SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10
GENERAL FORM FOR REGISTRATION OF SECURITIES
Under Section 12(b) or 12(g) of
The Securities Exchange Act of 1934
EUROTECH, LTD.
(Exact name of registrant as specified in its charter)
District of Columbia 33-0662435
-------------------- ----------
(State or other Jurisdiction I.R.S. Employer
of incorporation or organization) Identification No.
1200 Prospect Street, Suite 425, LaJolla, California 92037
- ---------------------------------------------------- -----
(Address of principal executive offices) (Zip code)
Registrant's telephone number, 619-551-6844
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
None _________
Securities to be registered pursuant to Section 12(g) of the Act:
Common Stock
(Title of Class)
Common Stock, Par Value $.00025 Per Share
<PAGE>
TABLE OF CONTENTS
Page
----
PART I .................................................................... 1
ITEM 1. DESCRIPTION OF BUSINESS .......................................... 1
ITEM 2. SELECTED FINANCIAL DATA; MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION................................ 14
ITEM 3. PROPERTIES ....................................................... 18
ITEM 4. SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL
OWNERS AND MANAGEMENT............................................. 18
ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS ................................. 29
ITEM 6. EXECUTIVE COMPENSATION ........................................... 20
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS...................................................... 21
ITEM 8. LEGAL PROCEEDINGS ................................................ 23
ITEM 9. MARKET PRICE AND DIVIDENDS OF THE
REGISTRANT'S COMMON EQUITY AND OTHER
STOCKHOLDER MATTERS............................................... 23
ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES .......................... 25
ITEM 11. DESCRIPTION OF SECURITIES TO BE
REGISTERED........................................................ 26
ITEM 12. INDEMNIFICATION OF DIRECTORS AND
OFFICERS.......................................................... 26
ITEM 13. FINANCIAL STATEMENTS AND
SUPPLEMENTARY DATA................................................ 27
ITEM 14. CHANGES IN AND DISAGREEMENTS
WITH ACCOUNTANTS.................................................. 27
PART F/S................................................................... F-1
PART III................................................................... 28
ITEM 15. EXHIBIT INDEX..................................................... 28
<PAGE>
PART I
ITEM 1. DESCRIPTION OF BUSINESS
GENERAL
Eurotech, Ltd. (the "Company"), which was incorporated in May, 1995, under
the laws of the District of Columbia, is a technology transfer, holding and
management company formed to commercialize new, existing but previously
unrecognized, and previously "classified" technologies, with a particular
emphasis on those developed by prominent research institutes and individual
researchers in the former Soviet Union, and to license those and other Western,
technologies for business and other commercial applications in Central Europe,
Eastern Europe, Ukraine, Russia, and North America. Since the Company's
formation its senior executives and consultants have been, through their
technology management expertise, active in identifying monitoring, reviewing and
assessing such technologies for their commercial applicability and potential.
Through this continuing process, the Company has acquired, and expects in the
future to acquire, rights to selected technologies by purchase, assignments, and
licensing arrangements. The Company operates its business by licensing its
technologies to end-users and through development and operating joint ventures
and strategic alliances.
The Company's plan of operation for the next twelve months will consist of
activities principally aimed at identifying, evaluating and acquiring rights to
the forgoing technologies; funding development for the on-site testing of its
silicon-organic compound technology in the contemplated remediation of
radioactive contamination; introducing its waste-to-energy technology in
Ukraine; introducing its automated parking garage technology in Moscow, Russia;
continued funding of the development of silicon-carbide, computer chip "wafer"
technology; and seeking to establish further strategic partnerships and joint
ventures for the development, marketing, sales, licensing and manufacturing of
the Company's existing and proposed technologies.
The Company has identified a number of technology acquisition and
commercialization opportunities afforded by the break-up and subsequent
reconfiguration of the former Soviet Union. In particular, pursuant to an
agreement between "Ukrstroj" (the Ukrainian State Construction Company) and the
Chernobyl Nuclear Power Plant, the Company will provide financing for the
on-site demonstration testing of its proprietary silicon-organic (EKOR) compound
technology in remediating the severe radioactive contamination problems that
persist from the 1986 reactor explosion at Chernobyl, Ukraine. The Company
believes its silicon-organic (EKOR) compound technology is the most effective
existing technology and material for containing and facilitating the disposal of
radioactive dust and other radioactive waste materials. The Company also has
entered into a technology licensing agreement with Arbat American Autopark,
Ltd., a Delaware corporation which is a 50% equity-holder in "Cinema World on
Arbat," a Russian joint stock company organized to develop, own and operate one
or more high-tech, automated parking garages in Moscow that use the Company's
automated parking technology; and has entered into technology transfer and other
agreements with Eurowaste Management, Ltd., a Delaware corporation
("Eurowaste"), for the development, construction and operation of
technologically advanced waste-to-energy generation plants in Ukraine, utilizing
the only technology currently approved for that purpose by the Ukrainian
government. Eurowaste has together with "Cherkassystroi", a Ukrainian
construction company, formed "Energy Ecology Construction Company," a Ukrainian
joint stock company, for the purpose of constructing and owning those plants.
<PAGE>
In addition, the Company presently is participating in the development of
silicon carbide "wafer" technology, which is in the late research and
development stage, in conjunction with the I.V. Kurchatov Institute
("Kurchatov") in Moscow, Russia, and the Euro-Asian Physical Society ("EAPS").
To date, the Company has provided approximately U.S. $80,000 in financing to
Kurchatov in connection with this technology. Although no assurance can be
given, the Company presently expects that upon the successful completion of its
development, all intellectual property, marketing and sales rights in and to the
silicon carbide "wafer" technology will be assigned to the Company. While there
is no assurance that such technology will be successfully developed, based on
reports from Kurchatov, the Company believes the silicon carbide technology will
permit the production of defect-free, radiation-resistant "wafers" (from which
integrated circuit chips are fabricated) that will be approximately twice the
size of those currently available. The Company expects that integrated circuit
chips fabricated from its silicon carbide wafers will have particular
application in high temperature environments such as automobile and aircraft
engine control systems, high power environments such as power control
transistors, and environments subject to ionizing radiation such as spacecraft.
The Company also is negotiating an agreement with the Technion Israel
Institute of Technology ("Technion") and the government of Israel for the
establishment of a technology incubator (the "Technion Incubator") to be
operated in cooperation with Technion Entrepreneureal Incubator, Ltd. ("TEI"),
an Israeli corporation controlled by Technion. It is expected that pursuant to
such agreement the Israeli government will provide 80% and the Company will
provide 20% of the financing required for research and development projects
selected by the Company, and that the Company will be granted a 20% equity
interest in, and exclusive, world-wide marketing rights for all resulting
technologies. In furtherance of this venture, the Company has opened an office
at the premises of TEI in Haifa, Israel, and has identified four present and six
potential technology development projects for inclusion in the Technion
Incubator. The Company expects to provide approximately U.S. $310,000 in
financing for the same in fiscal year 1997. There can be no assurance that these
or any other development projects will result in useful technologies or that the
same will be commercially saleable or profitable.
Silicon-Organic Compound. The Company's silicon-organic (EKOR) compound
technology was jointly developed by scientists at the I.V. Kurchatov Institute
("Kurchatov") in Moscow and the Euro- Asian Physical Society ("EAPS") for the
conservation and containment of ecologically hazardous radioactive materials.
The EKOR compound is based on radiation-resistant compounds produced from
silicon-organic elastomers. Kurchatov is a pre-eminent physics and scientific
research institute, which in the former Soviet Union enjoyed a position of
prestige, sophistication and importance roughly equivalent to that of the
Lawrence-Livermore National Laboratory in the United States. EAPS is a
professional society of over 5,000 scientists, physicists, and engineers in the
former Soviet Union. Until August 1, 2014, the Company is the exclusive licensee
of all right, title and interest (inclusive of all patent and other intellectual
property rights) in and to the EKOR technology in Canada, China, Japan, the
Republic of Korea, the United States of America, Ukraine, and all member
countries of the European Patent Agreement. See Item 7. "Certain Relationships
and Related Transactions - Silicon-Organic (EKOR) Compound."
The Company expects that the first commercial use of its EKOR compound
technology will be to contain and stabilize the extensive radioactive debris and
dust that continues to accumulate and contaminate the environment at Reactor 4
of the Chernobyl Nuclear Power Plant in Ukraine, the site of a disastrous
explosion and near-reactor core meltdown in 1986, and to help structurally
support the concrete and steel "sarcophagus" that was built over Reactor 4 as an
interim containment measure. The rapid deterioration of the "sarcophagus,"
caused by the intense radiation persisting at Reactor 4, has occasioned
international concern that without the implementation of effective site
containment measures,
- 2 -
<PAGE>
a second nuclear disaster and possible melt-down is likely to occur. To this
end, the G-7 group of industrialized nations (the United States, United Kingdom,
Italy, France, Canada, Japan and Germany) has pledged up to U.S. $3.1 billion to
assist in a multi-step project of remediating and closing the plant, with
approximately U.S. $300 million budgeted for the project's first containment and
site stabilization phase. Pursuant to an agreement with Kurchatov Research
Holdings, Ltd. ("KRH") a Delaware corporation jointly owned by ERBC Holdings,
Ltd., a Delaware corporation, ("ERBC") and individual Russian scientists,
researchers and academics who are affiliated with Kurchatov and EAPS, 50% of the
net profits derived from the sale of the EKOR compound for the Chernobyl project
will be retained by the Company, and 50% will be remitted to KRH. Two employees
of ERBC are beneficial owners of shares of the Company's Common Stock, and the
chief Executive Officer of ERBC is the beneficial owner of 17.07% of the
Company's outstanding Common Stock. See Item 4. "Security Ownership of Certain
Beneficial Owners and Management" and Item 7. "Certain Relationships and Related
Transactions."
In testing conducted at Kurchatov, the EKOR compound has been shown to be
highly resistant to radiation and structural degradation through exposure to
radiation, highly fire-resistant, water-proof, and capable of being formulated
in densities that display considerable structural strength and weight-bearing
properties (based on testing to date) of 100 lbs. per square inch. In
high-dosage radiation tests the EKOR compound has met or exceeded all
specifications for containment materials developed by the Chernobyl authorities.
The Company believes that the EKOR compound is the most technologically advanced
material for comprehensively containing radioactive materials, suppressing
radioactive dust and preventing such materials and dust from escaping into the
atmosphere and from leaching into and contaminating ground-water supplies.
Based on the properties demonstrated by the EKOR compound, which the
Company believes to be the only material presently considered by the Chernobyl
authorities as a solution to the containment problems posed by the Reactor 4
disaster, the Chernobyl Nuclear Power Station (an industrial amalgamation of the
State Committee of Ukraine on Atomic Energy), hereinafter referred to as
"ChNPP"), Kurchatov, "Ukrstroj" (the Ukrainian State Construction Corporation)
and the Company have entered into a Memorandum of Intent (the "Chernobyl
Memorandum of Intent") which acknowledges the successful completion of the
laboratory development of EKOR compound applicable to the radioactive
contamination remediation of Chernobyl Reactor 4, and sets forth the intention
of ChNPP to enter into a "co-operation agreement" with the Company pursuant to
which the Company will provide the financing for the development of an on-site
demonstration of the EKOR compound, in conjunction with ChNPP, "Ukrstroj" and
Kurchatov, which will provide the test sites, compound application equipment and
technical support, respectively. In furtherance of the foregoing, "Ukrstroj" and
ChNPP have entered into an agreement (the "Ukrstroj"-ChNPP Agreement") to
conduct such on-site demonstration testing of the EKOR compound as is necessary
to ascertain the specification requirements for its application to the
containment of ChNPP Reactor 4. The "Ukrstroj"-ChNPP Agreement provides for the
Company's participation in and financing of the EKOR demonstration test, which
the Company has agreed to pursuant to the aforesaid Co-operation Agreement
entered into by the Company, "Ukrstroj," and EAPS. The Company estimates that
total financing costs for the demonstration test will not exceed U.S. $100,000.
Although no assurance can be given, based on the Chernobyl Memorandum of Intent,
the "Ukrstroj"-ChNPP Agreement, the Co-operation Agreement, and the Company's
ownership of all right, title and interest to the EKOR technology, the Company
believes that it will be appointed the contract vendor of the EKOR compound for
the ChNPP Reactor 4 remediation project. The on-site demonstration is expected
to be conducted in April, 1997.
In addition, further applications of the EKOR technology are being
developed and tested at three sites in Russia: Sverdlosk Chimmash (a major
development, production and testing facility for nuclear,
- 3 -
<PAGE>
chemical and related equipment), Chelyabinsk Mayak (a plutonium production site)
and Kola (a disposal site for nuclear fuel from atomic-powered ships and
submarines).
Waste-to-Energy Technology. The Company's waste-to-energy technology is a
combination of "low- tech" mechanical technologies, "high-tech" combustion
controls, modern emissions abatement technology and effective operation
procedures configured into modules that produce steam energy from ordinary
municipal waste. The basic configuration was pioneered in 1980 by the U.S.
National Aeronautics and Space Administration ("NASA") and the city of Hampton,
Virginia, to provide steam power for NASA's Langley Research Center and the
Langley Air Force Base.
Steam energy produced by the waste-to-energy technology is clean,
efficient and environmentally "friendly". A typical modular unit burns 120 tons
of refuse per day and produces 33,000 pounds of steam per hour at 400 psi.
Pollutant levels are below present U.S. Environmental Protection Agency
minimums, and each modular unit reduces the volume of raw waste to ash at a
ratio of 10:1.
Through a consulting agreement with Hunter Taylor, the President of Power
Development Associates, Inc., the original designer of the NASA City of Hampton
facility, the Company has obtained the engineering and implementation know-how,
and has identified willing suppliers of component equipment for the
waste-to-energy technology, including Detroit Stoker, a leading manufacturer of
waste-to-energy stokers and a leading project management company for the
engineering and construction of waste-to-energy plants. Detroit Stoker has
informally agreed to act as the engineering project lead for the Company's
waste-to-energy projects, which the Company believes will enable it to
efficiently design and construct waste-to-energy plants customized to meet the
varying energy generation needs of disparate municipalities.
The Company intends to first introduce its waste-to-energy technology in
the city of Cherkassy, Ukraine, where the National Government has selected this
technology as the national standard for waste-to-energy facilities, and has
approved the construction of ten such facilities using the Company's
waste-to-energy technology. As part of that over-all approval, and pursuant to
the request of the Ukrainian government, a Ukrainian-American joint stock
company, "Energy Ecology Construction Company," ("Energy Ecology") has been
formed to construct, own and operate these energy generation plants. Energy
Ecology is equally owned by Eurowaste Management, Ltd., a Delaware corporation
("EuroWaste") and, pursuant to the request of the Ukrainian Cabinet of
Ministers, "Cherkassystroi," the largest privately-owned construction company in
Ukraine. The Company has entered into a technology transfer and consulting
agreement with Eurowaste under which Eurowaste will pay the Company a U.S. $2.4
million technology transfer fee prior to the construction of the first
waste-to-energy plant, and a design and implementation consulting fee of U.S.
$425,000 for each subsequent plant. A shareholder and director of the Company is
the chairman, Chief Executive Officer and a shareholder of Eurowaste. See Item
4. "Security Ownership of Certain Beneficial Owners and Management," and Item 7.
"Certain Relationships and Related Transactions."
The necessary Ukrainian governmental approvals for the Cherkassy
waste-to-energy facility have been obtained, including local site allocation and
construction approvals. A large fertilizer production enterprise, "AZOZ", in
Cherkassy has agreed to purchase the entire output of the Cherkassy
waste-to-energy facility at rates of U.S. $.04-$.06 per kilowatt hour.
The Company believes that the present and projected future waste
management and energy needs of Ukraine present a significant commercial
opportunity. Ukrainian governmental officials have acknowledged that
municipalities have become reluctant to locate waste dump sites within municipal
- 4 -
<PAGE>
boundaries, because of potential ecological and public health risks, and have
also acknowledged that the relative lack of local fuel resources has impaired
Ukraine's energy production capabilities, generally. In the Company's view, the
waste-to-energy technology's efficiency and low pollution levels, combined with
its use of an abundant, inexpensive, but previously under-utilized fuel source,
presents a comprehensive solution to these problems. Based on discussions with
local and national Ukrainian governmental officials, and although no assurances
can be given, the Company estimates that the municipal energy requirements of
Ukraine will support up to 70 facilities based on the waste-to-energy
technology.
Automated Parking Garages. The Company has identified vendors of, and has
adapted, automated parking garage technologies for the multiple applications
required for garage sites in Moscow, Russia.
Automated parking technology consisting of computer-controlled, rotating
carousels which can be configured to contain varying numbers of automobile
parking spaces, substantially reduces the economically unproductive space
devoted to ramps and maneuvering areas in traditional, multi-story parking
garages, and through the use of elevators and multi-level "stacking" of the
carousels, permits the erection of high-capacity garages on parcels of land
otherwise too small for such use. The Company believes that its automated
parking technology is particularly useful in congested urban areas and in cities
where available land for parking is scarce.
The Company is introducing its automated parking technology in Moscow,
Russia, which, particularly since the collapse of the former Soviet Union and
the subsequently increased pace of political and economic reforms, has
experienced a substantial increase in automobile ownership and traffic
congestion. Additionally, there is a relative scarcity of existing parking
spaces and construction sites of a size suitable for traditionally designed
parking garage facilities in Moscow. The municipal government of Moscow has
allocated a suitable construction site for the Company's intended, initial
automated parking venture, located at Arbat 8-10. Arbat is one of the City of
Moscow's principal commercial districts.
The Moscow automated parking garage will be developed, owned and operated
by "Cinema World on Arbat," a Russian joint stock company, the equity of which
is owned 50% by Arbat American Autopark, Ltd., a Delaware corporation ("Arbat
American"), 45% by "Soyuz Agat Fil," a Russian company to which the Moscow
municipal government has allocated the construction site and which holds the
necessary construction approvals and permits, and 5% by a privately owned
Russian affiliate of "Mosinterstroi". "Mosinterstroi" is a quasi-governmental
entity of the City of Moscow. 40% of the equity of Arbat American is owned by
ERBC Holdings, Ltd., a Delaware corporation ("ERBC"). Two employees of ERBC are
beneficial owners of shares of the Company's Common Stock, and the chief
executive officer of ERBC is the beneficial owner of 17.07% of the Company's
outstanding Common Stock. One of the directors of Arbat American is a
shareholder of the company's Common Stock, and another individual, who is a
director and the president of Arbat American, is a director and officer of the
Company and a shareholder of the Company's Common Stock. The Company has entered
into a technology license agreement with Arbat American pursuant to which the
Company will receive, prior to construction, a one-time royalty of U.S. $1,250
for each parking space to be contained in the automated parking facility and in
any garage facilities that in the future are developed, owned and/or operated by
Arbat American that use the Company's automated parking technology. The Company
presently estimates that, when completed, the Moscow automated parking garage
will contain 240 parking spaces. See Item 1. "Description of Business - Risk
Factors - Conflicts of Interest," Item 4. "Security Owernship of Certain
Beneficial Owners and Management," Item 5. "Directors and Executive Officers,"
and Item 7. "Certain Relationships and Related Transactions."
The Company is not a subsidiary of another corporation, entity or other
person. The Company does not have any subsidiaries.
- 5 -
<PAGE>
RISK FACTORS
Cautionary Statement for Purposes of the "Safe Harbor" Provisions of The Private
Securities Litigation Reform Act of 1995.
The United States Private Securities Litigation Reform Act of 1995
provides a new "safe harbor" for certain forward-looking statements. The
following factors set forth under "Risk Factors" among others, could cause
actual results to differ materially from those contained in forward-looking
statements made in this Registration Statement, future filings by the Company
with the SEC, in the Company's press releases and in oral statements made by
authorized officers of the Company. When used in this Registration Statement,
the words "estimate," "project," "anticipate," "expect," "intend," "believe" and
similar expressions are intended to identify forward-looking statements.
Uncertainty of Technology Transfer Fee, Consulting Fee and Royalty Payments.
The Company's near-term revenues are expected substantially to derive from
technology transfer and consulting fees in respect of Ukrainian waste-to-energy
facilities, and royalties in respect of automated parking garages. In the case
of Ukrainian waste-to-energy facilities, such fees are to be paid to the Company
by Eurowaste Management, Ltd. ("Eurowaste"), a newly formed corporation without
significant operating history and which presently is generating only
insignificant revenues. The Company's revenues with respect to its automated
parking garage technology presently are entirely dependent on royalty payments
from Arbat American, Autopark, Ltd. ("Arbat American"), which holds 50% of the
equity in "Cinema World on Arbat", the Russian Joint Stock Company that will
develop, own and operate the first parking facility to use such technology.
Arbat American was formed in May, 1995, and is not generating significant
revenues. The Company believes that Eurowaste will raise sufficient capital to
pay such technology transfer and consulting fees when due. It is the Company's
understanding that Arbat American will raise sufficient funds for the planned,
Moscow automated parking garage venture, inclusive of funds sufficient to cover
the Company's royalties, in either a private or public offering of its
securities. No assurance can be given that either or both Eurowaste or Arbat
American will be successful in raising capital, or that if successful, such
capital will be in a sufficient amount or amounts.
Risks Relating to the Russian Federation and Ukraine
Political and Social Risks. In recent years, Russia and Ukraine each have been
undergoing a substantial political and social transformation from centralized
communism to the early stages of pluralist democracy. As part of this process,
the former centrally controlled, command economies of Russia and Ukraine have
been subject to various reforms intended to lead to generally capitalist,
market-oriented economies. There can be no assurance that the political and
economic reforms necessary to complete these transformations will continue, or
if they continue, will be successful. In their present stages of relative
infancy, the Russian and Ukrainian political and economic systems are
characterized by a proliferation of political parties, none of which hold a
legislative majority. The Russian and Ukrainian political and economic systems
are also vulnerable to their respective populations' dissatisfaction with
reform, economic dislocations, social and ethnic unrest, and changes in
governmental policies and decisions. Any of these factors could have a material
adverse effect on the private or governmental availability of hard currency,
currency exchange rates, the private ownership of businesses and other
enterprises, the social distribution of wealth, the private ownership and
alienality of tangible and intellectual property, and the availability of
construction materials and equipment. Any of such adverse effects could have a
materially adverse effect on the Company.
- 6 -
<PAGE>
As part of the reforms being instituted in Russia and Ukraine, both
countries have enacted legislation to protect private property against
expropriation and nationalization. However, due to the lack of experience in
enforcing these provisions in the short time they have been in effect, and due
to the potential political changes that could occur in the future, no assurance
can be given that these protections will be enforced in the event of an
attempted expropriation or nationalization. The Company does not anticipate the
occurrence of such developments in respect of its presently contemplated
ventures involving Ukraine and Russia, because (i) in the case of the
application of the Company's EKOR compound technology to the remediation of
radioactive contamination at the Chernobyl Nuclear Power Plant Reactor 4, the
increasing probability of a second, disastrous nuclear accident has made the
rapid containment of radioactive debris a matter of high Ukrainian and
international concern and, to the Company's knowledge, the EKOR compound is the
only material presently being considered by the Chernobyl authorities for such
purpose; (ii) the Company's waste-to-energy technology has been selected by the
Ukrainian government as the national standard for the production of energy from
municipal waste products; and (iii) the Company's high-tech, automated parking
garage technology can assist in relieving the City of Moscow's acute shortage of
automotive parking spaces and has received preferential site allocation
treatment from Moscow's municipal government, nevertheless, expropriation or
nationalization of the EKOR foam intellectual property rights, the
waste-to-energy technology, the presently selected, Moscow parking garage site,
or the parking garage technology, would have a material adverse effect on the
Company. In particular, the EKOR compound technology was developed by the I.V.
Kurchatov Institute, a Russian, state-controlled scientific research and
development institute and the Euro-Asian Physical Society, a professional
society in Russia, which through a series of assignments have, ultimately,
assigned the EKOR compound intellectual property rights to the Company. All site
allocation and construction approvals for Ukrainian waste-to-energy facilities
are at the discretion of the respective Ukrainian municipal governments, whose
political autonomy from the national government (which has selected the
Company's waste-to-energy technology at the Ukrainian national standard for such
facilities) is in an unsettled state. Since the waste-to-energy technology is a
combination of existing, public domain technologies, it is uncertain whether the
waste-to-energy technology is patentable. Accordingly, such technology could be
subject to appropriation and use by any individual or entity that is so
inclined, for which the Company might not have legal recourse under any national
or international patent law. The allocation of the Moscow site for the automated
parking garage is controlled by "Mosinterstroi," a local, quasi-governmental
agency. No assurance can be given that any of these governmental, governmentally
controlled, or governmentally affiliated entities would legally resist an
attempted expropriation or nationalization, either or which, if successful,
would have a materially adverse impact on the Company.
In both Russia and Ukraine governmental institutions and the relations
between them, as well as governmental policies and the political leaders who
formulate and implement them, are subject to rapid and potentially violent
change. The Constitution of the Russian Federation gives the President of the
Russian Federation substantial authority, and any major changes in, or rejection
of, current policies favoring political and economic reform by the President may
have a material adverse effect on the Company. The Constitution of Ukraine has
been only recently adopted, and contrary to President Leonid Kuchma's prior
expectation, substantially shares governmental power between the President and
Parliament. The relations between the Ukrainian President and Parliament often
have been characterized by factional infighting in which communist-oriented
members of Parliament have mounted vigorous campaigns against President Kuchma's
economic reform policies and programs to stimulate economic growth, curb
inflation, and stabilize foreign exchange rates. In the summer of 1996,
President Kuchma caused a widely reported "shake-up" of his cabinet, in which a
relatively aggressive reform-oriented Minister of Finance was replaced by one
who advocates a more gradualist approach. This relative political instability
could result in major changes in the Ukrainian government, present reform
policies
- 7 -
<PAGE>
or rejection of the same, any of which may have a material adverse effect on the
Company. No assurance can be given that such developments will not occur either
in Russia or Ukraine.
The Russian Federation is a federation of republics, territories, regions
(one of which is an autonomous region), cities of federal importance and
autonomous areas, all of which are equal members of the Russian Federation.
Ukraine is composed of twenty-four regions ("Oblasts"), an autonomous republic
and two municipalities, Cherkas'ka and Chernihiv'ka. The delineation of
authority in both Russia and Ukraine between these political subdivisions and
the national government is, in many instances, uncertain, and in some cases in
Russia, contested, most notably in Chechnya which has experienced protracted
military confrontation with the Russian federal government. This lack of
consensus in Russia and Ukraine between local and regional authorities and the
national governments may result in political instability and negative economic
effects which could be materially adverse to the Company.
The political and economic changes that have occurred in Russia and
Ukraine in recent years have resulted in significant dislocations of political
and governmental authority caused by the collapse of their, respective, previous
governmental structures and political systems. New political and governmental
systems are only beginning to take form in Ukraine and Russia. Furthermore,
significant unemployment in Russia and Ukraine, the influx of unemployed persons
into major Russian cities, significant wage arrearages in Ukraine and Russia and
the existence of poorly paid police forces in both countries have led to
significant increases in crime in Russia and Ukraine. Significant levels of
organized criminal activity exist in large metropolitan areas of both countries.
While President Yeltsin of Russia and President Kuchma of Ukraine have
instituted anti-crime and anti-corruption programs, such measures are of recent
origin and have achieved minimal and uncertain results. No assurance can be
given that the levels of crime and corruption in Russia and Ukraine will be
curbed or otherwise brought under control, and no assurance can be given that
the social and economic dislocations caused by high rates of organized and other
crime and of official corruption will not in the future have a material adverse
impact on the Company.
In both Ukraine and Russia state-controlled and, more recently,
privately-owned enterprises have often failed to pay full salaries to their
employees, and in some instances have not paid salaries at all for extended
periods of time. This, in conjunction with historically high rates of inflation
and escalating costs of living in both countries, could lead in the future to
labor and social unrest. Such unrest could have political, social and economic
consequences such as increased support for a return to centralized governments,
a climate hostile to foreign investment and increasing levels of violence, any
of which could have a material adverse impact on the Company.
Economic Risks
Along with the institution of political reforms, the Ukrainian and Russian
governments have been attempting to create and implement policies of economic
reform and economic stabilization, and to create legal structures intended to
promote private, market-based activities, foreign trade and foreign investment.
Although these policies have met with some success in both countries, no
assurance can be given that they, or similar policies will continue to be
supported and pursued, or that if supported and pursued, will be successful.
Despite the implementation of economic reform policies, the Russian
economy and the Ukrainian economy are characterized by declining gross domestic
production, significant inflation, increasing rates of unemployment and
underemployment, unstable currencies, and high levels of governmental debt as
compared to gross domestic production. The prospect of wide-spread insolvencies
and the collapse of
- 8 -
<PAGE>
various economic sectors exists in both countries. Additionally, in both Russia
and Ukraine there is a general lack of consensus as to the rate, extent and
substantive content of economic reform. No assurance can be given that either
Russia or Ukraine in the future will remain receptive to foreign investment or
market-oriented economies. Moreover, no assurance can be given that the economy
of either country will improve.
Ukraine and Russia presently receive substantial financial assistance from
several foreign governments and from international organizations. The
restriction or elimination of any or all such financial assistance could have
severe negative impacts on those countries' respective economies, and could
significantly decrease the availability of hard currency, the payment of which
in technology transfer and consulting fees the Company depends upon. In
particular, the Ukrainian government's planned remediation of radioactive
contamination at the Chernobyl Nuclear Power Plant substantially depends on
financial assistance from the G-7 nations, and the reduction or elimination of
such assistance could impair or prevent the Company's use of its EKOR technology
in that remediation, thereby reducing or eliminating a substantial amount of the
Company's presently expected revenues. No assurance can be given that any or all
such events will not occur.
Ukrainian and Russian businesses have limited experience operating in free
market conditions, and compared with Western businesses have limited experience
with entering into contracts and performing contractual obligations.
Additionally, Ukrainian and Russian governmental agencies, as well as Ukrainian
and Russian business enterprises, have limited experience with the substantive
content and detail typical of Anglo-American and other Western contracts.
Accordingly, the detailed agreement to perform specified contractual obligations
in many instances may be contained in a series of written approvals, consents
and the like from various governmental and quasi-governmental bodies, as well as
from business companies, that accompany a formal contract. Legal reforms have
only been recently instituted in Russia and Ukraine to interpret and enforce
contractual obligations on principles similar to those of the legal systems of
Western countries. The Company's expected near-term revenues substantially
depend upon technology transfer and consulting fees memorialized in written
contracts with Ukrainian and Russian entities. No assurance can be given that
such fees will be paid in the manner called for in such contracts or that
enforcement of such payment obligations, if not performed fully or at all, will
be successful in Russian or Ukrainian courts.
Limited Operating History; Net Losses; Future Losses; Initial Commercialization
Stage
The Company's limited operations have consisted primarily of activities
related to identifying and financing the development of products and
technologies, including laboratory tests, and planning on-site tests and
demonstrations. The Company is subject to all of the business risks associated
with a new enterprise, including, but not limited to, risks of unforeseen
capital requirements, failure of market acceptance, failure to establish
business relationships, and competitive disadvantages as against larger and more
established companies. At September 30, 1996, the Company had an accumulated
stockholders' deficit of $(994,000), and a working capital deficit of
$(1,074,000). Additionally, at September 30, the Company had outstanding
indebtedness in an aggregate principal amount of $341,000 at an interest rate of
10% per annum.
The Company anticipates that it will continue to incur significant
operating losses through the third quarter of 1997, and may incur additional
losses thereafter, depending upon its ability to consummate collaborative
working arrangements or licenses with third parties and the operation and
financial success of any projects which the Company and its potential working
partners may be awarded. The Company has had no meaningful revenues to date, and
there can be no assurance as to when or whether it will be
- 9 -
<PAGE>
able to commercialize its products and technologies. Its products and
technologies have never been utilized on a large-scale commercial basis. The
Company's ability to operate its business successfully will depend on a variety
of factors, many of which are outside the Company's control, including:
competition, cost and availability of raw material supplies, changes in
governmental (including foreign governmental) initiatives and requirements,
changes in domestic and foreign regulatory requirements, and the costs
associated with equipment repair and maintenance.
No Assurance of Collaborative Agreements, Licenses or Project Contracts
The Company's business strategy is based upon entering into collaborative
joint working arrangements with various foreign governmental and
quasi-governmental entities. To date, neither the Company nor any of its
prospective collaborative ventures have been awarded any definitive project
contracts. There can be no assurance that the Company or any of its
collaborative ventures will enter into definitive project or collaborative
venture agreements with such entities or others, or that such agreements, if
entered into, will be similar in form to Western agreements covering like
activities, or will be on terms and conditions that are sufficiently
advantageous to the Company to enable it to generate profits.
There can be no assurance that the Company will be awarded contracts to
perform decontamination, remediation or waste disposal projects. Even if such
contracts are awarded, there can be no assurance that these contracts will be
profitable to the Company. In addition, any project contract which may be
awarded to the Company and/or any of its working partners may be curtailed,
delayed, redirected or eliminated at any time. Problems experienced on any
specific project, or delays in the implementation and funding of projects, could
materially adversely affect the Company's business and financial condition.
Uncertainty of Market Acceptance
Many prospective users of the Company's EKOR and waste-to-energy
technologies have already committed substantial resources to other forms of
radioactive contaminant remediation, municipal waste management and
environmentally clean energy production. The Company's growth and future
financial performance will depend on demonstrating to prospective collaborative
partners and users the advantages of these and others of its products and
technologies over alternative products and technologies. There can be no
assurance that the Company will be successful in this effort. See Item 1.,
Description of "Business- -Silicon-Organic Foam;-Waste-to-Energy Technology."
Risk of Environmental Liability
The use of Company's proposed radioactive contaminant technology is
subject to numerous national and local laws and regulations relating to the
storage, handling, emission, transportation and discharge of such materials, and
the use of specialized technical equipment in the processing of such materials.
There is always the risk that such materials might be mishandled, or that there
might be equipment or technology failures, which could result in significant
claims for personal injury, property damage, and clean-up or remediation. Any
such claims against the Company could have a material adverse effect on the
Company. The Company may be required to obtain environmental liability insurance
in the future in amounts that are not presently predictable. There can be no
assurance that such insurance will provide coverage against all claims, and
claims may be made against the Company (even if covered by insurance policies)
for amounts substantially in excess of applicable policy limits. Any such event
could have a material adverse effect on the Company.
- 10 -
<PAGE>
Potential Need for Additional Financing
The Company's future capital requirements could vary significantly and
will depend on certain factors, many of which are not within the Company's
control. These include the existence and terms of any collaborative
arrangements; the ongoing development and testing of its products; the nature
and timing of remediation and clean-up projects; and the availability of
financing. The Company`s lack of operational experience and (in relation to
other larger and better financed companies) limited capital resources could make
it difficult to successfully bid on major remediation or clean-up projects. In
such event, the Company's business development could be limited to smaller
projects with significantly lower potential for profit.
In addition, the expansion of the Company's business will require the
commitment of significant capital resources for technical and operational
support personnel and research and development activities. There can be no
assurance that such financing will be available or, if available, that it will
be on favorable terms. If adequate financing is not available, the Company may
be required to delay, scale back or eliminate certain of its research and
development programs, to forego technology acquisition opportunities, or to
license third parties to commercialize technologies that the Company would
otherwise seek to develop itself. To the extent the Company raises additional
capital by issuing equity securities, holders of its outstanding Common Stock
will be diluted. See Item 2. "Management's Discussion and Analysis of Results of
Operations -- Liquidity and Capital Resources."
While no assurance can be given, management believes the Company can raise
adequate capital to keep the Company functioning during 1997. No assurance can
be given that the Company can successfully obtain any working capital or
complete any proposed offerings or, if obtained, that such funding will not
cause substantial dilution to shareholders of the Company. Further, no assurance
can be given as to the completion of research and development and the successful
marketing of the technologies. See Item 2. "Selected Financial Data;
Management's Discussion and Analysis of Financial Condition and Results of
Operation - Liquidity and Capital Resources."
Public Offering Uncertain
The Company is exploring additional sources of working capital including
private sales of securities, joint ventures, licensing of technologies and a
public offering of preferred stock. In September 1996, the Company received a
letter of intent from an underwriter pursuant to which the firm agreed in
principle to underwrite, on a firm commitment basis, 5,000,000 shares of
cumulative convertible preferred stock (not including an underwriter's
over-allotment option equal to up to 75,000 shares) at an initial public
offering price of $10.00 per share. In connection therewith, the Company has
incurred costs aggregating $75,000, which if the offering is not consummated,
will be charged to expense. The Company is considering alternative financing
arrangements, and there is no assurance that the Company will complete that or
any other offering.
Competition and Technological Alternatives
The near-term, primary market for the Company's products and technologies
is radioactive contamination containment and remediation, the production of
steam energy from municipal waste and automated parking garages. Mid-term
markets are expected to continue in these technologies and also include silicon
carbide "wafer" technology. The Company has limited experience in marketing its
products and technologies and relies on management and consultants for its sales
and marketing efforts, whereas other private and public sector companies and
organizations have substantially greater financial
- 11 -
<PAGE>
and other resources and experience than the Company. Any one or more of the
Company's competitors or other enterprises not presently known to the Company
may develop technologies which are superior to the Company's products or other
technologies utilized by the Company. To the extent that the Company's
competitors are able to offer cost-effective alternatives, the Company's ability
to compete could be materially and adversely affected. See Item 1. "Description
of Business."
Unpredictability of Patent Protection and Proprietary Technology
Of the Company's present technologies, patent applications have been filed
only for the EKOR technology, in Russia and internationally, pursuant to the
European Patent Agreement. The Euro-Asian Physical Society is preparing a U.S.
patent application covering the EKOR foam technology and expects to file the
same in fiscal year 1997. The Company's success depends, in part, on its ability
to obtain and enforce patents covering, and maintain trade secrecy protection of
its EKOR foam technology and future technologies, and to operate without
infringing on the proprietary rights of third parties. There can be no assurance
that any of the Company's pending or future patent applications will be
approved, that the Company will develop additional proprietary technology that
is patentable, that any patents issued to the Company will provide the Company
with competitive advantages or will not be challenged by third parties or that
the patents of others will not have an adverse effect on the Company's ability
to conduct its business. Furthermore, there can be no assurance that others will
not independently develop similar or superior technologies, duplicate any of the
Company's processes, or design around any technology that is patented by the
Company. It is possible that the Company may need to acquire licenses to, or to
contest the validity of, issued or pending patents of third parties relating to
its products. There can be no assurance that any license acquired under such
patents would be made available to the Company on acceptable terms, if at all,
or that the Company would prevail in any such contest. In addition, the Company
could incur substantial costs in defending itself in suits brought against the
Company on its patents or in bringing patent suits against other parties.
In addition to patent protection, the Company also relies on trade
secrets, proprietary know-how and technology which its seeks to protect, in
part, by confidentiality agreements with its prospective working partners and
collaborators, employees and consultants. There can be no assurance that these
agreements will not be breached, that the Company would have adequate remedies
for any breach, or that the Company's trade secrets and proprietary know-how
will not otherwise become known or be independently discovered by others.
No Trading Market for Common Stock Registered Hereunder
There presently exists no trading market for the outstanding shares of the
Company's Common Stock being registered pursuant to this Registration Statement,
and no such market is expected to develop. See Item 1. "Description of Business
- - Risk Factors, Shares Eligible for Future Sale."
Dependence on Certain Personnel
The Company's business is substantially dependent on the services and
business experience of Dr. Randolph Graves, Peter Gulko, and of ERBC Holdings,
Ltd. The loss of the services of any of these individuals or of ERBC Holdings,
Ltd., would have a material adverse effect upon the Company. The Company has
entered into an Employment Agreement with Dr. Graves which expires on December
31, 1998, and is renewable for additional two-year terms thereafter. The
Employment Agreement provides that Dr. Graves may not compete with the Company
for a period of one year following the termination of his employment with the
Company. See Item 6. "Executive Compensation."
- 12 -
<PAGE>
Conflicts of Interest
Certain shareholders, directors and officers of the Company are also
shareholders, directors, officers and/or employees of a number of companies with
which the Company has entered into contracts and expects to conduct business.
See Item 7. "Certain Relationships and Related Transactions." Specifically, Kurt
Seifman, the beneficial owner of 2,336,300 shares of the Company's Common Stock,
is the chief executive officer of ERBC Holdings, Ltd. ("ERBC") which, in turn:
(i) has licensed the Silicon-Organic (EKOR) compound technology to the Company
(see Item 1. "Description of Business - Silicon-Organic Compound"); (ii) is a
principal equity owner of Kurchatov Research Holdings, Ltd. ("KRH"), to which
the Company has agreed to remit 50% of all net profits from sales of the EKOR
compound (see Item 1. "Description of Business - Silicon-Organic Compound"); and
(iii) owns 40% of the outstanding common stock of Arbat American Autopark, Ltd.
("Arbat American") the owner of 50% of the equity in "Cinema World on Arbat,"
the Russian joint stock company that is expected to develop a Moscow, Russia,
parking garage utilizing the Company's automated parking technology. See Item 1.
"Description of Business - Automated Parking Garages." In addition, Hans-Joachim
Skrobanek, who is a Director and Secretary of the Company and the beneficial
owner of 145,000 shares of the Company's Common Stock, is an employee of ERBC
and the President and a shareholder of Arbat American. Peter Gulko, who is a
Director of the Company and the beneficial owner of 1,355,000 shares of the
Company's Common Stock, is an employee of ERBC. See Item 7. "Certain
Relationships and Related Transactions" and Item 5. "Directors and Executive
Officers." Last, Karl Krobath, a Director of the Company and the beneficial
owner of 25,000 shares of the Company's Common Stock, is the chairman and chief
executive officer of Eurowaste Management, Ltd. ("Eurowaste"). Eurowaste has
agreed to pay technology license fees and consulting fees to the Company with
respect to the construction of waste-to-energy plants. See Item 1. "Description
of Business - Waste-to-Energy Technology," Item 5. "Directors and Executive
Officers," and Item 7. "Certain Relationships and Related Transactions."
By virtue of its ownership interest in KRH, ERBC (and Messrs. Seifman,
Skrobanek and Gulko) will derivatively benefit from any sales of EKOR compound
by the Company, to a greater extent than they would by virtue of their ownership
of Common Stock, alone. Similarly, by virtue of its ownership interest in Arbat
American, ERBC (and Messrs. Seifman, Skrobanek and Gulko) will derivatively
benefit from the success, if any, of parking garages constructed by Arbat
American or its affiliates, which may be disproportionate to the income derived
by the Company from royalties paid by Arbat American.
Regulation
There are various U.S. and foreign laws and regulations that govern the
marketing, sale or use of its present technologies, including U.S. and various
Western European environmental safety laws and regulations pertaining to the
containment and remediation of radioactive contamination (in the case of the
EKOR compound) and local, Russian and Ukrainian site approval and construction
permit, and construction code compliance requirements (in the cases of the
Company's automated parking and waste-to-energy technologies).
Shares Eligible for Future Sale
Of the 16,671,836 shares of the Company's Common Stock currently
outstanding, 9,673.836 shares are "restricted securities" as that term is
defined in Rule 144 under the Securities Act of 1933, as amended (the
"Securities Act"), and pursuant to that Rule, under certain circumstances may be
sold without registration. While none of such shares will be eligible for sale
upon the effectiveness of this Registration Statement, all such shares will
become eligible for sale at various times after the applicable holding period
- 13 -
<PAGE>
has expired, without registration.(1) 6,998,000 shares of the Company's
currently outstanding Common Stock were issued without registration pursuant to
Rule 504 of Regulation D under the Securities Act, and are free-trading.
Holders of an aggregate of 1,000,000 shares of the Company's Common Stock
have mandatory and demand registration rights as to their shares, which may be
exercised: (i) in the case of mandatory registration rights, at any time after
December 18, 1996, and until December 18, 1997, if the Company proposes to and
does file, either on its own behalf or on behalf of any of its security holders
or both, a registration statement relating to its capital stock under the
Securities Act of 1933, as amended, other than in connection with a dividend
re-investment, employee stock purchase, option or similar plan, or in connection
with a merger, consolidation or reorganization; and (ii) in the case of demand
registration rights, at any time after the Company's Common Stock has been
listed for trading on a national stock exchange and prior to December 18, 1998,
provided that the shareholders demanding such registration hold not less than
100,000 shares of Common Stock, that the number of shares to be so registered be
the equivalent of not less than $1,000,000 in bona fide, estimated public sale
price, and that the Company is not obligated to prepare and file more than two
such registration statements exclusive of registration statements on Form S-3.
In addition, if a registration statement under the Securities Act which includes
such 1,000,000 shares is not declared effective by the Securities Exchange
Commission (the "SEC") by April 1, 1997, the Company is obligated to issue an
aggregate of 500,000 additional shares of its Common Stock to the holders of
those 1,000,000 shares; and if such a registration statement is not declared
effective by the SEC by July 1, 1997, the Company is obligated to issue a
further aggregate of 500,000 shares of Common Stock to such holders.
The availability for sale, as well as actual sales, of currently
outstanding shares of Common Stock, and 900,000 shares of Common Stock issuable
upon the exercise of outstanding warrants, may depress the prevailing market
price for the Common Stock and could adversely affect the terms upon which the
Company would be able to obtain additional equity financing.
ITEM 2. SELECTED FINANCIAL DATA; MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION
SELECTED FINANCIAL DATA
The following selected financial data has been derived from, and are
qualified by reference to, the Financial Statements of the Company. The
Company's Financial Statements as of December 31, 1995 and for the period from
inception (May 26, 1995) to December 31, 1995, including the Notes thereto and
the related auditors' report (which contains an explanatory paragraph relating
to the Company's ability to continue as a going concern) of Tabb, Conigliaro &
McGann, P.C., independent auditors, are included elsewhere in this Registration
Statement. The financial data as of September 30, 1996 and for the nine
- ----------
(1) Included in those 9,673,836 shares are 4,288,000 shares of the
Company's Common Stock issued to certain employees of and consultants to the
Company pursuant to Rule 701 under the Securities Act (the "701 Shares").
Pursuant to Rule 701, holders of the 701 Shares who are not "affiliates" within
the meaning of Rule 144 may sell such shares without registration ninety days
after the effectiveness of this Registration Statement.
- 14 -
<PAGE>
months ended September 30, 1996, the period from inception (May 26, 1995) to
September 30, 1995 and the period from inception (May 26, 1995) to September 30,
1996 are derived from unaudited financial statements included elsewhere in this
Registration Statement. The unaudited interim financial statements include all
adjustments consisting 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 nine months ended
September 30, 1996 are not necessarily indicative of the result that may be
expected for the entire fiscal year ending December 31, 1996. The following data
should be read in conjunction with such Financial Statements and Management's
Discussion and Analysis and Plan of Operation.
Statement of Operations Data: (1)
<TABLE>
<CAPTION>
For the Period from
For the Nine Months Inception
For the Period from Inception Ended (May 26, 1995) to
(May 26, 1995) to September 30, 1996 September 30, 1996
December 31, 1995 September 30, 1995
<S> <C> <C> <C> <C>
Compensatory element of stock $ -- $ -- $ 1,105,000 $ 1,105,000
issuances
Research and development 212,000 118,000 796,000 1,008,000
expenses
Consulting fees 267,000 166,000 245,000 512,000
Other general and administrative 34,000 11,000 313,000 347,000
expenses
Interest expense -- -- 5,000 5,000
----------- ----------- ------------ -----------
NET LOSS $ (513,000) $ (295,000) $ (2,464,000) $(2,977,000)
----------- ----------- ------------ ===========
NET LOSS PER SHARE $ (0.06) $ (0.04) $ (0.20)
=========== ============ ===========
WEIGHTED AVERAGE
NUMBER OF SHARES 8,159,467 7,416,356 12,576,467
=========== ============ ============
OUTSTANDING
<CAPTION>
Balance Sheet Data:
December 31, September 30,
1995 1996
---- ----
<S> <C> <C>
Working capital (deficit) $ 42,000 $ (1,074,000)
Total assets $ 56,000 $ 81,000
Total liabilities $ 13,000 $ 1,074,000
Deficit accumulated during the $ (513,000) $ (2,977,000)
development stage
Total stockholders' equity $ 43,000 $ (994,000)
(deficiency)
</TABLE>
(1) Through September 30, 1996, and since that date, the Company has not
derived any sales revenues.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATION
GENERAL
- 15 -
<PAGE>
The following discussion of the financial condition and results of
operations of the Company should be read in conjunction with the selected
financial data and the financial statements and notes thereto appearing
elsewhere in this Registration Statement.
The following discussion contains certain forward-looking statements that
involve risks and uncertainties. The Company's actual results could differ
materially from those discussed herein.
PLAN OF OPERATION
Eurotech, Ltd. (the "Company") is a technology transfer, holding and
management company formed to commercialize new, existing but previously
unrecognized, and previously "classified" technologies, with a particular
emphasis on those developed by prominent research institutes and individual
researchers in the former Soviet Union, and to license those and other Western
technologies for business and other commercial applications in Central Europe,
Eastern Europe, Ukraine, Russia and North America. Through the technology
management expertise of its senior executives, the Company identifies, monitors,
reviews and assesses technologies for their commercial applicability and
potential, and acquires selected technologies by purchase, assignments, and
licensing arrangements. The Company operates its business by licensing its
technologies to end-users and through development and operating joint ventures
and strategic alliances.
The Company was organized and commenced operations in May 1995. The
Company is in the development stage and its efforts have been principally
devoted to the research and development activities and organizational efforts,
including the identification, review and acquisition of various technologies,
recruiting its scientific and management personnel and alliances and raising
capital.
The Company has not been profitable since inception and expects to incur
substantial operating losses over the next twelve months. For the period from
inception to September 30, 1996, the Company incurred a cumulative net loss of
approximately $2,977,000. The Company expects that it will generate losses until
at least such time as it can commercialize its technologies, if ever. No
assurances can be given that the Company can complete development of any
technology or that, if any technology is fully developed, it can be manufactured
on a large scale basis or at a feasible cost. Further, no assurance can be given
that any technology will receive market acceptance. Being a start-up stage
entity, the Company is subject to all the risks inherent in the establishment of
a new enterprise and the marketing and manufacturing of a new product, many of
which risks are beyond the control of the Company.
- 16 -
<PAGE>
The Company's plan of operation for the next twelve months will consist of
activities principally aimed at:
- Identification, evaluation and acquisition of technologies which were
developed by a prominent research institute and individual
researchers in the former Soviet Union, and others developed in
Germany, Israel and the United States.
- Funding development for on-site demonstration testing of its
proprietary silicon-organic (EKOR) compound technology for possibly
remediating the severe radioactive contamination problems that
persist in Chernobyl, Ukraine and three sites in Russia. See Item 1.
"Description of Business - Silicon-Organic Compound."
- Introduction of its waste-to-energy technology in the city of
Cherkassy, Ukraine. See Item 1. "Description of Business - Waste-to-
Energy Technology.
- Introduction of its automated parking technology in Moscow, Russia.
See Item 1. "Description of Business - Automated Parking Garages."
- Continued funding of the development of silicon carbide "wafer"
technology in conjunction with I.V. Kurchatov Institute in Moscow
and Euro-Asian Physical Society. See Item 1. "Description of
Business - General."
- Seeking to establish further strategic partnerships and joint
ventures for the development, marketing, sales, license and
manufacturing of the Company's existing and proposed technologies.
RESULTS OF OPERATION
Nine Months Ended September 30, 1996 vs. the Period from Inception (May 26,
1995) to September 30, 1995:
The Company commenced operations on May 26, 1995. The Company had no
revenues for the aforementioned periods. Consulting and other general and
administrative expenses increased from $177,000 for the period ended September
30, 1995 to $558,000 in the first nine months of 1996 as a result of an increase
in employees and consulting expenses.
The Company is focusing on the commercialization of its technologies.
Research and development expenses increased in the nine months ended September
30, 1996 to $796,000 from $118,000 for the period ended September 30, 1995 as
the Company funded the development of additional technologies.
The compensatory element of stock issuances increased in the nine months
ended September 30, 1996 to $1,105,000 from $-0- in 1995.
For the nine months ended September 30, 1996 and the period from inception
(May 26, 1995) through September 30, 1995, the Company incurred operating losses
of $2,464,000 and $295,000, respectively. The losses are principally due to
expenses incurred in the development of the technologies, including
administrative expenses and the compensatory element of stock issuances.
The Company does not expect to have any revenues through the first half of
1997. The Company will record a charge against income of approximately
$2,000,000 during fiscal 1997 related to shares of common stock issued in
connection with the bridge financing completed in December of 1996. The Company
intends to invest significantly in research and development of its technologies.
As a result, there can be no assurance that the Company will be profitable on a
quarterly or annual basis.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal sources of working capital have been net proceeds
of approximately $842,000 from the offering of common stock under Rule 504 of
Regulation D, shareholder advances aggregating $341,000 and from the bridge
financing discussed below, completed in December of 1996 of $2,000,000. Of the
shareholder advances, promissory notes evidencing approximately $200,000 of
shareholder indebtedness were exchanged for units in the bridge financing and
$141,000 was repaid from the proceeds of the bridge financing. The net proceeds
of the bridge financing reflect the cancellation of the notes referred to above
and are being used for repayment of accrued liabilities and funding the
development of certain technologies and for other working capital purposes.
In December 1996, the company entered into a purchase agreement for an
offering of up to an aggregate of 40 units to certain accredited investors as
defined pursuant to Rule 501 of the Securities Act of 1933 (as amended) (the
"Act") pursuant to Rule 506 of Regulation D under the Act (the "Bridge
Financing"). Each unit consists of one promissory note issued by the Company in
the principal amount of $50,000 bearing interest at the rate of 12% per annum
and 25,000 shares of the Company's Common Stock. Under the agreement, the notes
are due one year from the issuance date. Gross proceeds received under this
offering were $2,000,000. The shares of common stock issued pursuant to this
agreement have, among other things, demand and mandatory registration rights,
including penalties, which could require the Company to issue to the unit
holders up to 1,000,000 additional shares of common stock if shares are not
registered within the specified time frame. See Note 13 to accompanying
financial statements.
- 17 -
<PAGE>
The Company had a working capital deficiency and stockholders' deficiency
of $1,074,000 and $994,000, respectively, as of September 30, 1996.
The report of the Company's independent certified public accountants
contains an explanatory paragraph relating to the Company's ability to continue
as a going concern.
The Company has agreed to fund the commercialization of certain
technologies developed in the former Soviet Union by scientists and researchers
at the I.V. Kurchatov Institute ("Kurchatov"), other institutes associated
therewith, and the Euro-Asian Physical Society ("EAPS"), collectively the
"Scientists". Kurchatov will provide the materials, facilities and personnel to
complete the necessary work to commercialize such technologies.
In addition, the Company expects to fund during 1997 development and
commercialization expenses related to other technologies developed by scientists
and researchers in Germany, Russia, Israel and the United States.
The Company will require additional financing to continue to fund research
and development efforts, operating costs and complete necessary work to
commercialize its technologies. No assurance can be given that additional
financing can be obtained, or if obtainable, that the terms will be satisfactory
to the Company.
The Company is exploring additional sources of working capital including
private sales of securities, joint ventures and licensing of technologies and a
public offering of preferred stock. In September 1996, the Company received a
letter of intent from an underwriter pursuant to which the firm has agreed in
principle to underwrite, on a firm commitment basis, 5,000,000 shares of
cumulative convertible preferred stock (not including an underwriter's
over-allotment option equal to up to 75,000 shares) at an initial public
offering price of $10.00 per share. In connection therewith, the Company has
incurred offering costs aggregating $75,000, which if the offering is not
consummated, will be charged to expense. The Company is considering alternative
financing arrangements, and there is no assurance that the Company will complete
that or any other offering.
While no assurance can be given, management believes the Company can raise
adequate capital to keep the Company functioning during 1997. No assurance can
be given that the Company can successfully obtain any working capital or
complete any proposed offerings or, if obtained, that such funding will not
cause a dilution to shareholders of the Company. Further, no assurance can be
given as to the completion of research and development and the successful
marketing of the technologies. See Item 1. "Description of Business - Risk
Factors - Public Offering Uncertain."
ITEM 3. PROPERTIES
The Company occupies office space at 1200 Prospect Street, Suite 425,
LaJolla, California 92037 pursuant to a lease commencing August 30, 1996, and
ending October 30, 1997, for which the Company pays an annual rent of $30,600.
The Company believes it will be able to renew said lease and that its current
facilities are sufficient to meet the requirements of the Company's planned
growth for approximately the next year.
The Company also occupies office space at the premises of Technion
Entrepreneureal Incubator, Ltd., in Haifa, Israel, on a month-to-month tenancy
basis. The Company expects to commence rental payments for such Israeli office
in March, 1997 at the rate of $300 per month. Such office will be utilized by
the Company for its contemplated, Israeli technology development and marketing
activities. See, Item 1., "Description of Business -- General."
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information known to the Company
regarding the beneficial ownership of the Company's securities at the date of
this Registration Statement by each person known by the Company to beneficially
own more than 5% of each class of the Company's securities. At the date of this
Registration Statement only shares of the Company's Common Stock are issued and
outstanding.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
Name and Address of Beneficial Owner Amount and nature of Beneficial Percent
Title of Class Ownership of Class
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Common Stock Kurt Seifman 2,848,800 17.07%
150 East 58th Street
New York, New York 10155
Peter Gulko 1,355,000 8.12%
976 Rock Haven Drive
Rockville, Maryland 20852
</TABLE>
- 18 -
<PAGE>
The following table sets forth certain information known to the Company
regarding the beneficial ownership of the Company's securities at the date of
this Registration Statement by each director and executive officer of the
Company, and by the directors and executive officers as a group.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
Name and Address of Beneficial Owner Amount and nature of Beneficial Percent
Title of Class Ownership of Class
=================================================================================================
<S> <C> <C> <C>
Common Stock Peter Gulko 1,355,000 8.12%
Randolph A. Graves, Jr. 615,000 3.69%
Hans-Joachim Skrobanek 145,000 0.87%
Karl J. Krobath 25,000 0.15%
Directors and
Officers as a Group 2,140,000 12.84%
- -------------------
(4 persons)
</TABLE>
ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers of the Company are as follows:
Name Age Position with the Company
---- --- -------------------------
Randolph A. Graves, Jr. 57 Director, Chairman and Chief
Executive Officer, President
Karl J. Krobath 62 Director
Hans-Joachim Skrobanek 46 Director, Secretary
Peter Gulko 48 Director
Dr. Randolph A. Graves, Jr. has served as a Director, Chairman and Chief
Executive Officer of the Company since its incorporation in May, 1995. From
November, 1992, until January, 1995, Dr. Graves was the President and Chief
Executive Officer of Mosaic Multisoft Corp., a computer software company. From
February, 1991, until November, 1992, Dr. Graves was President of Graves
Technology, Inc., a technology consulting company. From September, 1989, until
January, 1991, Dr. Graves was the Vice President - Applications, of Super
Computing Solutions, Inc., a computer and software development company. From
June, 1963, until September, 1989, Dr. Graves was the Research and Development
Division Director of the National Aeronautics and Space Administration in
Washington, D.C. Dr. Graves received his Doctor of Science degree in 1978 from
the George Washington University, and a Masters degree in Business from Stanford
University in 1983.
Karl J. Krobath has served as a Director of the Company since its
incorporation in May, 1995. In addition to his duties as a Director of the
Company, since 1995 Mr. Krobath has been Chairman and Chief Executive Officer of
Eurowaste Management, Ltd. which is involved in the development, ownership and
operation of waste-to-energy plants utilizing the Company's waste-to-energy
technology (see Item 1. "Description of Business - Risk Factors - Conflicts of
Interest," and Item 7. "Certain Relationships and Related Transactions"); and
since 1994 Mr. Krobath has served as a business advisor to Nordex, GmbH, a
trading company in Vienna, Austria. From 1993 until 1994, Mr. Krobath was the
President of Eisenbeiss-Sohne, an Austrian gear manufacturing company. From 1991
through 1992, he was engaged as an East-West trading consultant in the trading
business maintained by Dr. Karl Pisec in Vienna, Austria. In 1962 Mr. Krobath
received a Masters Degree in Science from Montanuniversitat (University for
Mining and Metallurgy) in Austria.
Hans-Joachim Skrobanek has served as a Director and the Secretary of the
Company since its incorporation in May, 1995. In addition to his duties as a
Director and Secretary of the Company, since 1995 Mr. Skrobanek has been
employed as a managing director of ERBC Holdings, Ltd., a project development
and finance company in Rockville, Maryland, where he has coordinated that
company's Western European activities; and since 1995 has been the President of
Arbat American Autopark, Ltd., which is involved in the development, ownership
and operation of parking garages utilizing the Company's automated parking
technology. See Item 1. "Description of Business - Risk Factors Conflicts of
Interest," and Item 7. "Certain Relationships and Related Transactions." From
1989 through 1994 Mr. Skrobanek was a managing director of FBT, a finance
company in Berlin, Germany, where he was involved in that company's East-West
financing transactions. In 1976 Mr. Skrobanek received a Diploma in Economics
from the Johann Wolfgang Goethe Universitat in Frankfurt, Germany.
- 19 -
<PAGE>
Peter Gulko has been a Director of the Company since its incorporation in
May, 1995. From May, 1994, Mr. Gulko has also been employed as a managing
director of ERBC Holdings, Ltd., where he is involved in that company's
activities in the former Soviet Union. See Item 1. "Description of Business
- -Risk Factors - Conflicts of Interest," and Item 7. "Certain Relationships and
Related Transactions." From 1995 Mr. Gulko has also been the President of CIS
Development, Inc., a consulting company of which he is the sole owner. From 1991
until 1994 Mr. Gulko was the director of the Moscow, Russia, office of TMR,
International, a technology transfer company that specialized in oil refining.
Mr. Gulko is a 1973 recipient of a Masters Degree in Civil Engineering from
Novocherkassk University in Russia.
ITEM 6. EXECUTIVE COMPENSATION
The following table sets forth the compensation paid by the Company for
services rendered in all capacities during the calendar years 1996 and 1995 to
those persons who served as it chief executive officer during 1996. No other
executive officer or key employee (other than the chief executive officer) was
compensated in excess of $100,000.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
SUMMARY COMPENSATION TABLE
- -----------------------------------------------------------------------------------------------------------------
Annual Compensation
- -----------------------------------------------------------------------------------------------------------------
Other Annual
Salary Bonus Compensation
Name and Principal Position Year ($) ($) ($)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1996 $7,375 $20,000 $243,109
Randolph A. Graves, Jr, President & Chief Executive Officer... 1995 0 0 $10,500
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
Employment Agreement
The Company has entered into an Employment Agreement with Dr. Randolph
Graves, Jr., as President of the Company. The term of that agreement expires on
December 31, 1998, and is subject to renewal for additional two-year periods
thereafter, and is also subject to earlier termination upon the occurrence of
certain specified events. Pursuant to the Employment Agreement, Dr. Graves will
be entitled to receive: (i) a base salary of $77,374 per year, subject to
modification upon each renewal; (ii) an additional 255,000 shares of the
Company's Common Stock (which shares were issued to Dr. Graves in fiscal year
1996) and such bonus and other additional compensation as the Board of Directors
may authorize.
The Employment Agreement also contains covenants prohibiting the employee,
during the term of the Agreement and the one year period commencing upon
termination of the Agreement, from directly or indirectly competing with the
Company, and prohibiting the employee, during the term of the Agreement and the
three-year period following its termination, from disclosing any of the
Company's proprietary information and/or trade secrets.
Board of Directors
All Directors hold office until the next annual meeting of shareholders of
the Company or until their successors have been elected. All officers are
appointed annually by the Board of Directors and, subject to existing employment
agreements, serve at the discretion of the Board. Directors who are employees of
the Company receive no compensation for serving on the Board of Directors. It is
expected that Directors who are not employees of the Company will receive
compensation for their services in an amount to be determined. All Directors are
reimbursed by the Company for any expenses incurred in attending Director's
meetings. The Company may attempt to obtain Officers and Directors liability
insurance.
Audit Committee of the Board of Directors
The Board of Directors has established an Audit Committee, the current
members of which are Messrs. Graves and Krobath. The functions of the Audit
Committee are to recommend annually to the Board of Directors the appointment of
the independent auditors of the Company, discuss and review in advance the scope
and the fees of the annual audit and review the results thereof with the
independent auditors, review and approve non-audit services of the independent
auditors, review compliance with existing major accounting and financial
reporting policies of the Company, review the adequacy of the financial
organization of the Company and review management's procedures and policies
relating to the adequacy of the Company's internal accounting controls and
compliance with applicable laws relating to accounting practices.
1995 Incentive Stock Option Plan
The Company has adopted its 1995 Incentive Stock Option Plan ("Plan"). The
Board believes that the Plan is desirable to attract and retain executives and
other key employees of outstanding ability. Under the Plan, options to purchase
an aggregate of not more than 500,000 shares
- 20 -
<PAGE>
of Common Stock may be granted from time to time to key employees, officers,
directors, advisors and consultants to the Company or to any of its
subsidiaries.
The Plan is currently administered by the Board of Directors which may
empower a committee to administer the Plan. The Board is generally empowered to
interpret the Plan, prescribe rules and regulations relating thereto, determine
the terms of the option agreements, amend them with the consent of the optionee,
determine the individuals to whom options are to be granted, and determine the
number of shares subject to each option and the exercise price thereof. The per
share exercise price for options granted under the Plan are determined by the
Board of Directors provided that the exercise price of incentive stock options
("ISOs") will not be less than 100% of the fair market value of a share of the
Common Stock on the date the option is granted (110% of fair market value on the
date of grant of an ISO if the optionee owns more than 10% of the Common Stock
of the Company). Upon exercise of an option, the optionee may pay the purchase
price with previously acquired securities of the Company, or at the discretion
of the Board, the Company may loan some or all of the purchase price to the
optionee.
Options will be exercisable for a term determined by the Board, which will
not be greater than ten years from the date of grant (five years in the case of
ISO's). Options may be exercised only while the original grantee has a
relationship with the Company which confers eligibility to be granted options or
within three months after termination of such relationship with the Company, or
up to one year after death or total and permanent disability. In the event of
the termination of such relationship between the original grantee and the
Company for cause (as defined in the Plan), all options granted to that original
optionee terminate immediately. In the event of certain basic changes in the
Company, including a reorganization, merger or consolidation of the Company, or
the purchase of shares pursuant to a tender offer for shares of Common Stock of
the Company, in the discretion of the Committee, each option may become fully
and immediately exercisable. ISOs are not transferable other than by will or the
laws of descent and distribution. Non-qualified stock options may be transferred
to the optionee's spouse or lineal descendants, subject to certain restrictions.
Options may be exercised during the holder's lifetime only by the holder, his or
her guardian or legal representative.
Options granted pursuant to the Plan may be designated as ISOs, with the
attendant tax benefits provided under Section 421 and 422 of the Internal
Revenue Code of 1986. Accordingly, the Plan provides that the aggregate fair
market value (determined at the time an ISO is granted) of the Common Stock
subject to ISOs exercisable for the first time by an employee during any
calendar year (under all plans of the Company and its subsidiaries) may not
exceed $100,000. The Board may modify, suspend or terminate the Plan; provided,
that certain material modifications affecting the Plan must be approved by the
stockholders, and any change in the Plan that may adversely affect an optionee's
rights under an option previously granted under the Plan requires the consent of
the optionee.
To date, no options have been granted pursuant to the Plan.
Compensation of Directors
The Company's directors do not receive any compensation for their service
as directors or on any committee of the Board.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Shareholder and Other Loans.
On June 30, 1996, Richard A. Wall Associates, Inc. a company controlled by
Richard A. Wall (who has acted as a consultant to and a promotor of the Company)
loaned $128,300 to the Company, payable with accrued interest at the rate of 10%
per anum, on December 31, 1996.
On August 31, 1996, Richard A. Wall Associates, Inc., Chad Nellis (a
shareholder and the son of Mr. Wall) and D.K. Rogers (a shareholder and
consultant to the Company) loaned to the Company $13,000, $100,000, and
$100,000, respectively, each such loan being payable, with accrued interest at
the rate of 10% per annum, on December 31, 1996.
The loans made by Richard A. Wall Associates, Inc., were repaid in full in
fiscal year 1996. The loans made by Mr. Nellis and Ms. Rogers were fully
converted into four Units in the Company's third unregistered offering of Common
Stock pursuant to Rule 506 of Regulation D under the Securities Act. See Item
10. "Recent Sales of Unregistered Securities."
Issuance of Common Stock to Consultants and Advisors.
- 21 -
<PAGE>
On October 10, 1995, the Company granted options to Richard A. Wall, Kelly
Capital Corporation and Ruffa & Ruffa, to acquire 200,0002 shares, each, of the
Company's Common Stock in exchange for past financial public relations,
investment banking and legal services, respectively. The shares issuable upon
exercise of those options were part of the Company's first unregistered offering
of Common Stock pursuant to Rule 504 of Regulation D under the Securities Act of
1933. See Item 10. "Recent Sales of Unregistered Securities." All such options
were exercised on January 18, 1996.(1)
The services of Mr. Wall, Kelly Capital Corporation and Ruffa & Ruffa were
each valued by the Company at $25,000, which valuation the Company believes to
be fair and reasonable.
Common Directors and Shareholders
See Item 1. "Description of Business - Risk Factors - Conflicts of
Interest."
ERBC Holdings, Ltd. ERBC Holdings, Ltd., a Delaware corporation ("ERBC"),
is the beneficial owner of 255,000 shares of the Company's Common Stock. Two
employees of ERBC, Hans-Joachim Skrobanek and Peter Gulko, are shareholders and
directors of the Company, and Mr. Skrobanek is the Secretary of the Company. Mr.
Skrobanek is the beneficial owner of 145,000 shares, and Mr. Gulko is the
beneficial owner of 1,355,000 shares, of the Company's Common Stock. The chief
executive officer of ERBC, Kurt Seifman, is the beneficial owner of 2,336,300
shares of the Company Common Stock.
Eurowaste Management, Ltd. The chairman and chief executive officer of
Eurowaste Management, Ltd., a Delaware corporation ("Eurowaste"), Karl Krobath,
is a shareholder and director of the Company. Mr. Krobath is the beneficial
owner of 25,000 shares of the Company's Common Stock.
Arbat American Autopark, Ltd. Hans-Joachim Skrobanek, a shareholder,
director and the Secretary of the Company, is a shareholder and president of
Arbat American Autopark, Ltd., a Delaware corporation ("Arbat American"). ERCB
is the beneficial owner of 40% of the outstanding common stock of Arbat
American.
- ----------
(1) On June 1, 1996, the Company's Board of Directors authorized a
four-for-one forward split of the then outstanding shares of the Company's
Common Stock. The number of shares of Common Stock issuable upon exercise of the
foregoing options has been restated to reflect such stock split.
- 22 -
<PAGE>
Transactions Involving ERBC, Eurowaste and Arbat American.
See Item 1. "Description of Business - Risk Factors - Conflicts of
Interest."
Silicon-Organic (EKOR) Compound. Pursuant to the License Agreement among
the Euro-Asian Physical Society ("EAPS"), a professional society of scientists,
physicists and engineers in the former Soviet Union (as Licensor), and ERBC (as
Licensee) dated September 6, 1996 (the "EAPS-ERBC License") ERBC became the
exclusive licensee of all right, title and interest in and to the EKOR
technology in Canada, China, Japan, the Republic of Korea, the United States of
America, Ukraine and all countries that are members of the European Patent
Agreement (the "Territory") for a term expiring on August 1, 2014. The EAPS-ERBC
License, among other things, grants ERBC the right to sub-license its rights and
interest thereunder. Pursuant to the License Agreement among ERBC and the
Company dated September 16, 1996 (the "ERBC-Eurotech License"), ERBC exclusively
sub-licensed all of its right, title and interest in and to the EKOR technology
to the Company for a term co-terminus with the term of the EAPS-ERBC License.
Pursuant to an agreement among Kurchatov Research Holdings, Ltd., a Delaware
corporation ("KRH") and the Company dated January 28, 1997, 50% of the net
profits the Company derives from the commercialization, sale or licensing of any
technology developed by the I.V. Kurchatov Institute ("Kurchatov") and EAPS will
be remitted to KRH. 50% of the KRH's outstanding capital stock is owned by ERBC,
and 50% is owned by individual Russian scientists, researchers and academics
affiliated with either or both Kurchatov and EAPS.
Waste-to-Energy Technology. Pursuant to a letter agreement among the
Company and Eurowaste Management, Ltd., a Delaware corporation ("Eurowaste")
dated September 18, 1996, Eurowaste has agreed to pay to the Company $2,450,000
upon the initiation of construction of the first waste-to-energy plant in which
Eurowaste is involved, and to pay to the Company $425,000 upon the initiation of
construction of each additional waste-to-energy plan in which Eurowaste is
involved. The Company believes that the terms of this agreement are fair and
commercially reasonable.
Automated Parking Garages. Pursuant to a letter agreement among the
Company and Arbat American Autopark, Ltd., a Delaware corporation ("Arbat
American") dated January 28, 1997, Arbat American has agreed to pay to the
Company $1,250 per parking space in each parking garage erected by Arbat
American or any affiliate of Arbat American the design of which substantially
conforms to the technology, designs, renderings, blueprints and plans previously
furnished by the Company to Arbat American. The Company believes that the terms
of such agreement are fair and commercially reasonable.
ITEM 8. LEGAL PROCEEDINGS
The Company is not involved in any litigation.
ITEM 9. MARKET PRICE AND DIVIDENDS OF THE REGISTRANT'S COMMON EQUITY AND OTHER
STOCKHOLDER MATTERS
Trading Market. The Company's Common Stock trades on the NASDAQ Electronic
Bulletin Board market.
Principal Market-Makers. Following are the principal market-makers in the
Company's Common Stock: Cantor Fitzerald Securities, Grady & Hatch, Olson &
Company, Sherwood Securities, Fahnstock & Co., Paragon Capital Corporation, and
Nash Weiss & Co.
Number of Shareholders of Record. The following table sets forth the
approximate number of holders of record of the Company's Common Stock at the end
(December 31) of fiscal year 1996. The Common Stock is the only class of the
Company's equity securities share of which are outstanding.
- ------------------------------------------------------------------------
Title of Class Number of Record Holders
at end (Dec. 31) of Fiscal Year 1996
- ------------------------------------------------------------------------
Common Stock 59
Dividends. To date the Company has not declared or paid dividends on its Common
Stock. The Company presently plans to retain earnings, if any, for use in its
business.
Market Price. The following table set forth the quarterly high and low closing
bid and closing asked prices for the Company's Common Stock, since July 25,
1995:
- 23 -
<PAGE>
<TABLE>
<CAPTION>
CLOSING BID CLOSING ASKED
1995 HIGH LOW HIGH LOW
---- -------------------------- --------------------------
<S> <C> <C> <C> <C>
JULY 25
(First Available)
THRU 2.875 2.125 3.125 2.375
SEPT. 29
OCT. 2
THRU 4 2.25 4.50 3
DEC. 29
1996
----
JAN. 2
THRU
MAR. 29 5.375 4 5.875 4.50
(Excluding Jan. 8)
APR. 1
THRU 9.25 2.50 9.625 3
JUNE 21
JUNE 24
THRU 2.625 2 2.875 2.375
JUNE 28
JULY 1
THRU 2.50 1.325 2.625 1.40625
SEPT. 30
OCT. 1
THRU 10 1.9375 10.25 2.0625
DEC. 31
</TABLE>
- 24 -
<PAGE>
<TABLE>
<CAPTION>
1997
----
<S> <C> <C> <C> <C>
JAN. 2
THRU 12.25 1.825 12.50 8.50
JAN. 28
</TABLE>
The foregoing data represents prices between dealers and does not
include retail mark-ups, mark-downs or commissions, nor does such data represent
actual transactions or adjustments for stock-splits or dividends.
Source: National Quotation Bureau, Inc.
ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES
In December, 1995, the Company completed a private placement of
4,280,000(1) shares of its Common Stock for an aggregate offering price of
$305,000, of which: (i) 440,000 shares were issued in exchange for services
rendered in connection with that offering, valued by the Company at $27,500;
(ii) 600,000 shares were issued in exchange for certain legal, financial public
relations and investment banking services rendered to the Company and valued by
the Company at $75,000 in the aggregate; and (iii) 600,000 shares were issued in
exchange for a certain technology license, valued by the Company at $37,500. The
shares were offered and sold in reliance on an exemption from registration
pursuant to Rule 504 of Regulation D under the Securities Act of 1933 (the
"Act") and only to accredited investors within the meaning of Rule 501 of the
Regulation D under the Act. The proceeds of such offering have been used as
follows:
Purpose Amount
Payment for services rendered $ 102,500
Acquisition of technology license $ 37,500
Technology development $ 165,000
In June, 1996, the Company completed a private placement of 2,718,0001
shares of its Common Stock for an aggregate offering price of $679,500. The
shares were offered and sold in reliance on an exemption from registration
pursuant to Rule 504 of Regulation D under the Securities Act of 1933 (the
"Act") and only to accredited investors within the meaning of Rule 501 of the
Regulation D under the Act. The proceeds of such offering have been used as
follows:
Purpose Amount
Bonuses $ 20,000
Accounting Fees 22,000
Technology Development 637,500
In December, 1996, the Company completed a private placement of 40 Units, each
consisting of the Company's one-year promissory note in the principal amount of
$50,000 and 25,000 shares of its Common Stock for an aggregate offering price of
$2,000,000. The Units were offered and sold in reliance on an exemption from
registration pursuant to Rule 506 of Regulation D under the Act, and only to
accredited investors within the meaning of Rule 501 of Regulation D under the
Act.
- ----------
(1) On June 1, 1996, the Company's Board of Directors authorized a
four-for-one forward split of the then outstanding shares of the Company's
Common Stock. The number of shares issued in this offering have been re-stated
adjusted to reflect such stock split.
- 25 -
<PAGE>
The proceeds of such offering have been used as follows:
Purpose Amount
Legal fees $ 120,000
Accounting fees 5,000
Consulting fees 350,000
Repayment of loans 210,000
Salaries 100,000
Technology development 915,000
Reserved for working capital 300,000
ITEM 11. DESCRIPTION OF SECURITIES TO BE REGISTERED
The capital stock being registered is Common Stock
General
The Company's authorized capital consists of 50,000,000 shares of Common
Stock, par value $.00025 per share, and 1,000,000 shares of "blank check"
Preferred Stock (the "Blank Check Preferred Stock"). As of the date of this
Registration Statement there are outstanding 16,671,836 shares of Common Stock,
and no shares of Blank Check Preferred Stock.
Common Stock
The Company is authorized to issue 50,000,000 shares of Common Stock. All
the issued and outstanding shares of Common Stock are validly issued, fully paid
and non-assessable. Each outstanding share of Common Stock has one vote on all
matters requiring a vote of the stockholders. There is no right to cumulative
voting; thus, the holders of fifty percent or more of the shares outstanding
can, if they choose to do so, elect all of the directors of the Company. In the
event of a voluntary or involuntary liquidation of the Company, all stockholders
are entitled to a pro rata distribution after payment of liabilities and after
provision has been made for each class of stock, if any, having preference over
the Common Stock. The holders of the Common Stock have no preemptive rights with
respect to the Company's offerings of shares of its Common Stock. Holders of
Common Stock are entitled to dividends if, as and when declared by the Board of
Directors out of the funds legally available therefor. It is the present
intention of the Company to retain earnings, if any, for use in its business.
Dividends are, therefore, unlikely in the foreseeable future.
ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's Certificate of Incorporation provides that the Company
shall, to the full extent permitted by Section 29-304 of the District of
Columbia Business Corporation Act, as from time to time amended and in effect
(the "BCA"), indemnify any and all persons it has the power to indemnify under
said section. Section 29-304 of the BCA grants to the Company the power to
indemnify any and all of its directors or officers or former directors of
officers or any person who may have served at its request as a director or
officer of another corporation in which it owns shares of capital stock or of
which it is a creditor against expenses actually and necessarily incurred by
them in connection with the defense of any action, suit or proceeding in which
they, or any of them, are made parties or a party, by reason of being or having
been directors or officers or a director or officer of the Company, or of such
other corporation, except in relation to matters as to which any such director
or officer or former director or officer or person is adjudged in such action,
suit or proceeding to be liable for negligence or misconduct in the performance
of duty. Such indemnification is not deemed to be exclusive of any other rights
to which those indemnified may be entitled, under any bylaw, agreement, vote of
stockholders or otherwise. The foregoing provisions of the Company's Certificate
of Incorporation may reduce the likelihood of derivative litigation against the
Company's directors and officers for breach of their fiduciary duties, even
though such action, if successful, might otherwise benefit the Company and its
stockholders.
Additionally, the Company's By-Laws provide for the indemnification of
directors and officers. The specific provisions of the By-Laws related to such
indemnification are as follows:
ARTICLE VI
INDEMNIFICATION
No director shall be liable to the corporation or any of its stockholders
for monetary damages for breach of fiduciary duty as a director, except with
respect to (1) a breach of the director's duty of loyalty to the corporation or
its stockholders, (2) acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (3) liability which may be
specifically defined by law or (4) a transaction from which the director derived
an improper personal benefit, it being the intention of the foregoing provision
to eliminate the liability of the corporation's directors of the corporation's
directors to the corporation or its stockholders to the fullest extent permitted
by law. The corporation shall indemnify to the fullest extent permitted by law
each person that such law grants the corporation the power to indemnify.
- 26 -
<PAGE>
ITEM 13. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See, Part F/S.
ITEM 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
Since its incorporation, the Company has neither changed nor had any
disagreements with its accountants, Tabb, Conigliaro & McGann, P.C.
- 27 -
<PAGE>
PART F/S
EUROTECH, LTD.
(A Development Stage Company)
INDEX TO FINANCIAL STATEMENTS
Page Nos.
---------
INDEPENDENT AUDITORS' REPORT F-2
BALANCE SHEETS F-3
At December 31, 1995 (Audited) and September 30, 1996
(Unaudited)
STATEMENTS OF OPERATIONS F-4
For the Period from Inception (May 26, 1995) to December
31, 1995 (Audited), the Period from Inception (May 26,
1995) to September 30, 1995 (Unaudited), the Nine Months
Ended September 30, 1996 (Unaudited) and the Period from
Inception (May 26, 1995) to September 30, 1996 (Unaudited)
STATEMENTS OF STOCKHOLDERS' (DEFICIENCY) EQUITY F-5
For the Period from Inception (May 26, 1995) to December 31,
1995 (Audited) and the Nine Months Ended September 30,
1996 (Unaudited)
STATEMENTS OF CASH FLOWS F-6
For the Period from Inception (May 26, 1995) to December 31,
1995 (Audited), the Period from Inception (May 26, 1995)
to September 30, 1995 (Unaudited), the Nine Months Ended
September 30, 1996 (Unaudited) and the Period from Inception
(May 26, 1995) to September 30, 1996 (Unaudited)
NOTES TO FINANCIAL STATEMENTS F-7 - F-20
F-1
<PAGE>
Board of Directors and Stockholders
Eurotech, Ltd.
INDEPENDENT AUDITORS' REPORT
We have audited the accompanying balance sheet of Eurotech, Ltd. (a development
stage company) as of December 31, 1995 and the related statements of operations,
stockholders' equity (deficiency), and cash flows for the period from inception
(May 26, 1995) to 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 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 Eurotech, Ltd. (a development
stage company) at December 31, 1995 and the results of its operations and its
cash flows for the period from inception (May 26, 1995) to 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 discussed in Note 1 to the
financial statements, the Company has suffered a loss from operations in its
initial year of operations and has working capital of $42,001 that raise
substantial doubt about its ability to continue as a going concern. Management's
plans in regard to these matters are also described in Note 1. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
/s/ TABB, CONIGLIARO & McGANN, P.C.
-----------------------------------
TABB, CONIGLIARO & McGANN, P.C.
New York, New York
March 22, 1996
(Except for Notes 2(l) and 2(m), as to which
the date is June 1, 1996)
F-2
<PAGE>
EUROTECH, LTD.
(A Development Stage Company)
BALANCE SHEETS
A S S E T S
At At
December September
31, 1995 30, 1996
--------- -----------
(Unaudited)
CURRENT ASSETS:
Cash (Note 9) $ 54,001 $ --
Prepaid expenses 1,100 200
--------- -----------
TOTAL CURRENT ASSETS 55,101 200
COMPUTER EQUIPMENT - net of accumulated
depreciation (Note 3) -- 1,660
ORGANIZATION COSTS - net of accumulated
amortization (Note 4) 1,375 1,142
DEFERRED OFFERING COSTS (Note 11) -- 75,000
SECURITY DEPOSIT -- 2,500
--------- -----------
TOTAL ASSETS $ 56,476 $ 80,502
========= ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
CURRENT LIABILITIES:
Bank overdraft $ -- $ 24,959
Accrued expenses (Notes 8 and 10) 13,100 703,047
Notes payable - shareholders (Note 5) -- 341,300
Accrued interest payable - shareholders -- 4,983
--------- -----------
TOTAL CURRENT LIABILITIES 13,100 1,074,289
--------- -----------
COMMITMENTS AND OTHER MATTERS (Notes 1, 8, 9,
10, 11 and 13)
STOCKHOLDERS' EQUITY (DEFICIENCY):
Preferred stock - $0.01 par value; 1,000,000
shares authorized; -0- shares issued and
outstanding -- --
Common stock - $0.00025 par value; 50,000,000
shares authorized; 9,500,800 and 15,666,800
shares issued and outstanding at December 31,
1995 and September 30, 1996, respectively
(Note 6) 2,375 3,917
Additional paid-in capital 482,227 1,980,523
Additional paid-in capital - stock options
(Note 6) 75,000 --
Due from stockholders (Note 6) (3,000) (1,000)
Deficit accumulated during the development
stage (513,226) (2,977,227)
--------- -----------
TOTAL STOCKHOLDERS' EQUITY (DEFICIENCY) 43,376 (993,787)
--------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIENCY) $ 56,476 $ 80,502
========= ===========
See Independent Auditors' Report.
See notes to financial statements.
F-3
<PAGE>
EUROTECH, LTD.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the Period from
For the Period from Inception For the Nine Inception
(May 26, 1995) to Months Ended (May 26, 1995) to
--------------------------- ------------ -------------------
December September September September
31, 1995 30, 1995 30, 1996 30, 1996
----------- ----------- ------------ -----------
(Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
REVENUES $ -- $ -- $ -- $ --
----------- ----------- ------------ -----------
OPERATING EXPENSES:
Compensatory element of
stock issuances (Note 6) -- -- 1,105,188 1,105,188
Research and development
(Note 8) 212,061 118,061 795,550 1,007,611
Consulting fees (Notes 8
and 10) 266,900 166,000 245,453 512,353
Other general and
administrative 34,265 11,098 312,827 347,092
Interest expense (Note 5) -- -- 4,983 4,983
----------- ----------- ------------ -----------
TOTAL OPERATING EXPENSES 513,226 295,159 2,464,001 2,977,227
----------- ----------- ------------ -----------
NET LOSS $ (513,226) $ (295,159) $ (2,464,001) $(2,977,227)
=========== =========== ============ ===========
NET LOSS PER COMMON SHARE $ (0.063) $ (0.040) $ (0.196)
=========== ============ ============
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 8,159,467 7,416,356 12,576,467
=========== ============ ============
</TABLE>
See Independent Auditors' Report.
See notes to financial statements.
F-4
<PAGE>
EUROTECH, LTD.
(A Development Stage Company)
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
FOR THE PERIOD FROM INCEPTION (MAY 26, 1995) TO DECEMBER 31, 1995
AND THE NINE MONTHS ENDED SEPTEMBER 30, 1996 (UNAUDITED)
(Notes 6 and 7)
<TABLE>
<CAPTION>
Additional
Additional Paid-in
Date of Common Stock Paid-in Capital Stock Due From
Transaction Shares Amount Capital Options Stockholders
----------- --------- -------- ---------- -------------- ------------
(1)
<S> <C> <C> <C> <C> <C> <C>
Period Ended December 31, 1995:
Founder shares issued ($0.00025 per share) 05/26/95 4,380,800 $1,095 $ (1,095) $ -- $ --
Issuance of stock for offering consulting fees
($0.0625 per share) 08/31/95 440,000 110 27,390 -- --
Issuance of stock ($0.0625 and $0.25
per share) Various 4,080,000 1,020 523,980 -- (3,000)
Issuance of stock for license ($0.0625 per
share) 08/31/95 600,000 150 37,350 -- --
Issuance of stock options for offering legal
and consulting fees -- -- -- 75,000 --
Offering expenses -- -- (105,398) -- --
Net loss -- -- -- -- --
---------- ------ ----------- -------- -------
Balance - December 31, 1995 9,500,800 2,375 482,227 75,000 (3,000)
Nine Months Ended September 30, 1996:
(Unaudited)
Issuance of stock ($0.25 per share) Various 1,278,000 320 319,180 -- --
Exercise of stock options 01/18/96 600,000 150 75,000 (75,000) --
Issuance of stock for consulting fees
($0.34375 per share) 03/22/96 160,000 40 54,960 -- --
Issuance of stock for consulting fees ($0.0625
per share) 05/15/96 2,628,000 657 163,593 -- --
Issuance of stock for consulting fees
($0.590625 per share) 06/19/96 1,500,000 375 885,563 -- --
Repayment by stockholders -- -- -- -- 2,000
Net loss -- -- -- --
---------- ------ ----------- -------- -------
Balance - September 30, 1996 (Unaudited) 15,666,800 $3,917 $ 1,980,523 $ -- $(1,000)
========== ====== =========== ======== =======
</TABLE>
Deficit
Accumulated
During the
Development
Stage Total
----------- --------
Period Ended December 31, 1995:
Founder shares issued ($0.00025 per share) $ -- $ --
Issuance of stock for offering consulting fees
($0.0625 per share) -- 27,500
Issuance of stock ($0.0625 and $0.25
per share) -- 522,000
Issuance of stock for license ($0.0625 per
share) -- 37,500
Issuance of stock options for offering legal
and consulting fees -- 75,000
Offering expenses -- (105,398)
Net loss (513,226) (513,226)
----------- -----------
Balance - December 31, 1995 (513,226) 43,376
Nine Months Ended September 30, 1996:
(Unaudited)
Issuance of stock ($0.25 per share) -- 319,500
Exercise of stock options -- 150
Issuance of stock for consulting fees
($0.34375 per share) -- 55,000
Issuance of stock for consulting fees ($0.0625
per share) -- 164,250
Issuance of stock for consulting fees
($0.590625 per share) -- 885,938
Repayment by stockholders -- 2,000
Net loss (2,464,001) (2,464,001)
----------- -----------
Balance - September 30, 1996 (Unaudited) $(2,977,227) $ (993,787)
=========== ===========
(1) Share amounts have been restated to reflect the 4 for 1 stock split on
June 1, 1996.
See Independent Auditors' Report.
See notes to financial statements.
F-5
<PAGE>
EUROTECH, LTD.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the Period from
For the Period from For the Nine Inception
Inception (May 26, 1995) to Months Ended (May 26, 1995) to
--------------------------- ------------ -------------------
December September September September
31, 1995 30, 1995 30, 1996 30, 1996
-------- -------- --------- --------
(Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES
Net loss $(513,226) $(295,159) $(2,464,001) $(2,977,227)
Adjustments to reconcile net
loss to net cash used in
operating activities:
Depreciation and
amortization 182 104 351 533
Accrued interest payable -
shareholders -- -- 4,983 4,983
Stock issued for license 37,500 37,500 --
Compensatory element of 37,500
stock issuances -- -- 1,105,188 1,105,188
--------- --------- ----------- -----------
Sub-total (475,544) (257,555) (1,333,479) (1,809,023)
Cash provided by (used in)
the change in assets and
liabilities:
(Increase) decrease in
prepaid expenses (1,100) (100) 900 (200)
Increase in security
deposit -- -- (2,500) (2,500)
Increase in accrued
expenses 13,100 6,550 689,947 703,047
--------- --------- ----------- -----------
NET CASH USED IN
OPERATING ACTIVITIES (463,544) (251,105) (665,132) (1,128,676)
--------- --------- ----------- -----------
CASH FLOWS FROM INVESTING
ACTIVITIES
Organization costs (1,557) (1,557) -- (1,557)
Capital expenditures -- -- (1,778) (1,778)
--------- --------- ----------- -----------
NET CASH USED IN
INVESTING ACTIVITIES (1,557) (1,557) (1,778) (3,335)
--------- --------- ----------- -----------
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds from exercise of stock
options -- -- 150 150
Proceeds from issuance of
common stock 522,000 282,000 319,500 841,500
Deferred offering costs -- -- (75,000) (75,000)
Offering costs (2,898) (1,391) -- (2,898)
Repayment by stockholders -- -- 2,000 2,000
Proceeds from notes payable -
stockholders -- -- 341,300 341,300
--------- --------- ----------- -----------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 519,102 280,609 587,950 1,107,052
--------- --------- ----------- -----------
INCREASE (DECREASE) IN CASH 54,001 27,947 (78,960) (24,959)
CASH - BEGINNING -- -- 54,001 --
--------- --------- ----------- -----------
CASH (BANK OVERDRAFT) - ENDING $ 54,001 $ 27,947 $ (24,959) $ (24,959)
========= ========= =========== ===========
</TABLE>
See Independent Auditors' Report.
See notes to financial statements.
F-6
<PAGE>
EUROTECH, LTD.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
(Unaudited with respect to September 30, 1996 and
the Period from Inception (May 26, 1995) to
September 30, 1995 and the Nine Months Ended September 30, 1996)
NOTE 1 - BUSINESS AND CONTINUED OPERATIONS
Eurotech, Ltd. (the "Company") was incorporated under the laws
of the District of Columbia on May 26, 1995. The Company has
been in the development stage since its formation. The Company
is a technology transfer, holding and management company
formed to commercialize new, existing but previously
unrecognized and previously "classified" technologies, with a
particular emphasis on those developed by prominent research
institutes and individual researchers in the former Soviet
Union, and to license Western technologies for business and
other commercial applications in Central Europe, Eastern
Europe, Ukraine and Russia. The Company acquires selected
technologies by purchase, assignments and licensing
arrangements. The Company operates its business by licensing
its technologies to end-users and through development and
operating joint ventures and strategic alliances.
The Company became qualified to do business in California on
February 1, 1996.
As shown in the accompanying financial statements, the Company
has incurred losses from operations from inception. As of
September 30, 1996, the Company has a stockholders' deficiency
of $993,787, a working capital deficiency of $1,074,089 and
has an accumulated deficit since inception of $2,977,227. The
Company requires additional funds to continue research and
development efforts and complete the necessary work to
commercialize its technologies. These factors raise
substantial doubt about the Company's ability to continue as a
going concern.
In order to continue its operations as a going concern, the
Company must obtain additional financing. During 1996, the
Company has financed its operations through sale of its
securities, shareholder loans and a bridge financing of
$2,000,000, which was completed during December of 1996 (see
Note 13).
The Company is exploring additional sources of working
capital, which include a proposed public offering of preferred
stock (Note 11). The Company's ability to continue as a going
concern is dependent upon obtaining the additional financing,
completion of research and development and the successful
marketing of certain technologies. These financial statements
do not include any adjustments relating to the recoverability
of recorded asset amounts that might be necessary as a result
of the above uncertainty.
F-7
<PAGE>
EUROTECH, LTD.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
(Unaudited with respect to September 30, 1996 and
the Period from Inception (May 26, 1995) to
September 30, 1995 and the Nine Months Ended September 30, 1996)
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a) Basis of Accounting
The Company presents its financial statements on the accrual
basis of accounting in compliance with generally accepted
accounting principles.
b) Revenue Recognition
The Company will derive substantially all of its revenue from
the sale, licensing and sub-licensing of technology. Revenue
from the sale of technology will be recognized in the year of
sale. Revenue from licensing and sub-licensing will be
recognized in the year received.
c) Research and Development
Research and development costs are charged to expense as
incurred.
d) Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those
estimates.
e) Fair Value of Financial Instruments
Cash, security deposit, accrued expenses and notes payable
shareholders are reflected in the accompanying balance sheets
at amounts considered by management to reasonably approximate
fair value.
f) Cash and Cash Equivalents
The Company considers all highly liquid investments with
original maturity dates of three months or less to be cash
equivalents.
g) Computer Equipment
Computer equipment is stated at cost. Depreciation is
calculated using the straight-line method over the estimated
useful life of five years.
F-8
<PAGE>
EUROTECH, LTD.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENT
(Unaudited with respect to September 30, 1996 and
the Period from Inception (May 26, 1995) to
September 30, 1995 and the Nine Months Ended September 30, 1996)
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
h) Organization Costs
Organization costs are being amortized on a straight line
basis over 5 years.
i) Income Taxes
The Company provides for federal and state income taxes
currently payable and deferred income taxes under Financial
Accounting Standards Board Statement No. 109, "Accounting for
Income Taxes" (SFAS 109). SFAS 109 requires recognition of
deferred tax liabilities and assets for the expected future
tax consequences of events that have been recognized in the
financial statements or tax returns. Under this method,
deferred tax liabilities and assets are determined based on
the difference between the financial statement carrying
amounts and tax bases of assets and liabilities using enacted
tax rates in effect in the years in which the differences are
expected to reverse.
For the period from inception (May 26, 1995) to December 31,
1995, pursuant to Internal Revenue Service Code Section 195,
the Company elected to treat its expenditures as start-up
costs. These costs totalling approximately $510,000 will be
treated as deferred expenses to be amortized on a
straight-line basis over 5 years.
The Company did not require a tax provision for the period
ended December 31, 1995 and the nine months ended September
30, 1996 as a result of operating losses during these periods.
As of September 30, 1996, the Company has a net operating loss
to be carried forward for income tax purposes of approximately
$2,567,000 expiring in 2011. The deferred tax asset relating
to this carryforward, for which the Company maintains a 100%
valuation allowance, approximated $873,000 at September 30,
1996. The valuation allowance resulted in a difference between
the statutory tax rate of 34% and the Company's effective tax
rate of 0%.
Pursuant to Section 382 of the Internal Revenue Code,
substantial restrictions are imposed on the utilization of the
net operating loss carryforwards in the event of an ownership
change.
F-9
<PAGE>
EUROTECH, LTD.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
(Unaudited with respect to September 30, 1996 and
the Period from Inception (May 26, 1995) to
September 30, 1995 and the Nine Months Ended September 30, 1996)
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
j) Impairment of Assets
In March 1995, the Financial Accounting Standards Board issued
Statements of Financial Accounting Standards No. 121 ("SFAS
121"), "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to be Disposed of". SFAS 121 is
effective for the Company's fiscal year commencing January 1,
1996. The Company believes adoption of SFAS 121 did not have a
material impact on its financial statements.
k) Stock-Based Compensation
In October 1995, the Financial Accounting Standards Board
issued SFAS No. 123, "Accounting for Stock-Based Compensation"
("SFAS 123"). SFAS 123 requires compensation expense to be
recorded (i) using the new fair value method or (ii) using
existing accounting rules prescribed by Accounting Principles
Board Opinion No. 25, "Accounting for Stock Issued to
Employees" ("APB 25") and related interpretations with
proforma disclosure of what net income and earnings per share
would have been had the Company adopted the new fair value
method. The Company intends to continue to account for its
stock based compensation plans in accordance with the
provisions of APB 25.
l) Stock Split
On June 1, 1996, the Board of Directors authorized
four-for-one stock split, thereby increasing the number of
issued and outstanding common shares to 14,166,800 and
decreasing the par value of each common share to $0.00025. All
references in the accompanying financial statements to the
number of common shares and per share amounts for 1995 and
1996 have been restated to reflect the stock split.
m) Per Share Data
Net loss per common share and common equivalent share has been
computed based on the weighted average number of shares of
common stock and common stock equivalents outstanding during
the periods presented, which were retroactively adjusted to
give recognition to the stock split on June 1, 1996.
F-10
<PAGE>
EUROTECH, LTD.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
(Unaudited with respect to September 30, 1996 and
the Period from Inception (May 26, 1995) to
September 30, 1995 and the Nine Months Ended September 30, 1996)
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
n) Interim Financial Information
The accompanying financial statements as of September 30, 1996
and for the period from inception (May 26, 1995) to September
30, 1995, the nine months ended September 30, 1996 and the
period from inception (May 26, 1995) to September 30, 1996 are
unaudited but, in the opinion of management of the Company,
reflect all adjustments (consisting only of normal and
recurring adjustments) necessary for a fair presentation. The
results of operations for the nine-month period ended
September 30, 1996 are not necessarily indicative of the
results that may be expected for the full year ending December
31, 1996.
NOTE 3 - COMPUTER EQUIPMENT
Computer equipment consisted of the following:
December 31, September 30,
1995 1996
------ ------
Cost $ - $ 1,778
Less: Accumulated depreciation - 118
-------- --------
$ - $ 1,660
======== ========
Depreciation expense for the period from inception (May 26,
1995) to December 31, 1995, the period from inception (May 26,
1995) to September 30, 1995 and the nine months ended
September 30, 1996 amounted to $-0-, $-0- and $118,
respectively.
NOTE 4 - ORGANIZATION COSTS
Organization costs consisted of the following:
December 31, September 30,
1995 1996
------ ------
Organization costs $ 1,557 $ 1,557
Less: Accumulated amortization 182 415
-------- --------
$ 1,375 $ 1,142
======== ========
Amortization expense for the period from inception (May 26,
1995) to December 31, 1995, the period from inception (May 26,
1995) to September 30, 1995 and the nine months ended
September 30, 1996 amounted to $182, $104 and $233,
respectively.
F-11
<PAGE>
EUROTECH, LTD.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
(Unaudited with respect to September 30, 1996 and
the Period from Inception (May 26, 1995) to
September 30, 1995 and the Nine Months Ended September 30, 1996)
NOTE 5 - NOTES PAYABLE - SHAREHOLDERS
On June 30, 1996, a shareholder advanced $128,300 to the
Company in exchange for a promissory note. The note is payable
in full, with interest accrued at the rate of 10% per annum,
on December 31, 1996.
On August 31, 1996, three shareholders advanced $213,000 in
aggregate to the Company in exchange for promissory notes. The
notes payable in full, with interest accrued at the rate of
10% per annum, on December 31, 1996.
The accompanying balance sheet at September 30, 1996 includes
interest accrued related to these notes aggregating $4,983.
In December 1996, two shareholders agreed to convert $200,000
of principal into four units of securities discussed in Note
13.
NOTE 6 - COMMON STOCK
In May 1995, the Company issued 4,380,800 shares to its
founder.
Since inception (May 26, 1995), the Company completed two
offerings of common stock under Rule 504 of the Securities Act
of 1933 (the "Act") as follows:
First Offering
Under the first offering, during the period from inception
(May 26, 1995) to December 31, 1995, the Company sold
2,640,000 shares of common stock at $0.0625 per share and
derived aggregate proceeds of $165,000, of which $1,000 and
$3,000 were receivable from stockholders at September 30, 1996
and December 31, 1995, respectively.
During August 1995, the Company issued 440,000 shares of
common stock, valued at $27,500, to two individuals and a
financial institution as consideration for assistance in the
above offerings.
During August 1995, the Company issued 600,000 shares of
common stock in connection with its purchase of a license
valued at $37,500. The shares were issued as part of the first
offering.
On October 10, 1995, the Company issued 600,000 non-qualified
stock options to acquire shares of common stock to one
individual and two firms as consideration for financial public
relations services, investment banking services and legal
services, valued at $75,000, in connection with the above
offerings. The options were issued outside of the 1995 Stock
Option Plan and had a term of one year commencing January 1,
1996. All of the options were exercised on January 18, 1996
and the related 600,000 shares were issued as part of the
first offering.
F-12
<PAGE>
EUROTECH, LTD.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
(Unaudited with respect to September 30, 1996 and
the Period from Inception (May 26, 1995) to
September 30, 1995 and the Nine Months Ended September 30, 1996)
NOTE 6 - COMMON STOCK (Continued)
Second Offering
Under the second offering, which commenced in October of 1995,
the Company sold 2,718,000 shares of common stock at $0.25 per
share and derived aggregate proceeds of $679,500. Of these
2,718,000 shares sold, pursuant to the second offering,
1,440,000 shares were sold during 1995 for aggregate proceeds
of $360,000 and 1,278,000 shares were sold during 1996 for
aggregate proceeds of $319,500.
Other Issuances
During 1996, the Company issued 4,288,000 shares of common
stock as consideration for consulting services performed by
various consultants, including related parties, through
September 30, 1996. Shares issued under these arrangements
were valued at $1,105,188.
Shares of common stock and stock options issued for other than
cash have been assigned amounts equal to the fair value of the
services or assets received in exchange.
Warrants
Warrants to purchase 600,000 shares of common stock at $1.00
per share were issued to various individuals and corporations
in 1996 in connection with financial advisory services. The
warrants are exercisable for a term of four years commencing
May 22, 1997. At September 30, 1996, 600,000 warrants were
outstanding.
NOTE 7 - 1995 STOCK OPTION PLAN
The Company's 1995 Stock Option Plan (the "Option Plan") was
adopted by the Board of Directors and stockholders of the
Company on November 12, 1995. Under the Option Plan, 500,000
shares of the Company's common stock, subject to certain
adjustments, are reserved for issuance upon the exercise of
options. Options granted under the Option Plan may be either
(i) options intended to constitute incentive stock options
under Section 422 of the Internal Revenue Code of 1986, as
amended, or any corresponding provisions of succeeding law
(the "Code") or (ii) non-qualified stock options. Incentive
stock options may be granted under the Option Plan to
employees (including officers) of the Company or a subsidiary
corporation (or any director of, or consultant or advisor to,
the Corporation, as may be selected by the
F-13
<PAGE>
EUROTECH, LTD.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
(Unaudited with respect to September 30, 1996 and
the Period from Inception (May 26, 1995) to
September 30, 1995 and the Nine Months Ended September 30, 1996)
NOTE 7 - 1995 STOCK OPTION PLAN (Continued)
committee) thereof on the date of grant. Non-qualified options
may be granted to (i) non-employees of the Company or a
subsidiary thereof on the date of the grant, and (ii)
consultants of advisors who do not provide bonafide services,
and such services must not be in connection with the offer or
sale of securities in a capital raising transaction.
By its terms, the Option Plan is to be administered by a
committee (the "Committee") appointed by the Board of
Directors which shall consist of either the entire Board of
Directors, or by a committee of two or more persons (who may
or may not be directors), and who serve at the discretion of
the Board of Directors. Subject to the provisions of the
Option Plan, the Committee has the authority to determine the
persons to whom options will be granted, the exercise price,
the term during which options may be exercised and such other
terms and conditions as it deems appropriate.
Any options granted under the Option Plan will be at the fair
market value of the common stock on the date of the grant (or
110% of the fair market value in the case of employees holding
ten percent or more of the voting stock of the Company).
Options granted under the Option Plan will expire not more
than ten years from the date of the grant subject to earlier
termination under the Option Plan. The term of an incentive
stock option granted to a 10% shareholder shall be no more
than 5 years from the date of the grant. The Option Plan will
terminate on November 12, 2005.
As of September 30, 1996, no options were granted under the
Option Plan.
NOTE 8 - RESEARCH, COLLABORATION AND LICENSING AGREEMENTS
(a) Under an oral agreement, the Company has agreed to fund the
commercialization of certain uncommercialized technologies
developed in the former Soviet Union by scientists and
researchers at the I.V. Kurchatov Institute ("Kurchatov"),
other institutes associated therewith, and the Euro-Asian
Physical Society ("EAPS"), collectively the "Scientists".
Kurchatov will provide the materials, facilities and personnel
to complete the necessary work to commercialize such
technologies. Disbursements made by the Company related to the
Kurchatov arrangement were charged to research and development
expenses and amounted to $174,561, $80,561 and $586,550,
respectively, during the period from inception (May 26, 1995)
to December 31, 1995, the period from inception (May 26, 1995)
to September 30, 1995 and the nine months ended September 30,
1996. Included in accrued expenses at September 30, 1996 is an
additional $194,000 related to these services.
F-14
<PAGE>
EUROTECH, LTD.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
(Unaudited with respect to September 30, 1996 and
the Period from Inception (May 26, 1995) to
September 30, 1995 and the Nine Months Ended September 30, 1996)
NOTE 8 - RESEARCH, COLLABORATION AND LICENSING AGREEMENTS (Continued)
In addition, pursuant to an oral agreement, which was reduced
to writing on January 28, 1997, with the Kurchatov Research
Holdings, Ltd. ("KRH"), a Delaware corporation, jointly owned
by ERBC Holdings, Ltd. ("ERBC") and individual Russian
scientists, researchers and academics, who are affiliated with
Kurchatov and EAPS, the Company agreed to pay KRH 50% of the
net profits derived from the sale, license or
commercialization of any technologies or products based upon
technologies developed by the scientists and transferred to
the Company or supplied by the scientists to the Company. The
managing directors of ERBC are shareholders of the Company.
In connection with the collaboration agreement discussed
above, in September 1996, the Company entered into a licensing
agreement with ERBC, whereby ERBC sublicensed its license to
use and exploit certain technologies and inventions relating
to a silicon organic ("EKOR") foam in the United States,
Ukraine, Canada, China, Japan, Republic of Korea and all
European countries who are members of the European Patent
Agreement. Under the agreement, the Company shall pay to ERBC
a royalty equal to 3% of the cost of contracts made by the
Company on which the Company would have any income. In
addition to the royalty payment, pursuant to the collaboration
agreement with KRH, the Company will be required to remit 50%
of the net profit derived from the EKOR foam technology to
KRH.
(b) In September 1996, the Company licensed certain technology to
Eurowaste, Ltd. (the "Licensee"), whereby the Licensee agreed
to pay the Company $2,450,000 upon the initiation of
construction of the first waste to energy plant, and a design
and implementation consulting fee of $425,000 for each
subsequent plant. A shareholder of the Company holds the stock
of the Licensee.
(c) On May 1, 1995, the Company entered into a license agreement
which granted the Company an exclusive right to license
certain technologies for medical application systems in
Russian/European countries for the remaining life of the
patent for $37,500. In lieu of cash, the owner accepted
600,000 shares of the Company's common stock. The agreement
called for quarterly royalty payments equal to 5% of gross
revenues earned and received by the Company with a minimum
annual royalty of $100,000. No minimum royalty payment was to
accrue or be payable until December 1, 1995. The Company
terminated the agreement on November 30, 1995 and expensed the
cost of the license. No products were developed or sold using
the licensed technology and no royalties were due the owner.
F-15
<PAGE>
EUROTECH, LTD.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
(Unaudited with respect to September 30, 1996 and
the Period from Inception (May 26, 1995) to
September 30, 1995 and the Nine Months Ended September 30, 1996)
NOTE 8 - RESEARCH, COLLABORATION AND LICENSING AGREEMENTS (Continued)
(d) On May 29, 1995, the Company entered into a license agreement
which granted the Company, for the life of the patent,
territorially limited exclusive license to use technology
marketed under the name Coherent On Receive Only ("CORO") in
Europe and the Near East. In consideration for the grant of
the license and the use of the proprietary engineering, the
Company agreed to pay the developer $200,000 upon delivery of
the technology, along with an 8% royalty payable semi-annually
on equipment gross sales.
Management is currently evaluating the viability of this
technology and its potential uses in various markets.
NOTE 9 - CONCENTRATION OF CREDIT RISK
Financial instruments which potentially subject the Company to
concentration of credit risk consist principally of cash which
is at one bank. Future concentration of credit risk may arise
from trade accounts receivable. Ongoing credit evaluations of
customers' financial condition will be performed and,
generally, no collateral will be required.
NOTE 10 - COMMITMENTS
Consulting Agreements
Commencing January 1, 1996, the Company has agreed to pay
approximately $6,500 per month to the Chairman and President
of the Company for his services. This agreement extends
through December 31, 1996 and automatically renews on January
1, 1997 for a two-year period. Included in accrued expenses at
September 30, 1996 is $45,000 related to this agreement.
Commencing January 1, 1996, the Company agreed to pay a
consultant and advisor to the Company who is also a
shareholder of the Company, monthly consulting fees of
$16,667. This agreement expires on December 31, 1996. Included
in accrued expenses at September 30, 1996 is $180,000 related
to this agreement.
The Company engages ERBC under an oral agreement to develop
business plans, develop business opportunities in the European
Union, Russian and Ukraine and for the evaluation of various
technologies held by former instrumentalities in the former
Soviet Union. The Company paid ERBC for consulting services
$177,400, $129,000 and $8,700, respectively, during the period
from inception (May 26, 1995) to December 31, 1995, from
inception (May 26, 1995) to September 30, 1995 and the nine
months ended September 30, 1996. Included in accrued expenses
at September 30, 1996 is an additional $7,500 due ERBC related
to these services.
F-16
<PAGE>
EUROTECH, LTD.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
(Unaudited with respect to September 30, 1996 and
the Period from Inception (May 26, 1995) to
September 30, 1995 and the Nine Months Ended September 30, 1996)
NOTE 10 - COMMITMENTS (Continued)
The Company also utilizes the consulting services of two
directors of the Company, who are also managing directors of
ERBC, to establish manufacturing alliances and sub-licensing
arrangements in Germany and the former Soviet Union. The
Company paid the directors an aggregate of $79,500, $31,000
and $-0-, respectively, during the period from inception (May
26, 1995) to December 31, 1995, the period from inception (May
26, 1995) to September 30, 1995 and the nine months ended
September 30, 1996 for these services.
On April 15, 1996, the Company entered into a consulting
agreement for certain public relation services. The agreement
calls for a payment of $10,000 and issuance of 20,000 shares
of common stock as consideration for services to be performed
through September 15, 1996. Included in accrued expenses is
$10,000 related to such services. Commencing October 15, 1996
through April 15, 1998, the Company is obligated to pay $2,000
and issue 4,000 shares of common stock on a monthly basis as
compensation for the consulting services through the earlier
of April 15, 1998 or the termination date.
On July 1, 1996, the Company entered into a consulting
agreement for certain financial public relations services with
a shareholder. The agreement is for a period of one year, with
an exclusive right to the Company to terminate the agreement
at the end of any calendar quarter. The Company has agreed to
issue 75,000 shares of common stock in full consideration for
the services to be rendered. The shares will not be issued or
vested prior to January 1, 1997.
Lease Obligations
In August 1996, the Company entered into a lease agreement to
rent office space for a period of fourteen months. Monthly
rental under the lease amount to $2,500 subject to certain
expense adjustments.
NOTE 11 - PROPOSED INITIAL PUBLIC OFFERING
In September 1996, the Company received a letter of intent
from an underwriter pursuant to which the firm has agreed in
principle to underwrite, on a firm commitment basis, 5,000,000
shares of cumulative convertible preferred stock (not
including an underwriter's over- allotment option equal to up
to 75,000 shares) at an initial public offering price of
$10.00 per share. In connection therewith, the Company has
incurred offering costs aggregating $75,000, which if the
offering is not consummated, will be charged to expense.
The Company is considering alternative financing arrangements
and there is no assurance that the Company will complete this
or any other offering.
F-17
<PAGE>
EUROTECH, LTD.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
(Unaudited with respect to September 30, 1996 and
the Period from Inception (May 26, 1995) to
September 30, 1995 and the Nine Months Ended September 30, 1996)
NOTE 12 - SUPPLEMENTAL CASH FLOW INFORMATION
Non-Cash Transactions
During the period from inception (May 26, 1995) to September
30, 1995, the Company issued 440,000 shares of common stock to
settle liabilities of $27,500 associated with stock offerings
and issued 600,000 shares of common stock for the purchase of
a license valued at $37,500.
During the period from inception (May 26, 1995) to December
31, 1995, the Company issued stock options for 600,000 shares
of common stock to settle legal and consulting fee liabilities
of $75,000 associated with stock offerings.
During the nine months ended September 30, 1996, the Company
issued 4,288,000 shares of common stock to settle liabilities
of $1,105,188 associated with consulting services.
NOTE 13 - SUBSEQUENT EVENTS
Financing Activities
In December 1996, the Company entered into a purchase
agreement for an offering of up to an aggregate of 40 units to
certain accredited investors as defined pursuant to Rule 501
of the Securities Act of 1933 (as amended pursuant to Rule 506
of Regulation D under the Act).
Each unit consists of one promissory note issued by the
Company in the principal amount of $50,000 bearing interest at
the rate of 12% per annum and 25,000 shares of the Company's
common stock. Under the agreement, the notes are due one year
from the issuance date. Gross proceeds received under this
offering were $2,000,000. The shares of common stock issued
pursuant to this agreement have, among other things, demand
and mandatory registration rights. Under the agreement, if the
registration statement, which includes the common shares
issued pursuant to this agreement, is not declared effective
by the S.E.C. by April 1, 1997, then an additional 12,500
shares are to be issued for each unit, or 500,000 shares for
all 40 units. Further, if such registration statement is not
declared effective by the S.E.C. by July 1, 1997, then an
additional 12,500 shares are to be issued for each unit, or
500,000 shares for all 40 units.
F-18
<PAGE>
EUROTECH, LTD.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
(Unaudited with respect to September 30, 1996 and
the Period from Inception (May 26, 1995) to
September 30, 1995 and the Nine Months Ended September 30, 1996)
NOTE 13 - SUBSEQUENT EVENTS (Continued)
Consulting Agreements
In October 1996, the Company entered into two-year consulting
agreements with two individuals for certain advisory services.
As full compensation for services to be rendered for the term
of the agreements, the Company issued warrants to both
consultants to purchase 150,000 shares each of common stock
exercisable for a period of five years commencing October 1,
1996 at an exercise price of $1.50 per share.
In November 1996, the Company entered into a consulting
agreement to provide financial public relations services for a
term of two years. The agreement can be terminated by the
Company at the end of any calendar quarter by providing one
week's written notice to the consultant. The consultant will
receive $5,000 on a monthly basis as compensation. Also, the
consultant is granted an option to acquire up to 12,500 shares
of common stock in each calendar quarter at an exercise price
equal to the ask price per share on the first day of
respective calendar quarter as reported by National Quotation
Bureau. Each option shall have a term of one year.
In November 1996, the Company entered into a consulting
agreement for certain technology advisory services for a term
of two years. The Company is obligated to pay $4,000 and issue
20,000 shares of common stock for services performed through
November 15, 1996. Commencing December 15, 1996, the
consultant will receive $4,000 and 4,000 shares of common
stock on a monthly basis as compensation during the term of
the agreement.
In December 1996, the Company entered into a six-month
consulting agreement for financial public relations services.
The Company is obligated to pay $2,500 per month under the
agreement.
In December 1996, the Company entered into a consulting
agreement for certain advisory services for a term of two
years. The advisor will be paid $2,000 and issued 5,000 shares
of common stock for services performed through November 15,
1996. In addition, commencing January 1, 1997, on a monthly
basis, the advisor will receive as compensation $1,000 and
2,000 shares of common stock during the term of the agreement.
In December 1996, the Company entered into two consulting
agreements for certain services for a period of two years. The
Company is obligated in January 1997 to pay $2,000 and issued
5,000 shares of its common stock to each consultant for
services rendered through the date
F-19
<PAGE>
EUROTECH, LTD.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
(Unaudited with respect to September 30, 1996 and
the Period from Inception (May 26, 1995) to
September 30, 1995 and the Nine Months Ended September 30, 1996)
NOTE 13 - SUBSEQUENT EVENTS (Continued)
of the agreement. In addition, each consultant will be paid
$1,000 on a monthly basis during the term of the agreement.
Also, 1,000 and 2,000 shares of common stock, respectively,
will be issued on a monthly basis to these consultants.
In December 1996, the Company entered into a consulting
agreement with a shareholder of the Company for certain
technology advisory services for a term of two years. Under
the agreement, on April 1, 1997, the Company will pay an
introductory sum of $2,000 and issue 5,000 shares of common
stock. Commencing April 1, 1997, the shareholder will receive
$1,000 on a monthly basis as compensation during the term of
the agreement.
Licensing Agreements
On January 28, 1997, the Company entered into a technology
transfer consulting arrangement with American Autopark, Ltd.
("Arbat") to license its technology, designs, renderings,
blueprints and plans for the construction and operation of
vertical parking structures. The Company is to receive a fee
equal to $1,250 per parking space in each garage erected by
Arbat or any of its affiliates based upon the technology
transferred to Arbat by the Company. Certain shareholders of
the Company are shareholders of Arbat.
Memorandum of Intent
The Chernobyl Nuclear Power Station (an industrial
amalgamation of the State Committee of Ukraine on Atomic
Energy) ("ChNPP"), Kurchatov, the Ukrainian State Construction
Corporation ("Ukrstroj") and the Company have entered into a
Memorandum of Intent (the "Chernobyl Memorandum of Intent")
which sets forth the intention of ChNPP to enter into a
"co-operation agreement" with the Company pursuant to which
the Company will provide the financing for the development of
an on-site demonstration of the EKOR foam, in conjunction with
ChNPP, Ukrstroj and Kurchatov, which will provide the test
sites, foam application equipment and technical support,
respectively. In furtherance of the foregoing, Ukrstroj and
ChNPP have entered into an agreement (the "Ukrstroj"-ChNPP
Agreement") to conduct such on-site demonstration testing of
the EKOR foam as in necessary to ascertain the specification
requirements for its application to the containment of
Chernobyl Reactor 4. The Ukrstroj-ChNPP Agreement provides for
the Company's participation in and financing of the EKOR
demonstration test. The Company estimates that total financing
costs for the demonstration test will not exceed $100,000. The
on-site demonstration is expected to be conducted in February
1997.
F-20
<PAGE>
PART III
ITEM 15. EXHIBIT INDEX
1. Articles of Incorporation
2. By-Laws
3. Form of Common Stock
4. Material Contracts
a. License of EKOR technology by Euro-Asian Physical Society
to ERBC Holdings, Ltd.
b. License of EKOR technology by ERBC Holdings, Ltd., to
Eurotech, Ltd.
c. Agreement among Eurotech, Ltd. and Kurchatov Research
Holdings, Ltd.
d. Memorandum of Intent among Chernobyl Nuclear Power Plant,
I.V. Kurchatov Institute, "Ukrstroj." and Eurotech, Ltd.
e. Agreement among Chernobyl Nuclear Power Plant and
"Ukrstroj"
f. Letter of December 12, 1996, from "Ukrstroj" to Eurotech,
Ltd.
g. Cooperation Agreement among Eurotech, Ltd., "Ukrstroj,"
and Euro-Asian Physical Society
h. Agreement among Eurotech, Ltd., and Arbat American
Autopark, Ltd.
i. Agreement among Eurotech, Ltd., and Eurowaste Management,
Ltd.
j. Letter of Power Development Associates, Inc., to Eurotech,
Ltd.
k. Employment Agreement among Eurotech, Ltd. and Randolph
Graves, Jr.
27. Financial Data Schedule
- 28 -
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act
of 1934, the Registrant has duly caused this Registration Statement to be signed
on its behalf by the undersigned, thereto duly authorized.
EUROTECH, LTD.
a District of Columbia corporation
Dated:______________, 1997 By:______________________________________
Randolph A. Graves, Jr.
Chairman, CEO, President and Director
Dated:______________, 1997 By:______________________________________
Karl J. Krobath
Director
Dated:______________, 1997 By:______________________________________
Hans-Joachim Skrobanek
Secretary and Director
Dated:______________, 1997 By:______________________________________
Peter Gulko
Director
- 29 -
ARTICLES OF INCORPORATION
OF
EUROTECH, LTD. FILED
MAY 26 1995
To: The Department of Consumer BY: [illegible]
and Regu1atory Affairs
District of Columbia
The undersigned, a natural person of the age of eighteen years or older
and acting as incorporator for the purpose of organizing a corporation pursuant
to the provisions of the District of Columbia Business Corporation Act, does
hereby adopt the following Articles of Incorporation,
FIRST: The name of the corporation (hereinafter called the
"Corporation") is EUROTECH, LTD.
SECOND: The duration of the Corporation shall be perpetual.
THIRD: The purposes for which the Corporation is organized are as
follows:
To provide international counseling services with respect to all types
of infrastructure, strategic development and other projects of whatever nature
and description.
To be a principal, counselor or agent in all types of venture capital
transactions.
To carry on a general mercanti1e, industrial, investing and trading
business in all its branches; to devise, invent, manufacture, fabricate,
assemble, install, service, maintain, alter, buy, sell, import, export, license
as licensor or licensee, lease as lessor or lessee, distribute, job, enter into,
negotiate, execute, acquire, and assign contracts in respect of, acquire,
receive, grant, and assign licensing arrangements, options, franchises, and
other rights in respect of and generally deal in and with, at wholesale and
retail, as principal, and as sales, business, special, or general agent,
representative, broker, factor, merchant, distributor, jobber, advisor, and in
any other lawful capacity, goods, wares, merchandise, commodities, and
unimproved, improved, finished, processed, and other real, personal, and mixed
property of any and all kinds, together with the components, resultants and
by-products thereof, to acquire by purchase or otherwise own, hold, lease,
mortgage, sell, or otherwise dispose of, erect, construct, make, alter, enlarge,
improve, and to aid or subscribe toward the construction, acquisition, or
improvement of any factories, shops, storehouses, buildings, and commercial and
retail establishments of every character, including all equipment, fixtures,
machinery, implements, and supplies necessary, or incidental to, or connected
with, any of the purposes or business of the Corporation; and
<PAGE>
generally to perform any and all acts connected therewith or arising therefrom
or incidental thereto, and all acts proper or necessary for the purpose of the
business.
To engage generally in the real estate business as principal, agent,
broker, and in any lawful capacity, and generally to take, lease, purchase, or
otherwise acquire, and, to own, use, hold, sell, convey, exchange, 1ease,
mortgage, work, clear, improve, develop, divide, and otherwise handle, manage,
operate, deal in and dispose of real estate, real property, lands,
multiple-dwelling structures, houses, buildings, and other works and any
interest or right therein; to take, lease, purchase, or otherwise acquire, and
to own, use, hold, sell, convey, exchange, hire, lease, pledge, mortgage, and
otherwise handle and deal in and dispose of, as principal, agent, broker, and in
any lawful capacity, such personal property, chattels, chattels real, rights,
easements, privileges, choses in action, notes, bonds, mortgages, and securities
as may lawfully be acquired, held or disposed of; and to acquire, purchase,
sell, assign, transfer, dispose of, and generally deal in and with, as
principal, agent, broker, and in any lawful capacity, mortgages and other
interests in real, personal, and mixed properties; to carry on a general
construction, contracting, building, and realty management business as
principal, agent, representative, contractor, subcontractor, and in any other
lawful capacity.
To apply for, register, obtain, purchase, lease, take licenses in
respect of, or otherwise acquire, and to hold, own, use, operate, develop,
enjoy, turn to account, grant licenses and immunities in respect of, manufacture
under and to introduce, sell, assign, mortgage, pledge, or otherwise dispose of,
and, in any manner deal with and contract with reference to:
(a) inventions, devices, formulae, processes, and any improvements and
modifications thereof;
(b) letters patent, patent rights, patented processes, copyrights,
designs, and similar rights, trademarks, trade symbols and other indications or
origin and ownership granted by or recognized under the laws of the United
States of America or of any state of subdivision thereof, or of any foreign
country or subdivision thereof, and all rights connected therewith or
appertaining thereunto;
(c) franchises, licenses, grants and concessions.
To have, in furtherance of the corporate purposes, all of the powers
conferred upon corporations organized under the District of Columbia Business
Corporation Act.
FOURTH:
1. The aggregate number of shares which the Corporation shall have
authority to issue is:
(a) 7,500,000 shares of Class A Common Stock, having a par value of
$0.001 per share; and
<PAGE>
(b) 7,500,000 shares of Class B Common Stock, having a par value of
$0.001 per share.
2. The holders of the Class A Common Stock shall be entitled to cast
one vote for each share of Class A Common Stock held, at all stockholders
meetings for all purposes. The holders of the Class B Common Stock shall have no
voting rights in respect of such Class B Common Stock.
3. Any dividend shall be made on a pro rata basis between the holders
of the shares of Class A and Class B Common Stock.
4 Upon liquidation, dissolution or winding up of the Corporation, any
distribution or payment shall be made on a pro rata basis between the holders of
the shares of Class A and Class B Common Stock.
FIFTH: The minimum amount of capital with which the Corporation shall
commence business shall not be less than one thousand dollars.
SIXTH: No holder of any of the shares of any class of the Corporation
shall be entitled as of right to subscribe for, purchase, or otherwise acquire
any shares of any class of the Corporation which the Corporation proposes to
issue or any rights or options which the Corporation proposes to grant for the
purchase of shares of any class of the Corporation or for the purchase of any
shares, bonds, securities, or obligations of the Corporation which are
convertible into or exchangeable for, or which carry any rights, to subscribe
for, purchase, or otherwise acquire shares of any class of the Corporation; and
any and all of such shares, bonds, securities, or obligations of the
Corporation, whether now or hereafter authorized or created, may be issued, or
may be reissued or transferred if the same have been reacquired and have
treasury status, and any and all of such rights and options may be granted by
the Board of Directors to such persons, firms, corporations, and associations,
and for such lawful consideration, and on such terms, as the Board of Directors
in its discretion may determine, without first offering the same, or any
thereof, to any said holder.
SEVENTH: The following provisions are set forth for the regulation of
the interna1 affairs of the Corporation.
1. The entire Board of Directors or any individual director may be
removed from office with or without cause by the shareholders entitled to vote
in the election of directors.
2. The Corporation shall, to the fullest extent permitted by Section
29-304 of the District of Columbia Business Corporation Act, as the same may be
amended and supplemented, indemnify any and all persons whom it shall have power
to indemnify under said section from and against any and all of the expenses,
liabilities, or other matters referred to or covered by said section, and the
indemnification provided for herein shall not be deemed exclusive of any other
rights to which those indemnified may
<PAGE>
be entitled under any By1aw, agreement, vote of shareholders, or otherwise.
3. No contract or transaction between the Corporation and one or more
of its director or officers, or between the Corporation and any other
corporation, partnership, association, or other organization or entity in which
one or more of its directors or officers are directors or officers, or have a
financial interest, shall be deemed by the Corporation to be void or voidable
solely for this reason, or solely because the director or officer is present at
or participates in the meeting of the Board or Executive Committee thereof, if
any, which authorizes the contract or transaction if:
(i) The material facts as to his relationship or interest and as to
the contract or transaction are disclosed or are known to the Board
of Directors or the Executive Committee, if any, and the Board or
such Executive Committee in good faith authorizes the contract or
transaction by the affirmative votes of a majority of the
disinterested directors, and
(ii) The material facts as to his relationship or interest and as to
the contract or transaction are disclosed or are known to the
shareholders entitled to vote thereon, and the contract or
transaction is specifically approved in good faith by vote of the
shareholders; or
(iii) The contract or transaction is fair as to the Corporation as
of the time it is authorized, approved or ratified, by the Board of
Directors, any such Executive Committee thereof, and the
shareholders.
4. Whenever any provision of the District of Columbia Business
Corporation Act shall otherwise require for the approval or authorization of any
action the affirmative vote of two-thirds of the outstanding shares, the
affirmative vote of a majority of the outstanding shares shall be sufficient for
that purpose. Whenever any provision of the Director of Columbia Business
corporation Act shall otherwise also require for the approval or authorization
of any action the affirmative vote of two-thirds of the outstanding shares of
any class of shares, the affirmative vote of a majority of the outstanding
shares of each such class shall be sufficient for that purpose.
EIGHT: The address, including street and number, of the initial
registered office of the Corporation in the District of Columbia is c/o The
Prentice-Hall Corporation Systems, Inc., 1090 Vermont Avenue N.W., Washington,
D.C. 20005; and the name of the initial registered agent of the Corporation at
such address is The Prentice-Hall Corporation System, Inc.
NINTH: The number of directors constituting initial Board of Directors
of the Corporation is three persons.
The name and the address, including street number, if any, of each of
the persons who are to serve as directors of the Corporation until the first
annual meeting of shareholders or until their successors be elected and qualify
are as follows:
<PAGE>
NAME ADDRESS
---- --------
Randolph A. Craves 150 E. 58 Street
33th F1oor
New York, New York 10155
Jacob Ben-Avi 150 E. 58 Street
35th Floor
New York, New York 10155
Peter Gulko 150 E. 58 Street
35th Floor
New York, New York 10155
TENTH: The name and the address, including street and number of the
incorporator are as follows:
NAME ADDRESS
---- --------
Kelly Howley 1090 Vermont Avenue, N.W.
Washington, D.C. 20005
Signed this 26th day of May, 1995.
/s/ Kelly Howley
----------------------------
Kelly Howley, Incorporator
<PAGE>
FILED
ARTlCLES OF AMENDMENT 20 JUN 1996
TO THE ------------
ARTICLES OF INCORPORATION OF WLA
EUROTECH, LTD.
(After acceptance of subscriptions to shares)
To: Department of Consumer and Regulatory Affairs
District of Columbia
Pursuant to the provisions of Title 29, Chapter 3 of the District of
Columbia Code, the undersigned corporation adopts the following Articles of
Amendment to its Articles of Incorporation.
FIRST: The name of the corporation is Eurotech, Ltd.
SECOND: The following amendment to the Articles of lncorporation of the
corporation was adopted by the shareholders of the corporation at a Special
Meeting of Shareholders held on June 14, 1996, in the manner prescribed by the
Code of Laws of the District of Columbia:
"RESOLVED, that the Corporation amend Article FOURTH of its
Articles of Incorporation so as to (i) consolidate the two authorized
classes of common stock into a single class of common stock which would
be designated as "Common Stock," (ii) to increase the total number of
shares of Common Stock which the Company is authorized to issue to
50,000,000 shares, (iii) to affect a four-for-one split of the
outstanding shares of Common Stock and in connection therewith to
reduce the par value per share of Common Stock to $.00025, and (iv) to
add a class of preferred stock consisting of one million (1,000,000)
shares which the Board of Directors of the Company would have the power
to designate in its discretion as it deems necessary, and that said
Article FOURTH, as amended, would read as follows:
"FOURTH: (a) The total number of shares of capital stock
which the Corporation shall have authority to issue is Fifty One
Million (51,000,000) shares of which Fifty Million (50,000,000) shares
shall be designated as common stock with a par value of $.001 per share
and One Million (1,000,000) shares shall be designated as preferred
stock with a par value of $.01 per share. Upon the filing of these
Articles of Amendment, each outstanding share of Class A Common Stock
of the Corporation, $.001 par value per share, shall without any action
of the holders thereof, be reclassified and changed into four shares of
common stock par value of $.00025 per share.
<PAGE>
(b) The Corporation is authorized to issue the preferred shares from
time to time in one or more series with such designations, relative
rights, preference or limitations as shall be fixed by the Board of
Directors in the resolution or resolutions providing for the issue of
such shares, subject to the limitation, that if the stated dividends
and amounts payable on liquidation are not paid in full, the shares of
all series shall share ratably in the payment of dividends including
accumulations, if any, in accordance with the sums which would be
payable on such shares if all dividends were declared and paid in
full, and in any distribution of assets other than by way of dividends
in accordance with the sums payable were discharged in full. The Board
of Directors is expressly authorized to adopt such resolution or
resolutions providing for the issue of such shares from time to time
as the Board of Directors, in its discretion, may deem desirable"
THIRD: The number of shares of the corporation outstanding at the time of the
adoption of the foregoing amendment was 3,541,700 and the number of shares
entitled to vote thereon was 2,873,200.
FOURTH: The designation and number of outstanding shares of each class entitled
to vote thereon as a class were as follows:
Class Number of Shares
----- ----------------
Class A Common Stock 2,873,200
Class B Common Stock -0-
FIFTH: The number of shares which voted for such amendment was 1,637,700, the
number of shares which voted against such amendment was 0.
SIXTH: The number of shares of each class entitled to vote thereon as a class
voted for and against such amendment, respectively, was
Class Number of Shares Voted
----- For Against
--- --------
Class A Common Stock 1,637,700 -0-
SEVENTH: The manner, if not set forth in the amendment, in which any exchange,
reclassification or cancellation of issued shares provided forth in the
amendment shall be effected, is as follows:
The transfer agent of the corporation's capital stock shall be directed to
deliver certificates to shareholders of record on the close of business June 14,
1996 in an
<PAGE>
amount equal to the additional shares of common stock into which their shares
are converted as a result of the stock split set forth in the amendment. The
corporation intends to cause such certificates to be issued by July 15, 1996.
EIGHT: The manner in which such amendment effects a change in the amount of
stated capital, or paid-in surplus, or both, and the amount of stated capital
and the padi-in surplus as changed by such amendment, are as follows:
None
Date: June 17, 1996
EUROTECH, LTD.
By: /s/ Randolph Graves, Jr.
-------------------------------------
Randolph Graves, Jr., President
Attest:
/s/ William P. Ruffa
- -------------------------------------
William P. Ruffa, Assistant Secretary
BY-LAWS
OF
EUROTECH, LTD.
ARTICLE I
OFFICES
SECTION 1. REGISTERED OFFICE. - The registered office shall be
established and maintained at c/o _____________ 40601 and _______________ shall
be the registered agent of this corporation in charge thereof.
SECTION 2. OTHER OFFICES. - The corporation may have other offices,
either within or without the District of Columbia, at such place or places as
the Board of Directors may from time to time appoint or the business of the
corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
SECTION 1. ANNUAL MEETINGS. - Annual meetings of stockholders for
the election of directors and for such other business as may be stated in the
notice of the meeting, shall be held at such place, either within or without the
District of Columbia, and at such time and date as the Board of Directors, by
resolution, shall determine and as set forth in the notice of meeting.
If the date of the annual meeting shall fall upon a legal holiday,
the meeting shall be held on the next succeeding business day. At each annual
meeting, the stockholders entitled to vote shall elect a Board of Directors and
they may transact such other corporate business as shall be stated in the notice
of the meeting.
SECTION 2. OTHER MEETINGS. - Meetings of stockholders for any
purpose other than the election of directors may be held at such time and place,
within or without the District of Columbia, as shall be stated in the notice of
the meeting.
SECTION 3. VOTING. - Each stockholder entitled to vote in accordance
with the terms of the Certificate of Incorporation and in accordance with the
provisions of these By-Laws shall be entitled to one vote, in person or by
proxy, for each share of stock entitled to vote held by such stockholder, but no
proxy shall be voted after three years from its date unless such proxy provides
for a longer period. Upon the demand of any stockholder, the vote for directors
and the vote upon any question before the meeting, shall be by ballot. All
elections for directors shall be decided by plurality vote; all other questions
shall he decided by majority vote except as otherwise provided by the
Certificate of Incorporation or the laws of the District of Columbia.
<PAGE>
A complete list of the stockholders entitled to vote at the ensuing
election, arranged in alphabetical order, with the address of each, and the
number of shares held by each, shall be open to the examination of any
stockholder, for any purpose germane to the meeting, during ordinary business
hours, for a period of at least ten days prior to the meeting, either at a place
within the city where the meeting is to be held, which place shall be specified
in the notice of the meeting, or, if not so specified, at the place where the
meeting is to be held. The list shall also be produced and kept at the time and
place of the meeting during the whole time thereof, and may be inspected by any
stockholder who is present.
SECTION 4. QUORUM. - Except as otherwise required by law, by the
Certificate of Incorporation or by these By-Laws, the presence, in person or by
proxy, of stockholders holding a majority of the stock of the corporation
entitled to vote shall constitute a quorum at all meetings of the stockholders.
In case a quorum shall not be present at any meeting, a majority in interest of
the stockholders entitled to vote thereat, present in person or by proxy, shall
have power to adjourn the meeting from time to time, without notice other than
announcement at the meeting, until the requisite amount of stock entitled to
vote shall be present. At any such adjourned meeting at which the requisite
amount of stock entitled to vote shall be represented, any business may be
transacted which might have been transacted at the meeting as originally
noticed; but only those stockholders entitled to vote at the meeting as
originally noticed shall be entitled to vote at any adjournment or adjournments
thereof. If the adjournment is for more than thirty (30) days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each stockholder of record entitled to
vote the meeting.
SECTION 5. SPECIAL MEETINGS. - Special meetings of the stockholders
for any purpose or purposes may be called by the President or Secretary, or by
resolution of the directors.
SECTION 6. NOTICE OF MEETINGS. - Written notice, stating the place,
date and time of the meeting, and the general nature of the business to be
considered, shall be given to each stockholder entitled to vote thereat at his
address as it appears on the records of the corporation, not less than ten nor
more than sixty days before the date of the meeting. No business other than that
stated in the notice shall be transacted at any meeting without the unanimous
consent of all the stockholders entitled to vote thereat.
SECTION 7. ACTION WITHOUT MEETING. - Unless otherwise provided by
the Certificate of Incorporation, any action required to be taken at any annual
or special meeting of stockholders, or any action which may be taken at any
annual or special meeting, may be taken without a meeting, without prior notice
and without a vote, if a consent in writing, setting forth the action so taken,
shall be signed by the holders of outstanding stock having not less than the
minimum number of votes that would be necessary to authorize or take such action
at a meeting at which all shares entitled to vote thereon were present and
voted. Prompt notice of the taking of the corporate action without a meeting by
less than unanimous written consent shall be given to those stockholders who
have not consented in writing.
<PAGE>
ARTICLE III
DIRECTORS
SECTION 1. NUMBER AND TERM. - The number of directors shall be
_____________. The directors shall be elected at the annual meeting of the
stockholders and each director shall be elected to serve until his successor
shall be elected and shall qualify. A director need not be a stockholder.
SECTION 2. RESIGNATIONS. - Any director, member of a committee or
other officer may resign at any time. Such resignation shall be made in writing,
and shall take effect at the time specified therein, and if no time be
specified, at the time of its receipt by the President or Secretary. The
acceptance of a resignation shall not be necessary to make it effective.
SECTION 3. VACANCIES. - If the office of any director, member of a
committee or other officer becomes vacant, the remaining directors in office,
though less than a quorum by a majority vote, may appoint any qualified person
to fill such vacancy, who shall hold office for the unexpired term and until his
successor shall be duly chosen.
SECTION 4. REMOVAL. - Any director or directors may be removed
either for or without cause at any time by the affirmative vote of the holders
of a majority of all the shares of stock outstanding and entitled to vote, at a
special meeting of the stockholders called for the purpose and the vacancies
thus created may be filled, at the meeting held for the purpose of removal, by
the affirmative vote of a majority in interest of the stockholders entitled to
vote.
SECTION 5. INCREASE OF NUMBER. - The number of directors may be
increased by amendment of these By-Laws by the affirmative vote of a majority of
the directors, though less than a quorum, or, by the affirmative vote of a
majority in interest of the stockholders, at the annual meeting or at a special
meeting called for that purpose, and by like vote the additional directors may
be chosen at such meeting to hold office until the next annual election and
until their successors are elected and qualify.
SECTION 6. POWERS. - The Board of Directors shall exercise all of
the powers of the corporation except such as are by law, or by the Certificate
of Incorporation of the corporation or by these By-Laws conferred upon or
reserved to the stockholders.
SECTION 7. COMMITTEES. - The Board of Directors may, by resolution
or resolutions passed by a majority of the whole board, designate one or more
committees, each committee to consist of two or more of the directors of the
corporation. The board may designate one or more directors as alternate members
of any committee, who may replace any absent or disqualified member at any
meeting of the committee. In the absence or disqualification of any member or
such committee or committees, the member or members thereof present at any such
meeting and not disqualified from voting, whether or not he or they constitute a
quorum, may unanimously appoint another member of the Board of Directors to act
at the meeting in the place of any such absent or disqualified member.
<PAGE>
Any such committee, to the extent provided in the resolution of the
Board of Directors, or in these By-Laws, shall have and may exercise all the
powers and authority of the Board of Directors in the management of the business
and affairs of the corporation, and may authorize the seal of the corporation to
be affixed to all papers which may require it; but no such committee shall have
the power of authority in reference to amending the Certificate of
Incorporation, adopting an agreement of merger or consolidation, recommending to
the stockholders the sale, lease or exchange of all or substantially all of the
corporation's property and assets, recommending to the stockholders a
dissolution of the corporation or a revocation of a dissolution, or amending the
By-Laws of the corporation; and unless the resolution, these By-Laws, or the
Certificate of Incorporation expressly so provide, no such committee shall have
the power or authority to declare a dividend or to authorize the issuance of
stock.
SECTION 8. MEETINGS. - The newly elected Board of Directors may hold
their first meeting for the purpose of organization and the transaction of
business, if a quorum be present, immediately after the annual meeting of the
stockholders; or the time and place of such meeting may be fixed by consent, in
writing, of all the directors.
Unless restricted by the incorporation document or elsewhere in these
By-laws, members of the Board of Directors or any committee designated by such
Board may participate in a meeting of such Board or committee by means of
conference telephone or similar communications equipment allowing all persons
participating in the meeting to hear each other at the same time. Participation
by such means shall constitute presence in person at such meeting.
Regular meetings of the Board of Directors may be scheduled by a
resolution adopted by the Board. The Chairman of the Board or the President or
Secretary may call, and if requested by any two directors, must call a special
meeting of the Board and give five days' notice by mail, or two days' notice
personally or by telegraph or cable to each director. The Board of Directors may
hold an annual meeting, without notice, immediately after the annual meeting of
shareholders.
SECTION 9. QUORUM. - A majority of the directors shall constitute a
quorum for the transaction of business. If at any meeting of the board there
shall be less than a quorum present, a majority of those present may adjourn the
meeting from time to time until a quorum is obtained, and no further notice
thereof need be given other than by announcement at the meeting which shall be
so adjourned.
SECTION 10. COMPENSATION. - Directors shall not receive any stated
salary for their services as directors or as members of committees, but by
resolution of the board a fixed fee and expenses of attendance may be allowed
for attendance at each meeting. Nothing herein contained shall be construed to
preclude any director from serving the corporation in any other capacity as an
officer, agent or otherwise, and receiving compensation therefor.
<PAGE>
SECTION 11. ACTION WITHOUT MEETING. - Any action required or
permitted to be taken at any meeting of the Board of Directors, or of any
committee therof, may be taken without a meeting, if prior to such action a
written consent thereto is signed by all members of the board, or of such
committee as the case may be, and such written consent is filed with the minutes
of proceedings of the board or committee.
ARTICLE IV
OFFICERS
SECTION 1. OFFICERS. - The officers of the corporation shall be a
President, a Treasurer, and a Secretary, all of whom shall be elected by the
Board of Directors and who shall hold office until their successors are elected
and qualified. In addition, the Board of Directors may elect a Chairman, one or
more Vice-Presidents and such Assistant Secretaries and Assistant Treasurers as
they may deem proper. None of the officers of the corporation need be directors.
The officers shall be elected at the first meeting of the Board of Directors
after each annual meeting. More than two offices may be held by the same person.
SECTION 2. OTHER OFFICERS AND AGENTS. - The Board of Directors may
appoint such other officers and agents as it may deem advisable, who shall hold
their offices for such terms and shall exercise such powers and perform such
duties as shall be determined from time to time by the Board of Directors.
SECTION 3. CHAIRMAN. - The Chairman of the Board of Directors, if
one be elected, shall preside at all meetings of the Board of Directors and he
shall have and perform such other duties as from time to time may be assigned to
him by the Board of Directors.
SECTION 4. PRESIDENT. - The President shall be the chief executive
officer of the corporation and shall have the general powers and duties of
supervision and management usually vested in the office of President of a
corporation. He shall preside at all meetings of the stockholders if present
thereat, and in the absence or non-election of the Chairman of the Board of
Directors, at all meetings of the Board of Directors, and shall have general
supervision, direction and control of the business of the corporation. Except
as the Board of Directors shall authorize the execution thereof in some other
manner, he shall execute bonds, mortgages and other contracts in behalf of the
corporation, and shall cause the seal to be affixed to any instrument requiring
it and when so affixed the seal shall be attested by the signature of the
Secretary or the Treasurer or Assistant Secretary or an Assistant Treasurer.
SECTION 5. VICE-PRESIDENT. - Each Vice-President shall have such
powers and shall perform such duties as shall be assigned to him by the
directors.
<PAGE>
SECTION 6. TREASURER. - The Treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate account of
receipts and disbursements in books belonging to the corporation. He shall
deposit all moneys and other valuables in the name and to the credit of the
corporation in such depositaries as may be designated by the Board of Directors.
The Treasurer shall disburse the funds of the corporation as may be
ordered by the Board of Directors, or the President, taking proper vouchers for
such disbursements. He shall render to the President and Board of Directors at
the regular meetings of the Board of Directors, or whenever they may request it,
an account of all his transactions as Treasurer and of the financial condition
of the corporation. If required by the Board of Directors, he shall give the
corporation a bond for the faithful discharge of his duties in such amount and
with such surety as the board shall prescribe.
SECTION 7. SECRETARY. - The Secretary shall give, or cause to be
given, notice of all meetings of stockholders and directors, and all other
notices required by the law or by these By-Laws, and in case of his absence or
refusal or neglect so to do, any such notice may be given by any person
thereunto directed by the President, or by the directors, or stockholders, upon
whose requisition the meeting is called as provided in these By-Laws. He shall
record all the proceedings of the meetings of the corporation and of the
directors in a book to be kept for that purpose, and shall perform such other
duties as may be assigned to him by the directors or the President. He shall
have the custody of the seal of the corporation and shall affix the same to all
instruments requiring it, when authorized by the directors or the President, and
attest the same.
SECTION 8. ASSISTANT TREASURERS AND ASSISTANT SECRETARIES. -
Assistant Treasurers and Assistant Secretaries, if any, shall be elected and
shall have such powers and shall perform such duties as shall be assigned to
them, respectively, by the directors.
ARTICLE V
MISCELLANEOUS
SECTION 1. CERTIFICATES OF STOCK. - A certificate of stock, signed
by the Chairman or Vice-Chairman of the Board of Directors, if they be elected,
President or Vice-President, and the Treasurer or an Assistant Treasurer, or
Secretary or Assistant Secretary, shall be issued to each stockholder certifying
the number of shares owned by him in the corporation. When such certificates are
countersigned (1) by a transfer agent other than the corporation or its
employee, or, (2) by a registrar other than the corporation or its employee, the
signatures of such officers may be facsimiles.
SECTION 2. LOST CERTIFICATES. - A new certificate of stock may he
issued in the place of any certificate theretofore issued by the corporation,
alleged to have been lost or destroyed, and the directors may, in their
discretion, require the owner of the lost or destroyed
<PAGE>
certificate, or his legal representatives, to give the corporation a bond, in
such sum as they may direct, not exceeding double the value of the stock, to
indemnify the corporation against any claim that may be made against it on
account of the alleged loss of any such certificate, or the issuance of any such
new certificate.
SECTION 3. TRANSFER OF SHARES. - The shares of stock of the
corporation shall be transferrable only upon its books by the holders thereof in
person or by their duly authorized attorneys or legal representatives, and upon
such transfer the old certificate shall be surrendered to the corporation by the
delivery thereof to the person in charge of the stock and transfer books and
ledgers, or to such other person as the directors may designate, by whom they
shall be cancelled, and new certificates shall thereupon be issued. A record
shall be made of each transfer and whenever a transfer shall be made for
collateral security, and not absolutely, it shall be so expressed in the entry
of the transfer.
SECTION 4. STOCKHOLDERS RECORD DATE. - (a) In order that the
corporation may determine the stockholders entitled to notice of or to vote at
any meeting of stockholders or any adjournment thereof, the board of directors
may fix a record date, which record date shall not precede the date upon which
the resolution fixing the record date is adopted by the board of directors. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting; provided,
however, that the board of directors may fix a new record date for the adjourned
meeting.
(b) In order that the corporation may determine the stockholders
entitled to consent to corporate action in writing without a meeting, the board
of directors may fix a record date, which record date shall not precede the date
upon which the resolution fixing the record is adopted by the board of
directors.
(c) In order that the corporation may determine the stockholders
entitled to receive payment of any dividend or other distribution or allotment
of any rights or the stockholders entitled to exercise any rights in respect of
any change, conversion or exchange of stock, or for the purpose of any other
lawful action, the board of directors may fix a record date, which record date
shall not precede the date upon which the resolution fixing the record date is
adopted.
SECTION 5. DIVIDENDS. - Subject to the provisions of the Certificate
of Incorporation, the Board of Directors may, out of funds legally available
therefor at any regular or special meeting, declare dividends upon the capital
stock of the corporation as and when they deem expedient. Before declaring any
dividend there may be set apart out of any funds of the corporation available
for dividends, such sum or sums as the directors from time to time in their
discretion deem proper for working capital or as a reserve fund to meet
contingencies or for equalizing dividends or for such other purposes as the
directors shall deem conducive to the interests of the corporation.
<PAGE>
SECTION 6. SEAL. - The corporate seal shall be circular in form and
shall contain the name of the corporation, the year of its creation and the
words "Corporate Seal, District of Columbia, 1995". Said seal may be used by
causing it or a facsimile thereof to be impressed or affixed or reproduced or
otherwise.
SECTION 7. FISCAL YEAR. - The fiscal year of the corporation shall
be determined by resolution of the Board of Directors.
SECTION 8. CHECKS. - All checks, drafts or other orders for the
payment of money, notes or other evidences of indebtedness issued in the name of
the corporation shall be signed by such officer or officers, agent or agents of
the corporation, and in such manner as shall be determined from time to time by
resolution of the Board of Directors.
SECTION 9. NOTICE AND WAIVER OF NOTICE. - Whenever any notice is
required by these By-Laws to be given, personal notice is not meant unless
expressly so stated, and any notice so required shall be deemed to be sufficient
if given by depositing the same in the United States mail, postage, prepaid,
addressed to the person entitled thereto at his address as it appears on the
records of the corporation, and such notice shall be deemed to have been given
on the day of such mailing. Stockholders not entitled to vote shall not be
entitled to receive notice of any meetings except as otherwise provided by
Statute.
Whenever any notice whatever is required to be given under the
provisions of any law, or under the provisions of the Certificate of
Incorporation of the corporation of these By-Laws, a waiver thereof in writing,
signed by the person or persons entitled to said notice, whether before or after
the time stated therein, shall be deemed equivalent thereto.
ARTICLE VI
AMENDMENTS
These By-Laws may be altered or repealed and By-Laws may be made at
any annual meeting of the stockholders or at any special meeting thereof if
notice of the proposed alteration or repeal of By-Law or By-Laws to be made be
contained in the notice of such special meeting, by the affirmative vote of a
majority of the stock issued and outstanding and entitled to vote thereat, or by
the affirmative vote of a majority of the Board of Directors, at any regular
meeting of the Board of Directors, or at any special meeting of the Board of
Directors, if notice of the proposed alteration or repeal of By-Law or By-Laws
to be made, be contained in the notice of such special meeting.
<PAGE>
ARTICLE VII
INDEMNIFICATION
No director shall be liable to the corporation or any of its
stockholders for monetary damages for breach of fiduciary duty as a director,
except with respect to (1) a breach of the director's duty of loyalty to the
corporation or its stockholders, (2) acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (3)
liability which may be specifically defined by law or (4) a transaction from
which the director derived an improper personal benefit, it being the intention
of the foregoing provision to eliminate the liability of the corporation's
directors to the corporation or its stockholders to the fullest extent permitted
by law. The corporation shall indemnify to the fullest extent permitted by law
each person that such law grants the corporation the power to indemnify.
================================================================================
------------ -------------
NUMBER SHARES
------------ -------------
Eurotech, Ltd.
INCORPORATED UNDER THE LAWS OF THE DISTRICT OF COLUMBIA
SEE REVERSE FOR
CERTAIN DEFINITIONS
------------------ ---------------------
COMMON STOCK CUSIP 298796 10 3
------------------ ---------------------
THIS CERTIFIES THAT:
is owner of
______________________
FULLY PAID AND NON-ASSESSABLE SHARES OF COMMON STOCK OF $.001 PAR VALUE EACH OF
================================ Eurotech, Ltd. ================================
transferable on the books of the Corporation in person or by attorney upon
surrender of this certificate duly endorsed or assigned. This certificate and
the shares represented hereby are subject to the laws of the District of
Columbia, and to the Certificate of Incorporation and Bylaws of the Corporation,
as now or hereafter amended. This certificate is not valid until countersigned
by the Transfer Agent.
WITNESS the facsimile seal of the Corporation and the facsimile signatures
of its duly authorized officers.
COUNTERSIGNED AND REGISTERED:
- -----------------
DATED: INTERWEST TRANSFER CO., INC.
- ----------------- P.O. BOX 17136, SALT LAKE CITY, UT 84117
TRANSFER AGENT AND REGISTRAR
[SEAL]
BY:
AUTHORIZED SIGNATURE
/s/ ILLEGIBLE /s/ ILLEGIBLE
- ---------------------------------- ----------------------------------
SECRETARY & TREASURER CHAIRMAN & CEO
================================================================================
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT - ...Custodian...
TEN ENT - as tenants by the entireties (Cust) (Minor)
JT TEN - as joint tenants with right of under Uniform Gifts to Minors
survivorship and not as tenants
in common 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 ZIP CODE, OF ASSIGNEE)
________________________________________________________________________________
________________________________________________________________________________
_________________________________________________________________________ Shares
of the stock represented by the within Certificate, and do hereby irrevocably
constitute and appoint ________________________________________________ Attorney
to transfer the said stock on the books of the within named Corporation with
full power of substitution in the premises.
Dated __________________________
_________________________________________________________
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND
WITH THE NAME AS WRITTEN UPON THE FACE OF THE CERTIFICATE
IN EVERY PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT OR
ANY CHANCE WHATSOEVER.
THE SIGNATURE TO THE ASSIGNMENT OR THE SUBSCRIPTION FORM MUST CORRESPOND TO THE
NAME AS WRITTEN UPON THE FACE OF THIS CERTIFICATE IN EVERY PARTICULAR, WITHOUT
ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER, AND MUST BE GUARANTEED BY A
COMMERCIAL BANK OR TRUST COMPANY OR A MEMBER FIRM OF A NATIONAL OR REGIONAL OR
OTHER RECOGNIZED STOCK EXCHANGE IN CONFORMANCE WITH A SIGNATURE GUARANTEE
MEDALLION PROGRAM.
- --------------------------------------------------------------------------------
LICENSE AGREEMENT
Moscow "6" September 1996
Euro-Asian Physical Society (The Russian Federation), hereinafter referred
to as "Licensor" on the one hand, and ERBC Holding Ltd. (The United States of
America), hereinafter referred to as "Licensee" on the other hand, considering,
that:
The Licensor is applicant and owner of right to obtain patents in Canada,
China, Japan, Republic of Korea, USA, Ukraine and all countries-members of
European Patent Agreement on national app1ications, corresponding to the
International Applications No. PCT/RU96/00193 "Method of producing of foam
silicon-organic compositions", priority of May 20, 1996 and No. PCT/RU96/00194
"Foam organo-silocsan composition", priority of May 20, 1996 (commonly referred
to as "EKOR"), in which the said countries are the mentioned states, and the
Licensee, being the investor in development of above-mentioned silicon-organic
composition "EKOR", on conditions of the present Agreement receives the
exclusive licence with the purpose of use the rights represented in item 2.1 of
the present Agreement, the parties have agreed as follows.
1. Definitions applicable to this Agreement.
1.1. "Patents" - applications for granting of national patents in the USA,
Ukraine, Canada, China, Japan, Republic of Korea and all the countries-members
of European Patent Agreement in accordance with International applications No.
PCT/RU96/00193, No. PCT/RU96/00194 (Appendix 1).
1.2. "Production on licence" - production, which will be produced on the
basis of use the patents.
1.3. "Confidentiality" - observance of measures on preventions of casual
or deliberate disclosure of the information, concerning patents and conditions
of the present Agreement, to the third persons.
1.4. "Accounting period" - period of activity of the Licensee on
completion of conditions of the present Agreement during each three months from
the date, when the present Agreement comes into force.
1.5. "Territory" - United States of America, Ukraine, Canada, China,
Japan, Republic of Korea, countries of Europe - members of European Patent
Agreement.
1.6. "Payments" NETTO " - payments, at which all possible payments and
taxes are paid by the Licensee.
1.7. "Selling price" - price for a unit of production on licence.
1.8. "Know-how" - knowledge, experience, know-how, relating to
manufacturing of products on licence (Appendix 2).
2. Subject of Agreement.
2.1. Licensor grants to Licensee for the term of action of Agreement the
exclusive licence for the use of inventions, described in International
applications No. PCT/RU96/00193, No. PCT/RU96/00194, filed in accordance with
the Patent Cooperation Treatment with mention of the "Territories". According to
the above-mentioned applications, such inventions as "Method of producing of
foam
<PAGE>
2
silicon-organic compositions" and "Foam organo-silocsan composition", relating
to the methods of creation of foamelastocounter "EKOR" with improved parameters
of radiation resistance are the subject of legal protection.
The Licensor also has knowledge and experience concerning manufacturing of
production on the basis of the present licence. The descriptions of the
inventions and know-how are enclosed in Appendixes 1 and 3 of the present
Agreement.
Thus, the Licensee is granted the following rights:
- to manufacture the production on licence on the "Territory";
- to offer for sale the production on licence on the "Territory" and to
export it to the countries, in which the patent protection of above mentioned
inventions is executed;
- to grant sublicences on the "Territory".
3. Engineering specifications.
3.1. All engineering specifications, necessary and sufficient for
production on licence (Appendix 3), is submitted by the Licensor to an
authorized representative of the Licensee in Moscow is drawn up in Russian in
triplicate during 30 days after completion of the jointly confirmed program of
bench tests.
3.2. While submission of the engineering specifications the acceptance act
with signatures of the both parties is made.
The date of submission of the engineering specifications will be the date
of signing the above-mentioned acceptance act.
3.3. The Licensee will handle the engineering specifications as
confidential materials during validity of the present Agreement and after its
expiration.
4. Improvements and changes.
4.1. The Licensor is obliged to inform the Licensee about all changes and
improvements which were carried out by the Licensor during validity of the
present Agreement concerning to the subject of licence, as well as to transmit
them at disposal of the Licensee according to additional agreements, signed
between the parties.
5. Obligations and responsibility.
5.1. The Licensor declares, that on the moment of signing of the present
Agreement nothing it is known to him about rights of third persons, which could
be infringing by granting of the given licence.
5.2. The Licensor does not guarantee the novelty of his inventions, but if
it becomes known, that the patents are invalid on the reason of their
publications intentionally or unintentionally by the Licensor until the
submission of priority applications for patents, the Licensee has a right to
terminate the agreement completely or partially by written notification of the
other party.
5.3. The Licensor declares about technical practicability of manufacturing
of the production on the license.
5.4. The Licensor does not accept responsibility for the risk of
industrial development of the inventions on patents, for which the Licensee is
exclusively responsible.
5.5. The Licensee is obliged to pay all charges of the Licensors,
connected with patenting and preservation in force of patents in the countries,
enumeration of which will be agreed by the parties in addition.
5.6. The Licensee is obliged to finance research and design works,
necessary for development of the experimental sample of production and
technological regulations, connected with the beginning of industrial
manufacturing of the production on licence.
<PAGE>
3
The order and terms of financing will be determined in a separate
agreement of the parties.
5.7. The Licensee is obliged to conduct the effective marketing with the
purpose of search the most profitable use of patents and productions on the
licence.
6. Technical assistance in development of manufacturing
of production on licence.
6.1. For rendering of technical assistance to the Licensee in development
of manufacturing of the production on the licence, as well as for training of
the Licensee's staff to methods and ways of work, relating to manufacturing and
application of the production on the licence, the Licensor, at the request of
the Licensee, is obliged to send the necessary quantity of experts to the
Licensee's enterprise. The Licensee will inform the Licensor about his request
one month till the date of assumed departure of the experts.
6.2. The Licensee will ensure the Licensor's experts during the time of
their stay at the Licensee's enterprises by hotel, means of transport for travel
to location of work and back, meal, telephone communication.
6.3. All charges, connected with sending of the experts with the purposes
of rendering the necessary technical assistance, including payment for
registration of visas, passports, tickets to locations of their purpose and
back, as well as money reward, in dependence on qualification of the experts is
to be paid by the Licensee (is determined in each particular case).
7. Payments.
7.1. For granting the rights, provided by the present Agreement, and for
engineering specifications and other information, mentioned in Appendices 2 and
3, the Licensee pays to the Licensor the following compensation:
- lumpsum and/or current deductions (royalty) are paid to the Licensor at
a rate of 2 percent from cost of contracts, made by Licensees directly or
indirectly on licence or sublicence, on which the Licensee has had the income.
7.2. Current deductions (royalty) are executed during not more than four
months, following the accounting period. The Licensee has the right to execute
the currents deductions ahead of schedule.
7.3. All payments on the present Agreement are understood as the payments
- - net weight in the benefit of the Licensor without any deductions.
7.4. In case of delay of payments by the Licensee, outside of dependence
on reasons of such delay, except for force-majeure circumstances, the Licensee
in addition pays the penalty at a rate of 0.5 percent from delayed payments for
each three days of delay of payments, but not more than 10 percent of sum of the
payment.
7.5. After termination of validity of the present Agreement, its
regulations will be executed until the financial obligations, which have arisen
during the period of its validity will be finally settled.
7.6. Compensation to the Licensor is paid in the same currency, in which
the income has been received by the Licensee.
7.7. Duty of salary payment to the authors of inventions lies on the
Licensor.
8. Information and reporting.
8.1. The Licensee during ten days after reference of the Licensor grants
to the Licensor the summary accounting data on volumes of the production and
realization of the production on licences and sublicences during accounting
<PAGE>
4
periods, as well as information about selling prices of the production on
licence and special production.
8.2. The Licensor has the right to make the check of contracts,
information, relating to volume of the production and realization of the
production on licence and sublicences on summary accounting data. The Licensee
is obliged to ensure the opportunity of such check on first requirement of the
Licensor.
9. Ensure of confidentiality.
9.1. The Parties undertake obligations on observance of confidentiality of
engineering specifications and informations, received from Licensor, relating to
manufacturing of the production on licence as well as commercial part of the
present Agreement.
The Parties will take all necessary measures to prevent the total or
partial disclosure of the above-mentioned information or acquainting of the
third persons with it.
9.2. With submitted engineering specifications and information only that
persons from the Licensee's staff and his partners on cooperation, will be
acquainted which are directly connected with manufacturing of the production on
licence.
9.3. In case of intentional disclosure by the Licensee or by his partners
on cooperation above-mentioned confidential information, the Licensee will
reimburse to the Licensor direct losses incurred in this connection; the
indirect losses and overlooked profits will not be compensated. The Licensor has
the same responsibility.
9.4. The Licensee is obliged to connect by above-stated obligations any
third party, which participate in manufacturing of the production on licence,
special production, special equipment.
10. Protection of assigned rights.
10.1. During the whole period of validity of the present Agreement the
Licensee admits and will admit the validity of rights, following from patents of
the Licensor in case of their reception.
10.2. The Licensee is obliged to preserve in force the patents during the
whole period of validity of the present Agreement with the consideration of
obligations of the Licensor according to item 5.5. of the present Agreement.
10.3. About cases of illegal use by third persons of inventions, protected
by patents of the Licensor, which has become known to the Licensee, he
immediately in written form will inform the Licensor about such facts.
In case if dissatisfactions or claims in occasion of infringements by him
of rights of the third persons in connection with use of licence on the present
Agreement will be presented to the Licensee, the Licensee in written form will
notify the Licensor about it with submission of copies of dissatisfactions or
claims. In both cases the Licensor is obliged to settle such claims and/or
together with the Licensee to undertake the other measures in order to exclude
the occurrence of charges and losses for the Licensee.
11. Advertising.
11.1. The Licensee is obliged to indicate in his advertising materials, as
well as on the productions on licence and special production, which is
manufactured on his enterprises, that this production is manufactured on the
Licensor's licence.
<PAGE>
5
12. Cancellation of patents; influence on agreement.
12.1. If the security rights, underlying in the present Agreement are
cancelled on demand of the third persons, paid royalties in any case can not be
demanded back. The royalties, which to this moment are not paid yet, however
term their payments already has come are not to be taken.
13. Validity of the Agreement.
13.1. The present Agreement is signed for the term of action of patents
and enters into force after its signing and handing of all allowances, including
permission for transmission of currency, which is necessary for its completion.
13.2. Termination of the Agreement will become on the 1st of August, 2014.
14. Return of documentation.
14.1 The Licensee does not have the right to inform third persons about
industrial and technological secrets also after ending of validity of the
Agreement. He also has not the right to use it himself. After termination of
validity of the Agreement the Licensee immediately returns to the Licensor all
documentation, necessary for manufacturing of the production on licence.
15. Ending obligations to customers.
15.1. The Licensee has the right after termination of validity of the
Agreement to execute the contracts, which have been signed by him before with
his customers.
16. Applicable law.
16.1. For the present Agreement the law of the United States of America is
applicable.
17. Settlement of disputes.
17.1. In case of occurrence of disputes between the Licensors and the
Licensee on questions, provided by the present Agreement, the Parties will take
all measures for their settlement by negotiations.
17.2. Disputes or differences, which cannot be settled amicably by the
Parties are to be subject for consolidation by International Arbitration Court
at Commerce and Industry Chamber in Moscow in accordance with the Rules of this
court, decisions of which are final and binding upon both of the Parties.
17.3. The Parties will not submit claims to one another in case if the
financing of research and design works and execution of marketing will not give
positive results.
18. Other conditions.
18.1. Rights and duties of each of the Parties on the present Agreement
can not be assigned to physical or legal person without written permission for
it of the other Party, except for cases, provided by the present Agreement.
18.2. All changes and additions to the present Agreements should be
accomplished in written form and are signed by authorized representatives and
are approved by competent organizations, if such approval will be necessary.
Unilateral changing of the present Agreement is inadmissible.
18.3. Appendices 1-3 on ... pages mentioned in the present Agreement are
its integral part.
18.4. The present Agreement is drawn up in the Russian and English
languages in two copies, which have the identical legal force, one copy for each
Party.
<PAGE>
6
19. Legal addresses and essential elements of parties.
The Licensor: Euro-Asian Physical Society,
Russia, 119034 Moscow, Kursovoi per. 17.
The transit account N 3800170100122 for Euro-Asian Physical Society of Saving
Bank of Russian Federation.
Moscow Bank (Khoroshevshoye branch 7972)
109544, Moscow, Bol. Andronievskaya St., 18/6
BIC code: SABR RU MM 100, Acc. N 081000032
Corresponding acc. with The Bank of New York, NYC, NY
N 890-0059-982 USD BIC code IR VT US 3N
The Licensee: ERBC Holding, Limited
976 Farm Haven Drive
Rockville, MD 20852, USA
Appendices:
The appendix 1. (Patents)
The appendix 2. (Know-how description)
The appendix 3. (Engineering Specifications)
The present agreement is signed in city Moscow "6 September 1996 in
duplicate, one of which is stored at Licensor, second - at Licensee.
Name Licensor Name Licensee
General Director EAFO Managing Director ERBC
Holding Ltd.
/s/ M.M. Kozodaeva /s/ Peter Gulko
M.M. Kozodaeva Peter Gulko
[Seal of Euro-Asian Physical Society] [Seal of ERBC Holding Ltd.]
LICENSE AGREEMENT
AGREEMENT made this 16th day of September, 1996, between ERBC
Holdings, Ltd. a British Virgin Island corporation having an address at
Wiesbaden Strasse 17A, D-12309, Berlin, Germany (the "Licensor") and Eurotech,
Ltd. a District of Columbia corporation having an address at 3299 Villanova
Avenue, San Diego, California 92122 (the "Licensee") and.
WITNESSETH:
WHEREAS, the Euro-Asian Physical Society ("EAPS") has prepared and
filed patent applications for international patents, No.s PCT/RU96/00193 and
PCT/RU96/00194 (the "Patent Applications") encompassing certain useful
technologies (the "Technologies") and inventions (the "Inventions") relating to
a silicon organic foam with many applications, including, possibly, the
encapusulation of radioactive materials, which has been designated by EAPS as
EKOR Foam (the "EKOR Foam")(the Patent Applications, Technologies, Inventions
and EKOR Foam and all proprietary information, formulae, papers, engineering
specifications and documents and other related proprietary technologies
principally relating thereto are herein referred to as the "Intellectual
Property"); and
WHEREAS, by agreement dated September 6, 1996, EAPS granted to the
Licensor a license to use and exploit the Intellectual Property in the United
States, Ukraine, Canada, China, Japan, Republic of Korea, all European countries
and all of the members of the European Patent Agreement (herein referred to as
the "Territory"), a copy of which license and all of the exhibits and
appendicies thereto is appended hereto as Exhibit A (the "EAPS License") and
which is incorporated herein and made a part hereof; and
WHEREAS, EAPS has represented to the Licensor in the EAPS License
that (i) on the date of execution of the EAPS License it was not aware that the
license granted in the Intellectual Property infringed upon any rights of others
(ii) it is the sole and exclusive owner of the Intellectual Property, (iii) it
has not licensed or otherwise authorized any other person or entity to use,
exploit or commercialize the Intellectual Property; and
-1-
<PAGE>
WHEREAS, the EAPS License permits the Licensor to grant sublicenses
of the Intellectual Property and Licensor desires to grant the exclusive,
unrestricted license of the Intellectual Property to Licensee in the Territory
to exploit, commercialize and use the Patent Applications, the Technologies, the
Inventions, the EKOR Foam and the proprietary information, formulae, engineering
specifications, papers and documents and other related proprietary technologies
principally relating thereto, and to convey to and vest in Licensee all of the
rights of the Licensor granted to it by the EAPS License, with the right to
grant sublicenses to others, free and clear of all liabilities, charges, liens,
mortgages, obligations or encumbrances, subject completely to the rights of the
Licensor as defined, enumerated and elucidated in the EAPS License; and
WHEREAS, Licensee is desirous of acquiring an exclusive,
unrestricted license to exploit, use, commercialize and market the Inventions
and the EKOR Foam and the proprietary information, formulae, papers and
documents and other related proprietary technologies principally relating to the
Patent Applications and the Technologies, on the terms and conditions and for
the consideration set forth herein.
NOW THEREFORE, in consideration of the foregoing premises and the
mutual promises and covenants contained herein the parties agree as follows:
ARTICLE I
LICENSE OF TECHNOLOGIES PRODUCT AND INVENTIONS
Section 1.01. Exclusive License. Licensor hereby grants to the
Licensee, on the date hereof free and clear of all liabilities, liens, claims,
mortgages, encumbrances, security interests and any other restrictions
whatsoever, subject completely to the rights of the Licensor defined by and
elucidated and enumerated in the EAPS License, the exclusive, unrestricted and
irrevocable right and license to commercialize, use, exploit and market the
Intellectual Property.
Section 1.02. Necessary Information and Documents. Licensor shall
furnish and shall use its best efforts to cause EAPS to furnish, to Licensee, or
its nominees and patent attorneys, all information and documents regarding such
inventions) including the apparatus, processes,
-2-
<PAGE>
engineering specifications, technical information and formulae in respect of the
Intellectual Property, to enable Licensee to operate hereunder, it being agreed
and understood that, if so requested by Licensee, that Licensor shall
collaborate with and provide full cooperation, and shall use its best efforts
to cause EAPS to collaborate with and provide full cooperation, in favor of
Licensee in all operations pertaining to the use and exploitation of the
Intellectual Property.
Section 1.03. Rights to Improvements to the Product, the
Technologies and the Inventions. The exclusive right and license herein granted
shall include all inventions, improvements, enhancements and modifications and
all information now or hereafter developed, controlled or acquired by the
Licensor in respect of the Intellectual Property.
Section 1.04. Right to Receive Information Relating to Improvements,
Enhancements and Modifications. Licensor hereby covenants and agrees with
Licensee that it shall furnish to Licensee, or its nominees, immediately upon
receipt thereof from EAPS, all information and documents relating to
improvements, enhancements and modifications hereafter developed, controlled or
acquired by the Licensor in respect of the Intellectual Property and the
Licensor shall provide the Licensee with such information, working drawings,
blueprints, formulae and all other data and information necessary effect the
exploitation and use of such improvements, enhancements and modifications as
they relate to the Intellectual Property and Licensee shall be entitled to use
and exploit all such improvements, enhancements and modifications hereafter
developed, controlled or acquired by the Licensor in respect of the Intellectual
Property without additional charge hereunder.
Section 1.05. Sublicenses. Licensor hereby grants to Licensee the
right to grant sublicenses in respect of the Intellectual Property licensed by
this Agreement to third parties on terms consistent with this Agreement.
Section 1.06. Term. (a) This Agreement shall commence upon the
execution hereof and, subject to the provisions of this Agreement, the rights
and licenses granted hereby shall continue until the expiration of the term of
the EAPS License, provided, however, that if royalty payments due Licensor
hereunder are in arrears for sixty (60) days after the due date, or if the
Licensee is adjudicated a bankrupt or becomes insolvent, or enters into a
composition with creditors
-3-
<PAGE>
or if a receiver is appointed for it, then the Licensor shall have the right to
terminate this Agreement upon giving written notice to the Licensee thirty (30)
days prior to the effective date of the termination, and if the cause of such
termination is not cured within the thirty (30) days, then at the expiration of
the thirty (30) days, the Agreement and all rights and licenses granted to the
Licensee, hereunder shall terminate, without prejudice to the Licensor's right
to collect monies due or to become due under the Agreement and without prejudice
to any other rights of the Licensor.
(b) Upon termination of this Agreement for any cause, the
Licensee shall duly account to the Licensor for all royalties within sixty (60)
days of such termination, and shall immediately transfer to Licensor all rights
that Licensee may possess in sub-licenses, patent's, information, and trademarks
relating to the Intellectual Property, transferred hereunder and all rights and
licenses granted to Licensee pursuant to this Agreement shall immediately
terminate.
Section 1.07. Intent of License. It is the intent of the Licensor to
grant to and vest and convey in the Licensee all of the rights acquired by the
Licensor pursuant to the EAPS License. In view thereof, all of the rights
granted to the Licensor by said EAPS License are hereby granted to the Licensee
and Licensee shall enjoy and be entitled to all such rights and privileges as
those enjoyed by the Licensor pursuant to the EAPS License and in the case of
any question relating to the rights of the Licensee to the Intellectual
Property, the parties shall refer to and be bound by the terms of the EAPS
License.
Section 1.08. Ownership of Improvements to Intellectual Property
Developed by Licensee. Licensor hereby agrees with Licensee that Licensee shall
be the outright and sole owner of any and all improvements, enhancements and
modifications hereafter developed, controlled or acquired by the Licensor in
respect of the Intellectual Property.
Section 1.09. Further Assurances. Licensor shall at any time and
from time to time after the date hereof upon the request of Licensee, execute,
acknowledge, and deliver, or cause to be delivered, any and all such deeds,
assignments, transfers, conveyances, and assurances as may be reasonably
required for assigning, transferring, granting, conveying, assuring, and
confirming the license to Licensee, or to its successors and assigns, or for
aiding and assisting in the use and exploitation of the Intellectual Property
and the manufacture and sale of the Product herein describedo
-4-
<PAGE>
or derived therefrom.
ARTICLE II
Section 2.01. Payment of Royalties. (a) Subject to the provisions of
subsection (b) hereof, the Licensee shall pay to the Licensor a royalty equal to
one percent (1%) in excess of that which Licensor is required to pay to EAPS
pursuant to the EAPS License.
(b) In the event that Licensee hereunder shall make the
required royalty payments to Licensor within the period prescribed by this
License, and Licensor does not make the corresponding royalty payments required
to be made by it to EAPS within the time period prescribed by the EAPS License,
Licensee shall not be required to pay the penalty imposed upon the Licensor by
the EAPS License for late payments and the payment of any such penalty shall be
the responsibility of the Licensor.
Section 2.02. Accounting. Licensee shall, at all times, maintain a
separate account of all Products sold, royalties received and all revenues
received by it or from its sub-licensees which are the subject of this Agreement
and render written statements thereof to Licensor within thirty (30) days after
the end of each calendar quarter during the term of this Agreement, together
with the amount of all royalties earned during the corresponding calendar
quarter. The Licensor or its authorized representatives or agent, shall have the
right, at its own expense, to examine the Licensee's financial records for the
purpose of verifying such royalty statements. In any and all sub-licensing
agreements, the Licensee shall procure for the Licensor a similar right to have
the financial records of the sub-licensee examined for the purpose of verifying
the royalty statements.
REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
-5-
<PAGE>
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF LICENSOR
Section 3. Licensor hereby represents, warrants and covenants to
Licensee as follows:
Section 3.01. Organization, Qualification, Power and Authority.
Licensor is an corporation duly and validly organized and existing in good
standing under the laws of International Business Companies Act of the British
Virgin Islands and has all requisite power and authority to execute and deliver
this Agreement and any of the documents provided for hereunder and to perform
its obligations and to consummate the transactions contemplated hereunder and
has all requisite power and authority and all material licenses and permits to
carry on its business as it has been and is now conducted, and to own, lease,
and operate the properties and assets issued in connection therewith. The
execution, delivery, and performance of this Agreement, the Exhibits, and any
other documents provided for hereunder by Licensor, and the consummation of the
transactions contemplated hereunder have been duly authorized by all necessary
requisite action of Licensor and do not violate or conflict with, constitute a
default under, or an event that, with the giving of notice, the passage of time
or both, would constitute a default under, any provision of Licensors
certificate of association, by-laws, laws, orders, writings, injunctions,
decrees, rules, or regulations of any court, administrative agency, or any other
governmental authority or any agreement or other document or instrument to which
Licensor is a party or by which Licensor is, or may be, bound. This Agreement
has been duly and validly executed and delivered by Licensor and constitutes a
legal, valid, and binding obligation of Licensor enforceable in accordance with
its terms.
Section 3.02. Technological Data and Proprietary Information.
Exhibit A hereto sets forth and includes a true and complete copy of the license
agreement between the Licensor and EAPS and all exhibits and appendices thereto
as referenced therein, including all of the Patent Applications, trade secrets,
formulae, processes, inventions, know-how, engineering specifications and other
proprietary information, papers and documents relating to the Technology and the
Inventions, representing all such documents currently in the possession of the
Licensor or in which Licensor has any rights or licenses or which are used by
Licensor in connection with the foregoing and which are being licensed by
Licensor to Licensee hereunder.
-6-
<PAGE>
Section 3.03. Prior Disclosure of Intellectual Property. Licensor
has not revealed any proprietary information encompassing the Intellectual
Property to any one other than its employees, agents, representatives and others
to whom communication of said information was essential in the development
thereof. All such persons who have received or been privy to said information
have agreed or will agree not to disclose any such information without first
obtaining the written consent of the Licensee.
Section 3.04. Finders and Brokers. No finder's fee, brokerage
payment, or other payment is payable by Licensor to any third party or parties
in connection with the origination or negotiation of this Agreement or the
consummation of the transactions contemplated by this Agreement.
Section 3.05. Full Disclosure. To the best of Licensor's knowledge
no representation or warranty by Licensor in this Agreement, in any Schedule or
Exhibit, or in any certificate or other document expressly provided for herein
contains any untrue statement of a material fact or omits to state any material
fact necessary to make nay statement herein or therein not misleading.
Section 3.06. Right to Grant Sublicense. Licensor has the right to
grant this License and has not granted to any other person, firm, corporation or
other entity, any right, license or privilege thereunder.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF LICENSEE
Section 4. Licensee represents and warrants to and covenants with
the Licensor as follows.
Section 4.01. Organization, Qualification, Power and Authority.
Licensee is a corporation duly and validly organized and existing in good
standing under the laws of the District of Columbia and has all requisite power
and authority to execute and deliver this Agreement and any other documents
provided for hereunder and to perform its obligations and to consummate the
transactions contemplated hereunder and thereunder and is duly qualified to do
business as a foreign
-7-
<PAGE>
corporation in all jurisdictions where such qualifications are necessary. The
execution, delivery, and performance of this Agreement, the Exhibits, and any
other documents provided for hereunder by Licensee, and the consummation of the
transactions contemplated hereunder, have been duly authorized by all necessary
corporate action of Licensee, including, where appropriate, shareholder
approval, and do not violate or conflict with, constitute a default under or an
event that with the giving of notice, the passage of time or both, constitute a
default under, any provision of Licensee's certificate of incorporation, bylaws,
laws, orders, writings, injunctions, decrees, rules, or regulations of any
court, administrative agency, or any other governmental authority or any
Agreement or other document or instrument to which Licensee is a party, or by
which Licensee is or may be bound. This Agreement has been duly and validly
executed and delivered by Licensee and constitutes a legal, valid and binding
obligation of Licensee enforceable in accordance with its terms.
Section 4.02. Finders and Brokers. No finder's fee brokerage
payment, or other payment is payable by Licensee to any third party or parties
in connection with the origination or negotiation of this Agreement or the
consummation of the transactions contemplated by this Agreement.
ARTICLE V
COVENANTS OF LICENSOR
Section 5.01. Compliance with EAPS License. Licensor hereby
covenants to and agrees with Licensee that it shall use its best efforts to act
in accordance and remain in full compliance with the terms, provisions and
conditions of the EAPS License and will not take any action proscribed thereby
or omit to take any action required thereunder which in any way would constitute
a default thereunder or a breach thereof or in any way jeopardize the rights of
the Licensor thereunder or the rights of the Licensee hereunder. Licensor hereby
further covenants to and agrees with Licensee that it shall notify Licensee in
writing (in accordance with the notice provisions of Section 7.05 hereof) at
such time as Licensor shall become aware of any act or omission to act on the
part of the Licensor which could in any way be construed as a default or breach
of the EAPS License by the Licensor or which could in any way impact negatively
or jeopardize the Licensor's rights thereunder or Licensee's rights hereunder.
-8-
<PAGE>
Section 5.02. License of Patents, Patent Applications, Technologies
and Inventions Developed After the Date Hereof. Subject to the provisions of the
EAPS License, Licensor hereby covenants to and agrees with Licensee to grant a
license to Licensee in respect of any and all patents, patent applications,
technologies, inventions, products, engineering specifications and proprietary
information in respect of the Technologies, Inventions, Patent Applications and
proprietary information licensed hereby now or hereafter developed, controlled
or acquired by the Licensor in respect of the Intellectual Property and to
execute, deliver and file all such documents and papers necessary to perfect
Licensee's right thereto.
Section 5.03. Covenant to Interface with EAPS. Licensor agrees to
establish and maintain all lines of communication with EAPS in respect of the
Intellectual Property and to use its best efforts to cause EAPS to collaborate
with and provide full cooperation to the Licensee as necessary to operate under
this License.
Section 5.04 Further Actions. Licensor agrees to execute and deliver
such instruments and take such other actions as may be reasonably required to
consummate the transactions contemplated by this Agreement including executing
consents necessary to identify Licensee as a registered user of the Patents and
Trademarks of Licensor used by Licensee.
ARTICLE VI
COVENANTS OF LICENSEE
Section 6.01. Payment of Taxes and Fees. Licensee agrees to pay all
transfer, sales, use and other taxes, fees, and charges incurred in connection
with the consummation of the transactions contemplated by this Agreement.
Licensee shall prepare and file any returns and other filings and remit payment
relating to such taxes, fees and charges on a timely basis to proper
governmental authorities.
Section 6.02. Further Actions. Licensee agrees to execute and
deliver such instruments and take such other actions as may be reasonably
required to consummate the transactions contemplated by this Agreement.
-9-
<PAGE>
ARTICLE VII
GENERAL PROVISIONS
Section 7.01 Survival of Representations and Warranties. Each party
hereto covenants and agrees that its representations and warranties contained in
this Agreement, in any Schedule or Exhibit, or in any certificate delivered in
connection with the consummation of the transactions contemplated by this
Agreement shall survive the Closing for a period of one (1) year,
notwithstanding investigation by or on behalf of either party.
Section 7.02. Assignment. Licensee may assign its rights under this
Agreement to any affiliate of Licensee or any successor or purchaser of Licensee
which agrees to assume all of the obligations of Licensee pursuant to this
Agreement. Except for the foregoing, this Agreement may not be assigned by
either party hereto without the prior written consent of the other party which
shall not be unreasonably withheld.
Section 7.03. Expenses. Licensee shall pay all expenses and fees
including but not limited to attorney's and accountants' fees and fees of other
experts incurred in connection with the consummation of the transactions
contemplated by this Agreement.
Section 7.04. Waiver. The failure of either party to act to enforce
rights hereunder shall not be deemed a waiver and shall not preclude enforcement
of any rights hereunder. No waiver of any term or condition of this Agreement on
the part of either party shall be effective for any purpose whatsoever unless
such waiver is in writing and signed by such party.
Section 7.05. Notices. Any notice, request, demand, waiver, consent,
approval, or other communication ("Notice") which is required to be or may be
given under this Agreement shall be in writing and shall be deemed given only if
delivered to the party personally or sent to the party by telegram, telex, or
facsimile transmission, by courier, or by registered or certified mail, return
receipt requested, postage prepaid, to the parties as follows:
-10-
<PAGE>
To Licensor: EREC Holdings, Ltd.
Wiesbadener Strasse 17A
D-12309, Berlin Germany
Phone/Fax 49-30-746-5209
To Licensee: Eurotech, Ltd.
3299 Villanova Avenue
San Diego, California 92122
or to such other address as either party may designate from time to time by
notice to the other party sent in like manner; and any notice if personally
delivered or sent by telegram, telex, or facsimile transmission shall be deemed
given on the date of delivery or transmission, and any notice mailed shall be
deemed given three (3) days after the date of mailing.
Section 7.06. Entire Agreement. This Agreement, the Exhibits,
Schedules, and the instruments referred to herein constitute the entire
Agreement between the parties and supersede all prior Agreements and
understandings, oral and written, between the parties hereto with respect to the
subject matter hereof, and the parties are not bound by any Agreements,
understandings, or conditions other than expressly set forth herein or therein.
Section 7.07. Heading. The article and section headings contained in
this Agreement are for reference purposes only and shall not be deemed to be
part of this Agreement or to affect the construction or interpretation of this
Agreement.
Section 7.08. Exhibits and Schedule. All Exhibits and Schedules
referred to herein have been delivered by the parties hereto to each other prior
to or simultaneously with the execution of this Agreement, and such Exhibits and
Schedules shall be deemed to be a part of this Agreement as if set forth herein.
All information set forth in the Schedule is intended to be responsive to each
provision of the Section or requirement of this Agreement to which it can be
applied and is qualified by the contents of any documents to which reference is
made. The listing in the Schedules of any matter shall not be construed as an
admission that the matter is material or not in the ordinary course of business
or as establishing a standard of materiality.
-11-
<PAGE>
Section 7.09. Counterparts. This Agreement may be executed in one
or more counterparts, each of which shall constitute an original and all of
which together shall constitute one and the same instrument.
Section 7.10. Governing Law. This Agreement shall be governed by and
construed in accordance with the domestic laws of the State of New York without
giving effect to any choice or conflict of law provision or rule (whether of the
State of New York or any other jurisdiction) that would cause the application of
the laws of any jurisdiction other than the State of New York.
Section 7.11. Submission to Jurisdiction. Each of the Parties
submits to the jurisdiction of any state or federal court sitting in New York,
in any action or proceeding arising out of or relating to this Agreement and
agrees that all claims in respect of the action or proceeding may be heard and
determined in any such court. Each Party also agrees not to bring any action or
proceeding arising out of or relating to this Agreement in any other court. Each
of the Parties waives any defense of inconvenient forum to the maintenance of
any action or proceeding so brought and waives any bond, surety, or other
security that might be required of any other Party with respect thereto.
Section 7.12. Severability. The invalidity or unenforceability of
any provision of this Agreement shall not affect the validity or enforceability
of any other provision. If any provision of this Agreement is so broad as to be
unenforceable, such provision shall be construed to be only so broad as is
enforceable.
Section 7.13. No Benefit to Others. The representations, warranties,
covenants, and Agreements contained in this Agreement are for the sole benefit
of the parties hereto and their respective successors and assigns, and shall not
be construed to confer and are not intended to confer any rights on any other
persons.
Section 7.14. Amendments and Waivers. No amendment of any provision
of this Agreement shall be valid unless the same shall be in writing and signed
by the Licensor and the Licensee. No waiver by any Party of any default,
misrepresentation, or breach of warranty or
-12-
<PAGE>
covenant hereunder, whether intentional or not, shall be deemed to extend to any
prior or subsequent default, misrepresentation, or breach of warranty or
covenant hereunder or affect in any way any rights arising by virtue of any
prior or subsequent such occurrence.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed as of the day and year first written.
Attest: EREC HOLDINGS LTD.
/s/ [Illegible] By: /s/ [Illegible]
- ---------------------- ---------------------------------
Attest: EUROTECH, LTD.
/s/ [Illegible] By: /s/ [Illegible]
- ---------------------- ---------------------------------
-13-
<PAGE>
EXHIBIT A
January 28, 1997
Mr. William A. Hustwit, CEO
Kurchatov Research Holdings, Ltd.
2809 Main Street
Irvine, CA 92714
Dear Mr. Hustwit:
During the last year, Eurotech, Ltd. ("Eurotech") and Kurchatov Research
Holdings, Ltd. ("KRH") have enjoyed a close and productive relationship wherein
Eurotech has agreed to fund the commercialization of certain proven but as yet
uncommercialized technologies developed in the former Soviet Union by scientists
and researchers at the Institute for General and Nuclear Physics of Kurchatov
Research Centre, other Institutes associated therewith, and the Euro-Asian
Physical Society (the "Scientists"). At all times, Eurotech has verbally advised
KRH that it would share equally all net profits derived from the
commercialization, sale or licensing of any technologies developed by the
Scientists or supplied by the Scientists to Eurotech or any products based
thereon (such technologies and products being herein referred to as the
"Technologies" and the "Products"). This letter formally recognizes and reduces
to writing such understanding.
Eurotech hereby agrees that it shall pay to KRH a sum equal to fifty
percent (50%) of the net profits ("net profits" being defined as revenues less
operating costs and reserves for taxes) derived from the sale, license or
commercialization of any and all Technologies or Products based upon
technologies developed by the Scientists and transferred to Eurotech or supplied
by the Scientists to Eurotech. KRH shall be entitled to an accounting, at such
reasonable times, in such reasonable manner and provided that it shall have
provided Eurotech with reasonable advance written notice of its intention to
undertake such accounting, for all net profits generated from such
commercialization of any Technologies or Products (Eurotech shall have the right
to assess and test any Technology or Product prior to agreeing to commercialize
same and shall be entitled to accept for commercialization or reject any such
Technology or Product as it, in its sole discretion, sees fit). The Scientists
have agreed to execute a license or such other form of agreement as may be
appropriate under the circumstance to vest in Eurotech the rights herein
described and to effectuate the intent of the agreement between the parties.
<PAGE>
Please signify your agreement with the terms hereof by countersigning this
letter agreement in the space provided for such purpose below and by returning
the originally executed copy hereof to Eurotech your earliest convenience.
Very truly yours,
EUROTECH, LTD.
By: /s/ Randolph A. Graves, Jr.
----------------------------------
Randolph A. Graves, Jr., President
AGREED TO AND ACCEPTED
this 28th day of January 1997, by
KURCHATOV RESEARCH HOLDINGS, LTD.
By: /s/ William A. Hustwit
------------------------------
Its: Chief Executive Officer
State Committee of Ukraine on Atomic Energy
Industrial Amalgamation
Chernobyl Nuclear Power Station
translation
MEMORANDUM OF INTENT
During the working meeting which took place on November 18, 1996 at the
Chernobyl Nuclear Power Station between the Director of the Institute for the
General and Nuclear Physics of the Kurchatov Institute Prof. S.T. Belyaev, the
General Director of ChNPP Mr. S.K. Parashin, Deputy General Director on the
Shelter Project Mr. V.I. Kupnyj, President of the Ukrainian Construction
corporation Ukrstroj Mr. Y.K. Pelykh and Director of the US firm Eurotech Ltd.
Mr. Peter Gulko the participants acknowledged report of Prof. Belyaev on the
successful completion of the laboratory development of EKOR material in its
application to the ChNPP problems and beginning of the development of the
technological [application] equipment.
It was noted that all the parties are interested in conducting of the
technological development [of the EKOR application] at the site of ChNPP, which
will allow to conclude on the method of application of EKOR at the Shelter
project.
ChNPP has the intent to sign a co-operation agreement with the American
company [Eurotech] on the said project. It is assumed that the American company
will provide for the financing of such site development, Ukrstroj will provide
for all the required resources, Kurchatov Institute will provide for the
technical support and ChNPP will provide the sites for the testing.
On behalf of
ChNPP Parashi S.K.
General Director
Kurchatov Institute/EAPS Prof. Belyaev S.T.
Director
Corporation Ukrstroj Pelykh Y.K.
President
Eurotech Ltd P. Gulko
Director
translation
original on file
Agreement number 04-ok/96
City of Slavutich [Chernobyl] December 10, 1996
Ukrainian State Construction Corporation (UKRSTROJ) in the name of its
President Mr. Pelykh Yuri K. acting on the basis of the corporate charter on one
side and industrial amalgamation Chernobyl NPP (ChNPP) in the name of its
general director Mr. Parashin Yuri K. on the other side have concluded the
agreement on the following:
I. Subject of the Agreement
1. To conduct the works at the site of Chernobyl NPP for the methods of
implementation of the EKOR technology and determining the specific requirements
on the method of its application for containment of the reactor #4.
2. ChNPP will provide UKRSTROJ with a site for working off the technology
for application of EKOR, along with UKRSTROJ will determine the scope and type
of the work and will determine the quantity of the materials needed for these
works.
3. UKRSTROJ will:
- organise the project on EKOR implementation and will provide the
scientific and technical support to all the companies participating in this
work,
- manufacture the technological equipment for synthesis of EKOR,
transportation of EKOR and casting of EKOR at the site as provided by ChNPP
- provide for the supply of the required quantity of EKOR components to
prepare EKOR on-site,
- execute all the works for preparation, pumping and casting of EKOR to
the pilot project zone.
4. ChNPP along with the concerned [official] companies and UKRSTROJ will
test EKOR for the acceptance for industrial application and will if needed
determine additional requirements and will determine the technology for
application with consideration of application of EKOR at the Shelter of ChNPP.
II. Terms of execution
1. The terms [schedule] of the execution will be determined by the
attachment to this agreement after the completion of the technological
equipment, supplying the needed EKOR components and starting of the financing.
III. Cost and sequence of the works.
1. Acknowledge that in accordance with the memorandum of intent of the
working meeting at ChNPP on November 18, 1996 with participation of the all
parties the financing of the works within the scope of this agreement is
provided by the American firm Eurotech, Ltd.
2. Costs of the each stage of the work will be determined additionally.
IV. The term of the agreement.
I. The term of the agreement is determined from the moment of its
execution till full execution of the commitments of each side.
V. Legal addresses and bank accounts of the parties.
Ukrainian State Industrial amalgamation
Construction Corporation Chernobyl Nuclear Power Station
Y.K. Pelykh [signed, sealed] S.K. Parashin [signed, sealed]
UKRAINIAN
STATE BUILDING
CORPORATION
252030, 7 M. Kotsyubinski Str. Kiev UKRAINE
tel. 225-6095, fax 225-2294
================================================================================
translation
Reg. Num. 19/02-01-1165
dated December 12, 1996 to: EUROTECH, LTD.
According to our protocol [memorandum] of intent of the working meeting
which took place at the Chernobyl NPP on November 18, 1996, Corporation UKRSTROJ
on November 10, 1996 signed an agreement reg. num. 04-ok/96 with Industrial
Amalgamation Chernobyl NPP on conducting the works immediately at the site of
the NPP to master the EKOR application technology and to determine the specific
requirements on the method of EKOR application to containment of the reactor
num. 4
The specific scope and types of the works and the required quantity of the
materials will be determined after the [pilot] site is made available by ChNPP.
Please sign the attached agreement with your firm and start the works on
its implementation.
A copy of the agreement with Chernobyl NPP dated December 10, 1996 reg.
num. 04-ok/96 is attached.
President [signed] Y.K. Pelykh.
Translation
Cooperation Agreement
on documentation transfer [General Contractor Agreement]
Kiev, Ukraine December 11, 1996
Eurotech, Ltd. [The Firm] in the name of Dr. Randolph S. Graves and
UKRSTROJ [UKRSTROJ] - a Ukrainian State Construction Corporation in the name of
Mr. Yuri Pelykh acting on the basis of its founding documents have concluded the
following agreement.
1. Subject of the Agreement
The subject of the Agreement is to transfer of the rights to use EKOR material
and the documentation for the technological equipment for synthesis of EKOR, its
piping and casting at the Chernobyl NPP site. Eurotech will also provide the
feedstock list and requirements and the consumption of the components per unit
of mass and volume.
2. The firm along with the EAPS will provide UKRSTROJ with all required
documentation and the Program and methodology for technological testing. EAPS
will provide a technical supervision during the application testing.
3. UKRSTROJ does not have rights without Eurotech's consent to transfer
documentation on technological equipment. EKOR content, methods of its synthesis
and casting to any third party.
2. Terms of documentation transfer.
1. Transfer of the documentation on technological equipment, program for
testing, production of EKOR and other will be made between the Firm and UKRSTROJ
in the existing legal order.
2. The schedule for transfer will be agreed upon later.
3. The Firm will finance all the works related to technological testing of EKOR
and equipment [at the ChNPP].
3. Terms of the Agreement.
1. The agreement will become valid from the moment of signing by the parties and
will stay valid for the life of the [testing] project.
Eurotech
Dr. Randolph S. Graves
Chairman and CEO
UKRSTROJ
Mr. Y.K. Pelykh
President
concurred
EAPS
General Director
Dr. M.M. Kozodaeva
January 28, 1997
Arbat American Autopark, Ltd.
150 East 58th Street
New York, New York 10155
Gentlemen:
The undersigned, Eurotech, Ltd ("Eurotech"), previously has identified and
provided to Arbat American Autopark, Ltd. ("Arbat") certain technology, designs,
renderings, blueprints and plans for the construction and operation of vertical
parking structures having particular application in urban areas where adequate
real property is not readily available. Since Arbat has indicated an interest in
acquiring the design submitted, Eurotech would like to reduce to writing the fee
arrangement with respect to the technology transfer by Eurotech to Arbat.
In connection with any parking garage erected by Arbat or any affiliates
thereof which is based upon the technology, designs, renderings, blueprints and
plans previously supplied to Arbat by Eurotech, Arbat agrees to pay a fee to
Eurotech equal to the sum of US$1,250 per parking space in each garage so
erected by Arbat or any of its facilities. Arbat agrees to pay such fee in any
instance where the design used by Arbat substantially conforms to the
technology, designs, renderings, blueprints and plans previously supplied to
Arbat by Eurotech, even if such design is modified to meet the particular needs
and characteristics of the real property on which the garage is situated or such
other factors which might dictate the ultimate design of the structure.
Please signify your agreement with the terms hereof by countersigning this
letter agreement in the space provided for such purpose below and by returning
the originally executed copy hereof to Eurotech your earliest convenience.
Very truly yours,
EUROTECH, LTD.
By: /s/ Randy Graves
----------------------------
Randy Graves, President
AGREED TO AND ACCEPTED
this [illegible] day of January, 1997, by
ARBAT AMERICAN AUTOPARK, LTD.
By: /s/ [Illegible]
--------------------------------
Its PRESIDENT
September 18, 1996
Eurowaste Management, Ltd.
Wiesbadener Strasse, 17A
D 12309 Berlin, Germany
The following is intended to confirm our understanding wherein the
undersigned being the repository of certain information, know-how and technology
concerning the construction and management of waste-to-energy plants agrees to
license said information, know-how and technology to Eurowaste Management, Ltd.
on the following terms and conditions.
The undersigned, Eurotech, Ltd. represents that is has assembled and
developed certain proprietary information, formulae, proprietary technology,
processes, papers and documents related to the planning, construction and
operation of waste-to-energy plants. The undersigned has heretofore made this
information available to you which you have reviewed and approved. In addition
to the documentation heretofore made available to you, the undersigned agrees to
provide operating and technical manuals as well as training facilities for
personnel of each new plant and will consult to you in connection therewith at
your request for a fee to be determined as such consultation is requested.
In consideration that Eurowaste Management, Ltd. agrees to pay Eurotech,
Ltd. the sum of $2,450,000 upon the initiation of construction of the first
waste-to-energy plant in which Eurowaste Management, Ltd. is involved. In
addition, Eurowaste Management, Ltd. agrees to pay Eurotech, Ltd. the sum of
$425,000 upon the initiation of each and every waste-to-energy plant in which
Eurowaste Management, Ltd. is involved.
If the above accurately sets forth our understanding, please execute a
copy hereof and return same to us at your earliest opportunity.
Very truly yours,
Eurotech, Ltd.
By: /s/ [Illegible]
--------------------------
Chairman & CEO
Accepted and agreed this 18th day
of September 1996
Eurowaste Management, Ltd.
By: /s/ [Illegible]
-------------------------------
President
[Letterhead of Power Development Associates, Inc.}
February 23, 1996
Mr. Randy Graves
EUROTECH, LTD
3299 Villanova Ave.
San Diego, California 92122
Subject: Ukraine WTE
Dear Randy;
In response to your telephone request, I would be pleased to provide
professional consulting services to Eurotech or Eurowaste in support of your
efforts to develop waste-to-energy (WTE) facilities in the Ukraine. My
understanding is that the Ukrainian parties you are working with are
particularly interested in facilities similar to the existing WTE plant in
Hampton, VA. This causes me to be especially interested because my career in WTE
began with the design and construction of that plant in 1978.
As I mentioned on the phone, my availability is currently limited due to
obligations to other clients regarding the development of independently owned
power projects in Eastern Europe, however, this does not appear to be a problem
for you in the short run. Of course, my availability could also increase in the
future along with your needs for outside expertise. Also, as the projects
mature, I may be interested in an ownership position on behalf of clients which
would allow me to participate at no direct fee for service.
In the meantime, I should be able to provide one or two days a month subject to
scheduling around ongoing efforts with existing clients. For these initial
services, I propose to be compensated at $150 per hour up to a maximum of $1200
per day. In addition to fee, I propose to be reimbursed for direct expenses
incurred at cost. Direct expenses include travel, lodging, meals,
telecommunications, document preparation and other direct costs incurred at your
request.
I look forward to meeting with Mr. Peter Gulko on Monday, February 26th, and
perhaps the Ukrainians during there next visit to the US; although, as I
mentioned in a previous conversation, I am scheduled to be in Poland the week of
March 17-23, which I understand from your February 16th FAX to be a scheduling
conflict with the Ukrainians' visit here.
On a related matter, I received you FAX today regarding the SO2 removal
technology. Whereas I do not feel qualified to comment on the merits or lack
thereof of this technology, I do have friends who are qualified, and I shall
endeavor to solicit their oopinions.
I hope this response is satisfactory. Waste-to-energy is my love in the energy
development field, and I look forward to learning more about Eurotech's
activities and objects.
Thank you for your interest and consideration.
Very truly yours,
/s/ Hunter F. Taylor
----------------------------
Hunter F. Taylor
President
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT dated as of January 1,1996, by and between Eurotech,
Ltd., a District of Columbia corporation with offices at 1200 Prospect Street,
Suite 425, La Jolla, CA 92037-3608 (the "Corporation") and Randolph Graves, Jr.,
having an office at 3299 Villanova Avenue, San Diego, California 92122 (the
"Employee").
WITNESSETH:
WHEREAS, the Corporation desires to engage Employee in an executive
capacity to perform services for the Corporation, and Employee desires to
perform such services, on the terms and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual promises
contained herein, the parties agree as follows:
1. Employment.
The Corporation hereby employs Employee and Employee hereby accepts
such employment under the terms and conditions hereinafter contained, beginning
as of the date first set forth above.
2. Duties; Agreement to Serve.
So long as he is employed hereunder, Employee shall be the President
of the Corporation and Employee shall perform such duties for the Corporation
consistent with his position and office as may be assigned to him from time to
time by the Board of Directors.
3. Compensation.
(a) So long as Employee is employed hereunder, the Corporation shall
pay to Employee as compensation for his services, subject to subsection (b) of
this Paragraph 3, and Employee agrees to accept as full payment therefor, an
annual salary of $77,374 payable in equal monthly installments or such other
installments as Employee may reasonably request.
(b) The Corporation shall issue to the Employee 255,000 shares of
Common Stock, which such shares of common stock shall be "restricted securities"
and shall remain restricted until such time as the securities are registered or
unless an exemption from registration permits the transfer thereof. Nothing
contained herein shall
<PAGE>
be deemed to limit or prevent Employee from receiving and accepting such
additional benefits, emoluments, privileges, rights, pensions, bonuses,
insurance, and the like as the Board of Directors shall deem proper and in the
best interests of the Corporation. Neither the Corporation's grant nor
Employee's receipt of any such additional benefits, emoluments, privileges,
rights, pensions, bonuses, insurance, and the like shall be deemed to affect,
modify, impair, or amend the terms of this Agreement.
4. Reimbursement of Expenses.
The Corporation agrees to reimburse Employee for all reasonable
business expenses actually and properly incurred by Employee in the discharge of
his duties hereunder, upon presentation by Employee of vouchers or other
documentation reasonably satisfactory to the Corporation substantiating such
expense.
5. Benefits.
In addition to the compensation under Paragraph 3, Employee, during
the term of this Agreement, shall be entitled to participate in all pension,
retirement, and profit-sharing plans, and other fringe benefits, including,
without limitation, medical, hospital, major medical, life insurance, and
statutory disability coverage which the Corporation may from time to time make
generally available to other employees of the Corporation, on the same basis as
such plan or plans and benefits are made generally available to such individuals
(subject, however, to the provisions of said plans), or for the benefit of
Employee alone or solely for the officers of the Corporation. The Board of
Directors may also include Employee as a participant in any
management-incentive, stock option, bonus, or similar plan established by the
Board, subject, however, to the provisions of any such plan or plans.
6. Covenant Not to Compete; Confidentiality.
(a) Employee covenants that, during the term of his employment by
the Corporation, and for a period of one year thereafter, he will not engage
directly or indirectly, in, or serve as an employee or consultant to, any
Competing Business and shall not lend assistance of any kind to such Competing
Business. For the purposes of this Agreement, "Competing Business" shall be
deemed to mean any person, firm or corporation (other than an entity which is or
hereafter becomes an affiliate of the Corporation), which within a fifty mile
geographical radius of the area where the Corporation sells or markets its
products or services, is engaged in the sale or marketing of information systems
or services in The People's Republic of China. Employee's ownership or holding,
directly or indirectly, of securities constituting less than two percent (2%) of
the issued and outstanding securities of any corporation, the securities of
which are regularly traded on a national securities exchange or in the
over-the-counter market, which would otherwise be prohibited by the foregoing
provisions, shall conclusively be deemed not to be in breach of Employee's
covenant set forth herein.
<PAGE>
(b) Employee further covenants that during the term of his
employment, and for a period of three years thereafter, irrespective of whether
any future termination is voluntary or involuntary or with cause, he will not
disclose, divulge, utilize, furnish, or make accessible to anyone (other than in
the regular course of the business of the Corporation) or use for his own
benefit, gain or otherwise, any information concerning any inventions,
discoveries, improvements, processes, computer software programs, know-how,
ideas, trade secrets, customer lists, or any confidential materials, data,
information or instructions, technical or otherwise, issued or proclaimed, for
the sole use of the Corporation, disclosed to him or in any way acquired by him
during his employment hereunder; it being the intent of the Corporation, with
which Employee agrees, to restrict him from disseminating or using any
information which is unpublished and not readily available to the general
public. The parties hereby stipulate that all such information is confidential
material and affects the successful conduct of the business and the goodwill of
the Corporation. Nothing herein shall restrict Employee from disseminating, or
otherwise using any information which is published or which is or becomes
readily available to the general public through no action by Employee.
(c) Employee agrees that his engagement in any competition with the
Corporation in violation of his undertaking pursuant to subparagraph (a) of this
Paragraph 6 or the disclosure by him of any confidential material may result in
irreparable injury and damage to the Corporation which will not be adequately
compensable in money damages; that the Corporation may have no adequate remedy
at law therefor, and that the Corporation may obtain such preliminary, temporary
or permanent mandatory or restraining injunctions, orders or decrees as may be
necessary to protect it against or on account of any breach by Employee of the
foregoing.
(d) Employee agrees that upon any termination of his employment,
whether voluntary or involuntary, or with cause, he will notify any new partner,
associate, or any other person, firm or corporation with whom he becomes
associated in any capacity whatsoever, of the existence of this Agreement and
the provisions of this Paragraph 6, and that the Corporation may give similar
notice thereof.
(e) The covenants by Employee set forth in this Paragraph 6 shall be
construed as an agreement independent of this or the provisions of any other
agreement between the parties. The existence of any claim or cause of action by
Employee against the Corporation, whether predicated upon this or any other
agreement, or otherwise, shall therefore not constitute a defense by Employee to
the enforcement of the provisions of this Paragraph 6.
(f) While the restrictions set forth in this Paragraph 6 are
considered by the parties to be reasonable in all circumstances, it is
recognized that restrictions of the nature in question may fail for reasons
unforeseen, and accordingly it is hereby agreed and declared that if any such
restrictions shall be adjudged to be void as going beyond what is reasonable in
all the circumstances for the protection of the
<PAGE>
interests of the Corporation but would be valid if part of the wording thereof
were deleted, or the period thereof reduced, or the range of activities or area
dealt with thereby reduced in scope, the said transaction shall apply with such
modifications as may be necessary to make it valid and effective.
7. Disability.
For the purposes of this Agreement, "permanent disability" shall
mean Employee's inability to perform his duties for a period of six consecutive
months, by reason of any physical or mental incapacity, in a manner
substantially consistent with the manner in which he had performed such duties
prior to the first occurrence of such inability; provided, however, that if a
disability insurance policy is maintained by the Corporation for the benefit of
Employee, the definition of "permanent disability" for this Agreement shall also
include any condition defined by or stated in said policy. The "date of
permanent disability" shall be deemed to be the six month anniversary of the
date on which Employee first became unable to perform his duties as provided in
this Paragraph 7. Employee shall be entitled to his full pay and benefits until
the date of permanent disability, reduced by any disability benefit payments to
him until such date.
8. Termination.
(a) Notwithstanding anything herein contained to the contrary, the
Corporation shall have the right to terminate Employee's employment hereunder
immediately upon the occurrence of any of the following circumstances:
(i) Upon determination of the Board with cause;
(ii) Employee's conviction of a felony;
(iii) Employee's breach of any of the material terms of this
Agreement, provided such breach remains uncured 30 days
after the Corporation gives Employee written notice of
such breach;
(iv) Employee's death; or
(v) Employee's permanent disability, as defined in Paragraph
7 hereof.
(b) In the event that this Agreement is terminated pursuant to
Paragraph 8(a)(i) hereof, Employee shall be entitled to receive the monthly
compensation contemplated by Paragraph 3(a) for the remainder of the term of
this Agreement.
<PAGE>
(c) For the purpose of this Agreement, the term "cause" as used in
Paragraph 8(a)(i), above, shall mean: Employee's willful misconduct or neglect
of duties or commission of other acts or failure to act which are determined by
the Board to be contrary to the best interests of the Corporation.
9. Term and Renewal.
Unless sooner terminated as provided herein, the term of this
Agreement shall be for a term commencing as of the date hereof, and extending to
and through December 31, 1996. This Agreement shall be automatically renewed on
January 1, 1997 for a two-year period and each second anniversary date thereof
for two-year periods unless either party shall, not later than 90 days before
the expiration of the term then in effect, give written notice of his or its
intention not to renew. Any such renewal shall be upon the same terms and
conditions as contained in this Agreement, provided, however, that the
compensation provided for as of the date hereof for the initial term may be
modified as the parties shall agree for each such successive term and any such
modification shall be incorporated into an amendment hereto executed by the
parties.
10. Employee's Warranties.
Employee warrants that he has full power and authority to enter into
this Agreement and that such act, and the performance of his obligations
hereunder, will not conflict with any other agreements or undertakings to which
he is a party or to which he is bound, or give rise to any claim or proceeding
against the Corporation, and that he will fully indemnify the Corporation and
hold it harmless from and against any and all such claims, charges or
liabilities, including reasonable attorneys' fees, incurred by the Corporation
in connection therewith.
11. Notices.
Any and all notices or other communications given under this
Agreement shall be in writing and shall be deemed to have been duly given on the
date of delivery, if delivered in person, or three days after mailing, if mailed
within the continental United States, postage prepaid, by registered or
certified mail, to the party entitled to receive same, at his or its address or
addresses as either party shall specify in a notice given in conformity with the
provisions of this paragraph. Copies of all notices or other communications
given to the Corporation shall be sent to Ruffa & Ruffa, P.C., 150 East 58th
Street, 35th Floor, New York, New York 10155, Attention: William P. Ruffa, Esq.
12. Miscellaneous Provisions.
(a) This instrument represents the entire Agreement between the
parties and supersedes any prior agreement or understanding among them with
respect to the subject matter hereof. No provision hereof, including, without
limitation, this
<PAGE>
Paragraph 12, may be amended, modified, terminated, or revoked except by a
writing signed by all parties hereto.
(b) This Agreement contemplates the personal services of Employee,
and neither this Agreement nor any of the rights herein granted to Employee or
the duties assumed by him hereunder may be assigned by him. This Agreement, and
the rights of the Corporation hereunder, may be assigned by the Corporation only
in connection with the sale of the business of the Corporation. This Agreement
shall be binding upon and inure to the benefit of the parties and their
respective heirs, legal representatives, successors, and assigns, except as
otherwise provided in this Agreement.
(c) No waiver of any breach or default hereunder shall be considered
valid unless in writing, and no such waiver shall be deemed a waiver of any
subsequent breach or default of the same or similar nature.
(d) If any provision of this Agreement shall be held invalid or
unenforceable, such invalidity or unenforceability shall attach only to such
provision and shall not in any manner affect or render invalid or unenforceable
any other severable provision Of this Agreement, and this Agreement shall be
carried out as if any such invalid or unenforceable provision were not contained
herein.
(e) This Agreement is a contract made under the laws of the State of
California and shall in all respects be governed by and construed in accordance
with the laws of the State of California.
(f) The captions and headings contained In this Agreement are for
convenience only and shall not be construed as a part of this Agreement.
(g) This Agreement may be executed in any number of counterparts.
each of which shall be deemed an original and all of which shall constitute one
instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the day and year first above written.
EMPLOYER: EUROTECH, LTD
By: /s/ [Illegible]
-----------------------------------
EMPLOYEE:
RANDOLPH A. GRAVES, Jr.
/s/ Randolph A. Graves, Jr.
--------------------------------------
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM EUROTECH,
LTD. BALANCE SHEET AS OF SEPTEMBER 30, 1996 AND STATEMENT OF OPERATIONS FOR THE
INTERIM PERIOD JANUARY 1, 1996 THROUGH SEPTEMBER 30, 1996 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 80
<CURRENT-LIABILITIES> 1,074
<BONDS> 0
0
0
<COMMON> 4
<OTHER-SE> (998)
<TOTAL-LIABILITY-AND-EQUITY> 80
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,459
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5
<INCOME-PRETAX> (2,464)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,464)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,464)
<EPS-PRIMARY> (0.20)
<EPS-DILUTED> (0.20)
</TABLE>
