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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES OF
SMALL BUSINESS ISSUERS
Under Section 12(b) or (g) of the Securities Exchange Act of 1934
SOLUCORP INDUSTRIES LTD.
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(Name of Small Business Issuer in its Charter)
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Yukon N/A
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(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
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250 West Nyack Road, West Nyack, New York 10994
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(Address of Principal Executive Offices) (Zip Code)
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Issuer's Telephone Number (914) 623-2333
Securities to be registered under 12(b) of the Act:
Title of each class Name of each exchange on which
to be so registered each class is to be registered
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Securities to be registered under Section 12(g) of the Act:
Common Stock No Par Value
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(Title of Class)
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Certain matters discussed in this registration statement may constitute
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995 (the "Reform Act") and as such may involve
risks and uncertainties. These forward-looking statements relate to,
among other things, expectations of the business
environment in which the Company operates, projections
of future performance, perceived opportunities in the
market and statements regarding the Company's plans.
The Company's actual results, performance, or achievements
may differ significantly from the results, performance,
or achievements expressed or implied in such
forward-looking statement.
INFORMATION REQUIRED IN REGISTRATION STATEMENT
PART I
Item 1: Description of Business
General
Solucorp Industries Ltd. (the "Company"), incorporated under the laws
of the Province of Yukon, Canada (formerly World Tec Industries, Inc.) was
formed through an amalgamation (merger) of Livingstone Energy Corp. and
Intelicom Systems, Ltd. on June 30, 1987. On April 4, 1997 the Company changed
its corporate domicile from British Columbia to the Yukon Territory. The
Company is focused on the development, sales and marketing of solution
products that meet the needs of the environmental marketplace.
The Company has developed an innovative and cost effective hazardous
heavy metal remediation process for the environmental marketplace. The
Company's patent-pending Molecular Bonding System ("MBS(R)") process has been
included in the United States Environmental Protection Agency's ("EPA")
Superfund Innovative Technology Evaluation ("SITE") program as an innovative
solution to the remediation of heavy metals in soils, sludges and ash. The MBS
process has been proven in completed contracts in New Jersey, New York,
Connecticut, West Virginia, Missouri and Massachusetts. The MBS process
results in an immediate chemical reaction changing offensive leaching ions
into new non-leaching molecules. The process can be utilized on-site rather
than removing soil for off-site treatment. The Company's future product
development focuses on the patent enhancements and additional product
capability of the MBS process.
The Company's future plans for sales and marketing of the MBS process
will include direct sales and licensing of the process and technology for
which the Company would receive license and royalty payments.
The Company also markets a product called "Mercon(R)," Mercury Vapor
Suppressant Product which is used to clean up mercury spills, and suppress the
deadly vapors when spills occur. The Company believes the mercury clean up
business is limited and declining and sales emphasis is restricted to filling
orders for existing customers, and by taking on projects strictly on a
referral basis.
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The Company operates an environmental training and consulting
business through its wholly owned subsidiary Environmental Training Institute,
Inc. ("ETI") in Saddle Brook, New Jersey. ETI offers consulting and training
services; Safety, Health and Environmental training in accordance with the
Federal Occupational Safety and Health Act ("OSHA"); custom on-site video
training materials; instruction on how to avoid OSHA citations; and
representation during informal and formal OSHA conferences. The Company also
provides lead and asbestos abatement, mercury spill cleanups, air monitoring,
consultation for underground storage tank problems, ground water recovery and
treatment, transport and disposal of hazardous and non-hazardous materials,
design and illustration of monitoring wells, waste management consultation,
environmental impact studies and assessment, environmental auditing and
permitting, hydrogeology and engineering geology.
The Company's principal environmental remediation operations are
conducted by E.P.S. Environmental, Inc. ("EPS"), a wholly owned subsidiary
incorporated in the Province of British Columbia, Canada and through joint
venture arrangements. The Company also has several inactive wholly owned
subsidiaries. Unless the context otherwise requires the "Company" as used
herein refers to the Company and all of its subsidiaries.
The Company has offices in Vancouver, British Columbia; West Nyack,
New York; Regina, Saskatchewan; Saddle Brook, New Jersey; Leawood, Kansas; and
San Juan, Puerto Rico. The Company's principal executive offices are located
at 250 West Nyack Road, West Nyack, New York 10994. Its telephone number at
that location is (914) 623-2333. See "Item 3 - Description of Property".
Environmental Remediation
The Company is principally engaged in the development, sales and
marketing of its MBS process, which is an innovative and cost effective
hazardous heavy metal remediation process. It was designed to protect clients
from the threat of future liability claims, and offer a permanent solution to
stabilizing heavy metals. The MBS process stabilizes heavy metals in soils,
sludges, ashes and bag house dust by chemically rendering leachable metal ions
inert by bonding them to non-leachable molecules. The MBS process utilizes a
powder added to excavated soil or sludge in a pug mill operation. It also can
be applied in-situ (directly to contaminated soil) which eliminates the costly
excavation and processing associated with soil removal from the ground prior
to treatment. These processes stabilizes all toxic characteristic metals
identified in the United States Resource Conservation Recovery Act ("RCRA"),
and can treat multiple metals concurrently. The MBS process has proven,
through long term stability testing (Multiple Extraction Procedure), to not
leach for more than 1,000 years and has been proven under all recognized
regulatory protocols (TCLP, SPLP, SWEP, and CAL WET) to not only meet, but to
exceed minimum standards. The MBS process maintains the pH levels in the media
within a range where the insolubility of the heavy-metal sulfides is assured.
The process also provides buffer capacity to ensure that the pH is not
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significantly altered by the addition of acids or caustics to the media. In
the MBS process, waste is crushed and screened, reducing particles to a
one-inch diameter for maximum contact with a proprietary reagent mixture. The
powdered reagent, created for site-specific conditions, is mixed with waste in
a closed hopper pug mill. After water is added to the mixture to catalyze the
reaction and aid in mixing, the treated substance goes to a stockpile. Vapors
from the mill go through a regenerable wet scrubber and a carbon absorption
system. The dried soil is then tested to ensure compliance with regulatory
limits. Clean soil is returned to the site or transported to a non-hazardous
landfill for disposal.
The Company has mobile remediation systems that can be brought to a
site and set up in a matter of hours or days, depending upon the size of the
project. Currently the Company has three different machines capable of
performing the MBS process on the particular site. When not in use, these
machines are stored in a warehouse. It can be installed at the end of a
processing line to render hazardous waste non-hazardous at the source. A
customized MBS mixing system can be installed into a manufacturing line to
convert a hazardous metal waste, such as slag or bag house dust, into a
non-hazardous material. Accordingly, the Company believes that customers with
in-line manufacturing systems that produce hazardous heavy metal waste can
save significant amounts of money on transportation, disposal and insurance
costs, and have a safer facility by using the MBS process. The process can
operate at rates up to 90 metric tons per hour depending on site conditions.
Metals amenable to the MBS process include arsenic, cadmium, chromium, copper,
lead, mercury, nickel, silver and zinc. This system is also effective with
mixed wastes or chemical compounds. Soils processed with MBS have successfully
met toxicity characteristic leaching procedure requirements and in many cases,
metals are virtually undetectable. No residuals or byproducts are generated by
the MBS process. The Company has already successfully completed on-site
applications in Jersey City, New Jersey; Waterbury, Connecticut; Roanoke,
Virginia; Buffalo, New York; and Egremont, Massachusetts. They recently set up
an in-line operation in Buick, Missouri which is currently capable of
processing hazardous slag 24 hours a day.
The Company's MBS process has been accepted by the EPA SITE program
as an innovative solution to the remediation of heavy metals in soils,
sludges, ash and other manufacturing waste streams.
The Company also markets the Mercon(R) line of products which is used
throughout the United States in emergency response clean-up projects including
those contracted by the EPA. These certain chemicals facilitate collection of
mercury and prevent its methylation in water. Mercon is a line of premium
quality mercury suppressant products used to clean up mercury spills, and
suppress the deadly vapors present when a spill occurs. Unique properties of
Mercon include it being non-toxic and bio-degradable. Mercon products are used
mostly in hospitals, dental offices and laboratories. Industrial applications
are now minimal as most industries which required high cost mercury clean ups
have switched to newer, non-mercury dependent systems. Due to this switch the
Company believes the market for such services are minimal and has not pursued
an active marketing campaign. Instead, the Company only fills orders for
existing customers and takes jobs on a referral basis.
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Licensing Agreements and Patents
To protect the uniqueness of the Company's remediation process and
ensure that it is the sole owner of this process, the Company has secured, and
has patents pending in the United States and Canada.
The Company is the sole and exclusive owner of the MBS Process. To
that extent it has patents pending, under U.S. Patent Application #08,399,784
and Canadian Patent Application #2,137,996. On April 16, 1996 the Company
obtained trademarks for the terms "Solucorp" and "MBS" under the Trademark Act
of 1946, as amended with The United States Patent and Trademark Office. These
Trademarks remain in force for ten years, unless sooner terminated as provided
by law. MBS was registered for chemicals for use in soil remediation in Class
1, and Solucorp was registered for hazardous waste management and destruction
of waste by means of soil remediation, in Class 42. The Company has also been
assigned European Community Trademark Application Numbers for these terms,
00044154 and 000440750 respectively.
Management believes that by licensing the MBS technology, the Company
can realize greater revenues by establishing licensing arrangements throughout
the world for which it will receive license and royalty fees. The Company has
entered into several licensing arrangements covering the United States,
Canada, Europe and China and will continue to seek such arrangements.
In October 1995 the Company entered into an exclusive licensing
agreement with John Beech Remediation, Ltd. ("JBRL"), a subsidiary of John
Beech Limited, to utilize the Company's soil remediation process, and to
market of the Company's MBS soil remediation technology in the United Kingdom.
Under the terms of the agreement, JBRL must remediate soils utilizing the
Company's MBS process to certain minimum revenue levels each year, pay the
Company an annual licensing fee and pay a royalty per ton of soil remediated.
This agreement was superseded by a new agreement dated August 1, 1997 between
the Company and John Beech Limited ("JBL") which commences when JBL is
officially recorded as listed on the Alternative Investment Market ("AIM").
This new agreement redefined the minimum volume requirements and the
compensation arrangement between the parties.
In November 1996 the Company entered into a licensing agreement with
Global Technologies, Inc. ("Global"), a British Columbia company, whereby
Global was granted the right to utilize the MBS process in Canada for a period
of five years.
On June 6, 1997 the Company entered into a five year agreement to
exclusively license its MBS technology in China to Hong Kong based Smart
International Ltd. ("Smart"). The agreement, which is subject to an assessment
of the market in China, provides for annual licensing fees and royalties for
utilizing MBS.
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Sources of New Materials
The Company's MBS process requires the use of certain chemical
compounds at certain concentrations. The Company relies on two major suppliers
for sufficient quantities of this chemical compound which is vital to the MBS
process. Although the Company currently has arrangements with suppliers to
procure an ongoing supply of a sufficient quantity of the chemical compound,
the Company may, from time to time suffer shortages and possible cost
increases for this material. Accordingly, the Company's ability to perform
contracts and continued sales at a profitable level could be adversely
affected.
The Company has entered into a contract with Smart whereby Smart will
supply chemicals for the Company's MBS process. Smart was specifically
established to produce the chemical compound used in the MBS process by the
principals of Smartec, a supplier of products to various international
customers such as Ericsson, Philips and Tandy. Smart's chemical productions
facilities are in China. In addition, through its relationship with Smart and
a group of private Chinese investors, the Company has undertaken a plan to
provide a reliable long-term source for the primary component in MBS. This
relationship is expected to provide the Company with a joint ownership
interest in an integrated manufacturing network comprised of three (3)
facilities in China. This association will expand the Company's R & D
capabilities and safeguard its MBS patent in China as well as secure quality
production for world-wide distribution.
The Company also purchases some of the chemical compounds used in the
MBS process from Best Sulfur. The Company is under no written obligation to
purchase any set quantity from Best Sulfur, rather, the Company executes
purchase orders with Best Sulfur as the need arises for additional quantities
of the chemical compound.
Marketing and Sales
The Company markets and sells its services and products through the
efforts of its in-house sales personnel and by entering into agreements with
various marketing companies. As more fully described hereunder, the Company
has entered into several different marketing agreements including joint
marketing and operations agreements and sales representative agreements to
market and sell the Company's products and services throughout the world. The
Company believes that by forming relationships with established consulting
firms it will realize greater revenues by establishing company and product
credibility, market awareness, and a definite customer base.
On or about October 1995 the Company entered into a contract with IDM
Environmental Corp. ("IDM") which provides joint marketing and operations for
the Company's MBS process. This resulted in the Company participating in a
remediation project in Egremont, MA and being included in a remediation
contract with IDM at the Los Alamos National Laboratory site in New Mexico.
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On December 17, 1996 the Company entered into a Joint Marketing and
Operations Agreement with Roy F. Weston, Inc. ("Weston"), a Pennsylvania
corporation. Weston is a company that provides engineering, construction, and
environmental management services to businesses. Weston is to market and
provide field management for some of the Company's products and/or services
for a period of three years.
The Company, through its subsidiary EPS, entered into a Sales
Representative Agreement with ENSCI Environmental ("ENSCI"), a subsidiary of
American Eco Corp., for a term of three years. ENSCI will market and promote
all of the Company's products and services, including the MBS process, by
identifying specific accounts and/or projects where heavy metal contamination
is present and then, based on a specific sales/marketing plan, register the
account with the Company.
On November 20, 1997 the Company entered into a one year
non-exclusive finders agreement with Quest International Technologies
("Quest") to promote the Company's soil remediation process. As a result of
Quest's efforts, the Company will pay 3% of the gross revenues generated which
are payable 10 days after receipt from any third party.
Competition
The United States remediation construction market, according to the
Eighth Annual State of the Industry Report prepared by Farkas Berkowitz &
Company, was $3.5 billion in 1995, which represented a twenty percent increase
over 1994. It is continuing to undergo a market restructuring fueled by
regulatory changes, declines and/or shifts in government spending, and the
emergence of very large remediation companies via vertical integration and
cross service acquisition.
A key emerging market trend is the shift from transportation and
disposal to on-site remediation, due to the recent availability of more
effective treatment technologies and meaningful economic incentives with
on-site remediation. The 1996 heavy metal market was estimated to be
approximately ten million tons consisting of three main segments; (i)
Hazardous Waste Facilities (land fills and treatment, storage, and disposal
facilities); (ii) Manufacturing Operations (producers of hazardous waste); and
(iii) Site Remediation (projects for the clean up of contaminated sites.)
The remediation market is perceived to offer minimal product
differentiation and is characterized by a general reluctance to try new
products. The Company believes this stems from the generator/primary
responsible party ("PRP") reluctance to risk a possible future liability with
unproven products. Additionally, environmental consultants generally take a
very conservative approach in evaluating remedial design alternatives. The
remediation solutions that have historically dominated the market, including,
Portland Cement, Cement Kiln dust, and Lime, are coming under increasing
public and private scrutiny, because they are not providing PRP's with long
term protection. With increasing frequency, the "caps" that were used on many
SuperFund sites are now cracking and exposing the environment to toxic
materials.
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The Company's MBS process competes against three primary remediation
categories: (i) Solidification and Stabilization, (ii) Vitrificaton, and (iii)
Soil Washing. Each of these have several treatment technologies available.
Solidification and Stabilization as the primary category of remediation used
for heavy metals accounting for approximately ninety percent (90%) of market
usage. The MBS process compares favorably against solidification and
Stabilization, with its advantages being cost, versatility and efficacy.
The Company believes that its MBS process has certain price and
efficacy advantages over competing soil remediation technologies. However, the
Company competes against firms that are significantly larger and have far
greater capital, scientific and marketing resources than the Company.
Governmental Regulation
The EPA is the principal federal agency responsible for environmental
matters, including the disposal and discharge of hazardous substances. State
and local governments are involved in implementing environmental programs on a
state and local level. EPA, state and local policies can adversely affect the
demand for the Company's services by relaxing regulations requiring tests, by
delaying the effective date of regulations which require tests and by relaxing
its enforcement efforts. Furthermore, to the extent that the budgets of
administrating agencies are reduced, or funds not made available to them, the
demand for the Company's services can also be adversely affected. Applicable
federal legislation includes the RCRA, the Clean Water Act, the Safe Drinking
Water Act, the Clean Air Act, Toxic Substances Control Act, the Comprehensive
Environmental Response Compensation and Liability Act ("CERCLA"), and the
Superfund Amendments and Reauthorization Act ("SARA") and the Technical
Standards and Corrective Action Requirements for Owners and Operators of
Underground Storage Tanks Act ("UST").
The Company's activities and its facilities are subject to regulation
under federal, state and local laws, ordinances and rules and regulations
relating to the environment, environmental quality and occupational health and
safety including the RCRA, OSHA and similar state laws and regulations
promulgated thereunder. The Company receives and uses various hazardous
chemicals in its environmental testing operations, and is licensed for these
activities. While the Company believes that its operations have at all times
been conducted in compliance with all federal, state and local environmental
laws and regulations, any business handling hazardous waste is subject to
potential contingent liabilities under certain of these laws. The full impact
of applicable laws and regulations on the Company is difficult to predict
because of their complex nature and the possibility of changes, and because of
political and economic pressures. In connection with the Company's business of
waste analysis, the Company believes it is acting in compliance with
applicable environmental laws.
In response to the increasing public and private awareness to the
long term results from previous remediation initiatives, the EPA has submitted
changes to rules defining the acceptable levels of Toxic Characteristics (TC)
metals, and is attempting to have these changes enacted in the near future
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(see chart below of a sample of these proposed changes). The EPA's goal is to
abandon the levels set in the RCRA and adopt the far more stringent Universal
Treatment Standards (UTS). These proposed changes to the acceptable TC levels
benefit the Company, because MBS is already capable of achieving these new
levels without additional cost, equipment, or volume increase for the treated
materials. Management believes that the same cannot be said for most
competitors in the market. Management also believes that traditional
technologies are probably not capable of achieving the proposed new levels
without significant cost increases.
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SAMPLE OF PROPOSED CHANGES FOR TOXIC CHARACTERISTICS METALS
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TC METAL Old Approved Proposed New % Variance
RCRA Levels "UTS" Levels
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Arsenic 5.0 5.0 (N/C)
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Barium 100.0 7.6 92.4%
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Cadmium 1.0 0.19 81.0%
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Chromium (Total) 5.0 0.86 82.8%
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Lead 5.0 0.37 92.6%
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Mercury (Retort Residues) 0.2 0.2 (N/C)
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Mercury (All Others) 0.2 0.025 87.5%
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Selenium 1.0 0.16 84.0%
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Silver 5.0 0.30 94.0%
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Insurance
The Company maintains a Commercial General Liability Policy on an
occurrence basis which expires June 1998 with an aggregate limit of $4,000,000
and a Contractors Pollution Liability Policy with liability coverage of
$2,000,000 on a claims-made basis with a $25,000 deductible which expires June
1998. The Commercial General Liability Policy contains various exclusions,
including claims related to discharge of pollutants, radioactive matter, and
asbestos.
The Company intends to maintain the same coverage, either by renewal
or by obtaining similar coverage. However, no assurances can be given that the
Company will be able to maintain any or all of the above described policies of
insurance which may also be canceled before expiration in accordance with the
terms of each policy. Further, while management believes this coverage is
adequate, there can be no assurance that a recovery or settlement of a
material claim will not exceed the Company's coverage.
All of the aforementioned policies are maintained by the Company
through the Reliance Insurance Company and Hartford Insurance Company.
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Employees
As of September 30, 1997, the Company had twenty full time employees.
Of these employees four were executives, five were engaged in sales, three in
technical activities and eight were in administrative and support functions.
The Company is not subject to any collective bargaining agreement and
management believes that its employee relations are good.
Item 2: Management's Discussion and Analysis or Plan of Operation
The following discussion should be read in conjunction with the
consolidated financial statements and notes thereto.
Results of Operations
Three Months Ended September 30, 1997 Compared to the Three Months Ended
September 30, 1996.
Aggregate revenue increased to $1,238,261 from $206,171, an increase
of $1,032,090 or 501% for the first three months ended September 30, 1997 when
compared to the same period in 1996. This resulted primarily from the
licensing of the Company's Molecular Bonding Technology (MBS(R)) in China, the
renewal of its licensing agreement in the United Kingdom, a non-refundable
option receipt for a licensing agreement in Europe, and from increased
remediation projects in the U.S.
Cost of sales increased $64,741 or 30.3% when comparing the first
three months of fiscal 1998 to the comparable period in fiscal 1997. This
increase is primarily from the increased remediation work noted above.
Gross profit increased to $960,165 from ($7,184), an increase of
$967,349 for the first three months of fiscal 1998 when compared to the same
period in fiscal 1997. As indicated above, this resulted essentially from new
or renewed licenses for the Company's technology and from increased
remediation business. In addition, gross profits were enhanced from
improvements made in project costs as a result of the intensive R&D effort in
fiscal 1997.
Selling, general and administrative expenses ("SG&A") decreased
$77,420 or 13.0% for the first three months ended September 30, 1997 as
compared to the same period in 1996. This decrease was essentially from (i)
reduced spending on Office, Printing and Related Expenses ($25,855); Rent
($15,148); Salaries and Wages ($32,903); and Telephone ($9,458); (ii) a
Foreign Exchange Gain of $123,912; and (iii) partially offsetting increased
spending on Consulting & Management Fees ($130,998).
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The Company experienced a net profit of $529,987 for the three months
ended September 30, 1997 compared to a net loss of $604,805 during the same
period in 1996. This turnaround of $1,134,792 as indicated above, resulted
primarily from (i) increased remediation business; (ii) licensing fees in
fiscal 1998 with no comparable amounts in fiscal 1997; (iii) improvements made
on project costs; (iv) other income from a joint venture relationship; and (v)
reduced operating expenses.
Fiscal Year Ended June 30, 1997 Compared to Fiscal Year Ended June 30, 1996
Revenue from remediation and disposal sales decreased $1,187,755 or
63%. This decline was primarily due to the recognition of a deferred revenue
item totaling $750,000 in fiscal 1996 from the previous fiscal year with no
comparable offset in fiscal 1997; and from the Company's focus in fiscal 1997
away from operations toward the further research and development of the
Molecular Bonding System (MBS(R)) for in-line applications, and the
demonstration of its technology for the Environmental Protection Agency (EPA)
and the British Columbia Ministry of Environment (BCMOE). In addition, revenue
from training declined $87,279 or 63% essentially from the Company
de-emphasizing this limited growth area as it concentrated on the areas noted
above.
Costs of sales for environmental clean up and waste disposal
increased $178,507 or 20.0% when comparing fiscal 1997 to fiscal 1996. This
increase was principally attributable to higher than anticipated startup costs
on the Company's first in-line project. Partially offsetting this increase was
reduced cost of sales of $3,707 or 24.9% from the lower training institute
volume noted above.
Gross profit declined $1,499,834 or 130% primarily from the
recognition of the $750,000 deferred revenue item in fiscal 1996 noted above
which did not have related costs associated with it; and from the undertaking
of certain remediation jobs in fiscal 1997 with lower than normal production
volumes and accordingly higher unit costs. These jobs helped establish a track
record in a market targeted for significant future growth and helped establish
a preliminary cost structure from which subsequent reductions could be
accomplished once the Company goes into full operation.
In the aggregate operating expenses declined $185,118 or 5% from
$3,641,463 in fiscal 1996 to $3,456,345 in fiscal 1997. This was accomplished
through strict control over spending in fiscal 1997 as the Company focused its
attention towards the enhancement of its Molecular Bonding System technology
and towards gaining recognition in the environmental community. In addition,
in total certain other significant variances occurred in the following expense
categories when compared to fiscal 1996:
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Fiscal 1997 Fiscal 1996
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A&G R&D Total Total
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Bad debts $ 41,690 $ 0 $ 41,690 $ 676,310
Consulting & management fees $ 33,704 $188,759 $ 222,463 $ 272,048
Legal accounting & audit $227,256 $ 81,167 $ 308,423 $ 364,321
Salaries & wages $302,945 $903,706 $1,206,651 $ 1,096,509
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In fiscal 1996 the Company wrote off a receivable for approximately
$600,000 that related to a project that was halted due to a continuing dispute
between independent third parties. This write-off was a one-time occurrence,
and accordingly, only effected fiscal 1996.
The Company spent $49,585 less in fiscal 1997 for consulting and
management fees and $110,142 more for salaries and wages. The nature of the
work in fiscal 1997 dictated that it would be more effectively accomplished
internally than through outside services.
Legal accounting and audit fees decreased $55,898 in fiscal 1997.
This was accomplished by utilizing internal staff to accomplish some of the
work that was previously handled by our outside lawyers and accountants.
Fiscal 1997's consolidated statement of operations & deficit reflects
a loss of $3,827,599 of which $1,968,910 was directly related to spending on
research and development. This further "investment" in the research and
development without significant offsetting revenues at this time included
demonstrations for the EPA and the BCMOE, undertaking several low margin or
loss-leader projects to advertise the benefits of MBS to the environmental
community, by looking into new and improved products for the remediation
market, and by exploring ways to make the components of MBS more cost
effective. The increased loss of $1,410,742 from fiscal 1996 occurred
primarily from the recognition of the deferred revenue item in fiscal 1996
with no comparable offset in fiscal 1997 and from the Company's commitments to
the further development of MBS.
The Company's emphasis on R&D in fiscal 1997 noted above has so far
achieved some very positive results which should have significant long-term
benefits. MBS is consistently meeting the stringent criteria of UTS testing
procedures (scheduled for introduction within a year) with less chemical
reagent additions than any other remediation process known in the industry.
"In-Situ" applications of MBS (ground soils are treated without being
previously excavated and screened) are now available to the Company. In
addition, early test results using alternative chemical ingredients in the
Molecular Bonding System approach indicate that they are not only less
expensive with equal efficacy, but are possible solutions to such contaminants
as radionuclides.
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Fiscal Year Ended June 30, 1996 Compared to Fiscal Year Ended June 30, 1995
Aggregate revenues increased approximately $850,382 or approximately
66.4% in fiscal 1996 as compared to fiscal 1995. This increase in aggregate
revenues was primarily attributable to the recognition into income deferred
revenue from fiscal 1995 of $750,000 (see detailed explanation above). In
addition, environmental cleanup and waste disposal revenue increased $78,978
primarily from increased transportation and disposal activity; other income
increased $65,385 mostly from interest income from investing the proceeds from
various Company stock sales; partially offset by decreased revenue of $93,981
from the training institute due to increased competition in OSHA training.
Cost of sales increased $259,154 or approximately 40.0% during fiscal
1996 as compared to fiscal 1995. This increase occurred primarily from
increased environmental cleanup and waste disposal costs increasing $367,726
as a result of increased transportation and disposal activity, which is less
profitable than remediation work; partially offset by reduced training
institute costs of $108,572 from reduced classes and attendance.
Gross profit increased $591,228 when comparing fiscal 1996 to fiscal
1995. This increase resulted primarily from the inclusion of a $750,000
non-refundable deposit from a job that commenced in fiscal 1995, but was
abandoned in fiscal 1996; a $50,000 licensing fee received in fiscal 1996;
increased interest income of $65,386 from the temporary investment of proceeds
from the sales of the Company's stock; partially offset by reduced gross
profit from cleanup and waste disposal jobs totaling $288,748.
SG&A expenses increased $2,633,962 in fiscal 1996 as compared to
fiscal 1995. This increase resulted mostly from the following:
(a) Bad debts increased $645,362 in fiscal 1996 from the $30,948
experienced in fiscal 1995. This increase was essentially
from an allowance established for a project that was
initiated in fiscal 1995 and halted as a result of a
continuing dispute by independent third parties; and
accordingly, the collectibility of the receivable balances
was uncertain;
(b) Consulting and management fees increased $171,955 primarily
from the Company's initiatives to improve its MBS
technology;
(c) Insurance increased $47,595 primarily from the increase in
insurable assets;
(d) Legal, accounting and audit fees increased $241,959 from the
Company defending its positions surrounding several trading
halts, moving to the Electronic Bulletin Board, and from the
Company's initiative to strengthen its contractual
agreements from ongoing operations;
13
<PAGE>
(e) Rent increased $66,360 from the Company's expansion into
Puerto Rico, moving to West Nyack, New York to accommodate
increased space requirements, and from an increase in rent
at its Saddle Brook, New Jersey location;
(f) Salaries, wages and related benefits increased $680,601 or
164% as the Company migrated from its developmental stage to
its organizational stage, and finally to its operational
stage. Specifically, a full time CFO and Controller were
hired to strengthen the Company's financial operation;
management and other administrative employees were either
hired in fiscal 1996 and/or sometime in fiscal 1995; full
time operational employees were hired to perform
environmental clean ups; and staff was hired to strengthen
the environmental training business. In addition, the
Company initiated a health benefit program for its employees
to be competitive in the labor market;
(g) Telephone expense increased $23,256 or 39% as a result of
the increased staffing and other activities noted above;
(h) Travel expense increased $59,395 or 126% essentially from
the increased sales and administrative activities incurred
in fiscal 1996;
(i) Corporate development and marketing increased $240,449 or
248% essentially from the increase in the sales force to
make deeper penetrations into the environmental clean up and
waste disposal businesses;
(j) Depreciation and amortization expenses increased $279,821
primarily from the commencement of amortization on waste
disposal rights totaling $216,563.
The Company's net loss increased from $374,123 in fiscal 1995 to
$2,416,857 in fiscal 1996, an increased loss of $2,042,734. This loss occurred
primarily from the commencement of the amortization on waste disposal rights
($216,563) without any corresponding revenue; the establishment of an
allowance against balances due from a job that had been delayed as a result of
a dispute with outside third parties ($638,926); with the balance from the
migration from developmental to organizational to operational modes without a
corresponding increase in revenue.
Liquidity and Capital Resources
At September 30, 1997, the Company had working capital of $1,607,822
compared to a working capital deficiency of $283,426 at June 30, 1997. This
turnaround in working capital resulted primarily from: (i) the Company's
profitable first quarter; (ii) a significant infusion of capital through the
exercising of options and warrants; (iii) the overall reduction in payables;
and (iv) from an increase in related party receivables being treated as
short-term loans.
14
<PAGE>
Net Cash Provided by Operations
The Company's operations for fiscal 1997 used net cash of $3,251.132,
as compared to $1,940.081 in fiscal 1996. This increase of $1,311,051 was
primarily due to the Company's further investment in its MBS technology.
Cash Flows from Investing Activities
The net cash used for investing activities in fiscal 1997 was
$505,454 as compared to $352,758 used for the comparable period in 1996.
Cash Flows from Financing Activities
The net cash provided by financing activities in fiscal 1997 of
$3,476,077 was $1,368,136 more than the $2,107,941 in fiscal 1996. This
increase in financing resulted primarily from increased sales of the Company's
stock which occurred mostly from the exercise of stock options.
The carrying value for the waste disposal rights ($1,732,500 at June
30, 1997 and $1,679,359 at September 30, 1997) represents a significant
portion of the Company's assets. Measurement of the recoverability of the
carrying value is based on an assessment of the waste disposal rates currently
existing in the New York and New Jersey areas, and at other areas where Thermo
Tech plants are located, and on the assumption that the relocation of the
Corinth plant and/or some other Thermo Tech plants will be in operation in the
near future. However, it is reasonably possible, based on existing knowledge,
that changes in future conditions in the near term could require a material
change in the estimated recoverable amount.
In April 1995 the Company, in a private placement, sold an aggregate
of 180,306 shares of Common Stock at a price of (Cdn) $1.32 per share for
proceeds of (Cdn) $238,004. These private placement holders were also granted
a two year option to purchase an additional 180,306 shares of the Company's
Common Stock, exercisable in whole or in part during the first year allowed by
the Vancouver Stock Exchange ("VSE") at (Cdn) $1.32 per share and during the
second year at (Cdn) $1.52 per share.
In August 1995 the Company, in a private placement, sold an aggregate
of 467,940 shares of the Company's Common Stock at a price of (Cdn) $3.70 per
share resulting in proceeds of (Cdn) $1,731,378. These private placement
holders were also granted a two year option to purchase an additional 467,940
shares of the Company's Common Stock, exercisable in whole or in part during
the first year allowed by the rules of the VSE at (Cdn) $3.95 per share and
during the second year at (Cdn) $4.50 per share.
In April and May 1997 the Company issued $500,000 principal amount of
its 4% Senior Subordinated Convertible Debentures Due March 31, 2000 (the
"Debentures") in a private offering transaction exempt from registration under
Rule 504 under Regulation D promulgated under the Securities Act of 1933, as
15
<PAGE>
amended. The Debentures were convertible at the option of the holder, 30 days
after the issuance into shares of the Company's Common Stock at the lesser of
0.70 times the average high closing bid price of the Common Stock on the five
consecutive trading days ending two days before the conversion date or $4.00
per share. Through June 1997, the holders have converted $500,000 of the
Debentures into 264,355 shares of the Company's Common Stock.
On June 26, 1997 the Company sold 131,457 shares of Common Stock in a
private placement at a price of (U.S.) $1.75 per share resulting in gross
proceeds of (U.S.) $230,050. These private placement holders were also granted
a two year option to purchase an additional 131,457 shares of the Company's
Common Stock, exercisable in whole or in part during the first year at (U.S.)
$1.75 per share and (U.S.) $2.00 during the second year.
The Company is subject to normal inflationary trends and anticipates
that any increased costs should be passed on to its customers.
Item 3: Description of Property
The Company occupies an office of approximately 7,000 square feet at
250 West Nyack Road, West Nyack, New York pursuant to a sublease agreement
commencing March 1, 1996 for a six year term at a rent of (U.S.)
$12,000 per month.
The Company also occupies an office at 1413 Juncos Avenue, Santurce
Puerto Rico. The Company entered into a four year lease commencing June 1,
1996 with a monthly rent of (U.S.) $675 and has prepaid (U.S.) $27,385.68 in
rent by allowing Dr. Robert Sheldon, President of 1413 Fernandez Juncos, Inc.
(the landlord of the premises) to exercise warrants previously issued to him.
The Company also occupies an office at 105-1093 West Broadway,
Vancouver, British Columbia pursuant to a month to month lease arrangement at
a monthly rent of (U.S.) $600. The Company also occupies an office at 515
Victor Street, Saddle Brook, New Jersey pursuant to a one-year lease agreement
commencing May 1, 1997, with a monthly rent of (U.S.) $1,300 for the first six
months and (U.S.) $1,400 for the remaining six months.
The Company also maintains offices in their salesman's homes in
Saskatchewan, Canada, and Kansas, U.S.A. The Company has no written leases for
these offices and pays no monthly rent for them.
Management believes that all of the aforementioned properties are
adequately covered by insurance.
16
<PAGE>
Item 4: Security Ownership of Certain Beneficial Owners and Management
The following table sets forth as of September 30, 1997, the
beneficial ownership of voting securities of the Company by each person known
to the Company to be beneficial owners of more than 5% of any class of its
voting securities as well as beneficial ownership of equity securities of the
Company by each of its directors and its directors and officers as a group.
<TABLE>
<CAPTION>
Number of Shares Approximate
Name and Address of of Common Stock Percentage of
Beneficial Owner Beneficially Owned (1) Class (2)
---------------- ------------------------ ---------
<S> <C> <C>
Peter R. Mantia 201,000(3) 1.14%
7 Cutler Court
Wesley Hills, NY 10901
James Spartz 328,123(4) 1.84%
320 Elbert Street
Ramsey, NJ 07446
John A. VanDuzen 124,800(5) 0.65%
5184 Sonora Drive
Vancouver, BC V7R 3V6
W. Bryan Fair 83,000(6) 0.47%
1309 W. 8th Avenue
Vancouver, BC V6H 3W4
Bernadette Anderton 0.68%
916 West Broadway 119,608(7)
Vancouver, BC V5Z 1K7
Arle L. Pierro 2,437,012(8)(9) 13.58%
661 North Broadway
Upper Nyack, NY 10960
Donald G. Atkinson 34,000(10) 0.2%
1004 Seaside Drive
Sooke, BC V0S 1N0
All Officers and Directors 3,327,543 17.74%
as a group (7 persons)
</TABLE>
17
<PAGE>
- - ----------
(1) Information with respect to beneficial ownership is based upon
information provided by each stockholder.
(2) Based upon 17,527,233 shares of Common Stock outstanding as of September
30, 1997 and, with respect to each stockholder, the number of shares
which would be outstanding upon the exercise by such stockholder of
outstanding options to acquire stock.
(3) Includes 170,000 shares of Common Stock issuable upon the exercise of
stock options.
(4) Includes 305,000 shares of Common Stock issuable upon the exercise of
stock options.
(5) Includes 115,000 shares of Common Stock issuable upon the exercise of
stock options.
(6) Includes 79,000 shares of Common Stock issuable upon the exercise of
stock options.
(7) Includes 110,000 shares of Common Stock issuable upon the exercise of
stock options.
(8) Mrs. Pierro is married to Joseph Kemprowski who is a consultant to the
Company and formerly served as an officer and director. Mrs. Pierro
disclaims any beneficial ownership of the shares owned by Mr. Kemprowski.
(9) Includes 1,594,837 shares of Common Stock in escrow registered in the
name of Coastal Charters and Yacht Sales Ltd. but transferred to Ms.
Pierro subject to regulatory approval, which is still pending. Includes
415,000 shares of Common Stock issuable upon the exercise of stock
options.
(10) Includes 34,000 shares of Common Stock issuable upon the exercise of
stock options.
18
<PAGE>
Item 5: Directors, Executive Officers, Promoters and Control Persons
Set forth below are the names and ages of and the positions and
offices held by each of the directors and executive officers of the Company as
of December 1, 1997.
<TABLE>
<CAPTION>
Positions and Officers presently
Name Age held with the Company
- - ---- --- ---------------------------------
<S> <C> <C>
Peter Mantia 50 President and Director
James G. Spartz 45 Senior Vice-President and Director
John A. VanDuzen 56 Director
Bernadette Anderton 46 Secretary and Director
Arle L. Pierro 49 Senior Vice President and Director
Donald G. Atkinson 68 Director
W. Bryan Fair 40 Director
</TABLE>
A director is elected to hold office until the next annual meeting of
shareholders and until his successor is elected and qualified. Vacancies of
the Board of Directors may be filled by the remaining directors until the next
annual meeting of shareholders.
Mr. Mantia became President and a Director of the Company in February
1995. Mr. Mantia was the Corporate Purchasing Manager of BMW of North America
from 1986-1996, a National Purchasing Agent from 1982-1986, and a Senior Buyer
for BMW of North America from 1979-1982.
Mr. Spartz became Senior Vice-President and Director of the Company
and Vice president of EPS Environmental, Inc. in December 1992. From October
1994 to February 1995 Mr. Spartz was the President of the Company. Mr. Spartz
is the co-founder of Spartz-McIntyre Group, Inc. a marketing service company.
Mr. VanDuzen became a Director of the Company in September 1994. Mr.
VanDuzen is currently the president of International-En-R-Tech Inc., a
manufacturer of innovative lighting techniques, and a director of United Gunn
Resources Ltd. a mining, oil and gas company. Prior to becoming a Director
Mr. VanDuzen was self-employed, operating a consulting sales and promotion
business.
19
<PAGE>
Ms. Bernadette Anderton became the Company's Secretary and a Director
of the Company in November 1994. Prior to being named Secretary of the
Company, Ms. Anderton served as the Administration/Accounting manager in the
Company's Vancouver office.
Ms. Pierro has been a Vice President with EPS Environmental, Inc.
since May 1991, and has been a Director and Senior Vice President of the
Company since March 1994. From 1987 to 1991 Ms. Pierro was the owner and
president of Pierro Jewelers, Inc.
Mr. Atkinson became a Director of the Company in August 1996. Since
1989 Mr. Atkinson has owned and operated a private consulting company working
with small private companies in the clothing business.
Mr. Fair has been with the Company since October 1991 occupying such
positions as accountant, Vice President of Administration, Acting President
and Director. Currently, Mr. Fair serves as a member of the Board of
Directors. Mr. Fair is also a distance education technologist at the British
Columbia Institute of Technology.
Item 6: Executive Compensation
The following sets forth all cash compensation earned in the previous
three years by the Company's CEO. There are no other executive officers whose
annual salary exceeded $100,000 during any of the last three fiscal years:
<TABLE>
<CAPTION>
Name and Principal All other
Position Year Salary $ Bonus $ Compensation
- - --------------------------- ---- -------- ------ ------------
<S> <C> <C> <C> <C>
Peter Mantia 1997 105,417 -0- -0-
1996 81,750 -0- -0-
1995 42,000 -0- -0-
</TABLE>
Stock Option Plan
On August 22, 1996 the Company initially canceled 18,000 employee
incentive stock options from a total of 800,000 that were granted on September
11, 1995, and expiring on September 12, 2000. On December 6, 1996 an
additional 45,000 were canceled bringing the total to 737,000. These canceled
options were the result of particular individuals who were either no longer
employed or associated with the Company. In addition, to reflect the then
current trading price of the Company's shares and the fact that the Company's
shares are now trading exclusively in U.S. dollars, on September 9, 1996 the
option price per share was reduced from (Cdn) $13.16 per share to (U.S.)
$4.80. On November 19, 1996 and on December 6, 1996 these options were further
reduced to (U.S.) $3.65 and (U.S.) $1.75, respectively.
20
<PAGE>
On December 6, 1996 the Company canceled 20,000 employee incentive
stock options from a total of 194,200 that were granted on July 13, 1995 and
expiring on July 13, 2000. These canceled options were the result of a
particular individual who was no longer associated with the Company. In
addition, to reflect the then current trading price of the Company's shares
and the fact that the Company's shares are now trading exclusively in U.S.
dollars, on December 6, 1996 the option price per share was reduced from (Cdn)
$4.00 per share to (U.S.) $1.75.
On January 6, 1997 the Company granted employee incentive stock
options to employees and directors to acquire up to 363,000 shares at (U.S.)
$1.75 per share through January 6, 2002.
On June 9, 1997 the Company granted employee incentive stock options
to employees, directors and other individuals associated with the Company to
acquire up to 3,213,073 shares at (U.S.) $1.75 per share through June 9, 2002.
Item 7: Certain Relationships and Related Transactions
As of Septmber 30, 1997 Arle Pierro, an officer and director of the
Company, was indebted to the Company in the amount of $400,520.
As of September 30, 1997 Joseph S. Kemprowski, a consultant to the
Company who is also Arle Pierro's husband, was indebted to the Company in the
amount of $143,648.
As of September 30, 1997 Alise Pierro, an employee with the Company
who is also the daughter of Arle Pierro, was indebted to the Company in the
amount of $113,750.
As of September 30, 1997 James Spartz, an officer and director of the
Company, was indebted to the Company in the amount of $264,542.
As of September 30, 1997 Peter Mantia, an officer and director of the
Company, was indebted to the Company in the amount of $72,025.
As of September 30, 1997 John Van Duzen, a director of the Company,
was indebted to the Company in the amount of $15,647.
As of September 30,1 997 Bernadette Anderton, an officer and director
of the Company, was indebted to the Company in the amount of $6,938.
As of September 30, 1997 No. Catalytic, a company owned by Bernadette
Andertson's husband who is also an employee of the Company, was indebted to
the Company in the amount of $11,664.
As of September 30, 1997 Wiener Works, a business owned by Bryan
Fair, a director of the Company, was indebted to the Company in the amount of
$38,452.
21
<PAGE>
As of September 30, 1997 the Company loaned an aggregate of $184,206
to employees and consultants of the Company.
Each one of the foregoing indebtedness was fully collateralized
subsequent to September 30, 1997. All of the collateral is currently being
liquidated and the Company expects that these loans will be repaid in full by
December 31, 1997.
All future transactions and indebtedness between the Company and
officers, directors and 5% shareholders will be on terms no less favorable
than could be obtained from unaffiliated third parties and will be approved by
a majority of the independent, disinterested directors of the Company.
Item 8: Description of Securities
The following description relating to the capital stock of the
Company is a summary and is qualified in its entirety by the provisions of the
Company's Certificate of Incorporation, as amended, and Company Act, which are
exhibits to this registration statement.
Common Stock
The Company is authorized to issue 200,000,000 shares of Common
Stock, no par value. As of September 30, 1997 17,527,233 shares of Common
Stock were issued and outstanding. The shares of Common Stock (i) have equal
ratable rights to dividends from funds legally available therefore, when, as
and if declared by the Board of Directors of the Company; (ii) are entitled to
share ratable in all of the assets of the Company available for distributions
to holders of Common Stock upon liquidation, dissolution or winding up of the
affairs of the Company; (iii) are not subject to pre-emptive, subscription or
conversion rights and there are no redemption or sinking fund provisions
applicable thereto, and (iv) are entitled to one non-cumulative vote per share
on all matters which stockholders may vote on at all meetings of stockholders.
All outstanding shares of Common Stock are fully paid and non-assessable.
The Company has paid no cash dividends and it is not anticipated that
any cash dividends will be paid in the foreseeable future. In all events, the
declaration of cash dividends will depend upon future earnings, if any, the
financial needs of the Company, and other pertinent factors.
The Company's Transfer Agent is The R-M Trust Company, Vancouver,
British Columbia.
The foregoing statement is a summary of the rights and privileges of
the holders of the Company's Common Stock. It does not purport to be complete
and is subject to the provisions of the corporation law of the Yukon Territory
and to the terms of the Company's Certificate of Incorporation and Company
Act.
The Company intends to furnish its stockholders with annual reports
of its operations, containing audited financial statements and with additional
information concerning the business and affairs of the Company whenever deemed
appropriate by the Board of Directors.
22
<PAGE>
PART II
Item 1: Market Price of and Dividends on the Registrant's Common Equity and
other Shareholders Matters
The Company's Common Stock is traded in the over-the-counter market
via the Electronic Bulletin Board under the symbol "SLUP". The following table
shows the range of high and low bid quotations for shares of the Company's
Common Stock for the calendar quarters indicated. Prior to August 6, 1996, the
Company's Common Stock was traded on the Vancouver Stock Exchange ("VSE").
Prices prior to August 6, 1996 are not presented.
<TABLE>
<CAPTION>
(In U.S. Dollars)
High Low
---- ---
1997
----
<S> <C> <C>
First Quarter $ 6.50 $ 1.69
Second Quarter $ 4.19 $ 2.31
Third Quarter $ 3.87 $ 1.91
Fourth Quarter (through December 12, 1997) $ 6.19 $ 3.37
1996
Third Quarter (beginning August 6, 1996) $ 9.12 $ 1.15
Fourth Quarter $ 7.81 $ 1.53
</TABLE>
As of December 12, 1997, the Company's Common Stock was held of record
by 367 persons. The Company estimates that there are at least 5,000 additional
shareholders whose shares are held by brokerage firms, banks and depositories.
On that date, the last bid and asked price on the Electronic Bulletin Board was
$3.94 and $4.12.
Item 2: Legal Proceedings
The Company is subject only to routine legal proceedings incidental
to the Company's business which do not involve claims for damages exceeding
10% of the Company's current assets.
Item 3: Changes in and Disagreement with Accountants
None to be reported
23
<PAGE>
Item 4: Recent Sales of Unregistered Securities
Until August 1996, the Company's Common Stock was traded solely on
the Vancouver Stock Exchange ("VSE"). Each of the following transactions were
made in compliance with the rules of the VSE.
(1) In July 1994 the Company, in a private placement, sold an
aggregate of 175,205 shares of Common Stock at a price of (Cdn) $0.488 per
share for proceeds of (Cdn) $85,500. The private placement holder was also
granted a two year option to purchase an additional 175,205 shares of the
Company's Common Stock, exercisable in whole or in part during the first year
allowed by the VSE at (Cdn) $0.488 per share and during the second year at
(Cdn) $0.56 per share. The purchaser in this private offering was Geoffrey
Mattana. No commissions were paid by the Company in connection with this
transaction.
(2) In December 1994 the Company entered into a debt settlement
agreement whereby in exchange for debts of EPS Environmental, Inc. and the
Company totaling (Cdn) $499,350 the Company issued an aggregate of 337,399
shares of Common Stock, valued at (Cdn) $1.48 per share, to the following:
Edwina Beauclair; Edward Brodie; Harvey Lenchner; Loeb & Loeb; Charles Ras;
Paul and Sal Rutiagliano; James Sivolella; Michael Stramiello; Leonard Train;
Joseph D. Kemprowski; William J. Malinchak; Alise M. Pierro; Noel M. Spindler;
Tom Spartz; Canadian Imperial Bank; Golden Capital Corp.; Tupper Jonsson &
Yeadon; Metropolitan Recycling; Shigeo Ban; and J.T. Anderton. No commissions
were paid by the Company in connection with this transaction.
(3) In April 1995 the Company, in a private placement, sold an
aggregate of 180,306 shares of Common Stock at a price of (Cdn) $1.32 per
share for proceeds of (Cdn) $238,004. These private placement holders were
also granted a two year option to purchase an additional 180,306 shares of the
Company's Common Stock, exercisable in whole or in part during the first year
allowed by the "VSE" at (Cdn) $1.32 per share and during the second year at
(Cdn) $1.52 per share. The purchasers in this private offering were as
follows: Yolanda Lipschitz; Jonathan Mattana; Jonathan Mattana Pension Plan;
W.T. O'Reilly; Jonathan H. Simon; Jill H. Simon; and Weston Equities Inc.
Defined Benefit Pension Plan. No commissions were paid by the Company in
connection with this transaction.
(4) In August 1995 the Company, in a private placement, sold an
aggregate of 467,940 shares of the Company's Common Stock at a price of (Cdn)
$3.70 per share resulting in proceeds of (Cdn) $1,731,378. These private
placement holders were also granted a two year option to purchase an
additional 467,940 shares of the Company's Common Stock, exercisable in whole
or in part during the first year allowed by the rules of the VSE at (Cdn)
$3.95 per share and during the second year at (Cdn) $4.50 per share. The
purchasers in this private offering were as follows: Ira Altfeder; Arel
Company; Stephen Briggs; Frederick and Debra Brosowsky; William Coles; Michael
Devaney; Harry and Sophie Domansky f/b/o/ Elissa Domansky; Harry and Sophie
Domansky f/b/o/ Scott Domansky; Francis Dubie; Fred Edmaiston; Vic Evans;
Kenneth Fagan; John F. Forlenza; Dr. Irving Horowitz; Jason Horowitz; Paul R.
Johnston; Stanley Kahn; David Klein; Daniel Lewis; Yolanda Lipschitz; Joseph
24
<PAGE>
Lombardi; Eugene Long; Jeremy Lubcher; William Malinchak; Harry Markowitz;
Jonathan Mattana, i/t/f Zoe Mattana; Geoffrey Mattana; Donald Nowicki; Joel
Portnoy; Nancy Portnoy; Bernard Rapoport; RENP Corp. Profit Sharing Plan/Harry
Domansky; Edward Schultz; Howard Schwartz; Michael Schwartz; Dr. Robert
Sheldon; Seymour Shlomchik; Charles Smith; Dr. Ruby Stern; Thermo Tech
Technologies Inc.; and Steve Tuck. No commission were paid by the Company in
connection with this transaction.
Commencing August 6, 1996, the Company's Common Stock was quoted on
the Electronic Bulletin Board:
(1) In April and May 1997 the Company issued (U.S.) $500,000
principal amount of its 4% Senior Subordinated Convertible Debentures Due
March 31, 2000 (the "Debentures") in a private offering transaction exempt
from registration under Section 3(b) and Rule 504 under Regulation D
promulgated under the Securities Act of 1933, as amended. The Debentures were
convertible at the option of the holder, 30 days after the issuance into
shares of the Company's Common Stock at the lesser of 0.70 times the average
high closing bid price of the Common Stock on the five consecutive trading
days ending two days before the conversion date or (U.S.) $4.00 per share. The
purchasers of the Debentures are Alberto Ardissone and Sparta Capital Ltd.
Through June 1997 the holders have converted (U.S.) $500,000 of the Debentures
into 264,355 shares of the Company's Common Stock. The securities were sold
through a placement agent who received commissions of 13% of the gross
proceeds of the offering.
(2) On May 31, 1997, the Company issued to Ray R. Djurin and Ellen J.
Djurin, 100,000 shares of Common Stock as a deposit on a revenue inducement
joint venture agreement between their Company, TriState Restoration Company,
Inc. and the Company. The closing bid price of the Company's Common Stock on
May 31, 1997 was (U.S.) $2.50. No commissions were paid in connection with
this transaction. The aforementioned stock was privately offered and issued to
these individuals in reliance upon an exemption from registration under
Section 4(2) of the Securities Act of 1933, as amended.
(3) On June 26, 1997 the Company sold 131,457 shares of Common Stock
in a private placement at a price of (U.S.) $1.75 per share resulting in gross
proceeds of (U.S.) $230,049.75. These private placement holders were also
granted a two year option, exercisable in whole or in part, to purchase an
additional 131,457 shares of the Company's Common Stock during the first year
at (U.S.) $1.75 per share and to purchase an additional 131,457 shares of the
Company's Common Stock at (U.S.) $2.00 during the second year. The purchasers
in this offering were: Bernard and Barbara Shulman; Jan and Barbara Atlas;
Elizabeth and Stephen Beloyan; Elizabeth and Mark Beloyan; Stephen and LeAnn
Beloyan; Lionel Beloyan; Charles Ras; Louis Croes Jr.; Ken and Joyce Stampe;
Robert Mucci; 501254 Alberta Ltd.; National Group Insurance Ltd.; Margo
Kaufman; and W. Robert Vance. No commissions were paid by the Company in
connection with this transaction. This transaction was exempt from
registration under Section 3(b) and Rule 504 under Regulation D promulgated
under the Securities Act of 1933, as amended.
25
<PAGE>
(4) On June 30, 1997 the Company entered into a debt settlement
agreement whereby in exchange for debts of EPS Environmental, Inc. and the
Company totaling (U.S.) $420,565 the Company issued an aggregate of 238,693
shares of Common Stock, valued at between (U.S.) $1.50 and (U.S.) $2.00 per
share, to the following: Advanced Chemicals; Wickberg Marine Contracting;
Schaefer Transportation; Charles Ras; Martin E. Janis & Company; O'Brien &
Gere Laboratories; Clark, Wilson; MacKay and Partners, and Debra Bereck. No
commissions were paid in connection with this transaction. The aforementioned
stock was privately offered and issued to these individuals in reliance upon
an exemption from registration under Section 4(2) of the Securities Act of
1933, as amended.
(5) On December 15, 1997, the Company's Board of Directors approved a
previous agreement between the Company, M.H. Meyerson & Co., Inc. ("Meyerson")
and Brookehill Equities, Inc. ("Brookehill"). The agreement calls for Meyerson
and Brookehill to perform various investment banking and consulting services
for the Company. The agreement expires on June 3, 2001 except that it grants
each of the parties a right to terminate it at any time. As compensation for
their service, Meyerson and Brookehill received warrants to purchase a total
of 300,000 shares of the Company's Common Stock at $7.50 per share, which are
exercisable until June 3, 2001. Recently, the Company and Meyerson entered
into a separate addendum to the agreement, also approved by the Board on
December 15, 1997, pursuant to which Meyerson agreed to perform a due
diligence review at its cost, expanded the scope of its services to include
the international sphere, and agreed not to exercise its termination right
until at least October 22, 2000. In connection therewith, Meyerson received
additional warrants to purchase a total of 750,000 shares of the Company's
Common Stock at $2,75 per share, which are exercisable until October 22, 2000.
Item 5: Indemnification of Directors and Officers
Pursuant to the Company Act of By Laws No. 1 of the Business
Corporations Act of the Yukon, the Company may indemnify any person who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action or proceeding, whether or not brought by the Company or by a
corporation or other legal entity or enterprise as hereinafter mentioned and
whether civil, criminal or administrative, by reason of the fact that he is or
was a director, officer, employee, or agent of the Company or is or was
serving at the request of the Company as a director, officer, employee or
agent of another corporation, a partnership, joint venture, trust or other
enterprise, against all costs, charges and expenses including legal fees and
any amount paid to settle the action or proceeding or satisfy a judgment, if
he acted honestly and in good faith with a view to the best interests of the
corporation or other legal entity or enterprise as aforesaid of which he is or
was a director, officer, employee or agent, as the case may be, and exercised
the care, diligence and skill of a reasonably prudent person, and with respect
to any criminal or administrative, action or proceeding, he had reasonable
grounds for believing that his conduct was lawful; provided that the Company
shall not be bound to indemnify any such person, other than a director,
officer or an employee of the Company, who shall have notice or who shall be
deemed to have notice of this provision of the Company's Company Act and to
have contracted with the Company in the terms hereof solely by virtue of his
acceptance of such office or employment, if in acting as agent for the Company
or as a director, officer, employee or agent of another corporation or other
legal entity or enterprise as aforesaid, he does so by written request of the
Company containing an express reference to the applicable provision of the
Company's Company Act; provided that no indemnification of a director or
26
<PAGE>
former director of the Company, or director or former director of a
corporation in which the Company is or was a shareholder, shall be made except
to the extent approved by the Court pursuant to the Company Act or any other
statute. The determination of any action, suit or proceeding by judgment,
order, settlement, conviction or otherwise shall not, of itself, create a
presumption that the person did not act honestly and in good faith and in the
best interest of the Company and did not exercise the care, diligence and
skill of a reasonably prudent person and, with respect to any criminal action
or proceedings, did not have reasonable grounds to believe that his conduct
was lawful.
The Company may indemnify any person other than a director in respect
of any loss, damage, costs or expenses whatsoever incurred by him while acting
as an officer, employee or agent for the Company unless such loss, damage,
costs or expenses arises out of failure to comply with instructions, willful
act or default or fraud by such person in any of which events the Company
shall only indemnify such person if the directors, in their absolute
discretion, so decide or the Company by ordinary resolution shall so direct.
The directors are authorized from time to time to cause the Company
to give indemnities to any director, officer, employee, agent or other person
who has undertaken or is about to undertake any liability on behalf of the
Company or any corporation controlled by it.
Subject to the Company Act, no director or officer or employee for
the time being of the Company shall be liable for the acts, receipts, neglects
or defaults of any other director or officer or employee, or for joining in
any receipt or act for conformity, or for any loss, damage or expense
happening to the Company through the insufficiency or deficiency of title to
any property acquired by order of the Board for the Company, or for the
insufficiency or deficiency of any security in or upon which any of the moneys
of or belonging to the Company shall be invested or for any loss or damages
arising from the bankruptcy, insolvency, or tortious act of any person, firm
or corporation with whom or which any moneys, securities or effects shall be
lodged or deposited or for any loss occasioned by any error of judgment or
oversight on his part or for any other loss, damage or misfortune whatever
which may happen in the execution of the duties of his respective office or
trust or in relation thereto unless the same shall happen by or through his
own willful act or default, negligence, breach of trust or breach of duty.
Directors may rely upon the accuracy of any statement of fact
represented by an officer of the Company to be correct or upon statements in a
written report of the auditor of the Company and shall not be responsible or
held liable for any loss or damage resulting from the paying of any dividends
or otherwise acting in good faith upon any such statement.
The directors may cause the Company to purchase and maintain
insurance for the benefit of any person who is or was a director, officer,
employee or agent of the Company or is or was serving at the request of the
Company as a director, officer, employee or agent of another corporation, a
partnership, joint venture, trust or other enterprise against any liability
incurred by him as a director, officer, employee or agent.
27
<PAGE>
PART F/S
Financial Statements and Supplementary Data
Index to Financial Statements and Supplementary Financial Data
Page
Independent Auditor's Report F-2
Comments by Auditors for U.S. Readers on Canada-U.S.
Reporting Differences F-3
Consolidated Statements of Operations and Deficit F-4
Consolidated Balance Sheets F-5
Consolidated Statements of Cash Flows F-6
Notes to Consolidated Financial Statements F-7 - F-21
Schedule of Administrative and General Expenses F-22
Schedule of Research and Development Expense F-23
28
<PAGE>
Solucorp Industries Ltd.
Consolidated Financial Statements
<PAGE>
- - ------------------------------------------------------------------------------
Solucorp Industries Ltd.
Consolidated Financial Statements
- - ------------------------------------------------------------------------------
Years Ended June 30, 1997 and 1996 Page
- - ------------------------------------------------------------------------------
Auditors' Report 2
Comments by Auditors for U.S. Readers on Canada-U.S
Reporting Differences 3
Consolidated Statements of Operations and Deficit 4
Consolidated Balance Sheets 5
Consolidated Statements ofCash Flows 6
Notes to Consolidated Financial Statements 7-23
Schedule of Administrative and General Expenses 24
Schedule of Research and Development Expenses 25
- - ------------------------------------------------------------------------------
<PAGE>
Auditors' Report
To the Directors of
Solucorp Industries Ltd.
We have audited the consolidated balance sheets of Solucorp Industries Ltd. as
at June 30, 1997 and 1996, and the consolidated statements of operations and
deficit and cash flows for the years then ended. These financial statements
are the responsibility of the company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with Canadian generally accepted
accounting standards. Those standards require that we plan and perform an
audit to obtain reasonable assurance whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosure in these 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.
In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of the company as at June 30, 1997
and 1996, and the results of its operations and the changes in its financial
position for the years then ended in accordance with Canadian generally
accepted accounting principles.
Vancouver, Canada "MacKay & Partners"
October 23, 1997 Chartered Accountants.
- - ------------------------------------------------------------------------------
2
<PAGE>
COMMENTS BY AUDITOR FOR U.S. READERS
ON CANADA - U.S. REPORTING DIFFERENCES
In the United States , reporting standards for auditors require the addition
of an explanatory paragraph (following the opinion paragraph) when the
financial statements are affected by conditions and events that cast
substantial doubt on the company's ability to continue as a going concern,
such as those described in note 1 to the financial statements. Our report to
the directors dated October 23, 1997 is expressed in accordance with Canadian
reporting standards which do not permit a reference to such events and
conditions in the auditors' report when these are adequately disclosed in the
financial statements.
Vancouver, B.C.
December 15, 1997 Chartered Accountants.
- - --------------------------------------------------------------------------------
3
<PAGE>
- - --------------------------------------------------------------------------------
Solucorp Industries Ltd.
Consolidated Statements of Operations and Deficit (US Dollars)
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three months ended Years ended
September 30, June 30, June 30,
- - ------------------------------------------------------------------------------------------------------------------------------------
1997 1996 1997 1996
- - ------------------------------------------------------------------------------------------------------------------------------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Revenues
Environmental clean up and
Waste disposal $ 538,261 $ 193,336 $ 686,447 $ 1,874,202
Training Institute -- 12,835 50,507 137,786
License fees 700,000 -- -- 50,000
- - ------------------------------------------------------------------------------------------------------------------------------------
1,238,261 206,171 736,954 2,061,988
- - ------------------------------------------------------------------------------------------------------------------------------------
Cost of sales
Environmental clean up and
waste disposal 278,096 209,688 1,070,174 891,667
Training Institute -- 3,667 11,184 14,891
- - ------------------------------------------------------------------------------------------------------------------------------------
278,096 213,355 1,081,358 906,558
- - ------------------------------------------------------------------------------------------------------------------------------------
Gross margin 960,165 (7,184) (344,404) 1,155,430
Investment and other income 90,090 67 9,163 69,176
- - ------------------------------------------------------------------------------------------------------------------------------------
1,050,255 (7,117) (335,241) 1,224,606
- - ------------------------------------------------------------------------------------------------------------------------------------
Expenses
Administrative and general
(Schedule 1) 386,045 456,666 898,114 2,996,015
Corporate development and
Marketing 53,992 58,458 282,784 337,599
Amortization 80,231 82,564 306,537 297,334
Research and development (Schedule 2) -- -- 1,968,910 10,515
- - ------------------------------------------------------------------------------------------------------------------------------------
520,268 597,688 3,456,345 3,641,463
- - ------------------------------------------------------------------------------------------------------------------------------------
Earnings (loss) from operations 529,987 (604,805) (3,791,586) (2,416,857)
Writedown of investment -- -- 36,013 --
- - ------------------------------------------------------------------------------------------------------------------------------------
Income (Loss) for the period 529,987 (604,805) (3,827,599) (2,416,857)
- - ------------------------------------------------------------------------------------------------------------------------------------
Deficit, beginning (13,267,253) (9,439,654) (9,439,654) (7,022,797)
Deficit, ending $(12,737,266) $(10,044,459) $(13,267,253) $ (9,439,654)
- - ------------------------------------------------------------------------------------------------------------------------------------
Earnings (loss) per share $ 0.03 $ (0.04) $ (0.25) $ (0.17)
- - ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- - --------------------------------------------------------------------------------
4
<PAGE>
- - ------------------------------------------------------------------------------
Solucorp Industries Ltd.
Consolidated Balance Sheets (US Dollars)
- - ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
September 30, June 30, June 30,
1997 1997 1996
- - ------------------------------------------------------------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------------------------------------------------------------
Assets (Unaudited)
<S> <C> <C> <C>
Current
Cash $ 203,280 $ 15,787 $ 296,296
Accounts receivable net of allowance of $46,607
(1997-$46,607; 1996-$9,763) 82,541 14,230 64,766
Due from Smart International Inc. 500,000 -- --
Due from Doe Run Company -- 56,630 --
Unbilled revenues 234,537 -- 63,630
Loan receivable (note 3) 50,000 50,000 50,000
Due from related parties (note 4) 1,260,393 687,392 84,907
Other receivables 21,285 177,532 --
Inventories 54,990 101,205 57,372
Prepaid expenses 230,380 87,430 4,332
- - ------------------------------------------------------------------------------------------------------------------------------------
2,637,406 1,190,206 621,303
Long term investments (note 5) 501,515 359,961 318,155
Revenue agreement inducement (note 6) 241,667 250,000 --
Capital assets (note 7) 338,734 334,971 247,310
Waste disposal rights (note 8) 1,679,359 1,732,500 1,949,063
- - ------------------------------------------------------------------------------------------------------------------------------------
$ 5,398,681 $ 3,867,638 $ 3,135,831
- - ------------------------------------------------------------------------------------------------------------------------------------
Liabilities
Current
Accounts payable and accrued liabilities $ 756,477 $ 1,166,328 $ 719,634
Billings in excess of earned revenues -- 34,150 --
Loans payable (note 9) 273,107 273,154 323,330
- - ------------------------------------------------------------------------------------------------------------------------------------
1,029,584 1,473,632 1,042,564
Due on waste disposal rights (note 8) 1,265,625 1,265,625 1,265,625
- - ------------------------------------------------------------------------------------------------------------------------------------
2,295,209 2,739,257 2,308,589
- - ------------------------------------------------------------------------------------------------------------------------------------
Shareholders' Equity
Share capital (note 10) 15,865,153 14,420,049 10,291,311
Deficit (12,737,266) (13,267,253) (9,439,654)
- - ------------------------------------------------------------------------------------------------------------------------------------
3,127,887 1,152,796 851,657
Less: cost of 8,000 shares held by the
company's subsidiary (24,415) (24,415) (24,415)
- - ------------------------------------------------------------------------------------------------------------------------------------
3,103,472 1,128,381 827,242
- - ------------------------------------------------------------------------------------------------------------------------------------
$ 5,398,681 $ 3,867,638 $ 3,135,831
- - ------------------------------------------------------------------------------------------------------------------------------------
Subsequent Events (note 12)
Approved by the Directors:
Contingencies (note 14)
------------------------ ------------------------
Commitments (note 16) Director Director
</TABLE>
- - --------------------------------------------------------------------------------
5
<PAGE>
- - --------------------------------------------------------------------------------
Solucorp Industries Ltd.
Consolidated Statements of Cash Flows (US Dollars)
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Years Ended
September 30, September 30, June 30, June 30,
1997 1996 1997 1996
- - ------------------------------------------------------------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------------------------------------------------------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Cash provided by (used in)
Operating Activities
Income (Loss) for the period $ 529,967 $ (604,805) $(3,827,599) $(2,416,857)
Items not involving cash
Amortization 80,231 82,564 306,537 297,334
Writedown of investments -- -- 36,013 --
Change in non-cash operating
working capital (1,130,707) 51,686 233,917 179,442
- - ------------------------------------------------------------------------------------------------------------------------------------
(520,489) (470,555) (3,251,132) (1,940,081)
- - ------------------------------------------------------------------------------------------------------------------------------------
Financing activities
Issue of common shares 1,445,104 338,393 4,128,738 1,897,977
Due from related parties (573,001) 60,516 (602,485) (73,801)
Loan receivable -- (15,495) -- (25,000)
Loans payable (47) (7,430) (50,176) 308,765
- - ------------------------------------------------------------------------------------------------------------------------------------
872,056 375,984 3,476,077 2,107,941
- - ------------------------------------------------------------------------------------------------------------------------------------
Investing activities
Increase in capital assets (22,520) (108,500) (177,635) (70,619)
Revenue agreement inducement -- -- (250,000) --
Long-term investments (141,554) (60,734) (77,819) (282,139)
- - ------------------------------------------------------------------------------------------------------------------------------------
(164,074) (169,234) (505,454) (352,758)
- - ------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in cash 187,493 (263,805) (280,509) (184,898)
Cash, beginning of year 15,787 296,298 296,296 481,194
- - ------------------------------------------------------------------------------------------------------------------------------------
Cash, end of year $ 203,280 $ 32,491 $ 15,787 $ 296,296
- - ------------------------------------------------------------------------------------------------------------------------------------
Non-Cash Financing and Investing Activities
- - ------------------------------------------------------------------------------------------------------------------------------------
Revenue agreement inducement $ -- $ -- $ 250,000 $ --
- - ------------------------------------------------------------------------------------------------------------------------------------
Issuance of shares for debt settlements $ 170,000 $ -- $ 520,630 $ --
- - ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- - --------------------------------------------------------------------------------
6
<PAGE>
- - --------------------------------------------------------------------------------
Solucorp Industries Ltd.
Notes to Consolidated Financial Statements (US Dollars)
- - --------------------------------------------------------------------------------
Years ended June 30, 1997 and 1996
- - --------------------------------------------------------------------------------
1. Going Concern
The company has experienced losses for the past two years, and has a
working capital deficiency of $283,426 at June 30, 1997.
The company's continued existence as a going concern is dependent upon
its ability to generate profitable operations or raise adequate long-term
financing.
The accompanying financial statements have been prepared on the basis of
accounting principles applicable to a going concern. Accordingly, they do
not give effect to adjustment that would be necessary should the company
be unable to continue as a going concern and therefore be required to
realize its assets and retire its liabilities in other than the normal
course of business and at amounts different from those in the
accompanying financial statements.
2. Significant Accounting Policies
(a) Generally accepted accounting principles
The consolidated financial statements have been prepared in
accordance with accounting principles generally accepted in
Canada, which differ in some respects from those in the United
States. Except as disclosed in note 19, no differences have been
reported as they are not considered significant.
(b) Basis of Consolidation
The consolidated financial statements include the accounts of the
company and its subsidiaries. At June 30, 1997, the company's
subsidiaries and its percentage equity interest in each are as
follows:
ESM Industries (Canada) Inc. 100%
World Travel Plazas Inc. 100%
World Tec Equities Inc. 100%
EPS Environmental, Inc. 100%
Environmental Training Institute Inc.
(incorporated in the US) 100%
(c) Cash and Cash Equivalents
For purposes of balance sheet classification and the statements of
cash flows, the company considers all highly liquid investments
purchased with an original maturity of three months or less to be
cash equivalents.
- - --------------------------------------------------------------------------------
7
<PAGE>
- - --------------------------------------------------------------------------------
Solucorp Industries Ltd.
Notes to Consolidated Financial Statements (US Dollars)
- - --------------------------------------------------------------------------------
Years ended June 30, 1997 and 1996
- - --------------------------------------------------------------------------------
2. Significant Accounting Policies (Cont'd.)
(d) Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that effect the reported amount of
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
The carrying amounts reported in the balance sheets for cash and
cash equivalents, accounts receivable, loans and other
receivables, accounts payables and accrued liabilities and loans
payable approximate fair market value because of the immediate or
short-term maturity of these financial accounts. The fair value of
the long term investments are not readily determinable due to
uncertainties in their realization, however, where available, the
quoted market prices have been disclosed. The fair value of the
amount due on the waste disposal rights is not determinable due to
uncertainty regarding payment.
(f) Inventory
Inventory is valued at the lower of cost and net realizable value.
Cost is determined on a first-in, first-out basis.
(g) Long-term Investments
Investments are recorded at cost less a provision for permanent
impairment in value.
(h) Capital Assets
Capital assets are recorded at cost. Amortization is provided over
the estimated useful lives of the assets on the following basis:
Computer 30% declining balance
Furniture and office equipment 20% declining balance
Leasehold improvements 5 years straight-line
Remediation equipment 30% declining balance
Patent costs 10 years straight-line
No amortization has been provided on patent costs as the patent
application has not yet been approved.
- - --------------------------------------------------------------------------------
8
<PAGE>
- - --------------------------------------------------------------------------------
Solucorp Industries Ltd.
Notes to Consolidated Financial Statements (US Dollars)
- - --------------------------------------------------------------------------------
Years ended June 30, 1997 and 1996
- - --------------------------------------------------------------------------------
2. Significant Accounting Policies (Cont'd.)
(i) Waste Disposal Rights
Waste disposal rights are recorded at cost net of amortization.
These rights are being amortized at the greater of $10 per ton of
waste delivered or $216,500 per year. The company conducts an
annual review of the carrying value to ensure it is not in excess
of the estimated recoverable amount of this asset (see note 8).
Any excess amount identified as a result of this review is charged
to income in that year as a write-down of the carrying value.
(j) Reporting Currency and Translation of Foreign Currency
The company has adopted the United States dollar as its reporting
currency for its financial statements prepared after March 31,
1996. The United States dollar is the currency of the primary
economic environment in which the company conducts its business,
and is considered appropriate functional currency for its
operations. Accordingly, the financial statements of the company
have been translated using the temporal method with translation
gains and losses included in earnings. Under this method, the
operations of the company have been converted into U.S. dollars at
the following rates of exchange:
(i) Monetary assets and liabilities - at the rate of exchange
prevailing at the balance sheet date.
(ii) All other assets and liabilities - at the exchange rate
prevailing at the time of the transactions.
(iii) Revenue and expenses - at the average exchange rates
prevailing during the period.
(k) Share Issue Costs
Share issue costs are charged directly to the deficit.
- - --------------------------------------------------------------------------------
9
<PAGE>
- - --------------------------------------------------------------------------------
Solucorp Industries Ltd.
Notes to Consolidated Financial Statements (US Dollars)
- - --------------------------------------------------------------------------------
Years ended June 30, 1997 and 1996
- - --------------------------------------------------------------------------------
2. Significant Accounting Policies (Cont'd.)
(l) Revenue Recognition
Revenues from contracts for services are recognized using the
percentage of completion method of accounting. Under this method,
contract revenue is determined by applying to the total estimated
income on each contract, a percentage which is equal to the ratio
of contract costs incurred to date, to the most recent estimate of
total costs which will have to be incurred upon the completion of
the contract. Costs and estimated earnings in excess of billings
represents additional earnings over billings, based upon
percentage completed, as outline above. Similarly, billings in
excess of costs and estimated earnings represent excess of amounts
billed over income recognized. Provision for estimated losses on
uncompleted contracts are made in the period in which such losses
are determined.
(m) Research and Development
Research and development expenditures less related government
grants are charged to operations.
(n) Earnings (Loss) Per Share
The earnings (loss) per share is computed using the weighted
average number of common shares outstanding during the year.
(o) Accounting for Stock-Based Compensation
In October 1995, the FASB issued SFAS No. 123 "Accounting for
Stock-Based compensation". The statements encourages all entities
to adopt a new method of accounting to measure compensation cost
of all employee stock compensation plans based on the estimated
fair value of the award at the date it is granted. Companies are,
however, allowed to continue to measure compensation cost for
those plans using the intrinsic value based method of accounting,
which generally does not result in compensation expense
recognition for most plans. Companies that elect to remain with
the existing accounting are required to disclose in a footnote to
the financial statement pro forma net income and, if presented,
earning per share, as if SFAS No. 123 had been adopted. The
accounting requirements of SFAS No. 123 are effective for
transactions entered into in fiscal years that begin after
December 15, 1995; however, companies are required to disclose
information for awards granted in their first fiscal year
beginning after December 15, 1995. Currently, the company's
stock-based compensation plan is accounted for using Canadian
generally accepted accounting principles similar to the intrinsic
value method prescribed by APB No. 25. The company is in the
process of computing the effect of adopting SFAS No. 123 and has
not yet made a decision on whether to adopt the U.S. accounting
policy for the fiscal period December 31, 1997. Management
believes the financial impact of adopting SFAS No. 123 would be
immaterial.
- - --------------------------------------------------------------------------------
10
<PAGE>
- - --------------------------------------------------------------------------------
Solucorp Industries Ltd.
Notes to Consolidated Financial Statements (US Dollars)
- - --------------------------------------------------------------------------------
Years ended June 30, 1997 and 1996
- - --------------------------------------------------------------------------------
3. Loan Receivable
1997 1996
Loan receivable, 5% per annum,
due November 30, 1997 $ 50,000 $ 50,000
--------------------------------------------------------------------------
4. Due From Related Parties
Advances primarily to directors, and employees related to directors in
the amount of $687,392 (1996 - $84,907) are non-interest bearing,
unsecured and have no specific terms of repayment (note 12(a)).
1997 1996
5. Long Term Investments
(a) 500,000 shares (under 1%) in EPS
Chemicals, Inc., a USA company
controlled by a former director of
the company (no market value). $ 1 $ 1
(b) 100,500 shares of Earthworks
Industries Inc. plus accrued
shares of 26,283 (1996 - 9,197)
(note 9 and 16(c)), (market value
Cdn $95,087 (US $68,849)). 90,403 73,318
<PAGE>
(c) Convertible debenture from Travel
Plaza Developments Inc. (Travel
Plaza). The company elected on
December 28, 1994 to convert the
Cdn $50,000 debenture into 250,000
shares of Travel Plaza. Final
regulatory approval for this
conversion from the Alberta Stock
Exchange is still pending subject
to their acceptance of a financing
arrangement and the approval of
minority shareholders. On August
21, 1996, pending the finalization
of the required financing to
complete the project, construction
has been temporarily suspended and
the stock of Travel Plaza has been
halted from trading. Due to these
uncertainties, the company has
written this down to a nominal
value. 1 36,014
- - --------------------------------------------------------------------------------
11
<PAGE>
- - --------------------------------------------------------------------------------
Solucorp Industries Ltd.
Notes to Consolidated Financial Statements (US Dollars)
- - --------------------------------------------------------------------------------
Years ended June 30, 1997 and 1996
- - --------------------------------------------------------------------------------
5. Long Term Investments (cont'd.)
(d) Convertible loan to Cortina
Integrated Waste Management Inc.,
a subsidiary of Earthworks
Industries Inc. (public company),
due September 5, 2000 with
interest at 15% per annum. The
company is entitled to convert all
or a portion of the loan into
shares of Earthworks Industries
Inc. at any time. During the term
of this loan, the company has the
right to offset royalty payments
due to Earthworks Industries Inc.
against the loan balance. 208,821 208,821
(e) A 25% interest in John Beech
Remediation Limited (no market
value). 1 1
(f) 70,000 shares of Global
Technologies Inc. (note 9). 50,734 -
- - --------------------------------------------------------------------------------
$ 359,961 $ 318,155
- - --------------------------------------------------------------------------------
6. Revenue Agreement Inducement
The company entered into an agreement on June 1, 1997 with Tristate
Restoration Company, Inc. whereby the company will receive 60% of
Tristate's gross profit for consideration paid of 100,000 shares at
$2.50 per share of the company ($250,000). The agreement is for ten
years. The $250,000 inducement will be amortized over ten years. The
company will provide Tristate with sales and marketing support and
financing. Loans will be made on a demand basis at prime plus 1%
secured by personal guarantees of Tristate's shareholders or Tristate.
The company has the option to purchase Tristate for $1.
1997 1996
Inducement payment $ 250,000 $ -
- - --------------------------------------------------------------------------------
12
<PAGE>
- - --------------------------------------------------------------------------------
Solucorp Industries Ltd.
Notes to Consolidated Financial Statements (US Dollars)
- - --------------------------------------------------------------------------------
Years ended June 30, 1997 and 1996
- - --------------------------------------------------------------------------------
7. Capital Assets
1997 1996
Computer $ 21,177 $ 21,177
Furniture and office equipment 95,684 77,311
Remediation equipment 403,649 268,081
Leasehold improvements 15,927 8,541
Incorporation costs 688 688
Patent costs 27,983 12,183
- - --------------------------------------------------------------------------------
565,108 387,981
Less: Accumulated amortization 230,138 140,671
- - --------------------------------------------------------------------------------
$334,970 $ 247,310
- - --------------------------------------------------------------------------------
8. Waste Disposal Rights
During the year ended June 30, 1995, the company entered into a one
year agreement effective from August 1, 1994 with a non-related public
company, Thermo Tech Technologies Inc. (Thermo Tech), to deliver 3,500
tons per month of suitable organic waste to a bio conversion facility
located in Corinth, New York at $55 per ton on a put or pay basis. The
company delivered only approximately 5% of the waste contemplated
under the one-year agreement. The Corinth facility experienced
technical start-up problems and was shut down in July 1995 to correct
an engineering design problem. On September 14, 1995 and on January
17, 1996 the company and Thermo Tech signed confirmation agreements
which resulted in a ten (10) year extension from the put or pay
agreement to commence when either the Corinth facility became
operational, or as an alternative, when organic waste was delivered to
another Thermo Tech facility. The agreements obligated the company to
pay an up front amount of $2,165,625 for the right to deliver 216,500
tons of acceptable organic waste ($10 per ton) plus an additional $45
per ton during the ten (10) year term of the agreement.
The company paid Thermo Tech $900,000 of the initial up-front amount
leaving $1,265,625 still to be paid. Thermo Tech was not able to
renegotiate acceptable lease terms with the landlord of the Corinth
facility and is currently planning to relocate the plant to a nearby
site. The relocation is not expected to be completed within the next
year and as a result, Thermo Tech has agreed that the unpaid amount of
$1,265,625 is not due until the relocated plant is operational.
Accordingly the company has reclassified the balance due to a
non-current payable. However, the company expects to fully recover the
invested amount in waste disposal rights over the ten (10) year
contractual period by delivering waste to either the Corinth facility
or an alternative Thermo Tech facility.
- - --------------------------------------------------------------------------------
13
<PAGE>
- - --------------------------------------------------------------------------------
Solucorp Industries Ltd.
Notes to Consolidated Financial Statements (US Dollars)
- - --------------------------------------------------------------------------------
Years ended June 30, 1997 and 1996
- - --------------------------------------------------------------------------------
8. Waste Disposal Rights
The carrying value for the waste disposal rights represents a
significant portion of the company's assets. Measurement of the
recoverability of the carrying value is based on an assessment of the
waste disposal rates currently existing in the New York and New Jersey
areas, and at other areas where Thermo Tech plants are located, and on
the assumption that the Corinth plant will be successfully relocated
and in operation in the near future. As at June 30, 1997, the company
has determined that no write down is necessary. However, it is
reasonably possible, based on existing knowledge, that changes in
future conditions in the near term could require a material change in
the estimated recoverable amount.
9. Loans Payable
1997 1996
IDM Environmental Corp., 10.25%,
payable in monthly installments of
$22,008 including principal and
interest, maturing on July 1,
1997, secured by the company's
treasury stock and stock of other
companies held as an investment by
the company. Subsequent to the
year end, the loan was extended to
July 1, 1998. $ 200,748 $ 250,000
Global Technologies Inc., due on demand
($100,000 Cdn). 72,406 73,330
- - --------------------------------------------------------------------------------
$ 273,154 $ 323,330
- - --------------------------------------------------------------------------------
10. Share Capital
(a) Authorized:
200,000,000 common shares of no par value
(b) Issued:
<TABLE>
<CAPTION>
Three Months Ended
September 30,
1997 Year Ended June 30, Year Ended June 30,
(Unaudited) 1997 1996
- - ------------------------------------------------------------------------------------------------------------------------------------
Shares Amount Shares Amount Shares Amount
- - ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance, beginning 16,767,552 $14,420,049 14,637,705 $10,291,311 13,478,236 $8,393,334
--------------------------------------------------------------------------------------------------
Issued pursuant to
Stock options 624,100 1,086,200 878,994 1,791,485 743,818 1,501,954
Private placement - - 131,457 230,050 17,027 109,000
Shares for debt settlement 50,111 170,000 264,320 520,630 - -
Warrants 27,470 87,904 317,848 637,263 185,919 104,771
Finders agreement 58,000 101,000 50,000 101,000 38,000 110,399
Conversion of debentures - - 264,355 395,000 - -
Inducement (note 6) - - 100,000 250,000 - -
- - ------------------------------------------------------------------------------------------------------------------------------------
759,681 1,445,104 2,006,974 3,925,428 984,264 1,826,124
Allotted for cash - - 76,000 133,000 175,205 71,853
Allotted for debt settlement - - 46,873 70,310 - -
- - ------------------------------------------------------------------------------------------------------------------------------------
Balance, ending 17,527,233 $15,865,153 16,767,552 $14,420,049 14,637,705 $10,291,311
- - ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
14
<PAGE>
- - --------------------------------------------------------------------------------
Solucorp Industries Ltd.
Notes to Consolidated Financial Statements (US Dollars)
- - --------------------------------------------------------------------------------
Years ended June 30, 1997 and 1996
- - --------------------------------------------------------------------------------
10. Share Capital (Cont'd.)
(c) During the year, the company granted employees, directors and
other individuals associated with the company stock options to
acquire up to 363,000 shares at $1.75 per share, and additional
options to acquire up to 3,213,073 shares at $1.75 per share. At
June 30, 1997, stock options were outstanding as follows:
<TABLE>
<CAPTION>
Shares Exercise Price Expiration Date
--------------------------------------------------------------------------------------------------
<S> <C> <C>
266,500 $1.38 December 21, 1999
112,500 $1.75 July 13, 2000
213,000 $1.75 September 12, 2000
187,000 $1.75 January 6, 2002
3,135,279 $1.75 June 9, 2002
</TABLE>
(d) During the year, the company issued private placements which
included warrants to acquire 414,914 additional shares at $1.75
in the first year and at $2 in the second year. A $395,000
convertible debenture was also issued which included warrants to
acquire 25,000 additional shares over a four year period at $4
per share. At June 30, 1997, warrants related to private
placements and debentures were outstanding as follows:
<TABLE>
<CAPTION>
Shares Exercise Price Expiration Date
--------------------------------------------------------------------------------------------------
<S> <C> <C>
330,398 $3.26 August 14, 1997
414,914 $1.75-$2.00 June 25, 1999
25,000 $4.00 April 4, 2001
</TABLE>
(e) At June 30, 1997, 1,675,000 (1996 - 1,675,000) common shares were
held in escrow.
11. Income Taxes
At June 30, 1997, the company had accumulated tax losses aggregating
$10,228,000 which may be carried forward and applied against taxable
income in future years up to 2004. The company does not record the
income tax benefit of these losses.
12. Subsequent Events
(a) Subsequent to the year end, the officers, directors and employees
related to directors deposited with the company sufficient
security to repay their loans in full. The security is currently
being liquidated and the company expects that the loans will be
repaid in full by December 31, 1997.
- - --------------------------------------------------------------------------------
15
<PAGE>
- - --------------------------------------------------------------------------------
Solucorp Industries Ltd.
Notes to Consolidated Financial Statements US Dollars)
- - --------------------------------------------------------------------------------
Years ended June 30, 1997 and 1996
- - --------------------------------------------------------------------------------
12. Subsequent Events (cont'd)
(b) Subsequent to year end, the company issued 1,200,211 shares from
the exercise of options for $2,167,450.
(c) Subsequent to year end, the company issued 55,873 shares for debt
settlements totaling $115,310 of which 46,873 shares were
allotted in fiscal 1997.
(d) Subsequent to year end, the company issued 76,000 shares from
private placements totaling $133,000 of which the entire amount
was allotted in fiscal 1997.
(e) Subsequent to year end, the company issued 58,000 shares for a
finders agreement valued at $101,000.
(f) Subsequent to year end, the company entered into a one year
consulting agreement with William Webster (Webster) of Webster &
Associates effective October 1, 1997. Webster will assist the
company in business development, operational support, and
research and development. For Webster's efforts he will receive a
monthly retainer of $3,000 which will be applied against actual
services performed.
(g) The company entered into a preliminary licensing agreement with
Smart International Ltd. on June 4, 1997, whereby Smart has the
exclusive right to make, market, use and sub-license the soil
remediation chemical and process in China for five years with a
five year option. An initial annual licensing fee of $2,000,000
plus a royalty on every ton of soil or industrial waste treated
with the company's patented process will be payable to the
company. In addition, in consideration of expenses that Smart
will incur on Solucorp's behalf (setting up three manufacturing
facilities which will be 50% owned by Solucorp and opening and
staffing an office in Hong Kong), the company will issue to Smart
200,000 stock options at $3 with a five year period to exercise.
Subsequent to the year end, the agreement was finalized.
- - --------------------------------------------------------------------------------
16
<PAGE>
- - --------------------------------------------------------------------------------
Solucorp Industries Ltd.
Notes to Consolidated Financial Statements (US Dollars)
- - --------------------------------------------------------------------------------
Years ended June 30, 1997 and 1996
- - --------------------------------------------------------------------------------
13. Segmented Information
<TABLE>
<CAPTION>
US Services & Consolidated
Products Canada Totals
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
(a) Year Ended June 30, 1997:
Revenue $ 736,954 $ -- $ 736,954
Cost of sales (1,081,358) -- (1,081,358)
-----------------------------------------------------------------------------------------------------------
Operating earnings (344,404) -- (344,404)
Administrative and
general - Schedule I (647,134) (250,980) (898,114)
Corporate development
and marketing (270,368) (12,416) (282,784)
Research and development (1,968,537) (373) (1,968,910)
Amortization (300,177) (6,360) (306,537)
-----------------------------------------------------------------------------------------------------------
Segmented loss $(3,530,620) $ (270,129) (3,800,749)
-----------------------------------------------------------------------------------------------------------
Unallocated:
Writedown of investment (36,013)
Investment and other income 9,163
-----------------------------------------------------------------------------------------------------------
Loss for the year $(3,827,599)
-----------------------------------------------------------------------------------------------------------
Identifiable assets $ 3,118,451 $ 749,187 $ 3,867,638
-----------------------------------------------------------------------------------------------------------
(b) Year Ended June 30, 1996
Revenue $ 2,061,988 $ -- $ 2,061,988
Cost of sales (906,558) -- (906,558)
-----------------------------------------------------------------------------------------------------------
Operating earnings 1,155,430 -- 1,155,430
Administrative and
general - Schedule I (2,503,842) (492,173) (2,996,015)
Corporate development and
marketing (332,170) (5,429) (337,599)
Research and development -- (10,515) (10,515)
Amortization (290,974) (6,360) (297,334)
-----------------------------------------------------------------------------------------------------------
Segmented loss $(1,971,556) $ (514,477) (2,486,033)
-----------------------------------------------------------------------------------------------------------
Unallocated:
Investment and other income 69,176
-----------------------------------------------------------------------------------------------------------
Loss for the year $(2,416,857)
-----------------------------------------------------------------------------------------------------------
Identifiable assets $ 2,648,101 $ 487,730 $ 3,135,831
-----------------------------------------------------------------------------------------------------------
</TABLE>
- - --------------------------------------------------------------------------------
17
<PAGE>
- - --------------------------------------------------------------------------------
Solucorp Industries Ltd.
Notes to Consolidated Financial Statements (US Dollars)
- - --------------------------------------------------------------------------------
Years ended June 30, 1997 and 1996
- - --------------------------------------------------------------------------------
14. Contingencies
(a) Tellus Consultants Inc.
Tellus Consultants, Inc. has advised that it is owed $378,205
including accrued interest for unpaid consulting services. The
company maintains that the claim is unreasonable and the likely
amount owing would be $125,539. Accordingly, a provision of
$125,539 has been made at June 30, 1996 and 1997. If any
additional amounts become payable, they will be recorded in the
year they are known.
(b) Waste Disposal Rights
Recoverability of the waste disposal rights is subject to the
realization of management's assumptions as discussed in note 8.
15. Related Party Transactions
During the year the company paid consulting fees and salaries of $426,089
(1996 - $415,589) to directors, former directors and/or private companies
controlled by directors and/or individuals related to directors.
16. Commitments
(a) The company has two leases for buildings it presently occupies in New
Jersey and in New York which require the following payments:
1998 $ 157,600
1999 $ 144,000
2000 $ 144,000
2001 $ 144,000
2002 and subsequent $ 96,000
(b) The company has entered into a finder's agreement with Joseph
Theismann. The company has agreed to pay a 2% commission on gross
revenues generated by Mr. Theismann and 1% on gross revenues
indirectly attributable to him. The company also agreed to pay a 5%
commission on private placements raised directly or indirectly by
Mr. Theismann. The agreement has a five year term with an option to
renew for a further five years.
- - --------------------------------------------------------------------------------
18
<PAGE>
- - --------------------------------------------------------------------------------
Solucorp Industries Ltd.
Notes to Consolidated Financial Statements (US Dollars)
- - --------------------------------------------------------------------------------
Years ended June 30, 1997 and 1996
V
16. Commitments (cont'd.)
(c) The company has agreed to pay royalties to Earthworks Industries
Inc. (Earthworks) (a Canadian public company) based on Cdn $1/tonne
of soil remediated in Canada or the United States ($1/tonne will be
U.S. dollars if soil is remediated in the United States). The
company will receive one share for each $1 of royalty paid, to a
maximum of 200,000 shares, in minimum blocks of 50,000. These
shares are accrued as the soil is remediated. An additional $1 (Cdn
or US) will be paid for each ton remediated on contracts resulting
from the efforts of Earthworks. The company has the right to offset
royalty payments against the convertible loan from Cortina
Integrated Waste Management, Inc. (Note 5(d)).
(d) The company entered into a finder's agreement with KEM Finders
Corp. (KEM). The company has agreed to pay 8% of the gross revenues
for contracts exceeding 200,000 tons obtained as a result of KEM's
efforts. The company will also pay 2% of gross revenues on jobs
within the State of New Jersey which were not directly obtained
through the efforts of KEM. Subsequent to the year end, this
agreement was terminated.
(e) The company has granted to Associated North West, Inc. a
non-exclusive license and right to promote the soil remediation
process in Washington and Oregon for three 12 month terms, expiring
on April 17, 1999. For all remediation contracts obtained as a
result of Associated North West, Inc's efforts, the company will
pay a commission based on the gross revenue of the contracts
obtained during the term. The company will pay 3% if gross revenues
generated do not exceed $6,000,000, 5% if gross revenues exceed
$6,000,000 but do not exceed $15,000,000, or 6% if gross revenues
exceed $15,000,000. The commission will become payable when the
customer pays the invoice.
(f) The company entered into an unlimited non-exclusive license with
NEDCO, Ltd. (NEDCO) to promote the company's soil remediation
process. As a result of NEDCO's efforts the company will pay 7% of
the gross revenues generated. The commission becomes payable within
10 days after the customer or third party pays the invoice.
(g) The company entered into a non-exclusive sales representative
agreement with Soil Technologies, Inc.(STI) to promote the
company's soil remediation process. As a result of STI's efforts
the company will pay 4% of the gross revenues generated. The
commission becomes payable within 10 days after the customer or
third party pays the invoice.
- - --------------------------------------------------------------------------------
19
<PAGE>
- - --------------------------------------------------------------------------------
Solucorp Industries Ltd.
Notes to Consolidated Financial Statements (US Dollars)
- - --------------------------------------------------------------------------------
Years ended June 30, 1997 and 1996
V
16. Commitments (cont'd.)
(h) The company entered into a marketing agreement on December 17, 1996
with Roy F. Weston, Inc. to promote the company's soil remediation
process to their clients and potential clients. The agreement is
for three years and Roy F. Weston will be compensated based on the
size of their role in any project they help get.
(i) The company entered into a one-year financial public relations and
promotion agreement with Martin E. Janis & Company, Inc. (Martin)
starting January 15, 1997 and ending January 15, 1998. The company
will pay Martin $200,000 of which $145,000 will be paid for by
issuing of 41,111 common shares.
17. Economic Dependence
During the year ended June 30, 1997 revenues of $417,568 were from an
individual customer, of which $56,630 is included in accounts
receivable.
During the year ended June 30, 1996 revenues of $255,681, $261,570
and $750,000 were from individual customers, of which $Nil is included
in accounts receivable.
18. Comparative Figures
Certain 1996 figures have been reclassified to conform to the
presentation adopted in the current year. These changes have no effect
on 1996 earnings (see note 8).
19. Reconciliation to United States Generally Accepted Accounting Principles
As discussed in Significant Accounting Policies, these consolidated
financial statements are prepared in accordance with accounting
principles generally accepted in Canada.
Differences in accounting principles as they pertain to these
consolidated financial statements are as follows:
Marketable Securities
Under U.S. GAAP, the accounting for marketable securities depends on
the classification of securities as held to maturity, trading or
available for sale. The classification would be based on management's
intent. Marketable securities included in long term investments (Note
5) would be classified as being available for sale. Under U.S. GAAP
such securities would be recorded at fair value with any changes
recorded in a separate component of shareholder's equity. Realized
gains or losses would be recorded on the income statement. As at June
30, 1997 and 1996, the effect on the presentation of long-term
investment for U.S. GAAP purposes would not be material.
- - --------------------------------------------------------------------------------
20
<PAGE>
- - --------------------------------------------------------------------------------
Solucorp Industries Ltd.
Notes to Consolidated Financial Statements (US Dollars)
- - --------------------------------------------------------------------------------
Years ended June 30, 1997 and 1996
- - --------------------------------------------------------------------------------
20. Note to Interim Financial Statements (Unaudited)
(a) The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles
for interim financial information and with the instruction to Form
10-SB. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for
complete financial statements. These consolidated financial statements
should be read in conjunction with the consolidated financial
statements and related notes. In the opinion of management, all
adjustments, consisting only of normal recurring accruals, considered
necessary for a fair presentation have been included. Operating
results for the three month period ending September 31, 1997 are not
necessarily indicative of the results that may be expected for the
period ending December 31, 1997.
(b) Subsequent events
(i) Subsequent to September 30, 1997, the company decided to change
its year-end to December 31 from June 30. The new year-end
conforms closer to the company's seasonal work loads in that
July, August and September are generally busy while January,
February and March are generally slow.
(ii) Subsequent to September 30, 1997, the agreement with Tristate
(note 6) is being re-negotiated whereby the company and Tristate
will form a joint venture. The amount to be contributed by the
company and Tristate and the revenue sharing percentage have yet
to be determined.
(iii) Subsequent to September 30, 1997, the company entered into a one
year non-exclusive finders agreement with Quest International
Technologies (Quest) to promote the company's soil remediation
process. As a result of Quest's effort the company will pay 3% of
the gross revenues generated which are payable 10 days after
receipts from any third party.
- - --------------------------------------------------------------------------------
21
<PAGE>
- - --------------------------------------------------------------------------------
Solucorp Industries Ltd.
Notes to Consolidated Financial Statements (US Dollars)
- - --------------------------------------------------------------------------------
Years ended June 30, 1997 and 1996
- - --------------------------------------------------------------------------------
20. Note to Interim Financial Statements (Unaudited) (cont'd.)
(iv) On December 15, 1997, the company's Board of Directors approved a
previous agreement between the company, M.H. Meyerson & Co., Inc.
("Meyerson") and Brookehill Equities Inc. ("Brookehill"). The
agreement calls for Meyerson and Brookehill to perform various
investment banking and consulting services for the company. The
agreement expires on June 3, 2001 except that it grants each of
the parties a right to terminate it at any time. As compensation
for their service, Meyerson and Brookehill received warrants to
purchase a total of 300,000 shares of the company's common stock
at $7.50 per share, which are exercisable until June 3, 2001.
Recently, the company and Meyerson entered into a separate
addendum to the agreement, also approved by the Board on December
15, 1997, pursuant to which Meyerson agreed to perform a due
diligence review at its cost expanded the scope of its services
to include the international sphere, and agreed not to exercise
its termination right until at least October 22, 2000. In
connection therewith, Meyerson received additional warrants to
purchase a total of 750,000 shares of the company's common stock
at $2.75 per share, which are exercisable until October 22, 2000.
(c) Waste disposal rights
As disclosed in Notes (2g) and 8 management conducts an annual
review of this asset to determine if additional adjustments after
the minimum amortization provisions are necessary. Management is
currently obtaining and evaluating information from Thermo Tech
and other sources with respect to the status of the asset and has
not yet determined whether an additional adjustment is necessary.
However, it is reasonably possible that a material change could
occur which would be reflected in the annual financial statements
for the period ended December 31, 1997.
(d) Economic dependence
During the three months ended September 30, 1997 revenues of
$500,000, 402,105 and 200,000 were incurred from individual
customers. During the three months ended September 30, 1996
revenues of $86,889 and $70,788 were incurred from individual
customers.
- - --------------------------------------------------------------------------------
22
<PAGE>
- - --------------------------------------------------------------------------------
Solucorp Industries Ltd.
Schedule of Administrative and General Expenses (US Dollars)
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
Years ended June 30, 1997 and 1996
- - --------------------------------------------------------------------------------
20. Note to Interim Financial Statements (Unaudited) (cont'd.)
(e) Related party transactions
During the three months ended September 30, 1997, the company
incurred consulting fees and salaries of $113,781 (1996 -
$92,509) from directors, former directors and/or private
companies controlled by directors and/or individuals related to
directors.
- - --------------------------------------------------------------------------------
23
<PAGE>
- - --------------------------------------------------------------------------------
Solucorp Industries Ltd.
Schedule of Administrative and General Expenses (US Dollars) - Schedule 1
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
Years ended June 30, 1997 and 1996
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1997 1996
Consolidated Consolidated
U.S. Canada Totals Totals
- - ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Automobile $ 21,341 $ - $ 21,341 $ 32,780
Bad debts 41,690 41,690 676,310
Bank charges and interest 30,317 3,084 33,401 7,158
Consulting and management fees 28,582 5,122 33,704 272,048
Foreign exchange (gain) loss (1,338) - (1,338) 19,648
Insurance 25,714 - 25,714 58,940
Legal, accounting and audit 191,242 36,014 227,256 364,321
Office, printing and related 13,883 10,815 24,698 129,860
Rent 122,173 7,464 129,637 135,741
Salaries and wages 147,766 155,179 302,945 1,096,509
Telephone 15,928 11,227 27,155 83,677
Transfer and filing fees - 19,566 19,566 12,299
Travel 9,836 2,509 12,345 106,724
- - ------------------------------------------------------------------------------------------------------------------------
$647,134 $ 250,980 $ 898,114 $ 2,996,015
- - ------------------------------------------------------------------------------------------------------------------------
Three Months Ended September 30, 1997 1996
(Unaudited) Consolidated Consolidated
U.S. Canada Totals Totals
- - ------------------------------------------------------------------------------------------------------------------------
Automobile $ 7,557 $ - $ 7,557 $ 8,539
Bad debts - - -
Bank charges and interest 7,307 113 7,420 5,633
Consulting and management fees 144,871 - 144,871 13,873
Foreign exchange (gain) loss (128,073) 846 (127,227) (3,315)
Insurance 26,744 - 26,774 18,835
Legal, accounting and audit 9,163 7,441 16,604 11,530
Office, printing and related 13,208 2,149 15,357 41,212
Rent 29,561 1,841 31,402 46,550
Salaries and wages 211,568 27,880 239,448 272,351
Telephone 14,303 2,956 17,259 26,717
Transfer and filing fees - - - 490
Travel 5,982 598 6,580 14,251
- - ------------------------------------------------------------------------------------------------------------------------
$342,221 $ 43,844 $ 386,045 $ 456,666
- - ------------------------------------------------------------------------------------------------------------------------
</TABLE>
- - --------------------------------------------------------------------------------
24
<PAGE>
- - --------------------------------------------------------------------------------
Solucorp Industries Ltd.
Schedule of Research and Development Expenses (US Dollars) - Schedule 2
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
Years ended June 30, 1997 and 1996
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1997 1996
Consolidated Consolidated
U.S. Canada Totals Totals
- - -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Automobile $ 7,690 $ - $ 7,690 $ -
Chemical and related freight 216,959 - 216,959 -
Consulting and management fees 188,759 - 188,759 -
Insurance 38,572 - 38,572 -
Lab analyses 43,695 - 43,695 -
Legal, accounting and audit 81,167 - 81,167 10,515
Materials and supplies 19,037 - 19,037 -
Machine rentals 20,827 - 20,827 -
Mobilization/demobilization costs 21,098 - 21,098 -
Office, printing and related 95,407 - 95,407 -
Rent 43,021 - 43,021 -
Salaries and wages 903,706 - 903,706 -
Subcontracting costs 113,792 - 113,792 -
Telephone 78,875 - 78,875 -
Travel 96,305 - 96,305 -
- - -------------------------------------------------------------------------------------------------------------------------
$1,968,910 $ - $ 1,968,910 $10,515
- - -------------------------------------------------------------------------------------------------------------------------
</TABLE>
- - --------------------------------------------------------------------------------
25
<PAGE>
Item 1: Index to Exhibits
<TABLE>
<CAPTION>
Seq. Page No.
-------------
<S> <C>
3.0 Certificate of Amalgamation
3.1 Certificate of Change of Name
3.2 Company Act Articles of World Tec Industries, Inc.
3.3 Certificate of Continuance
4.0 Specimen Common Stock Certificate
4.1 Form of Common Stock Purchase Warrant (to be filed by Amendment)
4.2 Form of Common Stock Option Agreement
4.3 Form of Common Stock Option Amendment Agreement
10.0 Licensing Agreement between John Beech Remediation, Ltd. and the Company dated October 11, 1995.
10.1 Addendum to Licensing Agreement between John Beech Remediation, Ltd. and the Company dated October 30,
1995.
10.2 Licensing Agreement between Global Technologies, Inc. and the Company dated November 5, 1996.
10.3 License Agreement between Smart International, Ltd. and the Company dated June 4, 1997.
10.4 Sub-Lease covering Registrant's facility in Nyack, N.Y. between Twin Country Grocers, Inc. and the
Company dated March 1, 1996.
10.5 Lease covering Registrant's facility in Puerto Rico between 1413 Fernandez Juncos, Inc. and the Company
dated June 1, 1996.
10.6 Lease covering Registrant's facility in Saddle Brook, N.J. between Croes-Pecorino Industrial Co. and the
Company dated April 1992.
10.7 Addendum to Lease covering facility in Saddle Brook, N.J.between Coes-Pecorino Industrial Co. and the
Company dated May 6, 1997.
10.8 Agreement between John Beech Remediation Ltd. and the Company dated August 1, 1997.
13. Form F/X
21. Subsidiaries of Registrant:
(i) E.P.S. Environmental, Inc. - Incorporated under the laws of the province of Alberta,
Canada. - 100% owned
(ii) Environmental Training Institute, Inc. - Incorporated under the laws of New Jersey. -
100% owned
(iii) ESM Industries, Inc. - Incorporated under the laws of the province of British Columbia,
Canada. - 100% owned
(iv) World Tec Equities, Inc. - Incorporated under the laws of the province of British
Columbia, Canada. - 100% owned
(v) World Travel Plaa, Inc. - Incorporated under the laws of the province of Alberta,
Canad. - 100% owned
</TABLE>
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934,
the registrant caused this registration statement to be signed on its behalf
by the undersigned, there unto duly authorized.
SOLUCORP INDUSTRIES, LTD.
Registrant
Dated: December 19, 1997 By: /s/ Peter Mantia
-------------------------
Peter Mantia, President
<PAGE>
================================================================================
CERTIFIED A TRUE COPY
/s/ ILLEGIBLE
- - -------------------- SOLICITOR
[LOGO]
COMPANY ACT
Certificate
329407
Canada
Province of British Columbia
I Hereby Certify that LIVINGSTONE ENERGY CORPORATION, which was incorporated on
the twenty-eighth day of May, 1980, under Certificate No. 210406 and INTELICOM
SYSTEMS LTD., which was incorporated on the twenty-second day of July, 1981,
under Certificate No. 239625, are this day amalgamated pursuant to the Company
Act as one company with the name WORLD TEC INDUSTRIES INC.
[SEAL] Given under my hand and seal of office at
Victoria, B.C., this 30th
day of June, one
thousand nine hundred and eighty seven
/s/ Roberta J. Lawden
.............................................
Deputy Registrar of Companies.
================================================================================
<PAGE>
CERTIFIED A TRUE COPY
NUMBER: 329407
/s/ [ILLEGIBLE]
- - ----------------------
Solicitor
[LOGO]
CERTIFICATE
OF
CHANGE OF NAME
COMPANY ACT
CANADA
PROVINCE OF BRITISH COLUMBIA
I Hereby Certify that
WORLD TEC INDUSTRIES INC.
has this day changed its name to
SOLUCORP INDUSTRIES LTD.
Issued under my hand at Victoria, British Columbia
on August 18, 1994
/s/ JS Powell
[SEAL]
JOHN S. POWELL
Registrar of Companies
<PAGE>
COPY
COMPANY ACT
ARTICLES
- of -
WORLD TEC INDUSTRIES INC.
INDEX
Page
Part 1 Interpretation 1
Part 2 Shares and Share Certificates 2
Part 3 Issue of Shares 3
Part 4 Share Transfers 4
Part 5 Transmission of Shares 5
Part 6 Alteration of Capital 6
Part 7 Purchase of Shares 6
Part 8 Borrowing Powers 7
Part 9 General Meetings 8
Part 10 Proceedings at General Meetings 9
Part 11 Votes of Members 11
Part 12 Directors 13
Part 13 Termination of Directorship of Directors 16
Part 14 Retirement and Election of Directors 16
Part 15 Proceedings of Directors 17
Part 16 Officers 19
Part 17 Minutes, Documents and Records 19
Part 18 Execution of Documents 20
Part 19 Dividends 21
Part 20 Accounts 22
Part 21 Notices 22
Part 22 Indemnification and Protection of Directors,
Officers, Employees and Certain Agents 24
<PAGE>
APPROVED
[ILLEGIBLE]
REGISTRAR OF COMPANY
MAR 12 1987
COMPANY ACT
ARTICLES
- of -
WORLD TEC INDUSTRIES INC.
PART 1 - INTERPRETATION
1.1 In these Articles, unless the context otherwise requires:
(a) "Board of Directors" or "Board" means the directors of the Company for
the time being;
(b) "Company Act" means the Company Act of the Province of British
Columbia from time to time in force and all amendments thereto and
Act; includes all regulations and amendments thereto made pursuant to
that
(c) "directors" means the directors of the Company for the time being;
(d) "month" means calendar month;
(e) "ordinary resolution" has the meaning assigned thereto by the Company
Act;
(f) "register" means the register of members to be kept pursuant to the
Company Act;
(g) "registered address" of a member shall be his address as recorded in
the register;
(h) "registered address" of a director means his address as recorded in
the Company's register of directors to be kept pursuant to the Company
Act;
(i) "seal" means the common seal of the Company, if the Company has one;
(j) "special resolution" has the meaning assigned thereto by the Company
Act.
1.2 Expressions referring to writing shall be construed as including references
to printing, lithography, typewriting, photography and other modes of
representing or reproducing words in a visible form.
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1.3 Words importing the singular include the plural and vice versa; and words
importing a male person include a female person and a corporation;
1.4 The definitions in the Company Act shall with the necessary changes and so
far as applicable apply to these Articles.
1.5 The regulations contained in Table "A" in the First Schedule to the Company
Act shall not apply to the Company.
PART 2 - SHARE AND SHARE CERTIFICATES
2.1 Every member is entitled, without charge, to one certificate representing
the share or shares of each class held by him or, upon paying a sum not
exceeding the amount permitted by the Company Act as the directors may from time
to time determine, several certificates each for one or more of those shares;
provided that, in respect of a share or shares held jointly by several persons,
the Company shall not be bound to issue more than one certificate, and delivery
of a certificate for a share to one of several joint holders or to his duly
authorized agent shall be sufficient delivery to all; and provided further that
the Company shall not be bound to issue certificates representing redeemable
shares, if such shares are to be redeemed within one month of the date on which
they were allotted. Any share certificate may may be sent through the post by
registered prepaid mail to the member entitled thereto at his registered
address, and the Company shall not be liable for any loss occasioned to the
member owing to any such share certificates so sent being lost in the post or
stolen.
2.2 If a share certificate:
(a) is worn out or defaced, the directors may, upon production to them of
that certificate and upon such other terms, if any, as they may think
fit, order the certificate to be cancelled and may issue a new
certificate in lieu thereof;
(b) is lost, stolen or destroyed, then upon proof thereof to the
satisfaction of the directors and upon such indemnity, if any, as the
directors deem adequate being given, a new share certificate in place
thereof shall be issued to the person entitled to the lost, stolen or
destroyed certificate, or
(c) represents more than one share and the registered owner thereof
surrenders it to the Company with a written request that the Company
issue registered in his name two or more certificates each
representing a specified number of shares and in the aggregate
representing the same number of shares as the certificate so
surrendered, the Company shall cancel the certificate so surrendered
and issue in place thereof certificates in accordance with the
request.
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A sum, not exceeding that permitted by the Company Act, as the directors may
from time to time fix, shall be paid to the Company for each certificate issued
under this Article.
2.3 Except as required by law or statute or these Articles, no person shall be
recognized by the Company as holding any share upon any trust, and the Company
shall not be bound by or compelled in any way to recognize (even when having
notice thereof) any equitable, contingent, future or partial interest in any
share or any interest in any fractional part of a share or (except only as by
law or statute or these Articles provided or as ordered by a court of competent
jurisdiction) any other rights in respect of any share except an absolute right
to the entirety thereof in the registered holder.
2.4 Every share certificate shall be signed manually by at least one officer or
director of the Company, or by or on behalf of a registrar, branch registrar,
transfer agent or branch transfer agent of the Company and any additional
signatures may be printed or otherwise mechanically reproduced and a certificate
signed in either of those fashions shall be as valid as if signed manually,
notwithstanding that any person whose signature is so printed or mechanically
reproduced on a share certificate has ceased to hold the office that he is
stated on such certificate to hold at the date of the issue of a share
certificate.
2.5 Save as provided by the Company Act, the Company shall not give financial
assistance by means of a loan, guarantee, the provision of security or otherwise
for the purpose of or in connection with the purchase of or subscription by any
person for shares or debt obligations issued by the Company or an affiliate of
the Company or upon the security in whole or in part, of a pledge or other
charge upon the shares or debt obligations issued by the Company or an affiliate
of the Company.
2.6 Every share certificate issued by the Company shall be in such form as the
directors approve and shall comply with the Company Act.
2.7 The certificates of shares registered in the name of two or more persons
shall be delivered to the person first named on the register.
PART 3 - ISSUE OF SHARES
3.1 Subject to the Company Act and to any direction to the contrary contained in
a resolution passed at a general meeting authorizing any increase of capital,
the issue of shares, whether in the original or any increased capital of the
Company, shall be under the control of the directors who may, subject to the
rights of the holders of the shares of the Company for the time being issued,
allot or otherwise dispose of, and/or grant options on, shares authorized but
not yet issued at such times and to such persons, including
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directors, and in such classes, and in such manner and upon such terms and
conditions, and at such price or for such consideration, as the directors, in
their absolute discretion, may determine.
3.2 If the Company is not a reporting company then before allotting any shares
of the Company, the directors shall first offer those shares pro rata to the
members; but if there are classes of shares, the directors shall first offer the
shares to be allotted pro rata to the members holding shares of the class
proposed to be allotted and if any shares remain, the directors shall then offer
the remaining shares pro rata to the other members. The offer shall be made by
notice specifying the number of shares offered and limiting a time for
acceptance. After the expiration of the time for acceptance or on receipt of
written confirmation from the person to whom the offer is made that he declines
to accept the offer, and if there are no other members holdings shares who
should first receive an offer, the directors may for three months thereafter
offer the shares to such persons and in such manner as they think most
beneficial to the Company; but the offer to those persons shall not be at a
price less than, or on terms more favourable than, the offer to the members.
3.3 Except as otherwise provided in the Company Act, the Company or its
directors on behalf of the Company may pay a commission or allow a discount to
any person in consideration of his subscribing or agreeing to subscribe, whether
absolutely or conditionally, for any shares with or without par value in the
Company, or procuring or agreeing to procure subscriptions, whether absolutely
or conditionally, for any such shares provided that the rate of the commission
or discount shall not in the aggregate exceed that permitted by the Company Act.
The Company may also pay such brokerage as may be lawful on any shares of the
Company whether with or without par value.
3.4 No share may be issued until it is fully paid by the receipt by the Company
of the full consideration therefor in cash, property or past services actually
performed for the Company. A document evidencing indebtedness of the person to
whom the shares are allotted is not property for the purpose of this Article.
The value of property and services for the purpose of this Article shall be the
value determined by the directors by resolution to be, in all circumstances of
the transaction, the fair market value thereof.
PART 4 - SHARE TRANSFERS
4.1 Subject to the restrictions, if any, set forth in these Articles, any member
may transfer his shares by instrument in writing executed by or on behalf of
such member and delivered to the Company or its transfer agent. The instrument
of transfer of any share of the Company shall be in the form, if any, on the
back of the Company's form of share certificates, and in any form which the
directors may approve. If the directors so require, each instrument of transfer
shall be in respect of only one class of share.
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4.2 Every instrument of transfer shall be executed by the transferor and left at
the registered or records office of the Company or at the office of its transfer
agent or registrar for registration together with the share certificate for the
shares to be transferred and such other evidence, if any, as the directors or
the transfer agent or registrar may require to prove the title of the
transferor or his right to transfer the shares. All instruments of transfer
where the transfer is registered shall be retained by the Company or its
transfer agent or registrar and any instrument of transfer, where the transfer
is not registered, shall be returned to the person depositing the same together
with the share certificate which accompanied the same when tendered for
registration. The transferor shall remain the holder of the share until the name
of the transferee is entered on the register in respect of that share.
4.3 The signature of the registered owner of any shares, or of his duly
authorized attorney, upon the instrument of transfer constitutes an authority to
the Company to register the shares specified in the instrument of transfer in
the name of the person named in that instrument of transfer as transferee or, if
no person is so named, then in any name designated in writing by the person
depositing the share certificate and the instrument of transfer with the
Company or its agents.
4.4 The Company, and its directors, officers and agents are not bound to enquire
into any title of the transferee of any shares to be transferred, and are not
liable to the registered or any intermediate owner of those shares, for
registering the transfer.
4.5 There shall be paid to the Company in respect of the registration of any
transfer a sum, not exceeding that permitted by the Company Act, as the
directors deem fit.
PART 5 - TRANSMISSION OF SHARES
5.1 In the case of the death of a member the legal personal representative of
the deceased shall be the only person recognized by the Company as having any
title to or interest in the shares registered in the name of the deceased.
Before recognizing any legal personal representative the directors may require
him to obtain a grant of probate or letters of administration in British
Columbia.
5.2 Any person, who becomes entitled to a share as a result of the death or
bankruptcy of any member, upon producing the evidence required by the Company
Act, or who becomes entitled to a share as a result of an order of a court of
competent jurisdiction or a statute, upon producing such evidence as the
directors think sufficient that he is so entitled, may be registered as holder
of the share or may transfer the share.
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PART 6 - ALTERATION OF CAPITAL
6.1 The Company may by ordinary resolution filed with the Registrar amend its
memorandum to increase the share capital of the Company by:
(a) creating shares with par value or shares without par value, or both;
(b) increasing the number of shares with par value or shares without par
value, or both;
(c) increasing the par value of a class of shares with par value, if no
shares of that class are issued.
6.2 The directors may determine the price or consideration at or for which
shares without par value may be issued.
6.3 Except as otherwise provided by conditions imposed at the time of creation
of any new shares or by these Articles, any addition to the authorized capital
resulting from the creation of new shares shall be subject to the provisions of
these Articles.
6.4 Unless these Articles elsewhere specifically otherwise provide, the
provision of these Articles relating to general meetings shall apply, with the
necessary changes and so far as they are applicable, to a class meeting of
members holding a particular class of shares.
PART 7 - PURCHASE OF SHARES
7.1 Subject to the special rights and restrictions attached to any class of
shares, the Company may, by a resolution of the directors and in compliance with
the Company Act, redeem or purchase any of its shares at the price and upon the
terms specified in such resolution, but no such purchase shall be made if the
Company is insolvent at the time of the proposed purchase or the proposed
purchase would render the Company insolvent. Unless the Company is purchasing
the shares from a dissenting member pursuant to the Company Act, the Company
shall make its offer to purchase through the facilities of a stock exchange, if
a reporting company, or pro rata to every member who holds shares of the class
proposed to be purchased. The shares so purchased by the Company may be sold by
it but the Company shall not exercise any vote in respect of these shares while
they are held by the Company.
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PART 8 - BORROWING POWERS
8.1 The directors may from time to time at their discretion authorize the
Company to borrow any sum or sums of money or to undertake any obligation
(including obligations of guarantee or indemnity) for the purposes of the
Company and may raise or secure the repayment of that sum or sums or the
performance of any such obligation in such manner and upon such terms and
conditions, in all respects, as they think fit, and in particular, and without
limiting the generality of the foregoing, by the issue of bonds or debentures,
or any mortgage or charge, whether specific or floating, or other security on
the undertaking of the whole or any part of the property of the Company, both
present and future.
8.2 The directors may make any debenture, bonds or other debt obligations issued
by the Company by their terms, assignable free from any equities between the
Company and the person to whom they may be issued, or any other person who
lawfully acquires the same by assignment, purchase or otherwise, howsoever.
8.3 The directors may authorize the issue of any debentures, bonds or other debt
obligations of the Company at a discount, premium or otherwise, and with special
or other rights or privileges as to redemption, surrender, drawings, allotment
of or conversion into or exchange for shares, attending at general meetings of
the Company and otherwise as the directors may determine at or before the time
of issue.
8.4 The Company shall keep or cause to be kept in accordance with the Company
Act;
(a) a register of its debentures and debt obligations, and
(b) a register of the holders of its bonds, debentures and other debt
obligations,
and subject to the provisions of the Company Act may keep or cause to be kept
one or more branch registers of the holders of its bonds, debentures, or other
debt obligations within or without the Province of British Columbia as the
directors may from time to time determine and the directors may by resolution,
regulations or otherwise make such provisions as they think fit respecting the
keeping of such branch registers.
8.5 If the directors so authorize, or if any instrument under which any bonds,
debentures or other debt obligations of the Company are issued so provides, any
bonds, debentures and other debt obligations of the Company, instead of being
manually signed by the directors or officers authorized in that behalf, may have
the facsimile signatures of such directors or officers printed or otherwise
mechanically reproduced thereon and in either case, shall be as valid as if
signed manually, but no such bond, debenture or other debt obligation shall be
issued unless it is manually signed, countersigned or certified by or on behalf
of a trust company or other transfer agent or registrar duly authorized by the
directors or the instrument under which such
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bonds, debentures or other debt obligations are issued so to do. Notwithstanding
that any persons whose facsimile signature is so used shall have ceased to hold
the office the he is stated on such bond, debenture or other debt obligation to
hold at the date of the actual issue thereof, the bond, debenture or other debt
obligation shall be valid and binding on the Company.
PART 9 - GENERAL MEETINGS
9.1 Subject to Article 9.2 and to the Company Act the first annual general
meeting of the Amalgamated Company shall be held within 15 months from the date
of amalganation and thereafter an annual general meeting shall be held once in
every calendar year at such time, not being more than 13 months after the
holding of the last preceding annual general meeting, and place as the directors
shall appoint.
9.2 If the Company is not a reporting company and if all members entitled to
attend and vote at the annual general meeting of the Company consent in writing
each year to the business required to be transacted at the annual general
meeting that business shall be as valid as if transacted at an annual general
meeting, duly convened and held and, it is not necessary for the Company to hold
an annual general meeting that year.
9.3 Every general meeting, other than an annual general meeting, shall be called
an extraordinary general meeting.
9.4 The directors may whenever they think fit, and they shall, promptly on the
receipt of a requisition of a member or members of the Company representing not
less than one-twentieth of such of the issued shares in the capital of the
Company as at the date of the requisition carry the right of voting in all
circumstances at general meetings, call a general meeting of the Company.
9.5 Any such requisition, and the meeting to be called pursuant thereto, shall
comply with the provisions of the Company Act.
9.6 Not less than 21 days' notice of any general meeting specifying the time and
place of meeting and in case of special business, the general nature of that
business shall be given in the manner mentioned in Article 21, or in such other
manner, if any, as may be prescribed by ordinary resolution whether previous
notice thereof has been given or not, to any person as may by law or under these
Articles or other regulations of the Company be entitled to receive such notice
from the Company. But the accidental omission to give notice of any meeting to,
or the non-receipt of any such notice by, any of such person shall not
invalidate any proceedings at that meeting.
9.7 Persons entitled to notice of a general meeting may waive or reduce the
period of notice convening the meeting, by unanimous consent in writing, and may
give such waiver before, during or after the meeting.
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9.8 Where any special business includes the presenting, considering, approving,
ratifying or authorizing of the execution of any document, then the portion of
any notice relating to such document shall be sufficient if the same states that
a copy of the document or proposed document is or will be available for
inspection by members at a place in the Province of British Columbia specified
in such notice during business hours in any specified working day or days prior
to the date of the meeting.
PART 10 - PROCEEDINGS AT GENERAL MEETINGS
10.1 The following business at a general meeting shall be deemed to be special
business:
(a) all business at an extraordinary general meeting, and
(b) all business that is transacted at an annual general meeting, with the
exception of the consideration of the financial statement and the
report of the directors and auditors, the election of directors, the
appointment of the auditors and such other business as, under these
Articles, ought to be transacted at an annual general meeting, or any
business which is brought under consideration by the report of the
directors.
10.2 Save as otherwise herein provided a quorum for a general meeting shall be:
two members or proxyholders representing two members, or one member and a
proxyholder representing another member or two proxyholders personally present
at the commencement of the meeting and together holding or representing by proxy
not less than one-tenth of the issued shares of a class of shares the holders of
which are entitled to attend and to vote at such meeting.
10.3 No business, other than the election of a chairman and the adjournment of
the meeting shall be transacted at any general meeting unless the quorum
requisite was present at the commencement of the meeting.
10.4 If within 1/2 hour from the time appointed for a meeting a quorum is not
present, the meeting, if convened by requisition of the members, shall be
dissolved; but in any other case it shall stand adjourned to the same day in the
next week at the same time and place. If at such adjourned meeting a quorum is
not present within 1/2 hour from the time appointed, the members present or any
proxyholder shall be a quorum.
10.5 The Chairman of the Board, if any, or in his absence the President of the
Company shall be entitled to preside as chairman at every general meeting of the
Company.
10.6 If at any meeting neither the Chairman of the Board, if any, nor President
is present within fifteen minutes after the time appointed for holding
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the meeting or is willing to act as chairman, the directors present shall choose
someone of their number to be chairman. If no director be present or if all the
directors present decline to take the chair or shall fail to so choose, the
members or proxyholders present entitled to vote shall choose some person
present to be chairman.
10.7 The chairman of the meeting may, with the consent of any meeting at which a
quorum is present and shall if so directed by the meeting, adjourn the meeting
from time to time and from place to place, but no business shall be transacted
at any adjourned meeting other than the business left unfinished at the meeting
from which the adjournment took place. When a meeting is adjourned for 30 days
or more, notice of the adjourned meeting shall be given as in the case of a
general meeting. Save as aforesaid, it shall not be necessary to give any notice
of an adjournment or of the business to be transacted at any adjourned meeting.
10.8 Subject to the provisions of the Company Act every question submitted to a
general meeting shall be decided on a show of hands unless a poll is, before or
on the declaration of the result of the show of hands, directed by the chairman
or demanded by a member entitled to vote who is present in person or by proxy,
and the chairman shall declare to the meeting the decision on every question in
accordance with the result of the show of hands or the poll, and such decision
shall be entered in the book of proceedings of the Company. A declaration by the
chairman that a resolution has been carried or carried unanimously or by a
particular majority or lost or not carried by a particular majority, and an
entry to that effect in the book containing the minutes of the proceedings of
the Company shall be conclusive evidence of the fact without proof of the number
or proportion of the votes recorded in favour of or against such resolution.
10.9 No resolution proposed at a meeting need be seconded and the chairman of
any meeting shall be entitled to move or second a resolution.
10.10 In case of an equality of votes upon a resolution, the chairman shall,
either on a show of hands or on a poll, have a casting or second vote in
addition to the vote or votes to which he may be entitled as a member or
proxyholder.
10.11 Subject to the provisions of Article 10.12 if a poll is duly demanded as
aforesaid, it shall be taken in such manner and at such time within seven days
from the date of the meeting and place as the chairman of the meeting directs,
and either at once or after an interval or adjournment not exceeding sever days,
and the result of the poll shall be deemed to be the resolution of the meeting
at which the poll is demanded. A demand for a poll may be withdrawn. In the case
of any dispute as to the admission or rejection of a vote, the chairman shall
determine the same and such determination made in good faith shall be final and
conclusive.
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10.12 A member entitled to more than one vote need not, if he votes, use all his
votes or cast all the votes he uses in the same way.
10.13 No poll may be demanded on the election of a chairman of a meeting and a
poll demanded on a question of adjournment shall be taken at the meeting without
adjournment.
10.14 The demand of a poll shall not prevent the continuance of a meeting for
the transaction of any business other than the question on which a poll has been
demanded.
10.15 Every ballot cast upon a poll and every proxy appointing a proxyholder who
cast a ballot upon a poll shall be retained by the Secretary for the period and
be subject to the inspection as the Company Act may provide, and if not so
provided then as may be decided by the meeting at which the proxy or ballot was
used.
PART 11 - VOTES OF MEMBERS
11.1 Subject to any special rights or restrictions for the time being attached
to any shares, on a show of hands every member present in person shall have one
vote, and on a poll every member, present in person or by proxy, shall have one
vote for each share of which he is the holder.
11.2 Any person who is not registered as a member but is entitled to vote at any
general meeting in respect of a share, may vote the share in the same manner as
if he were a member; but, unless the directors have previously admitted his
right to vote at that meeting in respect of the share, he shall satisfy the
directors of his right to vote the share before the time for holding the
meeting, or adjourned meeting, as the case may be, at which he proposes to vote.
11.3 Where there are joint members registered in respect of any share, any one
of the joint members may vote at any meeting, either personally or by proxy, in
respect of the share as if he were solely entitled to it. If more than one of
the joint members is present at any meeting, personally or by proxy, the joint
member present whose name stands first on the register in respect of the share
shall alone be entitled to vote in respect of that share. Several executors or
administrators of a deceased member in whose sole name any share stands shall,
for the purpose of this Article, be deemed joint members.
11.4 A corporation, not being a subsidiary, that is a member may vote by its
proxyholder or by its duly authorized representative, who is entitled to speak
and vote, and in all other respects exercise the rights of a member and
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any authorized shall be deemed to be a member for all purposes in connection
with any general meeting of the Company.
11.5 A member for whom a committee has been duly appointed may vote, whether on
a show of hands or on a poll, by his committee and his committee may appoint a
proxyholder.
11.6 A member holding more than one share in respect of which he is entitled to
vote shall be entitled to appoint one or more proxyholders to attend, act and
vote for him on the same occasion. If such member should appoint more than one
proxyholder for the same occasion he shall specify the number of shares each
proxyholder shall be entitled to vote.
11.7 A proxy or an instrument appointing a duly authorized representative of a
corporation shall be in writing, under the hand of the appointor or of his
attorney duly authorized in writing, or, if such appointor is a corporation,
either under its seal or under the hand of an officer or attorney duly
authorized.
11.8 Any person of full age may act as proxyholder whether or not he is entitled
on his own behalf to be present and to vote at the meeting at which he acts as
proxyholder. The proxy may authorize the person so appointed to act as
proxyholder for the appointor for the period, at such meeting or meetings to the
extent permitted by the Company Act.
11.9 A proxy and the power of attorney or other authority, if any, under which
it is signed or a notarially certified copy thereof shall be deposited at the
registered office of the Company or at such other place as is specified for that
purpose in the notice calling the meeting, not less than 48 hours before the
time for holding the meeting at which the person named in the proxy proposes to
vote, or shall be deposited with the chairman of the meeting prior to the
commencement thereof. In addition to any other method of depositing proxies
provided for in these Articles, the directors may from time to time make
regulations permitting the lodging of proxies appointing the proxyholders at
some place or places other than the place at which a meeting or adjourned
meeting of members is to be held and for particulars of such proxies to be
cabled or telegraphed or sent in writing before the meeting or adjourned meeting
to the Company or any agent of the Company for the purpose of receiving such
particulars and providing that proxies appointing a proxyholder so lodged may be
voted upon as though the proxies themselves were produced to the chairman of the
meeting or adjourned meeting as required by this Part and votes given in
accordance with such regulations shall be valid and shall be counted.
11.10 A vote given in accordance with the terms of a proxy shall be valid
notwithstanding the previous death or insanity of the member or revocation of
the proxy or of the authority under which the proxy was executed, or the
transfer of the share in respect of which the proxy is given, provided no prior
notice in writing of the death, insanity, revocation or transfer as aforesaid
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shall have been received at the registered office of the Company or by the
chairman of the meeting or adjourned meeting at which the vote was given.
11.11 Unless, in the circumstances, the Company Act requires any other form of
proxy, a proxy appointing a proxyholder, whether for a specified meeting or
otherwise, shall be in the form following, or in any other form that the
directors or the chairman of the meeting at which the form of proxy is to be
used shall approve:
(Name of Company)
The undersigned hereby appoints _______________ (or failing him
___________________ of ________________________) as proxyholder for the
undersigned to attend at and vote for and on behalf of the undersigned at
the general meeting of the Company to be held on the _______ day of
_____________________________________________, 19_ and at any adjournment
of that meeting.
Signed this _____ day of ____________, 198_.
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(Signature of Member)
PART 12 - DIRECTORS
12.1 The management of the business of the Company shall be vested in the
directors and the directors may exercise all such powers and do all such acts
and things as the Company is, by its Memorandum or otherwise, authorized to
exercise and do, and which are not by these Articles or by statute or otherwise
lawfully directed or required to be exercised or done by the Company in general
meeting, but subject nevertheless to the provisions of all laws affecting the
Company and of these Articles and to any regulations not being inconsistent with
these Articles which shall from time to time be made by the Company in general
meeting; but no regulation made by the Company in general meeting shall
invalidate any prior act of the directors that would have been valid if that
regulation had not been made.
12.2 The first directors of the Company shall be those persons designated in the
amalgamation agreement pursuant to which the amalgamation occurs. The directors
to succeed the first directors and the number of directors may be determined in
writing by a majority of the directors. The number of directors may be changed
from time to time by ordinary resolution, whether previous notice thereof has
been given or not, but shall never be less than one while the Company is not a
reporting company and three while the Company is a reporting Company. Further,
the number of directors can be increased pursuant to Article 15.5.
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12.3 A director shall not be required to have any share qualification but any
person not being a member of the Company who becomes a director shall be deemed
to have agreed to be bound by the provisions of the Articles to the same extent
as if he were a member of the Company.
12.4 The remuneration of the directors as such may from time to time be
determined by the members, unless by ordinary resolution the directors are
authorized to determine their remuneration. Such remuneration to be in addition
to any salary or other remuneration paid to any officer or employee of the
Company as such, who is also a director. The directors shall be repaid such
reasonable expenses as they may incur in and about the business of the Company
and if any director shall perform any professional or other services for the
Company that in the opinion of the directors are outside the ordinary duties of
a director or shall otherwise be specifically occupied in or about the Company's
business he may be paid a remuneration to be fixed by the Board, or, at the
option of such director, by the Company in general meeting, and such
remuneration may be either in addition to, or in substitution for, any other
remuneration that he may be entitled to receive, and the same shall be charged
as part of the ordinary working expenses. Unless otherwise determined by
ordinary resolution the directors on behalf of the Company may pay a gratuity or
pension or allowance on retirement to any director who has held any salaried
office or place of profit with the Company or to his spouse or dependents and
may make contributions to any fund and pay premiums for the purchase or
provision of any such gratuity, pension or allowance.
12.5 The directors may from time to time and at any time by power of attorney
appoint any company, firm or person or body of persons, whether nominated
directly or indirectly by the directors, to be the attorney or attorneys of the
Company for such purposes and with such powers, authorities and discretions, not
exceeding those vested in or exercisable by the directors under these Articles,
and for such period and subject to such conditions as they may think fit, and
any such powers of attorney may contain such provisions for the protection and
convenience of persons dealing with any such attorney as the directors may think
fit and may also authorize any such attorney to delegate all or any of the
powers, authorities and discretions vested in him.
12.6 A director who is in any way, whether directly or indirectly, interested in
a contract or proposed contract or transaction with the Company shall declare
the nature and extent of his interest at a meeting of the directors or in any
resolution to be signed by the directors relating to such contract or proposed
contract in accordance with the provisions of the Company Act. A director shall
not vote in respect of any such contract or transaction with the Company in
which he is interested and if he shall do so his vote shall not be counted, but
he may be counted in the quorum present at the meeting at which such vote is
taken. Subject to the Company Act, the foregoing shall not apply to
(a) any contract or transaction relating to a loan to the Company, which a
director or a specified corporation or a specified firm in which he
has an interest has guaranteed or joined in guaranteeing the repayment
of the loan or any part of the loan, or
<PAGE>
- 15 -
(b) any contract or transaction made or to be made with, or for the
benefit of a holding corporation or a subsidiary corporation of which
a director is a director, or
(c) any contract by a director or by any company of which the director is
a shareholder, officer or director to subscribe for or underwrite
shares, debentures or debt obligations to be issued by the Company or
a subsidiary of the Company, or any contract, or transaction in which
a director is, directly or indirectly, interested if all the other
directors are also, directly or indirectly interested in the contract
or transaction, or
(d) if authorized by ordinary resolution pursuant to Article 12.4, the
remuneration of the directors.
Subject to the Company Act the foregoing prohibitions and exceptions thereto may
from time to time be suspended or amended to any extent by ordinary resolution,
either generally or in respect of any particular contract or transaction or for
any particular period.
12.7 A director may hold any office or place of profit under the Company, other
than auditor, in conjunction with his office of director for such period and on
such terms, as to remuneration or otherwise, as the directors may determine.
Subject to compliance with the Company Act, no director or intended director
shall be disqualified by his office from contracting with the office or place of
profit or as vendor, purchaser or otherwise, and, subject to compliance with the
Company Act, no contract or transaction entered into by or on behalf of the
Company in which a director is in any way interested shall be liable to be
avoided.
12.8 Any director may act by himself or his firm in a professional capacity for
the Company, and he or his firm shall be entitled to remuneration for
professional services as if he were not a director.
12.9 A director whose permanent place of residence is outside the city where the
registered office of the Company is situate, or who is about to leave or is
temporarily outside the said city, or who may be expecting to be absent from the
place where a meeting of the Board is to be held, or is otherwise unable to
attend the meeting of the Board, may appoint any person, whether a member or
director of the Company or not, to act on his behalf as an alternate director
and while such other person holds office as an alternate director, he shall be
entitled to notice of meetings of the directors and to attend and vote thereat
accordingly and he shall, if present, be included in computing the quorum, and
if he be a director, shall be entitled to two votes, one as a director and the
other as an alternate director, and shall further be empowered to sign
resolutions of the Board of directors, and shall ipso facto vacate office if and
when the appointor vacates or is removed from office as director and any
appointment or removal under this clause shall be effected by notice which may
be in writing under the hand of the director making the same or may be made by
telegram, cable or telex. An appointment under this Article may be a
<PAGE>
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general appointment, or may be restricted to a single specified meeting of the
Board and any adjourned portion thereof, or may be otherwise restricted in its
operation or duration.
PART 13 - TERMINATION OF DIRECTORSHIP OF DIRECTORS
13.1 The directorship of a director shall be immediately terminated:
(a) if he is found to be incapable of managing his own affairs by reason
of mental infirmity;
(b) on the date of resignation stated in any notice in writing to the
Company at its registered office by the director;
(c) if he is removed pursuant to Article 14.2;
(d) if he has been convicted within or without the Province of an
indictable offence and the other directors resolve to remove him; or
(e) if he ceases to be qualified to act as a director under the Company
Act.
PART 14 - RETIREMENT AND ELECTION OF DIRECTORS
14.1 At each annual general meeting of the Company all the directors shall
retire in which case the Company shall elect a Board of Directors consisting of
the number of directors for the time being fixed pursuant to these Articles but
which shall not be less than that required by the Company Act. If in any
calendar year the Company does not hold an annual general meeting the directors
appointed at the last annual general meeting of the Company shall be deemed to
have been elected or appointed as directors on the last day on which the meeting
could have been held pursuant to the Company Act and the directors so appointed
or elected may hold office, unless other directors have been appointed in the
meantime, until other directors are appointed or elected or until the day on
which the next annual general meeting is held.
14.2 The Company may by special resolution remove any director and, by ordinary
resolution, appoint another person in his stead. Any director so appointed shall
hold office only until the next following annual general meeting of the Company,
but shall be eligible for re-election at such meeting.
14.3 The directors shall have power at any time and from time to time to appoint
any person as a director, to fill a casual vacancy on the Board or a vacancy
resulting from an increase of the number of directors necessitated by the
Company Act upon the Company becoming a reporting company. Any director so
<PAGE>
- 17 -
appointed shall hold office only until the next following annual general meeting
of the Company at which directors are to be elected, but be eligible for
re-election at such meeting.
PART 15 - PROCEEDINGS OF DIRECTORS
15.1 The directors may meet together at such places as they think fit for the
dispatch of business, adjourn and otherwise regulate their meetings and
proceedings, as they see fit. The directors may from time to time fix the quorum
necessary for the transaction of business and unless so fixed such quorum shall
be a majority of the Board. The Chairman of the Board, if any, or in his absence
the President of the Company, shall be chairman of all meetings of the Board,
but if at any meeting neither the Chairman of the Board, if any, nor the
President shall be present within 30 minutes after the time appointed for
holding the same or if both the Chairman of the Board and the President, being
present decline to act, the directors present may choose someone of their number
to be chairman at such meeting. A director interested is to be counted in a
quorum notwithstanding his interest.
15.2 A director may at any time, and the Secretary upon the written request of a
director shall, call a meeting of the directors. Notice thereof specifying the
time and place of such meeting shall be mailed, postage prepaid, addressed to
each of the directors at his registered address at least 48 hours before the
time fixed for the meeting or such lesser period as may be reasonable under the
circumstances, or such notice may be given to each director either personally or
by leaving it at his usual business or residential address or by telephone,
telegram, telex or other method of transmitting visually recorded messages, at
least 48 hours before such time or such lesser period as may be reasonable under
the circumstances. It shall not be necessary to give to any director notice of a
meeting of directors immediately following a general meeting at which such
director has been elected or notice of a meeting of directors at which such
director shall have been appointed. Accidental omission to give notice of a
meeting of directors to, or the non-receipt of notice by, any director, shall
not invalidate the proceedings of that meeting.
15.3 Any director of the Company may from time to time file with the Secretary a
writing waiving notice of any meeting of the directors being sent to him and
agreeing to ratify and confirm any business transacted at any meeting of the
directors though he may not be present at such meeting and though no notice has
been sent to him of such meeting and any and all meetings of the directors of
the Company so held (provided that the quorum of the directors be present) shall
be valid and binding upon the Company; provided that the director in such waiver
may specify the period for which such waiver shall be effective.
15.4 A meeting of the directors at which a quorum is present shall be competent
to exercise all or any of the authorities, power and discretions for the time
being vested in or exercisable by the directors.
<PAGE>
- 18 -
15.5 The continuing directors may act notwithstanding any vacancy in their body
but, if and so long as their number is reduced below the number fixed pursuant
to these Articles as the necessary quorum of directors, the continuing directors
or director may act for the purpose of filling any vacancies in or increasing
the number of directors to that number, or for the purpose of summoning a
general meeting of the Company, but for no other purpose. The Board may, at any
time and from time to time, appoint one or more additional directors of the
Company in addition to the number of directors elected pursuant to Article 12.2.
15.6 The directors may delegate any but not all of their powers to committees
consisting of such of the directors as they think fit. Any committee so formed
shall in the exercise of the powers so delegated conform to any regulations that
may from time to time be imposed on it by the directors, and shall report every
act or thing done in exercise of such powers to the earliest meeting of the
directors to be held next after the same shall have been done.
15.7 A committee may elect a chairman of its meetings; if no such chairman is
elected, or if at any meetings the chairman is not present within 30 minutes
after the time appointed for holding the same, the members present may choose
one of their number to be chairman of the meeting.
15.8 The members of a committee may meet and adjourn as they think proper.
Questions arising at any meeting shall be determined by a majority of votes of
the members present and in case of an equality of votes the chairman shall have
a second casting vote.
15.9 All acts done by any meeting of the directors or by a committee of
directors or by any person acting as a director shall, notwithstanding that it
shall be afterwards discovered that there was some defect in the appointment of
any such director or person acting as aforesaid, or that they or any of them
were disqualified, be as valid as if every such person had been duly appointed
and was qualified to be a director.
15.10 For the first meeting of the Board to be held immediately following the
appointment or election of a director or directors at an annual or general
meeting of shareholders or for a meeting of the Board at which a director is
appointed to fill a vacancy in the Board, no notice of such meetings shall be
necessary to the newly elected or appointed director or directors in order for
the meeting to be duly constituted, provided that a quorum of directors is
present.
15.ll Any director of the Company who may be absent either temporarily or
permanently from the Province of British Columbia may file at the office of the
Company a waiver of notice which may be by letter, telegram or cable of any
meeting of the directors and may at any time withdraw such waiver, and until
such waiver is withdrawn, no notice of meetings of directors shall be sent to
such director, and any and all Meetings of the directors of the Company, notice
<PAGE>
- 19 -
of which shall not have been given to such director, shall, provided a quorum of
the directors is present, be valid and binding upon the Company.
15.12 Questions arising at any meeting of the directors shall be decided by a
majority of votes. In case of an equality of votes the Chairman shall have a
second or casting vote.
15.13 A resolution in writing, signed by each director or his alternate shall be
as valid and effectual as if it had been passed at a meeting of directors duly
called and held. Such resolution may be in one or more counterparts each signed
by one or more directors or alternate directors which together shall be deemed
to constitute one resolution in writing, but the provision of Article 12.6 shall
apply, mutatis mutandis, to any resolution passed in accordance herewith.
PART 16 - OFFICERS
16.1 The Board of Directors shall from time to time appoint a President, a
Secretary and such other officers of the Company as it may determine, none of
whom, save the Chairman of the Board, if any, and the President, need be
directors.
16.2 All appointments of officers shall be made upon such teems and conditions
and at such remuneration, whether by way of salary, fee, commission,
participation in profits, or otherwise, as the directors may determine, and
every such appointment shall be subject to termination at the pleasure of the
directors unless otherwise fixed by contract.
16.3 Every officer of the Company who holds any office or possesses any property
whereby, whether directly or indirectly, duties or interests might be created in
conflict with his duties or interests as an officer of the Company shall, in
writing, disclose to the President the fact and the nature, character and extent
of the conflict.
PART 17 - MINUTES, DOCUMENTS AND RECORDS
17.1 The directors shall cause minutes to be duly entered in books providing for
the purposes:
(a) of all appointments of officers;
(b) of the names of the directors or their alternates present at each
meeting of directors and of any committee of directors;
<PAGE>
- 20 -
(c) of all orders made by the directors or committees of directors;
(d) of all resolutions and proceedings of general meetings of the Company
and of all meetings of the directors and of committees of the
directors.
17.2 The directors shall cause the Company to keep at its records office or at
such other place as the Company Act may permit, the documents, copy documents,
registers, minutes, and records which the Company is required by the Company Act
to keep at its records office or such other place.
PART 18 - EXECUTION OF DOCUMENTS
18.1 The directors may provide a common seal for the Company and for its use and
the directors shall have power from time to time to destroy the same and
substitute a new seal in place thereof.
18.2 Subject to the provisions of the Company Act, the directors may provide for
use in any other Province, State or Country an official seal, which shall have
on its face of the name of the Province, Territory, State or Country where it is
to be used.
18.3 The directors shall provide for the safe custody of the common seal of the
Company, if any, which shall not be affixed to any instrument except in the
presence of any two directors of the Company by the authority of a resolution of
the directors or by such person or persons as may be authorized by such
resolution; and such person or persons shall sign every instrument to which the
seal of the Company is affixed in his or their presence; provided that a
resolution of the directors directing the general use of the seal, if any, may
at any time be passed by the directors and shall apply to the use of the seal
until countermanded by another resolution of the directors.
18.4 The signature of any officer of the Company may, if authorized by the
directors, be printed, lithographed, engraved or otherwise mechanically
reproduced upon all instruments executed or issued by the Company or any officer
thereof; and any instrument on which the signature of any such person is so
reproduced, shall be deemed to have been manually signed by such person whose
signature is so reproduced and shall be as valid to all intents and purposes as
if such instrument had been signed manually, and notwithstanding that the person
whose signature is so reproduced may have ceased to hold office at the date of
the delivery or issue of such instrument. The term "instrument" as used in this
Article shall include deeds, mortgages, hypothecs, charges, conveyances,
transfers and assignments of property, real or personal, agreements, releases,
receipts and discharges for the payment of money or other obligations,
certificates of the Company's shares, share warrants of the Company, bonds,
debentures and other debt obligations of the Company and all paper writings but
<PAGE>
- 21 -
shall not include square certificates or debentures which shall be signed in
accordance with the Company Act.
PART 19 - DIVIDENDS
19.1 The directors may declare dividends and fix the date of record therefor and
the date for payment thereof. No notice need be given of the declaration of any
dividend. If no date of record is fixed, the date of record shall be determined
under the Provisions of the Company Act.
19.2 Subject to the terms of the shares with special rights or restrictions, all
dividends shall be declared according to the number of shares held.
19.3 No dividend shall bear interest against the Company.
19.4 The directors may direct payment of any dividend wholly or partly by the
distribution of specific assets or of paid-up shares, bonds, debentures or other
debt obligations of the Company, or in any one or more of those ways, and where
any difficulty arises in regard to the distribution, the directors may settle
the sand as they think expedient, and in particular may fix the value for the
distribution of specific assets, and may determine that cash payments shall be
made to a member upon the basis of the value so fixed in place of fractional
shares, bonds, debentures or other debt obligations in order to adjust the
rights of all parties, and may vest any of those specific assets in trustees
upon Such trusts for the persons entitled as may seem expedient to the
directors.
19.5 Notwithstanding anything contained in these Articles the directors may from
time to time capitalize any undistributed surplus on hand of the Company and may
from time to time issue as fully paid and non-assessable any unissued shares or
any bonds, debentures or other debt obligations of the Company as a dividend
representing such undistributed surplus on hand or any part thereof.
19.6 Any dividend, interest or other moneys payable in cash in respect of shares
may be paid by cheque or warrant sent through the post directed to the
registered address of the holder, or, in the case of joint holders to the
registered address of that one of the joint holders who is first named on the
register or to such person and to such address as the holder or joint holders
may in writing direct. Every such cheque or warrant shall be made payable to the
order of the person to whom it is sent. Any one of two or more joint holders may
give effectual receipts for any dividends, bonuses or other moneys payable in
respect of the shares held by them as joint holders.
<PAGE>
- 22 -
19.7 A transfer of, shares shall not pass the right to any dividend declares
thereon before the registration of the transfer in the register.
19.8 Notwithstanding any other provisions of these Articles should any dividend
result in any shareholders being entitled to a fractional part of a share of the
Company, the directors shall have the right to pay such shareholders in place of
that fractional share, the cash equivalent thereof calculated on the par value
thereof or, in the case of shares without par value, calculated on the price or
consideration for which such shares were or were deemed to be issued, and shall
have the further right and complete discretion to carry out such distribution
and to adjust the rights of the shareholders with respect thereto on as
practical and equitable a basis as possible including the right to arrange
through a fiscal agent or otherwise for the sale, consolidation or other
disposition of those fractional shares on behalf of those shareholders of the
Company.
19.9 The directors may, before declaring any dividend, set aside out of the
profits of the Company such sums as they think proper as appropriations from
income, which shall at the discretion of the directors, be applicable for
meeting contingencies, or for equalizing dividends, or for any other purpose to
which the profits of the Company may be properly applied, and pending such
application may, either be employed in the business of the Company or be
invested in such investments as the directors in their discretion may from time
to time determine.
PART 20 - ACCOUNTS
20.1 The directors shall cause records and books of accounts to be kept as
necessary to properly record the financial affairs and conditions of the Company
and to comply with the provisions of statutes applicable to the Company.
20.2 The directors shall determine the place at which the accounting records of
the Company shall be kept and those records shall be open to the inspection of
any director during the normal business hours of the Company.
PART 21 - NOTICES
21.1 A notice may be given to any member or director, either personally or by
sending it by post to him in a prepaid letter, envelope or wrapper addressed to
the member or director at his registered address.
21.2 A notice may be given by the Company to joint members in respect of a share
registered in their names by giving the notice to the joint member first named
in the register of members in respect of that share.
<PAGE>
- 23 -
21.3 A notice may be given by the Company to the persons entitled to a share in
the consequence of the death or bankruptcy of a member by sending it through the
post in a prepaid letter, envelope or wrapper addressed to them by name, or by
the title of representatives of the deceased, or trustee of the bankrupt, or by
any like description, at the address, if any, supplied for the purpose by the
persons claiming to be so entitled, or until that address has been so supplied,
by giving the notice in any manner in which the same might have been given if
the death or bankruptcy had not occurred.
21.4 Any notice or document sent by post to or left at the registered address of
any member shall, notwithstanding that member is then deceased and whether or
not the Company has notice of his death, be deemed to have been duly served in
respect of any registered shares, whether held solely or jointly with other
persons by that deceased member, until some other person is registered in his
place as the member or joint member in respect of those shares, and that service
shall for all purposes of these Articles be deemed a sufficient service of such
notice or document on his personal representatives and all persons, if any,
jointly interested with him in those shares.
21.5 Any notice sent by post shall be deemed to have been served on the business
day following that on which the letter, envelope or wrapper containing that
notice is posted, and in proving service thereof it shall be sufficient to prove
that the letter, enve1ope or wrapper containing the notice was properly
addressed and put in a Canadian Government post office; postage prepaid.
21.6 If a number of days' notice or a notice extending over any other period is
required to be given, the day of service shall not, unless it is otherwise
provided in these Articles, be counted in the number of days or other period
required.
21.7 Notice of every general meeting shall be given in the manner authorized by
these Articles, to:
(a) every member holding a share or shares carrying the right to vote at
such meetings on the record date or, if no record date was established
by the directors, on the date of the meeting;
(b) the personal representative of a deceased member;
(c) the trustee in bankruptcy of a bankrupt member,
(d) the auditor of the Company;
(e) any other person entitled to receive notice under the Company Act;
but to no other person.
<PAGE>
- 24 -
PART 22 - INDEMNIFICATION AND PROTECTION OF DIRECTORS,
OFFICERS EMPLOYEES AND CERTAIN AGENTS
22.1 The Company may indemnify any person who was or is a party or is threatened
to be made a party to any threatened, pending or completed action or proceeding,
whether or not brought by the Company or by a corporation or other legal entity
or enterprise as hereinafter mentioned and whether civil, criminal or
administrative, by reason of the fact that he is or was a director, officer,
employee, or agent of the Company or is or was serving at the request of the
Company as a director, officer, employee or agent of another corporation, a
partnership, joint venture, trust or other enterprise, against all costs,
charges and expenses including legal fees and any amount paid to settle the
action or proceeding or satisfy a judgment, if he acted honestly and in good
faith with a view to the best interests of the corporation or other legal entity
or enterprise as aforesaid of which he is or was a director, officer, employee
or agent, as the case may be, and exercised the care, diligence and skill of a
reasonably prudent person, and with respect to any criminal or administrative,
action or proceeding, he had reasonable grounds for believing that his conduct
was lawful; provided that the Company shall not be bound to indemnify any such
person, other than a director, officer or an employee of the Company, who shall
have notice or who shall be deemed to have notice of this Article and to have
contracted with the Company in the terms hereof solely by virtue of his
acceptance of such office or employment, if in acting as agent for the Company
or as a director, officer, employee or agent of another corporation or other
legal entity or enterprise as aforesaid, he does so by written request of the
Company containing an express reference to this Article; provided that no
indemnification of a director or former director of the Company, or director or
former director of a corporation in which the Company is or was a shareholder,
shall be made except to the extent approved by the Court pursuant to the Company
Act or any other statute. The determination of any action, suit or proceeding bv
judgment, order, settlement, conviction or otherwise shall not, of itself,
create a presumption that the person did not act honestly and in good faith and
in the best interests of the Company and did not exercise the care, diligence
and skill of a reasonably prudent person and, with respect to any criminal
action or proceedings, did not have reasonable grounds to believe that his
conduct was lawful.
22.2 The Company may indemnity any person other than a director in respect of
any loss, damage, costs or expenses whatsoever incurred by him while acting as
an officer, employee or agent for the Company unless such loss, damage, costs or
expenses arises out of failure to comply with instructions, willful act or
default or fraud by such person in any of which events the Company shall only
indemnify such person if the directors, in their absolute discretion, so decide
or the Company by ordinary resolution shall so direct.
22.3 The indemnification provided by this Part shall not be deemed exclusive of
any other rights to which those seeking indemnification may be entitled under
any other Part, or any valid and lawful agreement, vote of members or
disinterested directors or otherwise, both as to action in his official capacity
and as to action in another capacity while holding such
<PAGE>
- 25 -
office, and shall continue as to a person who has ceased to be a director,
officer, employee or agent and shall enure to the benefit of the heirs,
executors and administrators of such person. The indemnification provided by
this Article shall not be exclusive of any powers, rights, agreements or
undertakings which may be legally permissible or authorized by or under any
applicable law. Notwithstanding any other provisions set forth in this Part, the
indemnification authorized by this Part shall be applicable only to the extent
that any such indemnification shall not duplicate indemnity or reimbursement
which that person has received or shall receive otherwise than under this Part.
22.4 The directors are authorized from time to time to cause the Company to give
indemnities to any directors, officer, employee, agent or other person who has
undertaken or is about to undertake any liability on behalf of the Company or
any corporation controlled by it.
22.5 Subject to the Company Act, no director or officer or employee for the time
being of the Company shall be liable for the acts, receipts, neglects or
defaults of any other director or officer or employee, or for joining in any
receipt or act for conformity, or for any loss, damage or expense happening to
the Company through the insufficiency or deficiency of title to any property
acquired by order of the Board for the Company, or for the insufficiency or
deficiency of any security in or upon which any of the moneys of or belonging to
the Company shall be invested or for any loss or damages arising from the
bankruptcy, insolvency, or tortious act of any person, firm or corporation with
whom or which any moneys, securities or effects shall be lodged or deposited or
for any loss occasioned by any error of judgment or oversight on his part or for
any other loss, damage or misfortune whatever which may happen in the execution
of the duties of his respective office or trust or in relation thereto unless
the same shall happen by or through his own willful act or default, negligence,
breach of trust of breach of duty.
22.6 Directors may rely upon the accuracy of any statement of fact represented
by an officer of the Company to be correct or upon statements in a written
report of the auditor of the Company and shall not be responsible or held liable
for any loss or damage resulting from the paying of any dividends or otherwise
acting in good faith upon any such statement.
22.7 The directors may cause the Company to purchase and maintain insurance for
the benefit of any person who is or was a director, officer, employee or agent
of the Company or is or was serving at the request of the Company as a director,
officer, employee or agent of another corporation, a partnership, joint venture,
trust or other enterprise against any liability incurred by him as a director,
officer, employee or agent.
<PAGE>
Yukon [LOGO] BUSINESS CORPORATIONS ACT
Justice FORM 3
Certificate of Continuance
SOLUCORP INDUSTRIES LTD.
I hereby certify that the above-mentioned corporation was continued into Yukon,
as set out in the attached Articles of Continuance, under section 190 of the
Business Corporations Act.
[SEAL]
/s/ M. Richard Roberts
Corporate Access Number: 25807 ------------------------
Date of Continuance: 1997-04-11 M. Richard Roberts
Registrar of Corporations
<PAGE>
YUKON
JUSTICE
BUSINESS CORPORATIONS ACT
(Section 22)
Form 1-02
NOTICE OF ADDRESS OR
NOTICE OF CHANGE OF ADDRESS
- - --------------------------------------------------------------------------------
1. Name of Corporation:
SOLUCORP INDUSTRIES LTD.
- - --------------------------------------------------------------------------------
2. Address of Registered Office:
3081 Third Avenue
Whitehorse, Yukon
Y1A 4Z7
- - --------------------------------------------------------------------------------
3. Records Address:
3081 Third Avenue
Whitehorse, Yukon
Y1A 4Z7
- - --------------------------------------------------------------------------------
4. Post Office Box (address for service by mail):
N/A
- - --------------------------------------------------------------------------------
5. Date Signature Title
04 April 1997 /s/ illegible Corporate Secretary/Director
- - --------------------------------------------------------------------------------
<PAGE>
================================================================================
- - ------------------------ ------------------------
NUMBER SHARES
05000
- - ------------------------ ------------------------
INCORPORATED IN THE PROVINCE OF BRITISH COLUMBIA
SOLUCORP INDUSTRIES LTD.
------------------------
CUSIP 83437C 10 2
------------------------
THIS CERTIFIES THAT
SPECIMEN
is the registered holder of
FULLY PAID AND NON-ASSESSABLE COMMON SHARES WITHOUT PAR VALUE
in the Capital of the above named Company subject to the Memorandum and Articles
of the Company transferable on the books of the Company by the registered holder
in person or by Attorney duly authorized in writing upon surrender of this
Certificate properly endorsed.
This Certificate is not valid unless countersigned by the Transfer Agent and
Registrar of the Company.
IN WITNESS WHEREOF the Company has caused this Certificate to be signed on its
behalf by the facsimile signatures of its duly authorized officers at Vancouver,
British Columbia.
DATED
COUNTERSIGNED AND REGISTERED
THE R-M TRUST COMPANY VANCOUVER
TRANSFER AGENT AND REGISTRAR
By_________________________________________
Authorized Officer
/s/ Joseph [ILLEGIBLE]
President
/s/ [ILLEGIBLE]
Secretary
The Shares represented by this Certificate are transferable at the offices
of The R-M Trust Company, Vancouver, B.C.
================================================================================
<PAGE>
FOR VALUE RECEIVED the undersigned hereby sells, assigns and
tranfers unto
PLEASE INSERT SOCIAL INSURANCE NUMBER OF TRANSFEREE
| | | | - | | | | - | | | |
________________________________________________________________________________
(Name and address of transferee)
________________________________________________________________________________
_________________________________________________________________________ shares
registered in the name of the undersigned on the books of the Company named on
the face of this certificate and represented hereby, and irrevocably constitutes
and appoints
___________________________________________________________________ the attorney
of the undersigned to transfer the said shares on the register of transfers and
books of the Company with full power of substitution hereunder.
DATED:
______________________________________ ________________________________________
(Signature of Witness) (Signature of Shareholder
NOTICE: The signature of this assignment must correspond with the name as
written upon the face of the certificate, in every particular, without
alteration or enlargement, or any change whatsoever, and must be
guaranteed by a bank, trust company or a member of a recognized stock
exchange.
Signature Guaranteed By:
<PAGE>
SAMPLE COPY OF OPTION AGREEMENT
THIS AGREEMENT made and dated this 12th day of September, 1995
BETWEEN:
SOLUCORP INDUSTRIES LTD., a body corporate, incorporated under the
laws of the Province of British Columbia with Registered Office at
800-885 West Georgia Street in the City of Vancouver, in the Province
of British Columbia
(hereinafter referred to as the "Company")
OF THE FIRST PART
AND:
-
-
-
(hereinafter referred to as the "Optionee")
OF THE SECOND PART
WHEREAS:
A. The Optionee, as a director, officer or employee of the Company or a
subsidiary of the Company (all references to "Company" hereafter will be to the
Company and its subsidiaries), is required to dedicate time and efforts to the
affairs of the Company for which the Optionee is not otherwise adequately
remunerated.
B. As an incentive to the Optionee to continue to serve the Company, the Company
desires to grant to the Optionee an option to purchase shares in its capital
stock on the terms hereinafter contained.
C. The shares of the Company are listed for trading on the Vancouver Stock
Exchange ("Exchange").
NOW THEREFORE, in consideration of the premises and the covenants and agreements
hereinafter contained, the Parties hereto agree as follows:
1. The Optionee declares that he/she is a director/employee of the Company.
2. The Company hereby grants to the Optionee an option to purchase _____________
(000,000) shares in the capital of the Company, exercisable at any time on or
before 5:00 p.m., Vancouver time, September 12, 2000 at the price of $13.16 per
share.
3. During the term of the aforesaid Option, the Optionee may exercise, from time
to time, the whole or any part of the Option held, by paying to the Company the
purchase price for the shares being purchased pursuant thereto. Upon receipt in
writing of a request for shares from the Optionee, and payment therefor, in cash
or certified cheque payable to the Company, the Company shall forthwith issue,
allot and deliver to the Optionee such number of shares as shall have been paid
for.
<PAGE>
OPTION AGREEMENT Page 2/2
DATED 12TH SEPTEMBER 1995
4. The Options hereby granted are not assignable by the Optionee. Provided,
however, that if the Optionee shall die while a director, officer or employee of
the Company, the Optionee's Estate shall be entitled to exercise the whole or
any part of the Options existing at the date of death, at any time up to twelve
months after the date of death.
5. If any time during the continued existence of the within Options there shall
be any alteration in the capital stock of the Company, other than an increase in
the authorized or issued capital, then the within options shall attach to an
appropriate number of the shares or securities of the Company which shall have
been created by any such alteration, and the price payable on the exercise of
the options shall be adjusted proportionately to the change in the shares
resulting from such capital alteration.
6. The Optionee's continued service to the Company is a condition of the
continuance of the option herein granted. It is accordingly agreed that if the
Optionee shall, during the term of the within option, cease to be a director,
officer or employee of the Company or a subsidiary of the Company, the option
herein granted the Optionee shall cease and terminate at 5:00 p.m., Vancouver
time, on the thirtieth day after the date of cessation of employment.
7. This Agreement, and any amendments hereto, are subject to the approval of the
Exchange. The Optionee shall not be entitled to exercise the option herein
granted untill all required approvals have been obtained.
8. All references herein are to Canadian dollars.
9. The Parties hereto agree to do such further and other acts and execute such
further and other documents as may be necessary to carry out the true intent and
meaning of this Agreement.
10. This Agreement shall enure to the benefit of and be binding upon the Parties
hereto and their heirs, successors and assigns.
IN WITNESS WHEREOF the Parties hereto have hereunto affixed their hands and
seals the day and year first above written.
The Corporate Seal of Solucorp Industries Ltd.
was hereunto affixed in the presence of:
- - --------------------------------------- (SEAL)
SIGNED, SEALED AND DELIVERED
in the presence of:
- - -------------------------------------- ----------------------------------------
Witness OPTIONEE
<PAGE>
OPTION AMENDMENT AGREEMENT
This Agreement dated August 20, 1996
BETWEEN:
SOLUCOR? INDUSTRIES LTD., a body corporate, incorporated under the
laws of the Province of British Columbia with registered office at 800
- 885 West Georgia Street in the City of Vancouver, in the Province of
British Columbia
(the "Company")
AND:
(the "Optionee")
WHEREAS:
A. The Company granted to the Optionee an option to purchase 92,000 common
shares of the Company (the "Option") exercisable at a price of $13.16 (Canadian)
per share until September 12, 2000, pursuant to a stock option agreement dated
September 12, 1995 (the "Agreement").
B. The price of the common shares of the Company trading on the NASDAQ Bulletin
Board in United States dollars resulted an average trading price over a ten day
period prior to the date of this Agreement of $4.80 (U.S.) per share.
C. The parties hereto wish to amend the Agreement by revising the exercise price
of the Option.
D. Option. The Company considers it in its best interest to revise the exercise
price of the Option.
NOW THEREFORE THIS AGREEMENT WITNESSETH that in consideration of the mutual
covenants and premises contained herein, the parties agree as follows:
<PAGE>
1 The exercise price of the Option pursuant to the Agreement is reduced to $4.80
(U.S.).
2. In all other respects the Agreement shall remain the same and in full force
and effect.
3. This Agreement is subject to regulatory approval as required.
IN WITNESS WHEREOF the parties hereto have executed this agreement the day
first mentioned above.
SIGNED, SEALED AND DELIVERED )
in the presence of: )
)
)
- - ----------------------------- ) -----------------------------
Signature )
)
)
- - ----------------------------- )
Print Name )
)
)
- - ----------------------------- )
Address )
)
)
- - ----------------------------- )
)
)
- - ----------------------------- )
Occupation )
SOLUCORP Th4DUSTRTES LTD.
per:
- - -----------------------------
Authorized Signatory
<PAGE>
AGREEMENT
This Agreement dated October 11, 1995
BETWEEN
SOLUCORP Industries, Ltd. ("SOLUCORP")
520 Victor Street
Saddle Brook, NJ 07663
of the First Part
AND
John Beech Remediation Limited ("JBRL")
Dock Road North
Bromborough
Wirral
Merseyside L62 4TQ
of the Second Part
WHEREAS:
A. SOLUCORP is the beneficial owner of a patent-pending process to
stabilize heavy metal contaminated soils and sludges by the addition of
proprietary reagents to the contaminated soils/sludges under increased
moisture conditions (hereinafler referred to as "MBS')
B. SOLUCORP entering into an exclusive marketing arrangement with JBRL in
the United Kingdom for the purposes of increasing the marketing presence
and potential client base.
C. JBRL obtaining an exclusive marketing license in the Uiiited Kingdom for
the MBS process to increase its market penetration and revenues.
<PAGE>
N0W THEREFORE THE PARTIES AGREE AS FOLLOWS:
The Companies mutually agree to the terms of the SOLUCORP Agreement identified
herein:
1. Exclusive Territory - Based upon the terms of this Agreement defined in this
document, SOLUCORP will grant an exclusive license to market the Company's MBS
product and future enhancements within a territory defined as the United
Kingdom. It is agreed by both parties that if SOLUCORP, in its normal course of
the Agreement. SOLUCORP will agree to provide the MBS proprietary reagents to
JBRL on an individual project basis, custom blended for each site by SOLUCORP's
manufacturer. It is further agreed that the parties will agree, in writing, to
the pricing on each project site.
2. JBRL to pay $50,000 (U.S.) within 60 days. It is agreed that JBRL will use
best efforts to to receive operating permits within the U.K. period during the
initial term of this agreement. After receipt of valid permits, JBRL will agree
to a performance agreement for the first 24 months of the exclusive agreement.
After the 24 month period has elapsed, all penalties will be in the form of
renegotiation of fees and/or discontinuation.
3. SOLUCORP will:
a. Provide MBS technology to JBRL on an exclusive basis for the United
Kingdom during the term of this Agreement.
b. Provide sufficient technical and marketing support to JBRL during the
Term of this Agreement.
4. Term - Both parties agree that the Term of this Agreement will be subject to
performance by both parties to meet the schedules above. The Term, in any case,
will be for 12 nuonths with two additional 12 month extensions based upon
payment of the fee discussed above and a 5 year option subject to performance by
both parties.
5. It is agreed that neither party is an agent of the other party during the
Term of this Agreement. All funding and personnel decisions are requirements
of the individual party unless otherwise indicated by mutual agreements in
writing.
6. JBRL employees and affiliates agree to the terms of the Confidentiality
Agreement already executed by the parties to include but not limited to all
proprietary products and equipment information.
<PAGE>
7. The parties agree that this Agreement is subject to the laws of the United
States and all contractual issues will be subject to the laws of Bergen County,
New Jersey, U.S.A.
IN WITNESS THEREOF
The parties hereto affix their hands and seals the day and year first above
written.
SOLU
CORP
/s/ Peter Martin 10-11-95
- - --------------------------------------- -------------------------------------
Date
/s/ J.G. Sparg
- - ---------------------------------------
Witness
JBRL
/s/ [ILLEGIBLE]
- - --------------------------------------- -------------------------------------
Date
- - ---------------------------------------
Witness
<PAGE>
THIS ADDENDUM AGREEMENT made the 30 day of October, 1995
BETWEEN:
SOLUCORP INDUSTRIES LTD., 520 Victor Street, Saddle Brook, New Jersey
(herein called the "Solucorp")
OF THE FIRST PART
AND:
JOHN BEECH REMEDIATION LIMITED, Dock Road North, Bromborough, Wirral,
Merceyside L62 4TQ, England
(herein called the "JBRL")
OF THE SECOND PART
AND;
JOHN BEECH LIMITED, Dock Road North, Bromborough, Wirral, Merceyside
L62 4TQ, England
(herein called the "John Beech")
OF THE THIRD PART
WHEREAS:
A. Solucorp and JBRL signed an agreement dated October 11, 1995 (the
"Agreement").
B. The parties wish to include John Beech as a party to the Agreement and
to define certain other terms as agreed.
NOW THEREFORE the parties agree that in consideration of the mutual
covenants and premises contained herein, the parties agrees as follows:
1. John Beech, will be a party to the Agreement and will cause JBRL to
perform its obligations thereunder.
2. John Beech, as the sole shareholder of JBRL, will transfer to Solucorp
or as directed by Solucorp in writing a total of 25% of the issued and
outstanding share capital of JBRL for a total consideration of $1.00.
3. John Beech will capitalize JBRL to the extent necessary for JBRL to
conduct its obligations pursuant to the Agreement and to build a remediation
business in the U.K. and other named accounts and territories using Solucorp's
MBS technology in a manner that will not dilute
<PAGE>
the equity shareholdings of Solucorp. In the event JBRL secures remediation
business in any other territory, it will:
(a) pay an annual license fee to Solucorp respecting that territory to
Solucorp prior to commencement of the project; and
(b) pay a design fee of $5.50 per ton of soil remediated on the same
terms as set out herein.
JBRL will not attempt to secure remediation contracts in territories
where Solucorp has granted to any third party the exclusive license to
remediate.
4. John Beech and Solucorp will execute a shareholders agreement with
respect to their shareholdings in JBRL which, among other things, contain the
following terms:
(a) Solucorp will be entitled to nominate one quarter of the directors of
the board of JBRL, with a minimum of one director nominated by
Solucorp notwithstanding that there may be less than four directors of
JBRL;
(b) any funds required to be expended by JBRL in order to develop the U.K.
marketplace for use of the MBS Process will be way of equity injection
by John Beech; there will be no requirement for Solucorp to inject any
funds into JBRL whatsoever;
(c) major decisions will be made by unanimous consent of directors;
(d) John Beech's nominees for director will control the day-to-day
management of the Company;
(e) there will be restrictions on transfer of equity shares so that the
other party has the right of first refusal to purchase;
(f) management remuneration will be as agreed between the parties;
(g) profits will be distributed among the shareholders within 7 days of
finalizing the annual audit accounts; and
(h) all parties to have full access to the books and records of JBRL.
5. Solucorp will arrange for provisions of chemicals required for the MBS
Process to be delivered to JBRL as ordered by JBRL. Solucorp will supply JBRL
with such chemicals for the 4% mixed materials at a price which is equal to
Solucorp's cost. JBRL will arrange the financing in advance with respect to
purchase of any such chemicals on terms satisfactory to the supplier and
Solucorp.
<PAGE>
6. JBRL agrees to pay to Solucorp a design fee of $5.50 (U.S.) per ton of
soil remediated by JBRL, payable within 10 days of JBRL receiving payment by the
client as per the payment schedule during and following the remediation.
Solucorp shall have the right at any time to review or audit the books of JBRL
to confirm the amounts payable or paid. In circumstances where no bonding or
other security is in place to secure payment for the remediation, JBRL will
obtain the consent of Solucorp as to the credit-worthiness of the client prior
to proceeding with remediation.
7. In the event that JBRL does not pay $50,000.00 (U.S.) to Solucorp within
60 days of October 11, 1995, the Agreement will be null and void.
8. The $50,000.00 payable as per paragraph 7 is an annual license fee for
the exclusive right to utilize Solucorp's MBS technology and system in the U.K.
Payment of $50,000.00 (U.S.) during the term hereof shall be made prior to
December 1 in each year of the contract. As a further requirement for the
exclusive right to utilize MBS, JBRL agrees that its minimum gross sales
utilizing the MBS technology and system will be as follows:
(a) $3,000,000.00 (U.S.) in year 1 of this contract beginning on the
earlier of the date a remediation permit is obtained by JBRL and October 1,
1996; and
(b) $6,000,000.00 (U.S.) in each of years 2 and 3 of this contract.
9. In all other respects, the Agreement shall remain in full force and
effect.
10. This Agreement may be executed in counterparts. Any signature received
by facsimile will be deemed to be an original signature.
IN WITNESS WHEREOF the parties hereto have executed this Agreement on the day
and year first above written.
SOLUCORP INDUSTRIES LTD.
Per: [ILLEGIBLE]
----------------------------------
Authorized Signatory
JOHN BEECH REMEDIATION LIMITED
Per: [ILLEGIBLE]
----------------------------------
Authorized Signatory
JOHN BEECH LIMITED
Per: [ILLEGIBLE]
----------------------------------
Authorized Signatory
<PAGE>
THIS AGREEMENT made the 5th day of November, 1996
BETWEEN:
SOLUCORP INDUSTRIES LTD., a British Columbia company, having an office
at 250 West Nyack Road, West Nyack, NY 10994
(herein called "Solucorp")
OF THE FIRST PART
AND:
GLOBAL TECHNOLOGIES INC., a British Columbia company, having an office
at 1024-4720 Kingway, Burnaby, B.C.
(herein called "Global")
OF THE SECOND PART
WHEREAS:
A. Solucorp has the rights to the MBS patent pending system for the
remediation of heavy metal contaminated soils, ashes and sludges (the
"technology");
B. Global wishes to acquire the rights to the Technology for the territory
of Canada (the "territory");
NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the mutual
covenants and premises contained herein, the parties agree as follows:
1. Solucorp agrees to grant to Global the rights to utilize the Technology
(the "License") for use in the Territory for a term of 5 years. The License is
exclusive in the Territory except for a non-exclusive license and research
contract granted to B.C. Research Institute.
2. The term of the License will be 5 years (the "Term"); Provided that in
the event Global is not in default under the License, it may renew the License
for two terms of 5 years each for consideration of $1.00. Solucorp agrees that
further extension or renewal will not be unreasonably denied.
<PAGE>
3. The License will be granted under the terms set out a license agreement
between the parties hereto respecting Canada. Global hereby agrees to execute a
license agreement generally in the form attached hereto as Schedule "A" amended
to reflect the terms of this Agreement and amended further as agreed between the
parties.
4. The price for the granting of the License herein shall be $5,500,000
(Canadian) (the "Purchase Price"), subject to the Adjustment (as herein
defined).
5. The parties agree to commission a valuation of the license being granted
herein (the "Valuation"), to be completed within 30 days or as soon after the
Closing (as hereafter defined).
6. The Purchase Price will be paid as follows:
(a) upon execution of this Agreement, $100,000 as a refundable
deposit to be repaid without interest if this transaction does
not close;
(b) upon Closing, $1,800,000 in cash or certified cheque; and
(c) upon Closing, and subject to the Adjustment, the issuance of
3,600,000 common shares of Global at a deemed price of $1.00 per
share (the "Shares"). If the Valuation has not yet been
completed, the Shares will be held in trust by die solicitor for
Global who shall release them to Solucorp upon receipt of and
subject to the Valuation and the Adjustment.
7. The Purchase Price will be adjusted (the "Adjustment") on the following
terms:
(a) if the Valuation is more that $5,500,000, the Territory will be
reduced such that provinces of Canada from east to west shall be
excluded from the Territory on a proportional basis;
(b) in the event that the Valuation is less than, $5,500,000, the
number of Shares shall be reduced so that the Purchase Price
equals the Valuation price. In no event will the Purchase Price
be reduced below $4,000,000.
8. In the event Solucorp is subject to a takeover, a merger or an
acquisition, Solucorp may repurchase the License for the greater of;
(a) $6,000,000 In cash and/or stock or
<PAGE>
(b) the fair market value of the unexpired portion of the Term as
determined by an independent valuation.
9. Global will pay to So1ucorp a research fee of $1.00 respecting each ton
of soil remediated. Global will provide access to its books to verify payments,
due on the 10th day following the end of the month in which the remediation took
place.
10. During the Term, Solucorp will provide to Global the following with
respect to any remediation project in the Territory for a price of $30.00 (U.S.)
per ton remediated, plus cost only escalation on an annual basis:
(a) Remediation equipment;
(b) Chemical analysis based on information provided by Global;
(c) Field supervision; and
(d) Remediation chemicals.
Global will market the Technology, provide administration, labor, ground
and soil preparation, transportation, testing and all other aspects not provided
by Solucorp. Global will only acquire the above services and products from
Solucorp and from no other source.
11. This Agreement is conditional upon the receipt by the parties hereto of
necessary regulatory and shareholder approval to its completion.
12. The Closing of the transactions herein will take place on January 6,
1997 (the "Closing").
13. The parties will execute and deliver all such further documents, do or
cause to be done all such further acts and things, and give all such further
assurances as may be necessary to give full effect to the provisions and Intent
of this Agreement.
14. This Agreement and the rights, duties, and obligations of any party
hereunder will not be assigned by any party hereto without the prior written
consent of the other, which consent may be unreasonably withheld.
15. There are not representations, warranties, collateral agreements or
conditions except as herein specified.
<PAGE>
16. This Agreement will be governed by and construed in accordance with the
law of British Columbia.
17. This Agreement will endure to the benefit of and be binding upon the
parties and their respective successors and assigns.
18. This Agreement may be executed in several counterparts, each of which
will be deemed to be an original and all of which will together constitute one
and the same instrument.
19. Words and phrases used herein that have acquired special meanings in
the environmental remediation business will be read and construed in accordance
with the special meanings attaching to those words, unless the context otherwise
requires.
20. Should there be a disagreement or a dispute between the parties hereto
with respect to this Agreement or the interpretation thereof, the same will be
referred to a single arbitrator pursuant to the Commercial Arbitration Act
(British Columbia), and the determination of such arbitrator will be final and
binding upon the parties hereto. This Clause 20 will be deemed to be a
submission to arbitration in accordance with the Commercial Arbitration Act.
21. Unless otherwise provided, all dollar amounts referred to in this
Agreement are in lawful money of Canada, payable at par in Vancouver, British
Columbia.
22 Delivery of an executed copy of this Agreement by electronic facsimile
transmission, telecopy, telex, or other means of electronic communication
producing a printed copy will be deemed to be execution and delivery of this
Agreement on the date of such communication by the party so delivering such
copy.
IN WITNESS WHEREOF the parties have executed this Agreement of the date
first above written.
SOLUCORP INDUSTRIES LTD.
- - ------------------------------------
Authorized Signatory
GLOBAL TECHNOLOGIES LTD.
- - ------------------------------------
Authorized Signatory
<PAGE>
Page-1
Licensing Agreement
MBS(R) Exclusive License Model-Specific for Smart International Ltd.
"OVERVIEW" DEFINITION OF LICENSE:
[ ] Smart International Ltd. (SL hereafter) would obtain the right to
"Make, Market, Use & Sub-license" CaS-based MBS under license for a
minimum term of 5 years, with a 5 year Option to continue.
[ ] The license would guarantee SI exclusivity of supply and control of
MBS use & marketing within the People's Republic of China ("China"
hereafter).
() SI would be granted unlimited opportunities to use &/or
market MBS in both On-Site Remediation projects, Fixed Site
Landfill operations and for In-Line applications to
stabilize heavy metals contaminated waste by-products at the
production source.
() In the event that another company - or an MBS Licensee for
another region or territory has access to a project within
China which is not available to SI, SI would have the
automatic right to enter a Teaming Agreement with such a
company for completion of the project, and would be the sole
supplier of MBS reagents for the project. SI's rights would
also include the option to Sub-license the other company in
these circumstances, the period of such a Sub-license to be
one (1) year with a one (1) year option to renew.
[ ] SI's right to manufacture the CaS-based MBS formula/s would require
an agreement to accept SOLUCORP's Technical Expertise Service for a
minimum period of 1 year to insure complete compliance with production
protocols and Quality Assurance/Quality Control standards.
[ ] SOLUCORP would provide on-going marketing and sales advice and support
to SI for a minimum period of 2 years.
[ ] The terms of SI's financial obligations for these rights will include
an initial fee, payable within the first year, an annual licensing fee
for all subsequent years, and a royalty payable per ton
of MBS-processed materials.
[ ] This Agreement is subject to SI completing a Market Survey within
sixty (60) days of this date, and establishing viable operations and
agreeing on-going financial arrangements with Solucorp within a
further four (4) months.
<PAGE>
Page - 2
SPECIFIC SUBJECTS FOR LICENSE TERMS:
(NOTE: The following is not necessarily to be regarded as a complete listing)
1. Manufacturing & Blending:
(/) SI would agree to SOLUCORP maintaining technical oversight of MBS
production and Quality Control for a minimum period of one year, with
an additional year optional if deemed necessary by SOLUCORP's
technical experts.
(/) SOLUCORP would retain the right of final arbitration &/or veto in all
matters relating to product quality in SI's CaS production facility,
including:
* Ability to consistently produce above a specified grade (%
purity) of CaS;
* Ability to manufacture & stockpile sufficient supplies of CaS and
MBS.
(/) SI would agree to accept a SOLUCORP-devised(3) production auditing
process (Per our Attorney & Accountant) to confirm tonnage used on
projects for calculation of royalty fees.
(/) SI would agree to manufacture MBS for sale to SOLUCORP on the basis of
* SOLUCORP's agreement to non-competitive "use &/or sale" of the
chemicals;
* SI's agreement to supply such chemicals matched to defined
specifications;
* SI supplying the chemicals exclusively for SOLUCORP and its own
use.
(/) Any derivation or modification of the MBS process - developed by
either SOLUCORP or SI - remains the proprietary property of SOLUCORP.
2. Marketing / Sales & Use:
(/) SOLUCORP would commit to aiding SI's marketing efforts by:
~~ Establishing "Corporate Identity" directives and guidelines
to maintain one consistent image/presence for MBS throughout
the world.
~~ Directing all freelance sales personnel and "finders" to
report to SI without requiring any fee or reimbursement for
this extension of the sales force.
NOTE: This would entail SI paying their commissions for
projects which proceed instead of SOLUCORP.
~~ Offering a support program for SI's sales staff which could
include:
~~ Defining MBS features & benefits and market-specific
sales techniques
~~ Directing production of physical sales aids
~~ Training &/or supporting staff in selling MBS to
potential clients.
<PAGE>
Page - 3
(MARKETING/SALES & USE cont.)
(/) SI would commit to accepting SOLUCORP's licensees for other
regions which may have exclusive access to projects in China as
Preferred Partners to insure:
* SI's involvement in/control of all projects in the licensed
region of China;
* Establishment of a "partnership network" to expand SI's
operational span via sub-contracting, joint venturing, etc.
on projects;
(/) SI would guarantee to use MBS on every project to which it can be
applied, and would commit to assisting Preferred Partners on
projects for MBS by offering all possible assistance with
government agencies within China.
(/) SI would accept minimum annual tonnage requirements for royalty
payments based on any or all combinations of the following:
~~ SOLUCORP's need to recoup substantial development costs -
and establish a viable income level from such an extensive
relinquishing of its technology.
~~ A budget basis for sales and revenue targeting by SI's
operational staff
NOTE: Total tonnage per year could be established on an
escalating basis after Year #1, but would always be
calculated to include SI's marketing to other end users of
MBS technology.
(/) SI would commit to acting on SOLUCORP'S behalf in China on such
matters as:
-- All reviews of and compliance with relevant environmental
regulations;
-- Obtaining all pertinent Permits and authorizations;
-- All contact with and representations to regulatory authorities.
SOLUCORP agrees to issue 200,000 Stock Options @ $3 value, with
an option exercising period of five (5) years, as remuneration
for this commitment by SI.
LICENSE FEE & ROYALTY STRUCTURE
A. Basic License Fee:
Al. Year #l SOLUCORP's License and Signing-On fee of $2,000,000, payable during
the year.
NOTE: Payment of this amount could include the expected profits from the
exercising of all or some of the 200,000 Stock Options detailed above in
the event that its Year #1 payments cannot be entirely funded from
commercial project sources.
However, in the event of the Options being exercised in the first year,
the Profit Percentage derived from the exercising must be applied to the
total of the Year #l Licensing Fee.
<PAGE>
(BASIC LICENSE FEE cont.)
-- SI has sixty (60) days from the signing of this Agreement to ascertain
the market viability of MBS within China. Within six (6) months after
the signing of this Agreement, SOLUCORP and SI will negotiate the
specific Annual Licensing and Royalty Fees for the full term of the
Agreement. If mutually satisfactory terms cannot be agreed within this
period, and if an extension of the period cannot be agreed, this
Agreement would terminate.
-- If this Agreement is canceled as indicated above, the balance of Stock
Options not exercised would also be canceled. NOTE: All prior payments
in such an event would be non-refundable.
A2. Years #2 to #5 License Fees would be agreed within the first six (6) months
of Year #1, based on an assessment of SI's initial Market Survey.
B. Technical Expertise Consulting Fee:
SI would commit to paying all expenses and SOLUCORP staff's time if
required for direct consulting on technical &/or formula evaluations.
This would be via a standard invoice for service at the end of each month.
C. Royalty Structure:
As an integral part of both parties' negotiations for the flail term of
this Agreement would be a $ amount Royalty for the use of CaS-based MBS in
projects, based on an assessment of SI's initial Market Survey.
-o-0-o-
This Agreement In Principle is signed this 4th day of June, 1997 by:
For Solucorp Industries: For Smart International Ltd.:
/s/ Peter R. Mantia /s/ Q. B Zheng
Peter R. Mantia Dr. Q. B. Zheng
- - ----------------------------- -----------------------------
President Chairman & Managing Director
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SUBLEASE
BETWEEN
TWIN COUNTY GROCERS, INC.
AND
SOLUCORP
DATED AS OF
MARCH 1, 1996
<PAGE>
TABLE OF CONTENTS
ARTICLE NUMBER SECTION PAGE NUMBER
ARTICLE I. MASTER LEASE 1
ARTICLE II. PREMISES, RENT AND USE 3
ARTICLE III. BUILD-OUT 5
ARTICLE IV. ASSIGNMENT AND SUBLET 5
ARTICLE V. CONDITIONAL LIMITATIONS 5
ARTICLE VI. DECLARATION 12
ARTICLE VII. ADDITIONAL RENT 13
ARTICLE VIII. MECHANIC'S LIENS 14
ARTICLE IX. INDEMNIFICATION, RISK AND
LIABILITY 15
ARTICLE X. MAINTENANCE OF PREMISES 16
ARTICLE XI. INSURANCE 17
ARTICLE XII. SURRENDER OF PREMISES 18
ARTICLE XIII. SUBORDINATION AND ATTORNMENT 19
ARTICLE XIV. SECURITY DEPOSIT 21
ARTICLE XV. NOTICES 22
ARTICLE XVI. MEMORANDUM OF SUBLEASE 23
ARTICLE XVII. LACK OF PARTNERSHIP OR
ASSOCIATION 23
ARTICLE XVIII. NO BROKER 24
ARTICLE XIX. ATTORNEYS FEES 24
ARTICLE XX. NO ALTERATIONS 24
ARTICLE XXI. SIGNS 25
ARTICLE XXII. HOLDOVER 25
ARTICLE XXIII. PARKING 25
ARTICLE XXIV. ENTIRE AGREEMENT 25
ARTICLE XXV. COVENANTS BINDING ON
RESPECTIVE PARTIES 26
ARTICLE XXVI. VALIDITY/PARTIAL VALIDITY 26
ARTICLE XXVII. RIGHTS LIMITED BY THE
MASTER LEASE 26
ARTICLE XXVIII. SUBLESSEE OBLIGATIONS TO
COMPLY WITH MASTER LEASE 26
ARTICLE XXIX. AGENT FOR SERVICE 27
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Exhibit "A" and made a part of this agreement.
1.1 All of the terms, provisions, covenants and conditions contained in the
MASTER LEASE except as herein otherwise expressly provided, and such rights and
obligations as are contained in the MASTER LEASE, during the term of this
Sublease are hereby imposed upon the respective parties hereto, the SUBLESSOR
being substituted for the Lessor or Landlord in the MASTER LEASE, and the
SUBLESSEE being substituted for the Lessee or Tenant in the MASTER LEASE, except
as modified and amended by this Sublease.
1.2 This Sublease is subject to all of the terms, covenants, agreements,
provisions, and conditions of the MASTER LEASE;
1.3 This Sublease shall not be deemed or construed to modify, amend or
affect the terms and provisions of the MASTER LEASE or SUBLESSOR'S obligations
thereunder, to the extent applicable, which shall continue to apply to the space
involved and the occupants thereof as if this Sublease had not been made;
1.4 If SUBLESSOR defaults in paying any Rents, OWNER is authorized to
collect any Rents due or accruing from SUBLESSEE and to apply the net amounts
collected to the Rents due under the MASTER LEASE in such priorities as OWNER
may determine;
1.5 OWNER's receipt or acceptance of any payments from SUBLESSEE shall not
be deemed or construed as releasing SUBLESSOR from SUBLESSOR's obligations under
the MASTER LEASE or the acceptance of SUBLESSEE as a direct tenant.
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ARTICLE II. PREMISES, RENT and USE
2.0 SUBLESSOR hereby sublets to SUBLESSEE, and SUBLESSEE hereby hires from
SUBLESSOR, approximately 7,000 square feet of the LEASED PREMISES on the ground
and second floor as same is shown on a sketch annexed hereto as Schedule "B",
("DEMISED PREMISES") for a six (6) year term commencing March 1, 1996 and ending
on February 28, 2002, at the annual base rent of One Hundred Forty Four Thousand
($144,000) Dollars, which SUBLESSEE hereby agrees to pay in equal monthly
installments in advance on the first day of each and every month during the term
hereof, provided, however, that the first of said monthly installments shall be
paid to SUBLESSOR simultaneously with the execution and delivery of this
Agreement.
2.1 Electrical service, water, heating, ventilation and air conditioning
shall be maintained by SUBLESSOR and SUBLESSOR shall operate the heating,
ventilating and air conditioning systems (hereinafter called the "systems") and,
subject to energy conservation requirements of governmental authorities, shall
furnish heat, ventilating and air conditioning service in the DEMISED PREMISES
through such systems, as may be required for comfortable occupancy of the
DEMISED PREMISES. The charges and costs of maintaining the systems shall be
included in the base rent. SUBLESSOR shall also provide electrical service,
water service, without specific measurement, which shall be included in the base
rent.
2.2 Except as is otherwise set forth herein, SUBLESSEE shall at its expense
procure and maintain all governmental licenses and
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permits including without limitation sign permits required for the operation of
SUBLESSEE'S business at the DEMISED PREMISES and at all times comply with the
requirements of each such licenses and permits.
2.3 Said premises shall be used by SUBLESSEE for general office use
including storage and meeting rooms, and for no other purpose or purposes
whatsoever.
2.4 SUBLESSEE is not obligated to pay a proportionate share of Real Estate
Taxes.
2.5 SUBLESSEE shall pay an additional monthly sum to be agreed to in
writing by the parties prior to June 1, 1996, as additional rent for ordinary
refuse removal, which shall be due in advance on the first day of each and every
month during the term of this lease commencing June 1, 1996. Thereafter the
refuse expense may be increased in proportion to increases in overall refuse
removal costs incurred by SUBLESSOR. In the event the parties fail to agree upon
the initial refuse expense prior to June 1, 1996 then the refuse expense shall
be determined by arbitration in Rockland County, New York administered by the
American Arbitration Association in accordance with its Commercial Arbitration
Rules. All fees and expenses of the arbitration shall be borne by the parties
equally. However, each party shall bear the expense of its own counsel, experts,
witnesses, and preparation and presentation of proofs.
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ARTICLE III. BUILD-OUT
3.0 Notwithstanding any terms to the contrary herein, prior to SUBLESSEE's
occupancy, SUBLESSOR shall construct partitions in the DEMISED PREMISES in
accordance with the sketch annexed hereto as Schedule "B" and shall obtain all
applicable building permits and certificates of occupancy at its sole cost and
expense.
3.1 SUBLESSEE shall not perform any construction or make any alterations,
additions or changes to the premises without the prior written consent of OWNER
and SUBLESSOR.
ARTICLE IV. ASSIGNMENT AND SUBLET
4.0 SUBLESSEE shall not, without the prior written consent of SUBLESSOR and
OWNER, assign this Sublease, nor suffer or permit it to be assigned by operation
of law or otherwise, nor shall SUBLESSEE, without the prior written consent of
SUBLESSOR and OWNER, underlet or permit the DEMISED PREMISES, or any part
thereof, to be used by others. The restrictions contained in this Article IV
shall not apply to a sale or merger of SUBLESSEE, where the Assignee is
financially responsible.
ARTICLE V. CONDITIONAL LIMITATIONS - DEFAULT PROVISIONS
5.0 This Sublease and the term are subject to the limitations that, if at
any time after the date hereof, any one of the following events (hereinafter
called an "Event of Default") shall occur:
a. If SUBLESSEE shall make an assignment for the benefit of its creditors;
or
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b. If any petition shall be filed by or against SUBLESSEE in any court,
whether or not pursuant to any statute of the United States or of any State, in
any reorganization, composition, extension, arrangement or insolvency
proceedings, and the same is not dismissed in SIXTY (60) days as respects any
petition filed against SUBLESSEE provided during such period SUBLESSEE continues
to pay all Rent, and other charges and perform all of its obligations under this
Sublease;
c. If SUBLESSEE, or a trustee or custodian appointed for all or a
substantial portion of SUBLESSEE'S property pursuant to the provisions of any
insolvency, bankruptcy, reorganization or other law then in effect, shall fail
within sixty (60) days or such other period of time provided by law or an order
of a court having competent jurisdiction, to provide SUBLESSOR with adequate
protection as that term is used in 11 USC 361, and specifically the indubitable
equivalent of SUBLESSOR'S interest in the Premises as provided in 11 USC 361(3)
and/or adequate assurances of future performance other than this SUBLEASE, as
required by 11 USC Section 365 (b). In the event that a petition shall be filed
by or against SUBLESSEE in any bankruptcy, reorganization, composition,
arrangement or insolvency proceeding pursuant to the provisions of the present
Bankruptcy Code or any subsequent Code or Laws similar thereto or amending same,
demand shall be and is hereby deemed automatically made for relief from the
imposition of the automatic stay presently imposed by 11 USC 362, or such later
section and shall be deemed the request of SUBLESSOR for a hearing to be held
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with regard to the modification, termination or lifting of said stay and shall
be deemed effective as of the date of filing of said petition or by or against
SUBLESSEE pursuant to 11 USC Section 362(e); or
d. If SUBLESSEE shall assign, mortgage or encumber this Sublease, or sublet
the whole or any part of the DEMISED PREMISES, otherwise than as expressly
permitted hereunder; or
e. If SUBLESSEE shall fail to pay any installment of the Base Rent set
forth in Article II of this Sublease or any part thereof more than thirty (30)
days after the same shall be due; or
f. If SUBLESSEE shall fail to pay any item of Additional Rent or any other
charge required to be paid by SUBLESSEE hereunder, or any part thereof more than
thirty (30) days after the same shall be due; or
g. If SUBLESSEE shall fail to perform or observe any other requirement of
this Sublease not hereinbefore in this Paragraph 5.0 specifically referred to on
the part of SUBLESSEE to be performed or observed, and such failure shall
continue for thirty (30) days after notice thereof from SUBLESSOR or OWNER to
SUBLESSEE; or
h. If SUBLESSEE shall abandon the DEMISED PREMISES or fail to keep the
DEMISED PREMISES occupied to the extent necessary to maintain fire insurance
coverage; or
i. If any execution, attachment or other process of law or equity shall be
issued against SUBLESSEE or a substantial portion of SUBLESSEE'S property,
whereupon the DEMISED PREMISES
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shall be taken or occupied by someone other than SUBLESSEE; or
j. If a petition or a proceeding is filed or commenced by or against
SUBLESSEE for its dissolution or liquidation (other than in connection with any
merger permitted hereunder), or if its property is taken by any governmental
authority in connection with a dissolution or liquidation, and if filed or
commenced against SUBLESSEE the same is not dismissed within sixty (60) days; or
k. If SUBLESSEE shall fail to pay, bond or otherwise remove, any amount due
in connection with any work done in connection with the DEMISED PREMISES within
the time specified in Article 8 hereof; then upon the happening of any one or
more of the aforementioned Events of Default, and the expiration of the period
of time for curing the same, SUBLESSOR may give to SUBLESSEE a notice of
intention to end the term of this Sublease ("Notice of Termination") at the
expiration of ten (10) days from the date of service of such Notice of
Termination, and at the expiration of such ten (10) days, the term, as well as
all of the right, title and interest of SUBLESSEE hereunder, shall wholly cease
and expire in the same manner and with the same force and effect as if the date
of expiration of such ten (10) day period were the date originally specified
herein for the expiration of this Sublease and the term, and SUBLESSEE shall
then quit and surrender the Premises to the SUBLESSOR, but SUBLESSEE shall
remain liable as hereinafter provided.
5.1 If this Sublease shall be terminated as in the preceding Paragraph 5.0
hereof provided, SUBLESSOR or SUBLESSOR'S agents or
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servants, may re-enter the DEMISED PREMISES and remove therefrom SUBLESSEE, its
agents, employees, servants, licensees, and any subtenants and other persons,
firms or corporations and all or any of its or their property, either by summary
dispossession proceedings or by any suitable action or proceeding at law,
without being liable to indictment, prosecution or damages therefor, and
repossess and enjoy said premises, together with all additions, alterations and
improvements thereto.
5.2 In case of any such termination, re-entry, or dispossession by summary
proceedings or otherwise, SUBLESSEE agrees that:
a. The Base Rent, and Additional Rent, and all other charges required
to be paid by SUBLESSEE hereunder shall thereupon become due and be paid up
to the time of such termination, re-entry or dispossession, and SUBLESSEE
shall also pay to SUBLESSOR all reasonable expenses, reasonable attorneys'
fees, brokerage commissions, and all other costs paid or incurred by
SUBLESSOR for restoring the DEMISED PREMISES to good order and condition
and for altering and otherwise preparing the same for reletting;
b. SUBLESSOR may, at any time and from time to time, resublet the
DEMISED PREMISES, in whole or in part, either in its own name or as agent
of SUBLESSEE, for a term or terms which, at SUBLESSOR'S option, may be for
the remainder of the then current term of this Sublease, or for any longer
or shorter period;
c. SUBLESSEE shall be obligated to and hereby agrees to pay to
SUBLESSOR, upon demand, and SUBLESSOR shall be entitled to
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recover from SUBLESSEE, damages in an amount equal to the excess, if any,
of all Base Rent, Additional Rent, and other charges and items as would be
required hereunder to be paid by SUBLESSEE for each calendar month had this
Sublease and the term not been terminated, or had SUBLESSOR not so
re-entered, over the rents, if any, collected by SUBLESSOR in respect of
such calendar month pursuant to any re-subletting. Said damages shall be
payable by SUBLESSEE to SUBLESSOR in monthly installments in the same
manner as Base Rent hereunder, and any suit or action brought to collect
the amount of the deficiency for any month shall not prejudice in any way
the rights of SUBLESSOR to collect the deficiency for any subsequent month
by a similar proceeding; and
d. If the Sublease shall terminate by reason of the occurrence of any
default of SUBLESSEE, SUBLESSOR shall at its option and election be
entitled, notwithstanding any other provision of this Sublease, or any
present or future law, to recover from SUBLESSEE or SUBLESSEE's estate, as
damages for loss of the bargain and not as a penalty, a lump sum which at
the time of such termination of this Lease equals the then present worth of
the Basic Rent, such lump sum being discounted to the date of termination
at the rate of six (6%) percent per annum, or the maximum amount which may
be allowed by statute or rule of law, whichever is less.
e. If the statute or rule of law governing SUBLESSOR'S claim for
damages shall limit the amount of such claim capable of being so proved and
allowed, SUBLESSOR shall be entitled to prove
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as and for liquidated damages and have allowed an amount equal to the
maximum allowed by or under such statute or rule of law.
5.3 In connection with any reletting, SUBLESSOR, at its option, may make
alterations, repairs and/or decorations which shall not operate or be construed
to release SUBLESSEE from liability hereunder. SUBLESSOR shall in no event be
liable in any way whatsoever for failure to relet the DEMISED PREMISES, or in
the event that the DEMISED PREMISES are relet, for failure to collect rent
thereof under such reletting, and in no event shall SUBLESSEE be entitled to
receive any excess of such annual rents over the sums payable By SUBLESSEE to
SUBLESSOR hereunder. Suit(s) for the recovery of such damages, or for any
installments thereof, may be brought by SUBLESSOR from time to time at its
election. Nothing herein contained shall be deemed to require SUBLESSOR to
postpone suit until the date when the term would have expired if it had not been
terminated under the provisions of this Sublease, or under any provision of law,
or had SUBLESSOR not re-entered into or upon the DEMISED PREMISES.
5.4 SUBLESSEE, for itself and any and all others claiming through or under
SUBLESSEE, including but not limited to its creditors, upon the termination of
this Sublease and the term in accordance with the terms hereof, or in the event
of entry of judgment for the recovery of possession of the DEMISED PREMISES, by
process of law or otherwise, hereby waives any right or redemption provided or
permitted by any statute, law or decision now or hereafter in force, and does
hereby waive, surrender and give up
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all rights and privileges which it or they may or might have under and by reason
of any present or future law or decision, to redeem the DEMISED PREMISES or for
a continuation of this Sublease after having been dispossessed or ejected
therefrom by process of law, or otherwise. SUBLESSEE waives all right to trial
by jury in any action or summary or other judicial proceeding hereafter
instituted by SUBLESSOR or OWNER against SUBLESSEE in respect to the DEMISED
PREMISES.
5.5 The word "re-entry" as used herein is not restricted to its technical
legal meaning.
ARTICLE VI. DECLARATION
6.0 SUBLESSEE shall within five (5) days of written request by SUBLESSOR or
OWNER, execute and deliver to SUBLESSOR or OWNER as the case may be a written
declaration in recordable form:
a. Ratifying this Sublease;
b. Expressing the commencement and termination dates thereof;
c. Certifying that this Sublease is in full force and effect and has not
been assigned, modified, supplemented or amended, except by such writings as
shall be stated;
d. That all conditions under this Sublease to be performed by SUBLESSOR
have been satisfied;
e. That there are no defenses or offsets against the enforcement of this
Sublease by SUBLESSOR or stating those claimed by SUBLESSEE;
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f. The amount of advance rental, if any, (or none if such is the case) paid
by the SUBLESSEE;
g. The date to which the rental has been paid; and
h. The amount of Twenty Four Thousand ($24,000) Dollars security which has
been deposited with SUBLESSOR.
Said declaration shall be executed and delivered by SUBLESSEE from time to
time as may be requested by SUBLESSOR or OWNER.
ARTICLE VII. ADDITIONAL RENT
7.0 In addition to the base rent, all other payments to be made by
SUBLESSEE shall be deemed to be and shall become additional rent hereunder
whether or not the same be designated as such; and shall be due and payable on
demand or together with the next succeeding installment of rent, whichever shall
first occur unless expressly set forth herein to the contrary; and SUBLESSOR
shall have the same remedies for failure to pay the same as for a nonpayment of
base rent. SUBLESSOR, at its election, shall have the right to pay or to do any
act which requires the expenditure of any sums of money by reason of the failure
or neglect of SUBLESSEE to perform any of the provisions of this Sublease, and
in the event SUBLESSOR shall at its election pay such sums or do such acts
requiring the expenditure of monies, SUBLESSEE agrees to pay SUBLESSOR, upon
demand, all such sums and the sums so paid by the SUBLESSOR together with the
interest thereon, shall be deemed additional rent and be payable as such.
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ARTICLE VIII. MECHANIC'S LIENS
8.0 SUBLESSEE shall not permit any mechanic's lien to be filed against the
fee of the LEASED PREMISES or against the SUBLESSEE'S leasehold interest in the
DEMISED PREMISES by reason of work, labor, services, or materials supplied or
claimed to have been supplied, whether prior or subsequent to the commencement
of the term hereof, to SUBLESSEE or anyone holding the DEMISED PREMISES.
SUBLESSEE shall, within ten (10) days after notice of the filing thereof, cause
such lien to be discharged of record by payment, deposit, bond, order of a court
of competent jurisdiction, or otherwise. If SUBLESSEE shall fail to cause such
lien to be discharged within such ten (10) day period, then, in addition to any
other right or remedy of SUBLESSOR, or OWNER, SUBLESSOR may, but shall not be
obligated to, discharge such lien either by paying the amount claimed to be due
or by procuring the discharge of such lien by deposit or by bonding proceedings,
and in any such event SUBLESSOR shall be entitled, if SUBLESSOR so elects, to
compel the prosecution of an action for the foreclosure of such mechanic's lien
by the lienor and to pay the amount of the judgment for and in favor of the
lienor, with interest, costs, and all other allowances. Any amount paid by
SUBLESSOR for any of such purposes, with interest thereon at the rate of 15% per
annum from the date of payment or deposit, shall be repaid by the SUBLESSEE to
SUBLESSOR on demand, and if unpaid may be treated as additional rent as provided
for elsewhere in this Sublease. Nothing in this Sublease shall be construed in
any way as constituting the consent or
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request of the SUBLESSOR, express or implied, by inference or otherwise, to any
contractor, subcontractor, laborer, or materialman for the performance of any
labor or the furnishing of any materials for any specific improvement,
alteration, or repair of or the Subleased property or as giving SUBLESSEE the
right, power, or authority to contract for or permit the rendering of any
service or the furnishing of any material that would give rise to the filing of
any mechanic's lien against the fee of the DEMISED PREMISES or the building.
ARTICLE IX. INDEMNIFICATION, RISK AND LIABILITY
9.0 OWNER and SUBLESSOR shall not be liable in the event of any
interruption in the supply of any utilities.
9.1 SUBLESSEE shall indemnify SUBLESSOR and OWNER and save it and them
harmless from suits, actions, damages, liability and expense in connection with
loss of life, bodily or personal injury or property damage arising from the
occupancy or use by SUBLESSEE of said DEMISED PREMISES or any part thereof,
including, without limitation, the sidewalks, parking lots and common areas and
facilities within the building of which the DEMISED PREMISES are a part, or
occasioned wholly or in part by any act or omission of SUBLESSEE, its agents,
contractors, employees, servants, invitees, or licensees.
9.3 SUBLESSOR and OWNER shall not be responsible or liable at any time for
any loss or damage to SUBLESSEE'S equipment or fixtures, or other personal
property of SUBLESSEE.
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9.4 SUBLESSOR and OWNER shall not be responsible or liable for any defect,
latent or otherwise, in any portion of the building of which the DEMISED
PREMISES are a part or any of the equipment, machinery, utilities, appliances or
apparatus therein, nor shall it be responsible or liable for any injury, loss or
damage to any person or to any property of SUBLESSEE or other person caused by
or resulting from pipes bursting or breaking, or by or from leakage or by or
from steam, snow or ice, running, backing up, or seeping, or the overflow of
water or sewage in any part of said DEMISED PREMISES or for any injury or damage
caused by or resulting from any defect in the occupancy, construction, operation
or use of any of said premises, building, machinery, apparatus or equipment by
any person or by or from the acts or negligence of any other occupant of the
LEASED PREMISES.
9.5 In case SUBLESSOR and/or OWNER shall without fault on its or their part
be made a party to any litigation commenced by or against SUBLESSEE, then
SUBLESSEE shall indemnify, protect and hold SUBLESSOR and OWNER harmless and
shall pay all costs, expenses and reasonable attorney's fees of SUBLESSEE and
OWNER upon demand.
ARTICLE X. MAINTENANCE OF PREMISES
10.0 Upon completion of partition construction in accordance with paragraph
3.0 hereof, SUBLESSEE accepts the DEMISED PREMISES in their "as is" condition
and SUBLESSEE, at its expense, shall be responsible for maintaining and
repairing the DEMISED PREMISES, except structural repairs and replacements and
building system repairs and replacements and shall clean and take good care of
the
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DEMISED PREMISES. SUBLESSEE, at its expense shall also maintain, clean and
repair the DEMISED PREMISES and the Building, as shall be required by reason of
the installation, use or operation of SUBLESSEE's Property in the Premises, the
moving of SUBLESSEE's Property in or out of the Building, or the misuse or
neglect of the DEMISED PREMISES or Building by SUBLESSEE or any of its
employees, agents or contractors.
ARTICLE XI. INSURANCE
11.0 SUBLESSEE shall maintain at its own cost and expense public liability
insurance on an occurrence basis with minimum limits of liability in an amount
of_____ Million ($_,000,000.00) Dollars for bodily injury, personal injury or
death to any one person and _____ Million ($_,000,000.00) Dollars for bodily
injury, personal injury or death to more than one person and _____ Million
($___,000,000.00) Dollars with respect to damage to property by water or
otherwise. Furthermore, SUBLESSEE shall name SUBLESSOR and OWNER as additional
insureds on said policy and furnish SUBLESSOR and OWNER with copies of said
policy prior to the commencement of this Sublease and furnish copies of renewal
policies to the SUBLESSOR and OWNER. SUBLESSEE shall also maintain at its own
cost and expense fire and extended coverage, vandalism, malicious mischief and
special extended coverage insurance in an amount, which in SUBLESSOR's
reasonable opinion is adequate to cover the cost of replacement of all personal
property, decorations, trade fixtures, furnishings, equipment and all contents
in the premises and workers compensation insurance
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covering all persons employed by SUBLESSEE or as required by law.
11.1 Any insurance procured by SUBLESSEE as herein required shall be issued
in the State of New York and shall contain endorsements that:
a. Such insurance may not be canceled or amended without ten (10) days'
written notice by certified mail to SUBLESSOR and OWNER by the insurance
company;
b. SUBLESSEE shall be solely responsible for payment of premiums and
SUBLESSOR and OWNER shall not be required to pay any premiums for such
insurance; and
c. Neither OWNER or SUBLESSOR shall not be liable for any damage for fire,
casualty or other peril includable in any insurance policy maintained or
required to be maintained by SUBLESSEE, no matter how caused, it being
understood that the SUBLESSEE will look solely to its insurer for reimbursement.
SUBLESSEE shall obtain a waiver of subrogation clause in such insurance policy
or policies and deliver SUBLESSOR evidence and OWNER that such waiver of
subrogation clause has been included in its insurance policy or policies.
ARTICLE XII. SURRENDER OF PREMISES
12.0 At the expiration of this Sublease, SUBLESSEE shall surrender the
DEMISED PREMISES in the same condition it was upon delivery of possession
thereto under this Sublease, including all additions, alterations, and
improvements made by SUBLESSEE, except as is otherwise set forth herein.
SUBLESSEE'S obligations to perform shall survive the end of the term of this
Sublease. If
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SUBLESSEE fails to remove its personal property upon the expiration of this
Sublease, the property shall be deemed abandoned and shall become the property
of the SUBLESSOR.
ARTICLE XIII. SUBORDINATION AND ATTORNMENT
13.0 This Sublease and all rights of SUBLESSEE hereunder are subject and
subordinate to the MASTER LEASE and to all ground and/or underlying Leases and
to all trust indentures and mortgages, blanket or otherwise, which do now or may
hereafter affect the same or the real property of which the DEMISED PREMISES
form a part (and which may also affect other property) and to any and all
renewals, modifications, consolidations, replacements and extensions thereof. It
is the intention of the parties that this provision by self-operative and that
no further instrument shall be required to effect such subordination of this
Sublease. SUBLESSEE shall, however, upon demand at any time or times, promptly
execute, acknowledge and deliver to SUBLESSOR or OWNER, without expense to
SUBLESSOR or OWNER, any and all instruments that may be necessary or proper to
subordinate this Sublease and all rights of SUBLESSEE hereunder to any such
Leases, indentures, and/or mortgages or to confirm or evidence said
subordination, and in the event that SUBLESSEE shall fail or neglect so to
execute, acknowledge and deliver any such subordination instrument or
certificate, SUBLESSOR or OWNER, in addition to any other remedies may, as the
agent or attorney-in-fact of SUBLESSEE, execute, acknowledge and deliver the
same and SUBLESSEE hereby irrevocably nominates, constitutes and appoints
SUBLESSOR or OWNER or SUBLESSOR'S or OWNER's designee as
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SUBLESSEE's proper and legal attorney-in-fact for such purpose. SUBLESSEE
covenants and agrees, in the event any proceedings are brought for the
foreclosure of any such mortgage, to attorn to the purchaser upon any such
foreclosure sale and to recognize such purchaser as the SUBLESSOR under this
Sublease or, in the event of the termination, for any reason whatsoever, of any
such underlying Lease above referred to, that SUBLESSEE will attorn to and
recognize such holder as the then SUBLESSOR under this Sublease to the same
extent and effect as the original SUBLESSOR hereunder. SUBLESSEE agrees to
execute and deliver at any time and from time to time, upon the request of
SUBLESSOR, or OWNER or any such holder, any instrument which, in the sole
judgment of SUBLESSOR or OWNER may be necessary or appropriate in any of such
events to evidence such attornment. SUBLESSEE hereby appoints SUBLESSOR or OWNER
or SUBLESSOR's designee, or OWNER's designee, such reversioner, and the holder
of such mortgage, or any of them, as the circumstances may require, the
attorney-in-fact, irrevocably, of SUBLESSEE to execute and deliver for and on
behalf of SUBLESSEE any such instrument.
13.1 SUBLESSEE agrees that if by reason of default on the part of SUBLESSOR
or OWNER herein, under any ground or underlying Lease or any mortgage if the
underlying OWNER or mortgagee shall enter into and become possessed of the real
property of which the DEMISED PREMISES form a part, or any part or parts of
which real property, either through possession or foreclosure action or
proceedings, or otherwise, then if this Sublease is in full force
20
<PAGE>
and effect at such time, SUBLESSEE shall attorn to OWNER or mortgagee as its
landlord; and in such event, OWNER or mortgagee shall not be liable to SUBLESSEE
for any defaults theretofore committed by SUBLESSOR and no such default shall
give rise to any rights of offset or deduction against the rents payable under
this Sublease.
The provisions for attornment hereinbefore set forth shall not require the
execution of any further instrument. However, if such OWNER or mortgagee to
which SUBLESSEE agrees to attorn, as aforesaid, reasonably requests a further
instrument expressing such attornment, and SUBLESSEE fails to do so, SUBLESSEE
hereby appoints SUBLESSOR or OWNER, or SUBLESSOR's designee or OWNER's designee
as Lessee's attorney-in-fact to execute any such instrument for and on behalf of
SUBLESSEE.
ARTICLE XIV. SECURITY DEPOSIT
14.0 SUBLESSEE has deposited with SUBLESSOR the sum of Twenty Four Thousand
($24,000) DOLLARS receipt of which is hereby acknowledged. Said deposit shall be
held by SUBLESSOR, in a separate interest bearing bank account as security for
the faithful performance by SUBLESSEE of all the terms of this Sublease by said
SUBLESSEE to be observed and performed. The security deposit shall not be
mortgaged, assigned, transferred or encumbered by SUBLESSEE without the written
consent of SUBLESSOR and any such act on the part of SUBLESSEE shall be without
force and effect and shall not be binding upon SUBLESSOR. SUBLESSOR shall notify
SUBLESSEE of the location of said bank account. The bank account
21
<PAGE>
shall be opened using SUBLESSEE's Federal Tax I.D Number.
14.1 If any of the rents herein reserved or any other sum payable by
SUBLESSEE to SUBLESSOR shall be overdue and unpaid or should SUBLESSOR make
payments on behalf of SUBLESSEE, or SUBLESSEE should fail to perform any of the
terms of this Sublease, then SUBLESSOR may, at its option and without prejudice
to any other remedy which SUBLESSOR may have on account thereof, appropriate and
apply said entire deposit or so much thereof as may be necessary to compensate
SUBLESSOR toward the payment of rent or additional rent for loss or damage
sustained by SUBLESSOR due to such breach on the part of SUBLESSEE; and
SUBLESSEE shall forthwith upon demand restore said security to the original sum
deposited. Should SUBLESSEE comply with all of said terms and promptly pay all
of the said rentals as they fall due and all other sums payable by SUBLESSEE to
SUBLESSOR, said deposit shall be returned in full with interest earned thereupon
to SUBLESSEE at the end of the term.
14.2 In the event of bankruptcy or other credit-debtor proceedings against
SUBLESSEE, all securities shall be deemed to be applied first to the payment of
rent and other charges due SUBLESSOR for all periods prior to the filing of such
proceedings.
ARTICLE XV. NOTICES
15. Any notice, demand, request or other instrument which may be or is
required to be given under this Sublease shall be delivered in person or sent by
overnight delivery by a nationally recognized carrier, and shall be addressed as
follows:
22
<PAGE>
To SUBLESSOR: TWIN COUNTY GROCERS, INC.
145 TALMADGE ROAD
EDISON, NEW JERSEY 08817
and SUBLESSOR'S Attorney: FREDERIC K. BECKER
90 WOODBRIDGE CENTER DRIVE
SUITE 900, BOX 10
WOODBRIDGE, NEW JERSEY 07095
To SUBLESSEE: SOLUCORP [ILLEGIBLE]
250 WEST NYACK ROAD
WEST NYACK, NEW YORK 10994
and SUBLESSEE'S Attorney: DEBRA BERECK, ESQ.
130 NORTH MAIN STREET
NEW CITY, NEW YORK 10956
To OWNER: MARK KARSCH
27 ROBERTS ROAD
NEW CITY, NEW YORK 10956
ROBERT SILVERMAN
384 PLEASANT HILL ROAD
NEW CITY, NEW YORK 10956
and OWNER's Attorney SCHWARTZ & SILVERSTEIN, ESQS.
254 SOUTH MAIN STREET
NEW CITY, NEW YORK 10956
Either party may designate such other addresses as shall be given by
written notice.
ARTICLE XVI. MEMORANDUM OF SUBLEASE
16.0 SUBLESSEE shall not record this Sublease or a memorandum thereof.
ARTICLE XVII. LACK OF PARTNERSHIP OR ASSOCIATION
17.0 SUBLESSOR and OWNER shall in no event be construed, held or become in
any way or for any purpose a partner or associate of SUBLESSEE or any party
associated with SUBLESSEE in the conduct of its business or otherwise.
23
<PAGE>
ARTICLE XVIII. NO BROKER
18.0 SUBLESSEE warrants and represents that he has not dealt with any
broker in connection with this sublease. SUBLESSEE agrees to hold SUBLESSOR and
OWNER harmless from all liabilities arising from any claim for brokerage
commissions, including attorney's fees.
ARTICLE XIX. ATTORNEYS FEES
19.0 In the event that it shall become necessary for SUBLESSOR and/or OWNER
to employ the services of an attorney to enforce any of its or their rights
under this Sublease or to collect any sums due under this sublease or to remedy
the breach of any covenant of this sublease on the part of the SUBLESSEE to be
kept or performed, regardless of whether suit be brought, SUBLESSEE shall pay to
SUBLESSOR and/or OWNER as the case may be such reasonable fees and expenses as
shall be charged by SUBLESSOR'S and OWNER's attorneys for such services. Should
suit be brought for the recovery of possession of the SUBLESSEE'S interests in
the DEMISED PREMISES, or for rent or any other sum due under this Sublease,
SUBLESSEE shall pay to SUBLESSOR all expenses of such suit and any appeal
thereof, including reasonable attorney's fees and expenses.
ARTICLE XX. NO ALTERATIONS
20.0 SUBLESSEE shall not make any alterations, additions or improvements to
the DEMISED PREMISES without SUBLESSOR'S and OWNER'S prior written consent which
SUBLESSOR and OWNER may give or withhold at its and their sole discretion.
24
<PAGE>
ARTICLE XXI. SIGNS
21.0 SUBLESSEE shall not place any signs on LEASED PREMISES or the DEMISED
PREMISES except for one (1) sign on one of the two existing monuments located on
the LEASED PREMISES. Said sign shall be of the same style, material, color and
type as presently appears on the other existing monument upon which a sign is
installed.
ARTICLE XXII. HOLDOVER
22.0 If SUBLESSEE continues occupancy of the DEMISED PREMISES after the
expiration of the term or any extended term, such occupancy shall be deemed a
tenancy from month to month upon the terms, covenants, conditions and rental
rate, plus twenty-five (25%) percent, in effect upon the expiration of the term.
The provisions of this Article shall not be construed to relieve SUBLESSEE from
liability to SUBLESSOR for damages resulting from any such holdover.
ARTICLE XXIII. PARKING
23.0 SUBLESSOR shall designate 19 parking spaces for use by SUBLESSEE, its
employees and guests.
ARTICLE XXIV. ENTIRE AGREEMENT
24.0 This sublease sets forth the entire agreement between the parties. Any
prior conversations or writings are merged herein and extinguished. No
subsequent amendment to this sublease shall be binding upon SUBLESSOR or
SUBLESSEE unless reduced to writing, signed and approved in writing by OWNER.
Submission of this sublease for examination does not constitute any option for
the DEMISED PREMISES and becomes effective as a Sublease only upon
25
<PAGE>
execution and delivery thereof by SUBLESSOR to SUBLESSEE.
ARTICLE XXV. COVENANTS BINDING ON RESPECTIVE PARTIES
25.0 The terms, conditions, covenants, provisions and undertakings herein
contained shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns.
ARTICLE XXVI. VALIDITY/PARTIAL INVALIDITY
26.0 If any term or provision of this Agreement or the application thereof
to any person or circumstances shall, to any extent, be invalid or
unenforceable, the remainder of this Agreement, or the application of such term
or provision to persons or circumstances other than those as to which it is held
invalid or unenforceable, shall not be affected thereby, and each term and
provision of this Agreement shall be valid and be enforced to the fullest extent
permitted by law.
ARTICLE XXVII. RIGHTS LIMITED BY THE MASTER LEASE
27.0 Notwithstanding anything herein contained, the only services or rights
to which SUBLESSEE is entitled hereunder are those to which SUBLESSOR is
entitled under the Master Lease.
ARTICLE XXVIII. SUBLESSEE OBLIGATIONS TO COMPLY WITH MASTER LEASE
28.0 SUBLESSEE shall neither do nor permit anything to be done which would
cause the Master Lease to be terminated or forfeited by reason of any right of
termination or forfeiture reserved or vested in the lessor under the Master
Lease, and the SUBLESSEE shall indemnify and hold SUBLESSOR harmless from and
26
<PAGE>
against all claims of any kind whatsoever by reason of any breach or default on
the part of SUBLESSEE by reason of which the Master Lease may be terminated or
forfeited.
ARTICLE XXIX. AGENT FOR SERVICE
29.0 SUBLESSEE designates DEBRA BERECK, ESQUIRE, 130 NORTH MAIN STREET, NEW
CITY, NEW YORK 10956, as its agent for service of process.
IN WITNESS WHEREOF, the parties hereto have signed this agreement the day
and year first above written.
Dated: West Nyack, New York
Twin County Grocers, Inc.
BY:
--------------------------------
Solucorp
BY:
--------------------------------
27
<PAGE>
LEASE CONTRACT
==============
In San Juan, Puerto Rico this 1 day of June 1996, From the First Part:
1413 Fernandez Juncos, Inc. a corporation organized under the laws of the
Commonwealth of Puerto Rico, represented by its President, Robert P. Sheldon,
(hereinafter referred to as the "Landlord"); From the Second part: SOLUCORP
INDUSTRIES, represented by its Chairman, Joseph Kemprowski, (hereinafter
referred to as the "Tenant").
WITNESSETH
==========
WHEREAS, Landlord is the owner of a certain three story building at 1413
Fernandez Juncos Avenue, Santurce, Puerto Rico, hereinafter referred to as the
"Building").
WHEREAS, Tenant desires to lease from Landlord and Landlord desires to let
to Tenant certain space of the Building,
NOW THEREFORE, in consideration of the terms, conditions and covenants
herein contained the parties hereto mutually do agree to obligate themselves as
follows:
1. PREAMBLE. The preamble to this Agreement is hereby made a part hereof.
2. PREMISES AND TERMS. The Landlord lets to Tenant and Tenant leases from
Landlord office 3-E (hereinafter referred to as the "Demised Premises"), for a
term of one (1) year, commencing June 1, 1996 and terminating May 31, 1997.
Tenant may renew for an additional one (1) year term provided he is not in
default. The rent for the renewal term will be the present rent increased in
accordance with the rise in cost of living
<PAGE>
index applicable to Puerto Rico. Tenant must inform landlord of intention to
renew or not within 60 days of termination of lease.
3. RENT. Tenant agrees to pay Landlord as rent for the Demised Premises an
annual rental of SIX THOUSAND THREE HUNDRED DOLLARS ($6,300.00) in advance.
4. USE OF THE PREMISES. Tenant shall forthwith obtain a use permit for the
Demised Premises and Tenant shall use the Demised Premises for office purposes
only. Tenant shall not use the Demised Premises in any manner forbidden or
prohibited by any laws, rules or regulations of the Commonwealth of Puerto Rico,
the Planning Board or any other governmental authority having jurisdiction over
the premises; nor shall Tenant use the Demised Premises in any manner which
unreasonably interferes with the use and enjoyment of any other tenant in the
building; nor shall Tenant use the Demised Premises in any manner which may
unreasonably be expected to result in damage to the floor, roof or structural
portions of the Building, normal wear and tear excepted.
Tenant shall not make any structural alterations in or to the Demised
Premises or alter the roof or exterior appearance of the Building in any manner
without first procuring the Landlord's written consent.
5. INSURANCE. Tenant shall not do anything in or about the Demised Premises
which will in any way impair or invalidate the obligation of any policy of
insurance on the Landlord's property or the Building, or increase the cost of
insurance coverage of the Building above the standard rate for offices. Landlord
shall not be liable to Tenant for damage to or destruction of Tenant's
<PAGE>
property or that of Tenant's customers, employees or agents, resulting from
fire, water damage or other casualty. Tenant shall, throughout the term of this
lease, maintain in full force public liability insurance insuring both the
Landlord and the Tenant against any and all claims for damages to person or
property or for loss of life or of property occuring upon, or about the Demised
Premises, such insurance to afford immediate protection in the limits of not
less than $100,000.00 in respect to bodily injury or death to any one person and
to the limit of not less than $300,000.00 in respect to any one accident, and to
the limit of not less than $50,000.00 for property damage. TENANT agrees to
indemnify LANDLORD and hold him harmless against any claims for injury or damage
to any person or property on the Premises or resulting from any action of Tenant
and provide insurance coverage for rented area.
6. FIRE OR OTHER CASUALTY. In the event of extensive damage or destruction
of, the Demised Premises, Landlord shall have the option either; (I) to repair
or rebuild the Demised Premises or (II) to terminate this lease by written
notice to Tenant forwarded within sixty (60) days of the occurrence of the fire
or other casualty causing such extensive damage or destruction. Extensive damage
or destruction shall be deemed to have occurred when the cost or repairing the
same exceeds twenty five percent (25%) of the appraised value of the Demised
Premises immediately preceding such fire or other casualty.
Tenant agrees to give the Landlord written notice of any damage to, or
destruction of, the Demised Premises within five (5) days after occurrence
thereof.
<PAGE>
If the demised Premises are so damaged as to be untenable or unfit for
occupancy, or for formal conduct of business, and Tenant temporarily vacates the
Demised Premises, then the rent hereby reserved shall be abated from the date of
the casualty until said premises have been repaired or rebuilt and made fit for
occupancy and use, (such repairs or restoration Landlord agrees to complete
within approximately six months from the date of the Notice of such Casualty),
or, if this Lease is terminated by Landlord as aforesaid, until the date of such
transaction.
It is agreed that the liability of Landlord, if any, hereunder shall be
limited to repairing and restoring as promptly as is reasonable feasible the
Demised Premises, excluding any leasehold improvements by Tenant, to the same
condition it was in immediately prior to such damage by fire or other casualty,
and that Landlord shall not be liable to repair or restore any leasehold
improvement installed by Tenant or fixtures, equipment, inventory or other
property brought upon the Demised Premises by Tenant, nor shall Landlord be
responsible for any delays occasioned by causes beyond its control.
7. PARKING. The Landlord agrees that the Tenant shall have one (1) assigned
parking space included in the rental fee. In addition he will pay $25.00 for
each additional parking space, if he requests.
8. SECURITY DEPOSIT. The Tenant now delivers to the Landlord as a security
deposit the sum of SIX THOUSAND THREE HUNDRED DOLLARS ($6,300.00) which
represents twelve (12) months rent, receipt of which is hereby acknowledged by
the Landlord to insure the faithful performance by Tenant of the terms and
<PAGE>
conditions of this lease contract.
9. SUBLEASE. Tenant shall not have the right to sublease or assign the
whole or part of the Demised Premises without the prior written consent of the
Landlord, which consent shall not be unreaseonably withheld. No sublease or
assignment by Tenant under this lease shall affect or reduce any of the
obligations of tenant under his lease, but the lease shall continue in full
force and effect.
If this lease is assigned or if the Demised Premises or any part thereof is
subleased or occupied by anybody, other than Tenant, Landlord may, after default
by Tenant, collect rent from the assignee, sublessee or occupant, and apply the
net amount collected to the rent herein reserved, but not such assignment,
subletting, occupancy or collection shall be deemed a waiver of this covenant,
or the acceptance of the assignee, sublessee or occupant as tenant or as a
release of tenant of further performance by Tenant of the terms, covenant and
conditions of this Lease on the part of Tenant to be performed. Any violation of
any provisions of this Lease, whether by act or commission, by any assignee,
sublessee or occupant shall be deemed a violation of such provision by Tenant,
it being the intention and meaning of the parties hereto that Tenant shall
assume and be liable to Landlord for any and all acts and ommissions of any and
all assignees, sublessees and occupants.
10. UTILITIES. Water is included in the monthly rent. Tenant delivers to
Landlord $1,800.00 for twelve (12) months of estimated electricity.
11. MAINTENANCE. Tenant shall keep the exterior, interior
<PAGE>
and all doors and windows of the Demised Premises clean and in good order,
condition, and repair as when delivered to Tenant, excepting ordinary wear and
tear, damage by forced majeure, or damaged resulting from Landlord's negligence
and Landlord shall maintain the roof, exterior, and all structural parts of the
Demised Premises, except for damage caused by Tenant's negligence.
12. ENTRY AND INSPECTION. Tenant shall permit Landlord or Landlord's agent
to enter the Demised Premises at all reasonable hours for the purpose of
inspecting the same, or making repairs required hereunder to be performed by the
Landlord, or that Tenant may neglect or refuse to make in accordance with the
terms, covenants and conditions of this Lease.
13. DEFAULT BY TENANT.
(a) The following shall be considered events of default hereunder:
(1) Non-payments by Tenant of any installment of the stipulated rent or
additional rent within ten (10) days of due date.
(2) Non-compliance by Tenant with any of the terms, conditions or covenants
of this Lease except for non-payment of rent, after notice of such
non-compliance has been given to Tenant, and the same has not been corrected
within thirty (30) days hereafter.
(3) Vacation, desertion or abandonment of the premises.
(4) The levy of an attachment or other order to secure the effectiveness of
judgement, or the levy of execution
<PAGE>
upon the property of tenant in the Demised Premises or upon the lease, in any
proceeding pending againts Tenant in any court of competent jurisdiction, unless
such attachment, order or execution be discharged by bond, or otherwise, not
later than twenty (20) days couted from the date upon which Tenant shall have
received notice thereof.
(5) The mere filing by tenant of a voluntary bankruptcy proceeding.
(6) The filing by any creditor against Tenant, in a court of competent
jurisdiction, of any involuntary proceedings permitted under any bankruptcy
statute then in force, unless the same shall have been dismissed or set aside
within thirty (30) days after the filing thereof.
(7) The issuance of an order placing the tenant's leasehold estate under
the control or management of a trustee, liquidator or receiver, with the
exception of a custodial receiver, if same is not vacated within twenty (20)
days after the date or receipt of notice thereof by Tenant.
(b) In the event of any such default, landlord shall have, in addition to all
other rights and limitations provided for by law, the right without notice to
tenant to terminate this lease, in which event Landlord may relet the Demised
Premises, in whole or in part, for the non-expired portion of the term of this
or any part thereof, and received the rent therefor and apply it to the rent
due hereunder, the terms and conditions of such reletting to be at the sole
discretion of the Landlord, and Landlord's action shall be final and binding
upon the Tenant; and Tenant agrees to pay promptly to Landlord on demand, at one
time or from time to
<PAGE>
time, any difference between the rent payable hereunder and any lesser amounts
collected by Landlord from the lessee or lessees to whom the Demised Premises
may be relet as aforesaid.
(c) All remedies given or reserved to landlord hereunder shall be cumulative and
non-exclusive of any other remedies in law or in equity which Landlord might
make use in the exercise or in defense or its rights hereunder.
14. NO WAIVER. Any default in the payment of rent or of other charges or
failure of Landlord to enforce the provisions of this Lease shall not be
construed as creating a custom of deferring payment or of modifying in any way
the terms of this Lease or a waiver of Landlord's rights to terminate this Lease
as herein provided or otherwise enforce the provisions hereof for any
subsequent default.
15. DELIVERY OF POSSESSION. Landlord shall not be liable for any damages
sustained by Tenant arising out of the failure of the Landlord to deliver
possession of the Demised Premises to the Tenant on the date herein provided for
the commencement of this Lease except to the extent of abatement of stipulated
rent from the date of commencement of this Lease to the day possession is
delivered to the Tenant. Tenant acknowledges having inspected the premises and
accepts them as in good condition.
16. RULES AND REGULATIONS. The Tenant understands and agrees that the
Landlord may make, and from time to time modify, alter and amend reasonable
general Rules and Regulations for the operation of the Building and for the the
parking facilities appurtenant thereto, and the Tenant agrees that he and its
employees, agents, contractors and visitors shall faithfully
<PAGE>
observe such Rules and Regulations. The Landlord shall deliver copies of any
such Rules and Regulations to the Tenant as well as any amendments thereto. The
Tenant shall be deemed conclusively to have waived any right which it may have
to object to any such Rules or Regulations. The Landlord shall have no
obligation to the Tenant, contractual or otherwise, to enforce as against other
tenant (s) any Rule or Regulation, and shall not be liable to the Tenant for
failure to do so, but the Landlord agrees that it shall use its best efforts to
remedy any violations of such Rules and Regulations of which it has notice.
17. ENTIRE AGREEMENT. This Lease agreement contains the entire agreement
between the parties and shall not be modified except by an instrument in writing
executed by the parties or their respective successors in interest.
18. BINDING ON SUCCESSORS. This Lease agreement shall inure to the benefit
of and be binding upon the parties hereto and their respective heirs, executors,
administrators, successors or assigns. Tenant shall be jointly and severally
liable hereunder.
19. NOTICES. All notices, demands and communications hereunder shall be
served or given by registered mail, and if intended for Landlord shall be
addressed to Landlord at 1413 Fernandez Juncos Avenue, Santurce, Puerto Rico, or
such address as may be requested by Landlord in writing, and if intended for
Tenant, shall be addressed to Tenant at:
Joseph Kemprowski
Chairman
Solucorp Industries
520 Victor Street
Saddle Brook, New Jersey 07682
<PAGE>
or such address as may requested by Tenant in writing.
20. COMMONWEALTH LAW. This Agreement shall be governed by and construed in
accordance with the laws of, or applicable to, the Commonwealth of Puerto Rico.
IN WITNESS WHEREOF, the parties have hereunto set their hands and seals,
this 1 day of June 1996, at San Juan, Puerto Rico.
TENANT LANDLORD
SOLUCORP INDUSTRIES 1413 FERNANDEZ JUNCOS, INC.
/s/ [ILLEGIBLE] /s/ Robert P. Sheldon
- - ------------------------- -------------------------------
By Dr. Robert P. Sheldon
Chairman President
<PAGE>
A D G R V T
255--LEASE, FOR BUSINESS AND COPYRIGHT(c) 1967 BY ALL-STATE LEGAL
COMMERCIAL PREMISES IND. OR CORP. SUPPLY CO. 269 SHEFFIELD STREET,
MOUNTAINSIDE, NJ 07092
This Lease Agreement, made the day of 1992,
Between
Landlord
CROES-PECORINO INDUSTRIAL CO., a New Jersey Partnership,
residing or located at P.0. Box 509 in the Township of Saddle Brook in the
County of Bergen and State of New Jersey, herein designated as the Landlord,
And
Tenant
EPS ENVIRONMENTAL INC.
residing or located 525 Palmer Avenue in the Borough of Maywood in the County of
Bergen and State of New Jersey, herein designated as the Tenant;
Premises
Witnesseth that, the Landlord does hereby lease to the Tenant and the
Tenant does hereby rent from the Landlord, the following described premises:
One--story building consisting of approximately 9,476 square feet and commonly
known and designated as 520 Victor Street, Saddle Brook, New Jersey. 07662
Term
for a term of five (5) years commencing on May 1, 1992, and ending on April 30,
1997, to be used and occupied only and for no other purpose than sales,
marketing and storage of Mercon products and uses directly related thereto.
Use
Payment of Rent
Upon the following Conditions and Covenants:
1st: The Tenant covenants and agrees to pay to the Landlord, as rent for
and during the term hereof, the sum of $260,590.00 (Two hundred sixty thousand
five hundred ninety dollars) in the following manner:
$3,553.50 per month in advance during the first year of the term hereof;
$3,948.34 per month in advance during the second year of the term hereof;
$4,343.17 per month in advance during the third year of the term hereof;
$4,738.00 per month in advance during the fourth year of the term hereof; and
$5,132.84 per month in advance during the fifth year of the term hereof.
Repairs and Care
2nd: The Tenant has examined the premises and has entered into this lease
without any representation on the part of the Landlord as to the condition
thereof. The Tenant shall take good care of the premises and shall at the
Tenant's own cost and expense, make all repairs, including painting and
decorating, and shall maintain the premises in good condition and state of
repair, and at the end or other expiration of the term hereof, shall deliver up
the rented premises in good order and condition, wear and tear from a reasonable
use thereof, and damage by the elements not resulting from the neglect or fault
of the Tenant, excepted. The Tenant shall neither encumber nor obstruct the
sidewalks, driveways, yards, entrances, hallways and stairs, but shall keep and
maintain the same in a clean condition, free from debris, trash, refuse, snow
and ice.
Glass, etc. Damage Repairs
3rd: In case of the destruction of or any damage to the glass in the leased
premises, or the destruction of or damage of any kind whatsoever to the said
premises, caused by the carelessness, negligence or improper conduct on the part
of the Tenant or the Tenant's agents, employees, guests licensees, invitees,
subtenants, assignees or successors, the Tenant shall repair the said damage or
replace or restore any destroyed parts of the premises, as speedily as possible,
at the Tenant's own cost and expense.
Alterations Improvements
4th: No alterations, additions or improvements shall be made, and no
climate regulating, air conditioning, cooling, heating or sprinkler systems,
television or radio antennas, heavy equipment, apparatus and fixtures, shall be
installed in or attached to the leased premises, without the written consent of
the Landlord. Unless otherwise provided herein, all such alterations, additions
or improvements and systems, when made, installed in or attached to the said
premises, shall belong to and become the property of the Landlord and shall be
surrendered with the premises and as part thereof upon the expiration or sooner
termination of this lease, without hindrance, molestation or injury.
Lights
5th: The Tenant shall not place nor allow to be placed any signs of any
kind whatsoever, upon, in or about the said premises or any part thereof, except
of a design and structure and in or at such places as may be indicated and
consented to by the Landlord in writing. In case the Landlord or the Landlord's
agents, employees or representatives shall deem it necessary to remove any such
signs in order to paint or make any repairs, alterations or improvements in or
upon said premises or any part thereof, they may be so removed, but shall be
replaced at the Landlord's expense when the said repairs, alterations or
improvements shall have been completed. Any signs permitted by the Landlord
shall at all times conform, with all municipal ordinances or other laws and
regulations applicable thereto. Landlord's consent shall not be unreasonably
withheld.
Utilities
6th: The Tenant shall pay when due all the rents or charges for water or
other utilities used by the Tenant, which are or may be assessed or imposed upon
the leased premises or which are or may be charged to the Landlord by the
suppliers thereof during the term hereof, and if not valid, such rents or
charges shall be added to and become payable as additional rent with the
installment of rent next due or within 30 days of demand therefor, whichever
occurs sooner.
Compliance with Laws etc.
7th: The Tenant shall promptly comply with all laws, ordinances, rules,
regulations; requirements and directives of the Federal, State and Municipal
Governments or Public Authorities and of all their departments, bureaus and
subdivisions, applicable to and affecting the said premises, their use and
occupancy, for the correction, prevention and abatement of nuisances, violations
or other grievances in, upon or connected with the said premises, during the
term hereof and shall promptly comply with all orders, regulations, requirements
and directives of the Board of Fire Underwriters or similar authority and of any
insurance companies which have issued or are about to issue policies of
insurance covering the said premises and its contents, for the prevention of
fire or other casualty, damage or injury, at the Tenant's own cost and expense.
Liability Insurance
8th: The Tenant, at Tenant's own cost and expense, shall obtain or provide
and keep in full force for the benefit of the Landlord, during the term hereof,
general public liability insurance, insuring the Landlord against any and all
liability or claims of liability arising out of, occasioned by or resulting from
any accident or otherwise in or about the leased premises, for injuries to any
person or persons, for limits of not less than $500,000.00 for injuries to one
person and $1,000,000.00 for injuries to more than one person, in any one
accident or occurrence, and for loss or damage to the property of any person or
persons, for not less than $100,000.00. The policy or policies of insurance
shall be of a company or companies authorized to do business in this State and
shall be delivered to the Landlord, together with evidence of the payment of the
premiums thereofor, not less than fifteen days prior to the commencement of the
term hereof, or of the date when the Tenant shall enter into possession,
whichever occurs sooner. At least fifteen days prior to the expiration or
termination date of any policy, the Tenant shall deliver a renewal or
replacement policy with proof of the payment of the premium therefor. The Tenant
also agrees to and shall save, hold and keep harmless and indemnify the Landlord
from and for any and all payments, expenses, costs, attorney fees and from and
for any and all claims and liability for losses or damage to property or
injuries to persons occasioned wholly or in part by or resulting from any acts
or omissions by the Tenant or the Tenant's agents, employees, guests, licensees,
invitees, subtenants, assignees or successors, or for any cause
[TEXT MISSING]
<PAGE>
Indemnification
Assignment
9th: The Tenant shall not, without the written consent of the Landlord,
assign, mortgage or hypothecate this lease, nor sublet or sublease the premises
or any part thereof. See Rider attached hereto.
Restriction of use
10th: The Tenant shall not occupy or use the leased premises or any part
thereof, nor permit or suffer the same to be occupied or used for any purposes
other than as herein limited, nor or any purpose deemed unlawful, disreputable,
or extra hazardous, on account of fire or other casualty.
Mortgage Priority
11th: This lease shall not be a lien against the said premises in respect
to any mortgages that may hereafter be placed upon said premises. The recording
of such mortgage or mortgages shall have preference and precedence and be
superior and prior in lien to this lease, irrespective of the date of recording
and the Tenant agrees to execute any instruments, without cost, which may be
deemed necessary or desirable, to further effect the subordination of this lease
to any such mortgage or mortgages. A refusal by the Tenant to execute such
instruments shall entitle the Landlord to the option of cancelling this lease,
and the term hereof is hereby expressly limited accordingly.
Condemnation
Eminent Domain
12th: If the land and premises leased herein, or of which the leased
premises are a part, or any portion thereof, shall be taken under eminent domain
or condemnation proceedings, or if suit or other action shall be instituted for
the taking or condemnation thereof, or if in lieu of any formal condemnation
proceedings or actions, the Landlord shall grant an option to purchase and or
shall sell and convey the said premises or any portion thereof, to the
governmental or other public authority, agency body or public utility, seeking
to take said land and premises or any portion thereof, then this lease, at the
option of the Landlord, shall terminate, and the term hereof shall end as of
such date as the Landlord shall fix by notice in writing; and the Tenant shall
have no claim or right to claim or be entitled to any portion of any amount
which may be awarded as damages or paid as the result of such condemnation
proceedings or paid as the purchase price for such option, sale or conveyance in
lieu of formal condemnation proceedings; and all rights of the Tenant to
damages, if any, are hereby assigned to the Landlord. The Tenant agrees to
execute and deliver any instruments, at the expense of the Landlord, as may be
deemed necessary, or required to expedite any condemnation proceedings or to
effectuate a proper transfer of title to such governmental or other public
authority, agency, body or public utility seeking to take or acquire the said
lands and premises or any portion thereof. The Tenant covenants and agrees to
vacate the said premises, remove all the Tenant's personal property therefrom
and deliver up peaceable possession thereof to the Landlord or to such other
party designated by the Landlord in the aforementioned notice. Failure by the
Tenant to comply with any provisions in this clause shall subject the Tenant to
such costs, expenses, damages and losses as the Landlord may incur by reason of
the Tenant's breach hereof.
Fire and other Casualty
13th: In case of fire or other casualty, the Tenant shall give immediate
notice to the Landlord. If the premises shall be partially damaged by fire, the
elements or other casualty, the Landlord shall repair the same as speedily as
practicable, but the Tenant's obligation to pay the rent hereunder shall not
cease. If, in the opinion of the Landlord, the premises be so extensively and
substantially damaged as to render them untenantable, then the rent shall cease
until such time as the premises shall be made tenantable by the Landlord.
However, if, in the opinion of the Landlord, the premises be totally destroyed
or so extensively and substantially damaged as to require practically a
rebuilding thereof, then the rent shall be paid up to the time of such
destruction and then and from thenceforth this lease shall come to an end. In
no event however, shall the provisions of this clause become effective or be
applicable, if the fire or other casualty and damage shall be the result of the
carelessness, negligence or improper conduct of the Tenant or the Tenant's
agents, employees, guests, licensees, invitees, subtenants, assignees or
successors. In such case, the Tenant's liability for the payment of the rent and
the performance of all the covenants, conditions and terms hereof on the
Tenant's part to be performed shall continue and the Tenant shall be liable to
the Landlord for the damage and loss suffered by the Landlord. If the Tenant
shall have been insured against any of the risks herein covered, then the
proceeds of such insurance shall be paid over to the Landlord to the extent of
the Landlord's costs and expenses to make the repairs hereunder, and such
insurance carriers shall have no recourse against the Landlord for
reimbursement.
Reimbursement of Landlord
14th: If the Tenant shall fail or refuse to comply with and perform any
conditions and covenants of the within lease, the Landlord may, if the Landlord
so elects, carry out and perform such conditions and covenants, at the cost and
expense of the Tenant, and the said cost and expense shall be payable on
demand, or at the option of the Landlord shall be added to the installment of
rent due immediately thereafter but in no case later than one month after such
demand, whichever occurs sooner, and shall be due and payable as such. This
remedy shall be in addition to such other remedies as the Landlord may have
hereunder by reason of the breach by the Tenant of any of the covenants and
conditions in this lease contained.
Inspection and Repair
15th: The Tenant agrees that the Landlord and the Landlord's agents,
employees or other representatives, shall have the right to enter into and upon
the said premises or any part thereof, at all reasonable hours, for the purpose
of examining the same or making such repairs or alterations therein as may be
necessary for the safety and preservation thereof. This clause shall not be
deemed to be a covenant by the Landlord nor be construed to create an obligation
on the part of the Landlord to make such inspection or repairs.
Right to Exhibit
16th: The Tenant agrees to permit the Landlord and the Landlord's agents,
employees or other representatives to show the premises to persons wishing to
rent or purchase the same, and Tenant agrees that on and after next preceding
the expiration of the term hereof, the Landlord or the Landlord's agents,
employees or other representatives shall have the right to place notices on the
front of said premises or any part thereof, offering the premises for rent or
for sale; and the Tenant hereby agrees to permit the same to remain thereon
without hindrance or molestation.
Increase of Insurance Rates
17th: If for any reason it shall be impossible to obtain fire and other
hazard insurance on the buildings and improvements on the leased premises, in an
amount and in the form and in insurance companies acceptable to the Landlord,
the Landlord may, if the Landlord so elects at any time thereafter, terminate
this lease and the term hereof, upon giving to the Tenant fifteen days notice in
writing of the Landlord's intention so to do, and upon the giving of such
notice, this lease and the term thereof shall terminate. If by reason of the use
to which the premises are put by the Tenant or character of or the manner in
which the Tenant's business is carried on, the insurance rates for fire and
other hazards shall be increased, the Tenant shall upon demand, pay to the
Landlord, as rent, the amounts by which the premiums for such insurance are
increased. Such payment shall be paid with the next installment of rent but in
no case later than one month after such demand, whichever occurs sooner.
Removal of Tenant's Property
18th: Any equipment, fixtures, goods or other property of the Tenant, not
removed by the Tenant upon the termination of this lease, or upon any quitting,
vacating or abandonment of the premises by the Tenant, or upon the Tenant's
eviction, shall be considered as abandoned and the Landlord shall have the
right, without any notice to the Tenant, to sell or otherwise dispose of the
same, at the expense of the Tenant, and shall not be accountable to the
Tenant for any part of the proceeds of such sale; if any.
Remedies upon Tenant's Default
19th: If there should occur any default on this part of the Tenant in the
performance of any conditions and covenants herein contained, or if during the
term hereof the premises or any part thereof shall be or become abandoned or
deserted, vacated or vacant, or should the Tenant be evicted by summary
proceedings or otherwise, the Landlord, in addition to any other remedies herein
contained or as may be permitted by law, may either by force or otherwise,
without being liable for prosecution therefor or for damages, re-enter the said
premises and the same have and again possess and enjoy; and as agent for the
Tenant or otherwise, re-let the premises and receive the rents therefor and
apply the same, first to the payment of such expenses, reasonable attorney fees
and costs, as the Landlord may have been put to in re-entering and repossessing
the same and in making such repairs and alterations as may be necessary; and
second to this payment of the rents due hereunder. The Tenant shall remain
liable for such rents as may be in arrears and also the rents as may accrue
subsequent to the re-entry by the Landlord, to the extent of this difference
between the rents reserved hereunder and the rents, if any, received by the
Landlord during the remainder of this unexpired term hereof, after deducting the
aforementioned expenses, fees and costs; the same to be paid as such
deficiencies arise and are ascertained each month.
Termination on Default
20th: Upon the occurrence of any of the contingencies set forth in the
preceding clause, or should the Tenant be adjudicated a bankrupt, insolvent or
placed in receivership, or should proceedings be instituted by or against the
Tenant for bankruptcy, insolvency, receivership, agreement of composition or
assignment for the benefit of creditors, or if this lease or the estate of the
Tenant hereunder shall pass to another by virtue of any court proceedings,
writ of execution, levy, sale, or by operation of law, the Landlord may, if the
Landlord so elects, at any time thereafter, terminate this lease and the term
hereof, upon giving to the Tenant or to any trustee, receiver, assignee or
other person in charge of or acting as custodian of the assets or property of
the Tenant, five days notice in writing, of the Landlord's intention so to do.
Upon the giving of such notice, this lease and the term hereof shall end on
the date fixed in such notice as if the said date was the date originally fixed
in this lease for the expiration hereof; and the Landlord shall have the
right to remove all persons, goods, fixtures and chattels therefrom, by force
or otherwise, without liability for damages.
Non-Liability of Landlord
21st: The Landlord shall not be liable for any damage or injury which may
be sustained by the Tenant or any other person, as a consequence of the failure,
breakage, or obstruction of the water, plumbing, steam, sewer, waste or soil
pipes, roof, drains, leaders, gutters, valleys, downspouts or the like or of the
electrical, gas, power, conveyor, refrigeration, sprinkler, airconditioning or
heating systems, elevators or hoisting equipment; or by reason of the elements;
or resulting from this carelessness, negligence or improper conduct on the part
of any other Tenant or of the Landlord or the Landlord's or this or any other
Tenant's agents, employees, guests, licensees, invitees, subtenants, assignees
or successors; or attributable to any interference with, interruption of or
failure, beyond the control of the landlord, of any services to be furnished or
supplied by the Landlord.
Non-Waiver by Landlord
22nd: The various rights, remedies, options and elections of the Landlord,
expressed herein, are cumulative, and the failure of the Landlord to enforce
strict performance by the Tenant of the conditions and covenants of this lease
or to exercise any election or option or to resort or have recourse to any
remedy herein conferred or the acceptance by the Landlord of any installment of
rent after any breach by the Tenant, in any one or more instances, shall not be
construed or deemed to be a waiver or a relinquishment for the future of the
Landlord of any such conditions and covenants, options, elections
[TEXT MISSING]
<PAGE>
Non-Performance by Landlord
23rd: This lease and the obligation of the Tenant to pay the rent hereunder
and to comply with the covenants and conditions hereof, shall not be affected,
curtailed, impaired or excused because of the Landlord's inability to supply any
service or material called for herein, reason of any rule, order, regulation or
preemption by any governmental entity, authority, department, agency or
subdivision or for any delay which may arise by reason of negotiations for the
adjustment of any fire or other casualty loss or because of strikes or other
labor trouble or for any cause beyond the control of the Landlord.
Validity of Lease
24th: The terms, conditions, covenants and provisions of this lease shall
be deemed to be severable. If any clause or provision herein contained shall be
adjudged to be invalid or unenforceable by a court of competent jurisdiction or
by operation of any applicable law, it shall not affect the validity of any
other clause or provision herein, but such other clauses or provisions shall
remain in full force and effect.
Notices
25th: All notices required under the terms of this lease shall be given and
shall be complete by mailing such notices by certified or registered mail,
return receipt requested, to the address of the parties as shown at the head of
this lease, or to such other address as may be designated in writing, which
notice of change of address shall be given in the same manner.
Title and Quiet Enjoyment
26th: The Landlord covenants and represents that the Landlord is the owner
of the premises herein leased and has the right and authority to enter into,
execute and deliver this lease; and does further covenant that the Tenant on
paying the rent and performing the conditions and covenants herein contained,
shall and may peaceably and quietly have, an enjoy the leased premises for the
term aforementioned.
Entire Contract
27th: This lease contains the entire contract between the parties. No
representative, agent or employee of the Landlord has been authorized to make
any representations or promises with reference to the within letting or to
vary, alter or modify the terms hereof. No additions, changes or modifications,
renewals or extensions hereof, shall be binding unless reduced to writing and
signed by the Landlord and the Tenant.
Mechanics' Liens
30th: If any mechanics' or other liens shall be created or filed against
the leased premises by reason of labor performed or materials furnished for the
Tenant in the erection, construction, completion, alteration, repair or addition
to any building or improvement, the Tenant shall within 15 days thereafter, at
the Tenant's own cost and expense, cause such lien or liens to be satisfied and
discharged of record together with any Notices of Intention that may have been
filed. Failure so to do, shall entitle the Landlord to resort to such remedies
as are provided herein in the case of any default of the lease, in addition to
such as are permitted by law.
Waiver of Subrogation Rights
31st: The Tenant waives all rights of recovery against the Landlord or
Landlord's agents, employees or other representatives, for any loss, damages or
injury of any nature whatsoever to property or persons for which the Tenant is
insured. The Tenant shall obtain from the Tenant's insurance carriers and will
deliver to the Landlord, waivers of the subrogation rights under the respective
policies.
Security
32nd: The Tenant has this day deposited with the Landlord the sum of
$3948.34 as security for the payment of the rent hereunder and the full and
faithful performance by the Tenant of the covenants and conditions on the part
of the Tenant to be performed. Said sum shall be returned to the Tenant,
without interest, after the expiration of this term hereof, provided that the
Tenant has fully and faithfully performed all such covenants and conditions and
is not in arrears in rent. During the term hereof, the Landlord may, if the
Landlord so elects, have recourse to such security, to make good any default by
the Tenant, in which event the Tenant shall, on demand, promptly restore said
security to its original amount. Liability to repay said security to the Tenant
shall run with the reversion and title to said premises, whether any change in
ownership thereof be by voluntary alienation or as the result of judicial sale,
foreclosure or other proceedings or the exercise of a right of taking or entry
by any mortgagee. The Landlord shall assign or transfer said security, for the
benefit of the Tenant, to any subsequent owner or holder of the reversion or
title to said premises, in which case the assignee shall become liable for the
repayment thereof as herein provided, and the assignor shall be deemed to be
released by the Tenant from all liability to return such security. This
provision shall be applicable to every alienation or change in title and shall
in no wise be deemed to permit the Landlord to retain the security after
termination of the Landlord's ownership of this reversion or title. The Tenant
shall not mortgage, encumber or assign said security without the written consent
of the Landlord. At the commencement of the 4th year and again at the
commencement of the 5th year of the term hereof, Tenant shall increase the
amount of the security deposit to equal 2 months of base rent (the original
amount for the first 3 years equals 2 months of base rent during the 2nd year of
the term hereof).
*Balance of Security Deposit, 3,948.34 to be paid Nov 1-1992
SEE RIDERS ANNEXED HERETO AND MADE A PART HEREOF.
[ILLEGIBLE]
The Landlord may pursue the relief or remedy sought in any invalid clause,
by conforming the said clause with the provisions of the statutes or the
regulations of any governmental agency in such case made and provided as if the
particular provisions of the applicable statutes or regulations were set forth
herein at length.
In all references herein to any parties, persons, entities or corporations
the use of any particular gender or the plural or singular number is intended
to include the appropriate gender or number as the text of the within
instrument may require. All the terms, covenants and conditions herein
contained shall be for and shall inure to the benefit of and shall bind the
respective parties hereto, and their heirs, executors, administrators,
personal or legal representatives, successors and assigns.
In Witness Whereof, the parties hereto have hereunto set their hands and
seals, or caused these presents to be signed by their proper corporate officers
and their proper corporate seal to be hereto affixed, the day and year first
above written.
CROES-PECORINO INDUSTRIAL CO.
/s/ Louis Croes, Jr.
Signed, Sealed and Delivered --------------------------------
in the presence of Louis Croes, Jr. Partner Landlord
or Attested by
EPS ENVIRONMENTAL INC.
/s/ Arle Pierro
- - ------------------------------ /s/ Joseph Kemprowski
Arle Pierro, Vice Pres. & Sec. ---------------------------------
Joseph Kemprowski, Pres. Tenant
<PAGE>
State of New Jersey, County of )ss.: Be it Remembered,
that on 19 , before me, the subscriber,
personally appeared
who, I am satisfied, _______________ the person named in and who executed the
within Instrument, and thereupon ____________________ acknowledged that
________________ signed, sealed and delivered the same as act and deed, for the
uses and purposes therein expressed.
State of New Jersey, County of )ss.: Be it Remembered,
that on 19 , before me, the subscriber,
personally appeared
who, being by me duly sworn on h_______ oath, deposes and makes proof to my
satisfaction, that he is the _______________________ Secretary of
______________________ the Corporation named in the within Instrument; that
__________________________ is the ____________________ President of said
Corporation; that the execution, as well as the making of this Instrument, has
been duly authorized by a proper resolution of the Board of Directors of the
said Corporation; that deponent well knows the corporate seal of said
Corporation; and that the seal affixed to said Instrument is the proper
corporate seal and was thereto affixed and said Instrument signed and delivered
by said __________ President as and for the voluntary act and deed of said
Corporation, in presence of deponent, who thereupon subscribed h__________ name
thereto as attesting witness.
Sworn to and subscribed before me,
the date aforesaid.
Lease
================================================================================
TO
================================================================================
Dated, ,19
================================================================================
Expires,
Rent,$
Prepared by:
ASSIGNMENT OF LEASE
For one dollar and other good and valuable consideration, the Tenant as
Assignor assigns this Lease and all the Assignor's rights and privileges
therein, including any and all monies deposited with the Landlord as security,
subject to all the terms, covenants and conditions contained therein; and the
Assignee accepts this Assignment of Lease and assumes and agrees to comply with
and be bound by the terms, covenants and conditions in said Lease contained. The
signature of the Landlord hereto is evidence of the Landlord's consent to and
acceptance of this Assignment of Lease.
- - ---------------------------- ----------------------------
Assignee Assignor
----------------------------
Landlord
<PAGE>
RIDER TO LEASE AGREEMENT
Dated: , 1992
Between: CROES-PECORINO INDUSTRIAL CO.,
a New Jersey Partnership, Landlord
And: EPS ENVIRONMENTAL INC., Tenant
33rd: Tenant shall have the right to sublet or assign in whole or in part,
but Tenant will remain responsible for the rent and other obligations provided
in this lease agreement.
34th: Prior to taking occupancy, Tenant shall:
A. Arrange to have the gas, electric and water billings transferred to
its name;
B. Pay in full the first month's rent;
*C. Pay in full the security deposit;
D. Furnish the Landlord with the applicable certificate of occupancy;
E. Furnish the Landlord with the applicable insurance policy or policies
together with evidence of payment of premiums therefore;
F. Pay to the Landlord its proportionate share of second quarter, 1992
real estate taxes as otherwise set forth herein.
*3948.34 of Security deposit to be paid at signing of Lease Balance of 3948.34
to be paid Nov 1-92
35th: Prior to taking occupancy, Tenant shall obtain its own cost and
expense a certificate of occupancy for its intended use
36th: Each rental payment is due on the first day of each month in advance.
In the event any such payment is more than ten (10) days late, there shall be a
late fee or penalty payable as additional rent in the amount of 5% of the
overdue payment.
37th: Upon taking possession of premises, Tenant shall be deemed to have
accepted the premises in its "as is" condition, except for any of the
alterations on the Additional Rider comprising a portion of this lease
agreement, which may not have been completed at the time Tenant takes occupancy.
38th: Landlord agrees to make the alterations contained in the Additional
Rider attached to and made a part of this lease agreement at its own cost and
expense. Landlord further agrees to attempt to complete all the alterations
prior to the date of occupancy and, if unsuccessful, as soon thereafter as
practical.
39th: Tenant represents that its operation of the premises shall not
involve the use of "hazardous substances" or "hazardous wastes" as defined by
ECRA and that its SIC number is 7310 5160 & 6299
40th: Landlord agrees to provide parking for up to twenty (20) cars.
41st: Tenant represents that its use will involve no manufacturing or
assembly.
<PAGE>
Rider to Lease Agreement
Croes-Pecorino Industrial Co.
and EPS Environmental Inc.
Page -2-
42nd: This lease is intended to be what is commonly known as a "Net Net Net
Lease" whereby all expenses in connection with the property shall be the
obligation of the Tenant.
43rd: In addition to the rent and other expenses and obligations required
of the Tenant herein, the Tenant shall pay the real estate taxes affecting the
demised premises which are also known as Block 707, Lot 30 and incorrectly set
forth on the tax bill as 530 Victor Street, Saddle Brook, New Jersey. Taxes
shall be paid to the Landlord quarterly on the first day of each calendar
quarter in advance and shall be considered as additional rent. Taxes for the
second quarter of 1992 shall be apportioned and Tenant shall pay two-thirds
(2/3) of the quarterly billing prior to taking occupancy (second quarter taxes
equal $1,786.00 and Tenant's share equals $1,190.67).
44th: By way of a concession, Tenant shall be excused from paying one
month's base rent, provided Tenant is not otherwise in default with respect to
any of its other obligations under this lease agreement. The excused rental
period shall be the rent for the month of April, 1993 (the 12th month of the
term hereof).
45th: Tenant shall have the right during the first 6 months of the term
hereof to purchase the entire parcel of land of which the demised premises are a
part. The entire parcel consists of approximately 1.25 acres and includes an
adjoining piece of land to the demised premises with an additional building
contained thereon. The purchase price shall be negotiated between the parties
and the closing date at Tenant's option can be set for any time during the
original term of this lease agreement. Any subdivisions or other approvals or
permits necessary to accomplish this transaction shall be Tenant's obligation
and at Tenant's sole cost and expense.
In order to exercise the rights granted in this paragraph, Tenant shall
have successfully negotiated a purchase price and furnished Landlord with
written notice of its intention to exercise this right by certified mail, return
receipt requested during the first 6 months of the term hereof. In order to be
effective, any such notice must also include a nonrefundable deposit by
certified check made payable to the Landlord in the amount of 10% of the
purchase price.
Tenant shall give the Landlord at least 30 days notice of the date of
closing if Tenant exercises its rights under the provisions of this paragraph.
<PAGE>
Rider to Lease Agreement
Croes--Pecorino Industrial Co.
and EPS Environmental Inc.
Page -3-
46th: At any time during the first 2 1/2 years of the term hereof, Tenant
shall have the right to unilaterally declare the last 2 years of the term of
this lease agreement to be null and void, in which event this lease agreement
will terminate at the end of 3 years. In order to exercise this right, Tenant
must not be in default with respect to any of its other obligations under
this lease agreement and must notify the Landlord within the said 2 1/2 year
period in writing by certified mail, return receipt requested.
CROES-PECORINO INDUSTRIAL CO.
By: /s/ Louis Croes, Jr.
-----------------------------
Louis Croes, Jr., Partner
EPS ENVIRONMENTAL INC.
/s/ Arle Pierro By: /s/ Joseph Kemprowski
- - ------------------------------------- -----------------------------
Arle Pierro, Vice Pres. and Secretary Joseph Kemprowski, President
<PAGE>
ADDITIONAL RIDER TO LEASE AGREEMENT
Dated: , 1992
Between: CROES-PECORINO INDUSTRIAL CO.,
a New Jersey Partnership, Landlord
And: EPS ENVIRONMENTAL INC., Tenant
Landlord agrees to perform the following alterations at its own cost and
expense and to do so before the commencement of this lease agreement or as soon
thereafter as practical:
1. Front door to be replaced. Door and trim to be painted black.
2. Small brass lamp fixture to be placed over entrance door.
3. Reception area in front office section to be painted with color to be
selected by Tenant.
4. A third office area, approximately 25 feet by 40 feet, shall be
constructed behind the two existing office areas and it shall contain one
partition, one 3 foot door, dropped ceilings, recessed lights, and walls to be
painted with color to be selected by Tenant.
5. All three office areas (approximately 3,000 square feet) are to be
carpeted with Aladdin carpet in a color to be selected by Tenant.
6. Exterior concrete around windows and walls in front and west side of
building by offices to be repaired.
7. Glass to be replaced in two large windows in rear storage area.
8. Baseboard hot water gas fueled heat to be installed in all office areas.
9. New heating units to be installed in rear section of building.
10. New central air conditioning to be installed in all office areas and a
wall unit in rear area.
CROES-PECORINO INDUSTRIAL CO.
By: /s/ Louis Croes, Jr
------------------------------
Louis Croes, Jr., Partner
EPS ENVIRONMENTAL INC.
/s/ Arle Pierro By: Joseph Kemprowski
- - --------------------------------- ---------------------------------
Arle Pierro, Vice Pres. and Joseph Kemprowski
Secretary
<PAGE>
ADDENDUM TO LEASE between EPS Environmental Inc. (DBA Solucorp Industries Ltd.)
as Tenant, and Croes Pecerino Industrial, as Landlord, dated May 1, 1992 as
follows;
1) The current lease term between Landlord and Tenant for 520 Victor Street,
Saddle Brook, New Jersey expires on April 30, 1997.
2) On or about May 1, 1997, Tenant will extend the lease and move from 520
Victor Street to 515 Victor Street, Saddle Brook, New Jersey, also owned by
Landlord.
3) This lease extension shall be for a period of one year commencing on May 1,
1997 and ending on April 30, 1998. Tenant or Landlord may cancel this extension
with written notice delivered to the other party by certified mail (RRR) not
less than 60 days from intended cancellation date.
4) The monthly rent shall be $1,300.00 for months 1 - 6 and $1,400.00 for months
7 - 12. Tenant agrees to lease property "as is" except for new carpet to be
installed by Landlord.
5) Tenant agrees to provide Landlord with a security deposit of $2,600.00 and
the first months rent ($1,300.00) on or before May 1, 1997.
6) Tenant agrees that the rent is net, net, net and agrees to pay any and all
utilities. Tenant shall arrange to have gas, electric, water and telephone
service transferred to Tenant as of May 1, 1997.
7) In addition to monthly rent, Tenant agrees to pay its proportionate share of
real estate taxes, including a proportionate share of any increases.
8) Tenant shall obtain a Certificate of Occupancy from the town of Saddle Brook
at its sole expense and furnish a copy of same to Landlord within 30 days of
execution of this agreement.
9) Tenant represents and warrants that Sheridan Mechaber Co. is the sole
procuring cause of this lease extension and that no other broker or agent was
involved. Landlord agrees to pay any and all brokerage and management fees.
10) Tenant understands that the entire property (511, 515 & 520 Victor St.) is
being offered for sale and agrees to allow Landlord and its representatives to
show the property to prospective buyers with reasonable notice to Tenant. Tenant
agrees that it has no option to purchase the property and can submit an offer to
Landlord and/or its representatives at any time.
11) Tenant shall have common area parking not to exceed five cars and two 15'
trucks.
12) Tenant and Landlord agree that all terms and conditions of the original
lease of May 1,1992, (except those revised by this agreement) are in full force
and effect, including and not limited to environmental and insurance compliance.
Agreed & Accepted
Tenant Landlord
by: /s/ Charles H Ludwig 5-6-97 by:
----------------------------------- ----------------------------------
Print name & title Date Print name & title Date
Charles H Ludwig Vice President
<PAGE>
THIS AGREEMENT is made the 1st day of AUGUST 1997 BETWEEN:-
(1) EPS Environmental Inc. (trading as Solucorp Industries) of 250 West Nyack
Road, West Nyack, New York, USA 10994 ("Solucorp") (2) John Beech Limited of
Dock Road North, Bromborough, Wirral, Merseyside, England ("JBL")
IT IS AGREED as follows:
1. Definitions.
The following terms shall have the following meaning:-
"Commencement Date date of JBL being officially recorded as
listed on AIM
"Expiry Date"
"the MBS Process" the invention which is the subject of
the Patent Applications namely the
stabilization of heavy metal(s)
contaminated soils and industrial slag,
sludges, ash and other such materials by
the addition of proprietary reagents to
the contaminated materials under
moisture controlled conditions
"Patent Applications" the Patent Applications listed in part 1
of the schedule.
"Royalties" the payments specified in clause 5
"Term" the period starting on the Commencement
Date and ending on the Expiry Date
unless earlier terminated as
<PAGE>
provided by clause 10.
"Territories" the territories specified in part 2 of
the schedule.
2. Recitals
2.1 Solucorp is entitled to the benefit of the Patent Applications.
2.2 Solucorp has agreed to grant to JBL a licence under the Patent
Applications on the terms of this Agreement.
3. Grant
3.1 In consideration of JBL's payment of the Royalties Solucorp grants to
JBL for the Term an exclusive licence to make use of the MBS Process
within the Territories.
3.2 Solucorp shall at the request of JBL execute any further document
which may be necessary to give effect to this Agreement in any of the
Territories.
4. JBL to register Licence
JBL shall register this Agreement at the relevant Patent Office within
three months from the Commencement Date.
5. Royalties
5.1 For the purposes of the currency exchange rate basis the agreed
exchange rate for the first year of the Term shall be (pound)1.00 to
US$1.67. Such exchange rate base will be reviewed and if agreed
adjusted as appropriate by both parties on each anniversary of the
Commencement Date on the basis that Solucorp accepts that JBL's
budgeting requirements necessitate its need to
2
<PAGE>
express currency in UK currency.
5.2 On the Commencement Date JBL will pay to Solucorp the sum of
$600,000.00 ((pound)359,280.00) in cash or non--restricted shares as
mutually agreed by the parties as soon as practicable following
raising at least that sum through JBL's launch on the Alternative
Investment Market but if such launch is unsuccessful in raising such
sum or does not take place then this Agreement shall be null and void.
5.3 On the first anniversary and each subsequent anniversary of the Term
JBL shall pay to Solucorp a minimum annual Royalty payment of $50,000
((pound)29940.00).
5.4 JBL agrees that for each year of the Term the following provisions
shall apply:-
5.4.1 JBL will use all reasonable endeavours to process a minimum of
100,000 tons of soil or other medium with the MBS Process each
year.
5.4.2 Solucorp agrees that no automatic penalty or revocation of this
Licence will be imposed on JBL in the event of JBL's failure to
attain the target of 100,000 tons of soil or other medium
remediated by the MBS Process.
5.4.3 JBL shall pay the sum of $7.00 ((pound)4.20) per ton processed
by the MBS Process at the end of each quarter by reference to
specific projects.
6. Solucorp's warranties and Indemnity.
Solucorp warrants:-
3
<PAGE>
6.1 that it is the sole proprietor of the Patent Applications and has full
power to enter into this Agreement.
6.2 that it has not granted any licences to use the Patent Applications or
the MBS Process within the Territories nor suffered the Patent
Applications to be the subject of any charge, mortgage or other
incumbrance.
6.3 The Patent Applications are in force and Solucorp has not either by
act or omission caused or permitted anything which may cause the
Patent Applications:-
6.3.1 to lapse prematurely.
6.3.2 to be the subject of a compulsory licence.
6.4 Solucorp will keep JBL fully indemnified against all actions, claims,
proceedings, costs and damages (including any damages or compensation
paid by JBL on the advice of its legal advisors to compromise or
settle any claim) and all legal costs or other expenses arising out of
any breach of the above warranties or out of any claim by a third
party based on any facts which if substantiated would constitute such
a breach.
7. Invalidity or revocation of Patents Applications
If the Patent Applications or any of them shall be declared invalid or
revoked by a court or tribunal of competent jurisdiction all Royalties
shall cease to be payable as from the date of such declaration or
revocation but if the decision of the court or tribunal making such
declaration or revocation shall be reversed on appeal Royalties shall
become payable from the date of such reversal together with all Royalties
which would have been payable but for the adverse decision.
8. Solucorp's Obligations
4
<PAGE>
Solucorp shall:-
8.1 Supply Information.
8.1.1 inform JBL of all technical information concerning the MBS
Process.
8.1.2 supply JBL with any mutually agreed to be appropriate documents
or drawings relevant to the MBS Process.
8.1.3 licence JBL to use such documents, drawings and technical
information.
8.2 Improvements
If any improvement to the MBS Process is discovered:--
8.2.1 disclose to JBL full details of the improvement.
8.2.2 grant to JBL an exclusive royalty--free licence to make use of
it.
8.3 Supply of chemicals.
8.3.1 supply JBL with the chemicals required for the MBS Process at
cost on an open book basis such chemicals to be paid for by JBL
at the sooner of when Solucorp pays its suppliers or shipment
of the chemicals to JBL.
8.3.2 consult regularly with JBL regarding chemicals supply and costs
during which JBL will have the right to identify lower priced
alternative suppliers for chemicals other than the sulphides
covered by the Patent Applications to Solucorp with a view to
effecting a change of supplier and consequent price reduction.
Such arrangements for changing chemical suppliers remaining the
exclusive responsibility of Solucorp.
9. JBL's Obligations
JBL shall:
9.1 Quality
5
<PAGE>
Ensure that all schemes carried out by JBL using the MBS Process
comply with all laws and regulations in operation in the territory in
which the relevant operations take place.
9.2 Marketing
Make every endeavour to effectively market and promote the MBS Process
within the Territories.
9.3 Confidentiality
Keep secret all confidential information and details of the
proprietary MBS Process without the written consent of Solucorp to
release such information or details.
9.4 Indemnity
Keep Solucorp indemnified against all actions claims proceedings costs
and damages (including any damages or compensation paid by Solucorp on
the advice of its legal advisors to compromise or settle any claim)
and all legal costs or other expenses arising out of any breach of the
above obligations or out of any claim by a third party based on any
facts which if substantiated would constitute such a breach
10. Termination
This Agreement shall terminate;
10.1 Time
On the Expiry Date but the Term shall be automatically renewed for a
further 10 years unless both parties agree in writing to the contrary
10.2 Insolvency
If JBL or Solucorp goes into liquidation either compulsory or
voluntary (except for the purpose of reconstruction or amalgamation)
or if a receiver administrative receiver or administrator is appointed
in respect of the whole or
6
<PAGE>
any part of their assets or if JBL or Solucorp makes an assignment for
the benefit of or composition with its creditors generally or
threatens to do any of these things or any similar occurrence under
any jurisdiction affects JBL or Solucorp
10.3 Invalidity or revocation of a Patent
in the circumstances set out in clause 7
10.4 Fundamental breach
on the occurrence of significant default by either party under the
terms of this Agreement and in such event the defaulting party shall
receive notice in writing to rectify the situation within 120 days or
risk termination and such notification shall acknowledge that all
existing terms are applicable throughout that period.
11. Termination Consequences
11.1 Procedure
On the expiry or other termination of this Agreement through JBL'S
default but not otherwise JBL undertakes:
11.1.1 to return to Solucorp all samples publicity promotional and
advertising materials and all confidential data
11.1.2 to sign such notification of cessation of use of the Patent
Applications as is required by Solucorp
11.1.3 to return to Solucorp all originals and copies of all documents
and information in any form containing or covering in any way
any part of the Patent Applications
11.1.4 to cease carrying on the activities permitted by this Agreement
11.2 Existing rights
The termination of this Agreement shall be without prejudice to any
rights
7
<PAGE>
which have already accrued to either of the parties under this
Agreement
11.3 Acknowledgement
The parties acknowledge that in order to further the purposes of this
Agreement information containing or consisting of trade secrets,
customer lists and other confidential information may be communicated
by either party to the other. Such information may take the form of
plans drawings and data and will be deemed confidential unless
otherwise designated by Solucorp or JBL as appropriate. Solucorp shall
have the right to apply and obtain from the Court a restraining order
to prevent JBL from disclosing or using such confidential information
to third parties either during the Term or for a period of 12 months
thereafter
12. General
12.1 Receipt
The receipt of money by Solucorp shall not prevent Solucorp from
questioning the correctness of any statement in respect of any money
12.2 Force majeure
12.2.1 if either party is prevented from fulfilling its obligations
under this Agreement by reason of any supervening event beyond
its control including but not by way of limitation war national
emergency flood earthquake strike or lockout (other than a
strike or lockout induced by the party so incapacitated) the
party unable to fulfil its obligations shall immediately give
notice of this to the other party and shall do everything in
its power to resume full performance
8
<PAGE>
12.2.2 on such notice being given neither party shall be deemed to be
in breach of its obligations under this Agreement
12.2.3 if and when the period of incapacity exceed 6 months then this
Agreement shall automatically terminate unless the parties
first agree otherwise in writing
12.3 Whole agreement
This Agreement contains the whole agreement between the parties and
supersedes any prior written or oral agreement between them in
relation to its subject matter and the parties confirm that they have
not entered into this Agreement on the basis of any representations
that are not expressly incorporated into this Agreement. Should any
provisions of this Agreement be determined to be unenforceable or
prohibited by any applicable law this Agreement shall be considered
divisible after such provision which shall be inoperative and the
remainder of this Agreement shall be valid and binding as though such
provisions were not included herein.
12.4 No modification
This Agreement may not be modified except by an instrument in writing
signed by both of the parties their duly authorised representatives
12.5 Headings
Headings contained in this Agreement are for reference purposes only
and shall not be incorporated into this Agreement and shall not be
deemed to be any indication of the meaning of the clauses and
sub--clauses to which they relate
12.6 Joint and several
All agreements on the part of either of the parties which comprises
more than
9
<PAGE>
one person or entity shall be joint and several
12.7 Proper law and jurisdiction
This Agreement shall be governed by English law in every particular
including formation and interpretation and shall be deemed to have
been made in England and all parties agree to submit to the
jurisdiction of the courts of England and Wales
12.8 Arbitration
Any difference between the parties concerning the interpretation or
validity of this Agreement or the rights and liabilities of either of
the parties shall in the first instance be referred to the arbitration
of two persons (one to be nominated by each party) and their mutually
agreed umpire
12.9 Notices
12.9.1 any notice consent or the like (in this clause referred to
generally as `notice') required or permitted to be given under
this Agreement shall not be binding unless in writing and may
be given personally or sent to the party to be notified by
pre-paid first class post or by telex or by facsimile
transmission at its address as set out above or as otherwise
notified in accordance with this clause
12.9.2 notice given personally shall be deemed given at the time of
delivery
12.9.3 notice sent by post in accordance with this clause shall be
deemed given at the commencement of business on the second
business day next following its posting
12.9.4 notice sent by telex or facsimile transmission in accordance
with this clause shall be deemed given at the time of its
actual
10
<PAGE>
transmission
12.10 Reservation of rights
All rights not specifically and expressly granted to JBL by this
Agreement are reserved to Solucorp
12.11 Waiver
The failure by either party to enforce at any time or for any period
any one or more of the terms of conditions or this Agreement shall not
be a waiver of them or of the right at any time subsequently to
enforce all terms and conditions of this Agreement
12.12 Interpretation
12.12.1 unless the context otherwise requires:
12.12.1.1 words importing the singular number shall include
the plural and vice versa
12.12.1.2 words importing any particular gender shall
include all other genders
12.12.1.3 reference to persons shall include bodies of
persons whether corporate or incorporate
12.12.2 any reference in this Agreement to any statute or statutory
provision shall be construed as referring to that statute or
statutory provision as the same may from time to time be
amended modified extended reenacted or replaced (whether before
or after the date of this Agreement) and including all
subordinate legislation made under it from time to time
12.13 Survival of terms
The warranties and indemnity contained in this Agreement and the
provisions for payment of and accounting in respect of Royalties and
other money due to
11
<PAGE>
Solucorp under this Agreement shall survive the termination or expiry
of this Agreement
12.14 No agency or partnership
The parties are not partners or joint venturers nor is JBL entitled to
act as Solucorp's agent nor shall Solucorp be liable in respect of any
representation act or omission of JBL of whatever nature
12
<PAGE>
SCHEDULE
Part 1
The Patent Applications.
Serial numbers: 08/339,784 and 705,794
Part 2
The Territories
The United Kingdom and the Republic of Ireland.
13
<PAGE>
EXECUTED AS A DEED )
for and on behalf of )
EPS ENVIRONMENTAL INC. )
Director /s/ Peter Manteo
Director/Secretary /s/ J.B. Spartz
EXECUTED AS A DEED )
for and on behalf of )
JOHN BEECH LIMITED )
Director /s/ ILLEGIBLE
Director /s/ ILLEGIBLE
14
<PAGE>
U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form F-X
APPOINTMENT OF AGENT FOR SERVICE OF PROCESS AND
UNDERTAKING
A. Name of issuer or person filing ("Filer"): Solucorp Industries Ltd.
B. This is [check one]
[X] an original filing for the Filer
[_] an amended filing for the Filer
C. Identify the filing in conjunction with which this Form is being filed:
Name of registrant Solucorp Industries Ltd.
Form type Form 10-SB
File Number (if known)
Filed by Solucorp Industries Ltd.
Date Filed (if filed concurrently, so indicate) Concurrently
D. The Filer is incorporated or organized under the laws of (Name of the
jurisdiction under whose laws the issuer is organized or incorporated ... and
has its principal place of business at (Address in full and telephone number)
Incorporated in the Yukon Territory, Canada, and has its principal place of
business at 250 Road, West Nyack, New York 10994
E. The Filer designates and appoints (Name of United States person serving
as agent) ("Agent"). Located at (Address in full in the Unites States and
Telephone Number) Sommer & Schneider LLP, 600 Old Country Road, Garden City, New
York 11530 (516) 228--8181 as the agent of the Filer upon whom may be served any
process, pleadings, subpoenas, or other papers in
(a) any investigation or administrative proceeding conducted by the
Commission; and
(b) any civil suit or action brought against the Filer or to which the
Filer has been jointed as defendant or respondent, in any appropriate court in
any place subject to the jurisdiction of any state or of the United States or of
any of its territories or possessions or of the District of Columbia, where the
investigation, proceeding or cause of action arises out of or relates to or
concerns (i) any offering made or purported to be made in connection with the
securities registered or qualified by the Filer on Form (Name of form) 10-SB on
(Date)December l9, 1997 or purchases or sales of any security in connection
therewith; (ii) the securities in relation to which the obligation to file an
annual report on Form 40-F arises, or any purchases or sales of such securities;
(iii) any tender offer for the securities of a Canadian issuer
<PAGE>
with respect to which filings are made by the Filer with the Commission on
Schedule 13E-4F, 14D-IF or 14D-9F; or (iv) the securities in relation to which
the Filer acts as trustee pursuant to an exemption under Rule lOa-5 under the
Trust Indenture Act of 1939. The Filer stipulates and agrees that any such civil
suit or action or administrative proceeding may be commenced by the service of
process upon, and that service of an administrative subpoena shall be effected
by service upon such agent for service of process, and that service as aforesaid
shall be taken and held in all courts and administrative tribunals to be valid
and binding as if personal service thereof had been made.
F. Each person filing this Form in connection with:
(a) the use of Form F-9, F-b, 40-F, or SB-2 or Schedule 13K-4F, 14D-lF or
14D-9F stipulates and agrees to appoint a successor agent for service of process
and file an amended Form F-X if the Filer discharges the Agent or the Agent is
unwilling or unable to accept service on behalf of the Filer at any time until
six years have elapsed from the date the issuer of the securities to which such
Forms and Schedules relate has ceased reporting under the Exchange Act;
(b) the use of Form F-8 or Form F-80 stipulates and agrees to appoint a
successor agent for service of process and file an amended Form F-X if the Filer
discharges the Agent or the Agent is unwilling or unable to accept service on
behalf of the Filer at any time until six years have elapsed following the
effective date of the latest amendment to such Form F-8 or Form F-80;
(c) its status as trustee with respect to securities registered on Form
F-7, F-8, F-9, F-b, F-80, or SB-2 stipulates and agrees to appoint a successor
agent for service of process and file an amended Form F-X if the Filer
discharges the Agent or the Agent is unwilling or unable to accept service on
behalf of the Filer at any time during which any of the securities subject to
the indenture remain outstanding; and
(d) the use of Form 1-A or other Commission form for an offering pursuant
to Regulation A stipulates and agrees to appoint a successor agent for service
of process and file an amended Form F-X if the Filer discharges the Agent or the
Agent is unwilling or unable to accept service on behalf of the Filer at any
time until six years have elapsed from the date of the last sale of securities
in reliance upon the Regulation A exemption.
Each filer further undertakes to advise the Commission promptly of any change to
the Agent's name and address during the applicable period by amendment of this
Form, referencing the file number of the relevant form in conjunction with which
the amendment is being filed.
G. Each person filing this Form, other than a trustee filing in accordance
with General Instruction I.(e) of this Form, undertakes to make available, in
person or by telephone, representatives to respond to inquires made by the
Commission staff, and to furnish promptly when requested to do so by the
Commission staff, information relating to: the Forms, Schedules and offering
statements described in General Instructions I.(a), I.(b), I.(c), I.(d) and
I.(f) of this Form, as applicable; the securities to which such Forms, Schedules
and offering statements relate; and the transactions in such securities.
The Filer certifies that its has duly caused this power of attorney, consent,
stipulation and agreement to be signed West Nyack Count on its behalf by the
undersigned, thereunto duly authorized, in the City of West Nyack Country of
U.S.A. this 19th day of December, 1997.
/s/ Peter Mantia, President
- - --------------------------------------------------------------------------------
Filer: Peter Mantia By:(Signature and Title)
This statement has been signed by the following persons in the capacities
and on the dates indicated.
(Signature) /s/ Peter Mantia
---------------------------
(Title) President
(Date) December 19, 1.997
