD )
Personally appeared RICHARD F. FRICKE, Signer and Sealer of the foregoing
Instrument, and acknowledged the same to be his free act and deed, before me.
s/Sharlet S. Wirzulis
-------------------------------------------
STATE OF CONNECTICUT)
) SS. Ridgefield
COUNTY OF FAIRFIELD )
Personally appeared PATRICK J. CREHAN, Signer and Sealer of the foregoing
Instrument, and acknowledged the same to be his free act and deed, before me.
s/Sharlet S. Wirzulis
-------------------------------------------
STATE OF CONNECTICUT)
) SS. Ridgefield
COUNTY OF FAIRFIELD )
Personally appeared STEPHEN J. THOMPSON, President of SAFE ALTERNATIVES
CORPORATION OF AMERICA, INC. and acknowledged the same to be his free act and
deed, and the free act and deed of said corporation, before me.
s/Sharlet S. Wirzulis
-------------------------------------------
<PAGE>
EXHIBIT 10.8
AGREEMENT made this day of , 1993, by and between Richard
B. Kennedy, Patrick J. Crehan and Richard J. Fricke, (hereinafter referred to as
"Licensor") and Safe Alternatives Corporation of America, Inc., (hereinafter
referred to as "Licensee").
WHEREAS, there exists certain License Agreements between Licensor and
Licensee as follows:
I. CERTAIN INVENTIONS AND TECHNOLOGY AS SET FORTH IN THE FOLLOWING UNITED
STATES PATENTS:
<TABLE>
<CAPTION>
U.S. Patent # Dated
------------- -----
<S> <C>
4,520,139 5/28/85
4,530,777 7/23/85
4,515,638 5/7/85
4,521,544 6/4/85
RC 31-757
reissue of 4,291,129 12/4/84
4,417,998 11/29/83
4,400,475 8/23/83
4,291,129 9/22/81
Patent application
07,490,136 3/13/90
</TABLE>
SAID TECHNOLOGY SPECIFICALLY INCLUDES THE RIGHT TO USE
SAID TECHNOLOGY AS PACKAGING FOAM.
II. CERTAIN INVENTIONS AND TECHNOLOGY AND KNOW-HOW RELATING TO THE
FOAMING AND DISPOSAL OR ORGANIC SLUDGE.
III. CERTAIN INVENTIONS AND TECHNOLOGY AND KNOW-HOW RELATING TO
FIRE RETARDED WATER BLOWN URETHANE FOAM WITH REDUCED SMOKE TOXICITY.
WHEREAS, each of the aforementioned Licenses contain the
following provision:
Notwithstanding anything to the contrary, in the event this
<PAGE>
License does not generate $20,000.00 per annum within two (2) years of the date
of this License, it shall become automatically a non-exclusive License. If,
however, said License generates the sum of $20,000.00 in any one of the two (2)
years, the License shall continue as an exclusive License.
By deleting the following language wherever it is set forth in any of
the aforementioned Licenses:
5.05 Notwithstanding anything to the contrary, in the event this
License does not generate $20,000.00 per annum within two (2) years of the date
of this License, it shall become automatically a non-exclusive License. If,
however, said License generates the sum of $20,000.00 in any of the two (2)
years, the License shall continue as an exclusive License.
and by inserting the following in place of said deletion:
"It is agreed that Richard B. Kennedy shall, for his lifetime, be paid
the sums of Five Thousand ($5,000.00) dollars per month, and One Thousand Two
Hundred ($1,200.00) dollars per week by Safe Alternatives Corporation of
America, Inc. Should the said Richard B. Kennedy predecease his wife, Kathleen
Kennedy, then said payments shall be made to the said Kathleen Kennedy. Said
payments shall be credited against Royalty payments due under the terms of each
License Agreement on a quarterly basis, but shall not accrue, i.e. if the
payments made exceed the Royalties due on a quarterly basis, the payments shall
not become a credit against the next quarterly Royalty.
Upon the last to die of the said Richard B. Kennedy and
<PAGE>
Kathleen Kennedy, the payments shall cease. This, however, shall not affect the
Royalties due under the terms of the Licenses.
In the event a payment of either the Five Thousand ($5,000.00) dollars
per month or One Thousand Two Hundred ($1,200.00) dollars per week is not made
by Safe Alternatives Corporation of America, Inc. either Richard B. Kennedy or
Kathleen Kennedy shall mail a notice of default to Safe Alternatives Corporation
of America, Inc. at 27 Governor Street, Ridgefield, Connecticut 06877, or any
subsequent address given by Safe Alternatives Corporation of America, Inc. Safe
Alternatives Corporation of America, Inc. shall have sixty (60) days to cure
said default. If the default is not cured within said sixty (60) days period,
then all Licenses shall become non-exclusive, with the Royalty payments still
due thereunder.
Additionally, the aforementioned License Agreements provide for a
continuing Royalty of four (4%) percent of gross sales by Safe Alternatives
Corporation of America, Inc. It is Marketing Agreement with Integrated Labs,
Inc. (a copy of which is attached hereto and made a part hereof). It is further
agreed and understood that the continuing Royalty of four (4%) percent applies
to the revenues generated by sales received by Safe Alternatives Corporation of
America, Inc. under the formula set forth in the said Exclusive Marketing
Agreement or in any subsequent agreements with strategies partners which are not
subsidiaries of Safe Alternatives Corporation of America, Inc.
<PAGE>
For so long as the payments are made the exclusive Licenses
hereinbefore referred to shall continue until April 17, 2050."
Witness Licensor
s/Sharlet S. Wirzulis s/Richard B. Kennedy
- --------------------- --------------------
Richard B. Kennedy
- ---------------------
s/Joan E. West s/Patrick J. Crehan
- --------------------- -------------------
Patrick J. Crehan
s/Kathy R. Palumbo
- ---------------------
s/Sharlet S. Wirzulis s/Richard J. Fricke
- --------------------- -------------------
Richard J. Fricke
- ---------------------
Licensee
Safe Alternatives Corporation of
America, Inc.
s/Sharlet S. Wirzulis s/ Stephen J. Thompson
- --------------------- ----------------------
Stephen J. Thompson,
_____________________ its President
STATE OF CONNECTICUT)
)ss: Ridgefield August 23, 1993
COUNTY OF FAIRFIELD )
Personally appeared Richard B. Kennedy, Signer and Sealer of the
foregoing Instrument, and acknowledged the same to be his free act and deed
before me.
s/Sharlet S/ Wirzulis
--------------------------
Sharlet S. Wirzulis
Notary Public - Commission
Expires: Feb. 28, 1997
<PAGE>
STATE OF CONNECTICUT)
)ss: Ridgefield November 30, 1993
COUNTY OF FAIRFIELD )
Personally appeared Patrick J. Crehan, Signer and Sealer of the
foregoing Instrument, and acknowledged the same to be his free act and deed
before me.
s/Joan E. West
-------------------------
Joan E. West
Notary Public - Commission
Expires: March 31, 1995
STATE OF CONNECTICUT)
)ss: Ridgefield August 13, 1993
COUNTY OF FAIRFIELD )
Personally appeared Richard J. Fricke, Signer and Sealer of the
foregoing Instrument, and acknowledged the same to be his free act and deed
before me.
s/Sharlet S. Wirzulis
-------------------------
Sharlet S. Wirzulis
Notary Public - Commission
Expires: Feb. 28, 1997
STATE OF CONNECTICUT)
)ss: Ridgefield August 13, 1993
COUNTY OF FAIRFIELD )
Personally appeared Stephen J. Thompson, President of Safe
Alternatives Corporation International, Inc. Signer and Sealer of the foregoing
Instrument, and acknowledged the same to be his free act and deed, and the free
act and deed of said corporation, before me.
s/Sharlet S. Wirzulis
-------------------------
Sharlet S. Wirzulis
Notary Public - Commission
Expires: Feb. 28, 1997
<PAGE>
EXHIBIT 10.9
EMPLOYMENT AGREEMENT
--------------------
AGREEMENT made effective the First day of August, 1993, by and between SAFE
ALTERNATIVES CORPORATION OF AMERICA, INC. (hereinafter called "Employer"), a
Delaware corporation with its principal offices in Ridgefield, Connecticut, and
STEPHEN J. THOMPSON (hereinafter called "Employee"), a resident of Ridgefield,
Connecticut.
WITNESSETH:
WHEREAS, Employer is a corporation engaged in several industries, and
wishes to employ Employee to render services to it; and
WHEREAS, Employee is willing to perform services for Employer, all in
accordance with the following terms, conditions and provisions.
NOW, THEREFORE, it is agreed that:
1. EMPLOYMENT: Effective from and after August 1, 1991, Employee shall
----------
faithfully serve Employer in the business of Employer (hereinafter called the
"Business"), until this association is terminated as provided in Paragraph 10
hereof.
2. DUTIES: Employee shall devote time and attention as required to the
------
performance of services in the Business as CHIEF EXECUTIVE OFFICER, and the
additional time that may be required of Employee for the administration and
management of the Business. Some of these duties are attached hereto and made a
part hereof on Schedule "A". Schedule "A" shall not be deemed a limitation of
other duties. Employee shall perform such duties as shall be reasonably
assigned to Employee by Employer.
It is understood by Employer that Employee is engaged in another
business or businesses which are not related to Employer. It is agreed and
understood by Employer that Employee shall be allowed to continue in said
business or businesses and conduct said business or businesses in property owned
or leased by Employer. It is also understood and agreed that the business of
Employer shall be the primary business of Employee.
3. COMPENSATION: Employee shall receive and Employer shall pay to
------------
Employee during the first year of the term of this Agreement a salary at the
rate of $300,000.00 per year, payable weekly in arrears. In addition, Employee
shall be paid, on an annual basis in arrears, a bonus of ten (10%) percent of
the net annual income of Employer. In addition, Employee may receive such
productivity,overtime and workload compensation as the Board
<PAGE>
of Directors may, from time to time, determine, said determination to be totally
within the discretion of said Board of Directors. In the event that the normal
salary above shall be changed at the end of any yearly term hereof, such changed
amount shall be set forth on Schedule "C" attached hereto, dated and signed by
both parties and made a part hereof.
4. EXPENSES: Employer recognizes that Employee will incur, from time to
--------
time, for Employer's benefit and in furtherance of Employer's Business, various
expenses; and Employer agrees either to pay directly, advance sums to Employee
to be used for expenses, or to reimburse Employee for expenses if approved by
Employer prior to incurring same as follows:
(a) Business association dues and memberships.
(b) State license fees.
(c) Business conventions and meeting expenses.
(d) Employee agrees to submit to Employer the documentation as may be
necessary to substantiate the deductibility of the foregoing
expenses for income tax purposes.
(e) Special expenses required for critical or emergency purposes
consistent with sustaining the services the business requires, as
determined by the Regional Director of Services ("Employee").
5. VACATION: Each year during this Agreement, Employee shall be entitled
--------
to a vacation so set forth in Schedule "C" attached hereto. Vacation and other
leave shall be taken on reasonable prior notice and at a time and manner not to
interfere with the proper operation of the Business. Unused vacation time may
not be carried over from year to year without Employer's written consent.
6. EQUIPMENT AND EXPENSES, INSURANCE AND AUTOMOBILES: Employer shall
-------------------------------------------------
provide and pay for suitable office space and facilities, furniture, fixtures,
equipment, supplies and other employees and assistance necessary or appropriate
for the Business, and, in addition, shall pay for or reimburse to Employee the
expenses provided for in Paragraph 4 above. In addition, Employer shall provide
Employee with a suitable automobile, suitable health and major medical
insurance, and suitable life insurance.
7. SALARY CONTINUATION: If Employee becomes physically or mentally
-------------------
disabled, Employee shall nonetheless receive the salary due hereunder for Twelve
(12) years, from the date of said disability. In the event of the death of
Employee, Employer agrees to pay the Employee's salary, to the estate of
Employee for a period of Ten (10) years after said death.
8. EMPLOYEE CONDUCT: Employee, at all times during this Agreement,
----------------
shall:
<PAGE>
(a) Observe and conform to all the laws, customs and principle of
ethics of the business;
(b) Comply with all of Employer's reasonable directions and orders in
the Business;
(c) Not disclose, except to Employer, any trade secrets or
information with respect to Employer, the Business, of any
clients thereof.
9. POLICY DECISIONS: It is understood that Employer shall have the sole
----------------
and exclusive right of management over the Business, said decisions to be taken
by vote of the Board of Directors pursuant to the By-Laws of the Corporation.
10. CONDITIONS OF TERMINATION: (1) the minimum term of this Agreement
-------------------------
shall be fifteen (15) years, unless earlier terminated by employee. (2) After
fifteen (15) years and unless otherwise agreed to in writing by Employer and
Employee, this Agreement shall terminate on the occurrence of any of the
following events:
(a) Employer feels, at Employer's sole discretion, that Employee
should be terminated only for just cause: e.g., theft,
inattentiveness to duties, lack of reasonable productiveness,
etc.;
(b) Upon the election to retire by Employee;
(c) At the death of Employee;
(d) Upon the unanimous vote of Employer's Board of Directors.
11. RESTRICTIVE COVENANTS: In consideration of good and valuable
---------------------
consideration, receipt of which is hereby acknowledged by Employee, and the
mutual promises herein set forth, Employee expressly covenants and agrees as
follows:
(a) Employee shall not at any time divulge to persons who are not
employees of Employer, any confidential information obtained by
Employee in the course of employment by Employer relating to the
Business, work products, financial or marketing plans or
personnel of Employer.
(b) In the event Employee's employment hereunder is terminated, on
the termination of Employee's services for Employer, Employee
shall immediately return to Employer all property in Employee's
possession belonging to Employer. Employee acknowledges that all
books, financial materials, manuals, records, client's lists and
other papers relating to the Business, at any time in Employee's
possession, are the property of Employer.
(c) During the term of Employee's employment hereunder and, for a
term of one and one-half (1-1/2) years
<PAGE>
thereafter, Employee shall not directly or indirectly, either on
behalf of Employee or on the behalf of any business venture, non-
profit organization, or any other entity, as an employee, agent,
consultant, partner, principal, stockholder, officer or
otherwise, without the prior written permission of Employer:
(i) own or manage or work for a company, individual, or
corporation which competes with Employer; or
(ii) recruit any employee or contractor of Employer or induce or
attempt to induce any Employee or contractor of Employer to leave the
employ of or terminate a relationship with Employer.
(d) The period of time during which Employee is prohibited from
engaging in certain activities pursuant to the terms of this
Paragraph 11 shall be extended by the length of time during which
Employee is in breach of the terms of this Paragraph 11.
(e) If Employee shall engage in the practices set forth in Paragraph
11(c) above within the time limited therein, or in violation of
the provisions of this Paragraph 11, termination of Employee's
employment shall be considered a termination for cause which will
result in great damage and loss to Employer. As liquidated
damages for loss suffered by Employer and not as punitive
damages, if Employee shall have violated the provisions hereof,
Employee shall pay to Employer the amount of the average of
Employee's last three (3) years salary, in addition to any other
remedies available to Employer hereunder by law, made and
provided.
(f) The provisions of this Paragraph 11 shall be regarded as
divisible and shall be operative both as to time and area covered
only to the extent that they are legally enforceable, and if any
of the provisions of this Paragraph 11 or any part hereof are
determined invalid or unenforceable, the ability and
enforceability of the remainder of this Paragraph 11 and of the
other terms and conditions of this Agreement shall not in any way
be affected thereby.
(g) Employee acknowledges that (i) the covenants contained in this
Paragraph 11 are a material factor in inducing Employer to enter
into this Employment Agreement; (ii) that Employee's
<PAGE>
services under this Agreement are unique and extraordinary; and
(iii) that Employee has and will have access to secret and
confidential information of the Employer. Without intending to
limit the remedies available to Employer if Employee violates the
terms of this Paragraph 11, Employer shall be entitled to
injunctive relief to restrain the breach or threatened breach or
otherwise to specifically enforce any of the covenants of this
Paragraph, in addition to such other remedies and relief which,
in the event of such breach, may be available to it.
12. SETTLEMENT AND ARBITRATION OF DISPUTES: Any dispute or controversy
--------------------------------------
arising under this Agreement shall be determined and settled by arbitration
under the rules of the American Arbitration Association. The arbitration award
shall be final and binding and judgment on the award may be entered by any court
having competent jurisdiction.
13. AMENDMENT: No modification, amendment, addition to, or termination of
---------
this Agreement, nor waiver of any of its provisions, shall be valid or
enforceable unless in writing and signed by all the parties.
14. BINDING AGREEMENT: This Agreement shall be binding upon and inure to
-----------------
the benefit of the parties hereto, their distributees, legal representatives,
successors, and assigns.
15. NOTICES: All notices under this Agreement shall be in writing and
-------
shall be served by personal service, or registered mail, return receipt
requested, and shall be addressed to each party at his residence or its business
address. Either party may notify the other party of a different address to
which notices shall be sent.
16. GOVERNING LAW: This Agreement shall be governed by the laws of the
-------------
State of Connecticut.
IN WITNESS WHEREOF, the parties have hereunto set their hands and seals as of
the date and year first above written.
Signed, Sealed and Delivered
in the presence of: SAFE ALTERNATIVES CORPORATION
OF AMERICA, INC. (Employer)
- -------------------- By:______________________________
(signature of RICHARD J. FRICKE, (Secretary)
Tracey Jackson) (signed)
- -------------------
(Signature of Sharlet
S. Wirzulis)
<PAGE>
STEPHEN J. THOMPSON (Employee)
- ------------------- ------------------------------
Tracey Jackson Stephen J. Thompson (signed)
- --------------------
Sharlet S. Wirzulis
STATE OF CONNECTICUT )
) SS.: RIDGEFIELD
COUNTY OF FAIRFIELD )
Personally appeared, Richard J. Fricke, Secretary of SAFE ALTERNATIVES
CORPORATION OF AMERICA, INC., Signer and Sealer of the foregoing Instrument, and
acknowledged the same to be his free act and deed, and the free act and deed of
said Corporation, before me.
----------------------------------
Sharlet S. Wirzulis, Notary Public
My Commission expires 2/28/97
(notary stamp)
STATE OF CONNECTICUT )
) SS.: RIDGEFIELD
COUNTY OF FAIRFIELD )
Personally appeared, Stephen J. Thompson, individually, Signer and Sealer
of the foregoing Instrument, and acknowledged the same to be his free act and
deed before me.
----------------------------------
Sharlet S. Wirzulis, Notary Public
My Commission expires 2/28/97
(notary stamp)
<PAGE>
SCHEDULE A
----------
All duties shall be consistent with the Chief Executive Officer.
<PAGE>
RESOLUTION
BE IT RESOLVED that the Board of Directors of Safe Alternatives Corporation
of America, Inc., hereby amend the employment contract of Stephen J. Thompson as
follows:
Said Employee, Stephen J. Thompson, shall, in addition to a Salary, receive
expense and automobile allowance of $1,000.00 per month. Additionally, Employee
shall receive a marketing incentive, payable quarterly, equal to one (1.0%)
percent of SAC's consolidated quarterly net revenues, (computed non-
cumulatively) in excess of $2.5 million, plus; a performance-based incentive,
payable quarterly, and equal in amount to (5%) percent of SAC's consolidated
corporate pre-tax earnings (computed non-cumulatively). This incentive shall be
paid in your discretion in a combination of cash and SAC's common shares at
their market value as of their issuance date, plus; a seniority bonus consisting
of a number of shares of SAC's common stock equal to one and one-half of (1.5%)
percent of the adjusted number ("Adjusted Number") of SAC's total shares
outstanding as of the end of each year during the term of your employment
contract, and issued within fifteen (15) days following the end of each contract
year. The Adjusted Number shall be equal to the total number of shares
outstanding, reduced by the amount of all shares issued to third parties in
consideration of employment agreements, consulting contracts, leases and asset
acquisitions (where these transactions are brought about without the benefit of
your direct active efforts and stewardship).
Dated at Danbury, Connecticut this 1st day of April, 1994.
s/Stephen J. Thompson
------------------------------
STEPHEN J. THOMPSON
s/Richard J. Fricke
------------------------------
RICHARD J. FRICKE
s/Robert F. Thompson
------------------------------
ROBERT F. THOMPSON
<PAGE>
EXHIBIT 10.10
EMPLOYMENT AGREEMENT
--------------------
AGREEMENT made effective the First day of August, 1993, by and between SAFE
ALTERNATIVES CORPORATION OF AMERICA, INC. (hereinafter called "Employer"), a
Delaware corporation with its principal offices in Ridgefield, Connecticut, and
RICHARD J. FRICKE (hereinafter called "Employee"), a resident of Wilton,
Connecticut.
WITNESSETH:
-----------
WHEREAS, Employer is a corporation engaged in several industries, and
wishes to employ Employee to render services to it; and
WHEREAS, Employee is willing to perform services for Employer, all in
accordance with the following terms, conditions and provisions.
NOW, THEREFORE, it is agreed that:
1. EMPLOYMENT: Effective from and after August 1, 1991, Employee shall
----------
faithfully serve Employer in the business of Employer (hereinafter called the
"Business"), until this association is terminated as provided in Paragraph 10
hereof.
2. DUTIES: Employee shall devote time and attention as required to the
------
performance of services in the Business as CORPORATE COUNSEL, and the additional
time that may be required of Employee for the administration and management of
the Business. Some of these duties are attached hereto and made a part hereof
on Schedule "A". Schedule "A" shall not be deemed a limitation of other duties.
Employee shall perform such duties as shall be reasonably assigned to Employee
by Employer.
It it understood by Employer that Employee is engaged in another
business or businesses which are not related to Employer. It is agreed and
understood by Employer that Employee shall be allowed to continue in said
business or businesses and conduct said business or businesses in property owned
or leased by Employer. It is also understood and agreed that the business of
Employer shall be the primary business of Employee.
3. COMPENSATION: Employee shall receive and Employer shall pay to
------------
Employee during the first year of the term of this Agreement a salary at the
rate of $300,000.00 per year, payable weekly in arrears. In addition, Employee
-----------
shall be paid, on an annual basis in arrears, a bonus of ten (10%) percent of
the net annual income of Employer. In addition, Employee may receive such
productivity,overtime and workload compensation as the Board
<PAGE>
of Directors may, from time to time, determine, said determination to be totally
within the discretion of said Board of Directors. In the event that the normal
salary above shall be changed at the end of any yearly term hereof, such changed
amount shall be set forth on Schedule "C" attached hereto, dated and signed by
both parties and made a part hereof.
4. EXPENSES: Employer recognizes that Employee will incur, from time to
--------
time, for Employer's benefit and in furtherance of Employer's Business, various
expenses; and Employer agrees either to pay directly, advance sums to Employee
to be used for expenses, or to reimburse Employee for expenses if approved by
Employer prior to incurring same as follows:
(a) Business association dues and memberships.
(b) State license fees.
(c) Business conventions and meeting expenses.
(d) Employee agrees to submit to Employer the documentation as may be
necessary to substantiate the deductibility of the foregoing
expenses for income tax purposes.
(e) Special expenses required for critical or emergency purposes
consistent with sustaining the services the business requires, as
determined by the Regional Director of Services ("Employee").
5. VACATION: Each year during this Agreement, Employee shall be entitled
--------
to a vacation so set forth in Schedule "C" attached hereto. Vacation and other
leave shall be taken on reasonable prior notice and at a time and manner not to
interfere with the proper operation of the Business. Unused vacation time may
not be carried over from year to year without Employer's written consent.
6. EQUIPMENT AND EXPENSES, INSURANCE AND AUTOMOBILES: Employer shall
-------------------------------------------------
provide and pay for suitable office space and facilities, furniture, fixtures,
equipment, supplies and other employees and assistance necessary or appropriate
for the Business, and, in addition, shall pay for or reimburse to Employee the
expenses provided for in Paragraph 4 above. In addition, Employer shall provide
Employee with a suitable automobile, suitable health and major medical
insurance, and suitable life insurance.
7. SALARY CONTINUATION: If Employee becomes physically or mentally
-------------------
disabled, Employee shall nonetheless receive the salary due hereunder for Twelve
(12) years, from the date of said disability. In the event of the death of
Employee, Employer agrees to pay the Employee's salary, to the estate of
Employee for a period of Ten (10) years after said death.
8. EMPLOYEE CONDUCT: Employee, at all times during this Agreement,
----------------
shall:
<PAGE>
(a) Observe and conform to all the laws, customs and principle of
ethics of the business;
(b) Comply with all of Employer's reasonable directions and orders in
the Business;
(c) Not disclose, except to Employer, any trade secrets or
information with respect to Employer, the Business, of any
clients thereof.
9. POLICY DECISIONS: It is understood that Employer shall have the sole
----------------
and exclusive right of management over the Business, said decisions to be taken
by vote of the Board of Directors pursuant to the By-Laws of the Corporation.
10. CONDITIONS OF TERMINATION: (1) the minimum term of this Agreement
-------------------------
shall be fifteen (15) years, unless earlier terminated by employee. (2) After
fifteen (15) years and unless otherwise agreed to in writing by Employer and
Employee, this Agreement shall terminate on the occurrence of any of the
following events:
(a) Employer feels, at Employer's sole discretion, that Employee
should be terminated only for just cause: e.g., theft,
inattentiveness to duties, lack of reasonable productiveness,
etc.;
(b) Upon the election to retire by Employee;
(c) At the death of Employee;
(d) Upon the unanimous vote of Employer's Board of Directors.
11. RESTRICTIVE COVENANTS: In consideration of good and valuable
---------------------
consideration, receipt of which is hereby acknowledged by Employee, and the
mutual promises herein set forth, Employee expressly covenants and agrees as
follows:
(a) Employee shall not at any time divulge to persons who are not
employees of Employer, any confidential information obtained by
Employee in the course of employment by Employer relating to the
Business, work products, financial or marketing plans or
personnel of Employer.
(b) In the event Employee's employment hereunder is terminated, on
the termination of Employee's services for Employer, Employee
shall immediately return to Employer all property in Employee's
possession belonging to Employer. Employee acknowledges that all
books, financial materials, manuals, records, client's lists and
other papers relating to the Business, at any time in Employee's
possession, are the property of Employer.
(c) During the term of Employee's employment hereunder and, for a
term of one and one-half (1-1/2) years
<PAGE>
thereafter, Employee shall not directly or indirectly, either on
behalf of Employee or on the behalf of any business venture, non-
profit organization, or any other entity, as an employee, agent,
consultant, partner, principal, stockholder, officer or
otherwise, without the prior written permission of Employer:
(i) own or manage or work for a company, individual, or
corporation which competes with Employer; or
(ii) recruit any employee or contractor of Employer or induce or
attempt to induce any Employee or contractor of Employer to leave the
employ of or terminate a relationship with Employer.
(d) The period of time during hich Employee is prohibited from
engaging in certain activities pursuant to the terms of this
Paragraph 11 shall be extended by the length of time during which
Employee is in breach of the terms of this Paragraph 11.
(e) If Employee shall engage in the practices set forth in Paragraph
11(c) above within the time limited therein, or in violation of
the provisions of this Paragraph 11, termination of Employee's
employment shall be considered a termination for cause which will
result in great damage and loss to Employer. As liquidated
damages for loss suffered by Employer and not as punitive
damages, if Employee shall have violated the provisions hereof,
Employee shall pay to Employer the amount of the average of
Employee's last three (3) years salary, in addition to any other
remedies available to Employer hereunder by law, made and
provided.
(f) The provisions of this Paragraph 11 shall be regarded as
divisible and shall be operative both as to time and area covered
only to the extent that they are legally enforceable, and if any
of the provisions of this Paragraph 11 or any part hereof are
determined invalid or unenforceable, the ability and
enforceability of the remainder of this Paragraph 11 and of the
other terms and conditions of this Agreement shall not in any way
be affected thereby.
(g) Employee acknowledges that (i) the covenants contained in this
Paragraph 11 are a material factor in inducing Employer to enter
into this Employment Agreement; (ii) that Employee's
<PAGE>
services under this Agreement are unique and extraordinary; and
(iii) that Employee has and will have access to secret and
confidential information of the Employer. Without intending to
limit the remedies available to Employer if Employee violates the
terms of this Paragraph 11, Employer shall be entitled to
injunctive relief to restrain the breach or threatened breach or
otherwise to specifically enforce any of the covenants of this
Paragraph, in addition to such other remedies and relief which,
in the event of such breach, may be available to it.
12. SETTLEMENT AND ARBITRATION OF DISPUTES: Any dispute or controversy
--------------------------------------
arising under this Agreement shall be determined and settled by arbitration
under the rules of the American Arbitration Association. The arbitration award
shall be final and binding and judgment on the award may be entered by any court
having competent jurisdiction.
13. AMENDMENT: No modification, amendment, addition to, or termination of
---------
this Agreement, nor waiver of any of its provisions, shall be valid or
enforceable unless in writing and signed by all the parties.
14. BINDING AGREEMENT: This Agreement shall be binding upon and inure to
-----------------
the benefit of the parties hereto, their distributees, legal representatives,
successors, and assigns.
15. NOTICES: All notices under this Agreement shall be in writing and
-------
shall be served by personal service, or registered mail, return receipt
requested, and shall be addressed to each party at his residence or its business
address. Either party may notify the other party of a different address to
which notices shall be sent.
16. GOVERNING LAW: This Agreement shall be governed by the laws of the
-------------
State of Connecticut.
IN WITNESS WHEREOF, the parties have hereunto set their hands and seals as of
the date and year first above written.
Signed, Sealed and Delivered
in the presence of: SAFE ALTERNATIVES CORPORATION
OF AMERICA, INC. (Employer)
s\Tracey Jackson By: s\Stephen J. Thompson
------------------- --------------------------------
STEPHEN J. THOMPSON, (President)
s\Sharlet S. Wirzulis
-----------------------
<PAGE>
s\Tracey A. Jackson s\Richard J. Fricke
-------------------- -------------------
RICHARD J. FRICKE (Employee)
STATE OF CONNECTICUT )
) SS.: RIDGEFIELD
COUNTY OF FAIRFIELD )
Personally appeared, Richard J. Fricke, Secretary of SAFE ALTERNATIVES
CORPORATION OF AMERICA, INC., Signer and Sealer of the foregoing Instrument, and
acknowledged the same to be his free act and deed, and the free act and deed of
said Corporation, before me.
----------------------------------
Sharlet S. Wirzulis, Notary Public
My Commission expires 2/28/97
(notary stamp)
STATE OF CONNECTICUT )
) SS.: RIDGEFIELD
COUNTY OF FAIRFIELD )
Personally appeared, Stephen J. Thompson, individually, Signer and Sealer
of the foregoing Instrument, and acknowledged the same to be his free act and
deed before me.
----------------------------------
Sharlet S. Wirzulis, Notary Public
My Commission expires 2/28/97
(notary stamp)
<PAGE>
SCHEDULE A
----------
All duties shall be consistent with Corporate Counsel.
<PAGE>
RESOLVED
BE IT RESOLVED that the Board of Directors of Safe Alternatives Corporation
of America, Inc., hereby amend the employment contract of Richard J. Fricke as
follows:
Said Employee, Richard J. Fricke, shall, in addition to a Salary, receive
expense and automobile allowance of $1,000.00 per month. Additionally, Employee
shall receive a marketing incentive, payable quarterly, equal to one (1.0%)
percent of SAC's consolidated quarterly net revenues, (computed non-
cumulatively) in excess of $2.5 million, plus; a performance-based incentive,
payable quarterly, and equal in amount to (5%) percent of SAC's consolidated
corporate pre-tax earnings (computed non-cumulatively). This incentive shall be
paid in your discretion in a combination of cash and SAC's common shares at
their market value as of their issuance date, plus; a seniority bonus consisting
of a number of shares of SAC's common stock equal to one and one-half of (1.5%)
percent of the adjusted number ("Adjusted Number") of SAC's total shares
outstanding as of the end of each year during the term of your employment
contract, and issued within fifteen (15) days following the end of each contract
year. The Adjusted Number shall be equal to the total number of shares
outstanding, reduced by the amount of all shares issued to third parties in
consideration of employment agreements, consulting contracts, leases and asset
acquisitions (where these transactions are brought about without the benefit of
your direct active efforts and stewardship).
Dated at Danbury, Connecticut this 1st day of April, 1994.
s/Richard J. Fricke
------------------------------
RICHARD J. FRICKE
s/Stephen J. Thompson
------------------------------
STEPHEN J. THOMPSON
s/Robert F. Thompson
------------------------------
ROBERT F. THOMPSON
<PAGE>
EXHIBIT 10.11
EMPLOYMENT AGREEMENT
--------------------
AGREEMENT made effective this 31st day of January, 1996, by and between
SAFE ALTERNATIVES CORPORATION OF AMERICA, INC. (hereinafter called "SAC" or
"Employer"), a Florida Corporation with an office in Ridgefield, Conneticut, and
ROBERT F. THOMPSON, (hereinafter called "EMPLOYEE"),
WITNESSETH:
-----------
WHEREAS, Employer is a corporation engaged in several industries, and
wishes to employ Employee to render services to it; and
WHEREAS, Employee is willing to perform services for Employer, all in
accordance with the following terms, conditions and provisions.
NOW, THEREFORE, it is agreed that:
1. EMPLOYMENT: Effective from and after January 31st, 1996, Employee
shall faithfully serve Employer in the business of Employer (hereinafter called
"Business"), until this association is terminated as provided herein. It is
agreed that this Agreement shall be for a minimum period of four (4) years, and
renewed annually thereafter by mutual agreement.
2. DUTIES: Employee shall devote time and attention as required to the
performance of services in the Business as Employee for the Employer in the
areas of Chief Financial Officer and the additional time that may be required of
Employee for the administration and management of the Business. Some of these
shall not be deemed a limitation of other duties. Employee shall perform such
duties as shall be reasonably assigned to Employee by Employer.
It is understood by Employer that Employee is engaged in another
business or businesses which are not related to Employer. It is understood by
Employer that Employee shall be allowed to continue in said business or
businesses and conduct said business or businesses in property owned or leased
by Employer. It is also understood and agreed that the business of Employer
shall be the primary business of Employee.
3. COMPENSATION: Employee shall receive and Employer shall pay to
Employee during the first year of the term of this Agreement a salary at the
rate of $125,000.00 per year payable in bi-weekly arrears plus automobile
allowance of $400.00 per month. The base salary shall be reviewed annually for
amount in arrears. In addition, Employee may receive such productivity,
overtime and
<PAGE>
workload compensation as the Board of Directors may, form time to time,
determine, said determination to be totally within the discretion of said Board
of Directors. Additionally, at the sole mention of the Employee, Employee shall
be entitled to be insured under Employee's health insurance coverage. In the
event that the normal salary above shall be changed at the end of any yearly
term hereof, such changed amount shall be set forth on Schedule "B" attached
hereto, dated and signed by both parties and made a part hereof.
4. EXPENSES: Employer recognizes that Employee will incur, from time to
time, for Employer's benefit and in furtherance of Employer's business, various
expenses, and Employer agrees either to pay directly, advance sums to Employee
to be used for expenses, or to reimburse Employee for expenses if approved by
Employer prior to incurring same as follows:
a. Business association dues and memberships.
b. State License fees.
c. Business conventions and meeting expenses.
d. Employee agrees to submit to Employer the documentation
as may be necessary to substantiate the deductibility of the
foregoing expenses for income tax purposes.
5. VACATION: Each year during this Agreement, Employee shall be entitled
to a vacation so set forth in Schedule "C" attached hereto. Vacation and other
lease shall be taken on reasonable prior notice, and at a time and manner not to
interfere with the proper operation of the Business. Unused vacation time shall
not be carried over from one year to the next without written consent from
Employer.
6. EQUIPMENT AND EXPENSES: Employer shall provide and pay for suitable
office space and facilities, furniture, fixtures, equipment, supplies and
assistance necessary or appropriate for the Business, and, in addition, shall
pay for or reimburse to Employee the expenses provided for in paragraph 4 above.
7. SALARY CONTINUATION: If Employee becomes physically or mentally
disabled, so as not to be able to perform Employee's full time regular duties in
the Business contemplated by this Agreement, and if Employee returns to active
duties in the Business but does not devote full time to same, Employee shall
receive a salary as determined by mutual agreement pursuant to paragraph 3 of
this Agreement as to what employee's reduced time bear to full time regular
duties.
8. EMPLOYEE CONDUCT: Employee, at all times during this Agreement, shall:
a. Observe and conform to all the laws, customs and ethical principles of
the Business and SAC;
<PAGE>
b. Comply with all of Employer's reasonable directions concerning the
Business;
C. Not disclose, except to Employer, any trade secrets or information
with respect to Employer, the Business, or any clients thereof.
9. POLICY DECISIONS: It is understood that Employer shall have the sole
and exclusive right of management over the Business, said decisions to be made
by vote of SAC's Board of Directors pursuant to the By-Laws of the Corporation.
10. RESTRICTIVE COVENANTS: In consideration of good and valuable
consideration, the receipt and adequacy which is hereby acknowledged by
Employee, as well as for the mutual promises herein set forth, Employee
expressly covenants and agrees as follows:
a. Employee shall not at any time divulge to persons who are not
employees of Employer, any confidential information obtained by
Employee in the course of employment by Employer relating to the
Business, work products, financial or marketing plans or personnel of
Employer.
b. In the event Employee's employment hereunder is terminated, on the
termination Employee's services for Employer, Employee shall
immediately return to Employer all property in Employee's possession
belonging to Employer. Employee acknowledges that all books,
financial material, manuals, records, client lists, supplier lists and
other papers relating to the Business, at any time in Employee's
possession, are the property of Employer.
c. During the term of Employee's employment hereunder and, for a term of
one and one-half (1-1/2) years thereafter, Employee shall not directly
or indirectly, either on behalf of Employee or onthe behalf of any
business venture, non-profit organization, or any other entity, as an
Employee, agent, partner, principal, stockholder, officer or
otherwise, without the prior written permission of Employer:
i. own or manage or work for a company, individual, or corporation which
competes with Employer, or
ii. recruit any employee or contractor of Employer or induce or attempt to
induce any employee or contractor of Employer to leave the employ of or
terminate a relationship with Employer.
d. The period of time during which Employee is prohibited from engaging
in certain activities pursuant to the
<PAGE>
terms of this paragraph 8 shall be extended by the length of time
during which Employee is in breach of the terms of this Paragraph 8.
e. If Employee shall engage in the practices set forth in Paragraph 8
above within the time limited therein, or in violation of the
provisions of this Paragraph 8, termination of Employee's employment
shall be considered a termination for cause which will result in great
damage and loss to Employer.
f. The provisions of this Paragraph 8 shall be regarded as divisible and
shall be operative both as to time and area covered only to the extent
that they are legally enforceable, and if any of the provisions of
this Paragraph 8 or any part hereof are determined invalid or
enforceable, the ability and enforceability of the remainder of this
Paragraph 8 and of the other terms and conditions of this Agreement
shall not in any way be affected thereby.
g. Employee acknowledges that (i) the covenants contained in this
Paragraph 8 are a material factor or in inducing Employer to enter
into this Agreement; (ii) that Employee's services under this
Agreement are unique and extraordinary; and (iii) that Employee has
and will have access to secret and confidential information of the
Employer.
Without intending to limit the remedies available to Employer if
Employee violates the terms of this Paragraph 8, Employer shall be entitled to
injunctive relief to restrain the breach or threatened breach or otherwise to
specifically enforce any of the covenants of this Paragraph in addition to such
other remedies and relief which, in the event of such breach, may be available
to it.
11. SETTLEMENT AND ARBRITATION OF DISPUTES: Any dispute or controversy
arising under this Agreement shall be determined and settled by binding
arbritation under the rules of the American Arbritation Association. The
arbritation award shall be final and binding and judgment on the award by any
court having competent jurisdiction.
12. AMENDMENT: No modification, amendment, addition to , or termination
of this Agreement, nor waiver of any kind of its provisions, shall be valid or
enforcable unless in writing and signed by both parties hereto.
13. BINDING AGREEMENT: This Agreement shall be binding upon and inure
to the benefit of the parties hereto, thier distributees, legal representatives,
successors, and assigns.
<PAGE>
14. NOTICES: All notices under this Agreement shall be in writing and
shall be served by personal service, or registered mail, return receipt
requested, and shall be addressed to each party at this residence or its
business address. Either party may notify the other party of a different
address to which notices shall be sent.
15. GOVERNING LAW: This Agreement shall be governed by the laws of the
State of Connecticut.
IN WITNESS WHEREOF, the parties have hereunto set their hands and seals as of
the date and year first above written.
Signed, Sealed and Delivered
in the presence of :
__________________________ SAFE ALTERNATIVES CORPORATION
OF AMERICA, INC.
__________________________ BY ____________SIGNED
STEPHEN J. THOMPSON, its President
_________________________ Employee
_________________________ _____________SIGNED
STATE OF CONNECTICUT
SS. RIDGEFIELD
COUNTY OF FAIRFIELD
Personally appeared Signer, and Sealer of the foregoing Instrument, and
acknowledged the same to be his free act and deed, before me.
____________________
STATE OF CONNECTICUT
SS. RIDGEFIELD
COUNTY OF FAIRFIELD
Personally appeared STEPHEN J. THOMPSON, President of SAFE ALTERNATIVES
CORPORATION OF AMERICA, INC., and acknowledged the same to be his free act and
deed, and the free act and deed of said corporation, before me.
________________________
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE AUDITED
FINANCIAL STATEMENTS OF SAFE ALTERNATIVES CORPORATION OF AMERICA, INC. (THE
"COMPANY") FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995 AND THE UNAUDITED
FINANCIAL STATEMENTS OF THE COMPANY FOR THE SIX MONTH PERIOD ENDED JUNE 30, 1996
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> YEAR 6-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1996
<PERIOD-START> JAN-01-1995 JAN-01-1996
<PERIOD-END> DEC-31-1995 JUN-30-1996
<CASH> 12,331 26,834
<SECURITIES> 0 0
<RECEIVABLES> 11,209 17,725
<ALLOWANCES> 0 0
<INVENTORY> 3,968 17,865
<CURRENT-ASSETS> 38,230 100,590
<PP&E> 260,714 278,409
<DEPRECIATION> 119,570 136,398
<TOTAL-ASSETS> 141,144 142,011
<CURRENT-LIABILITIES> 574,023 429,339
<BONDS> 0 0
0 0
0 0
<COMMON> 850 850
<OTHER-SE> (351,167) (149,338)
<TOTAL-LIABILITY-AND-EQUITY> 223,706 280,851
<SALES> 38,359 37,661
<TOTAL-REVENUES> 38,359 37,661
<CGS> 15,554 23,868
<TOTAL-COSTS> 2,479,972 1,334,417
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> (2,441,613) (1,296,756)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (2,441,613) (1,296,756)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (2,441,613) (1,296,756)
<EPS-PRIMARY> (.36) (.16)
<EPS-DILUTED> (.36) (.16)
</TABLE>
