<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 11, 1998
REGISTRATION NO. 333-
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- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------
ATG INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
--------------
<TABLE>
<CAPTION>
<S> <C> <C>
CALIFORNIA 4955 94-2657762
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
47375 FREMONT BOULEVARD
FREMONT, CALIFORNIA 94538
(510) 490-3008
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
--------------
DOREEN M. CHIU
PRESIDENT AND CHIEF EXECUTIVE OFFICER
ATG INC.
47375 FREMONT BOULEVARD
FREMONT, CALIFORNIA 94538
(510) 490-3008
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF REGISTRANT'S AGENT FOR SERVICE)
COPIES OF COMMUNICATIONS TO:
BRIAN A. SULLIVAN, ESQ. RICHARD A. PEERS, ESQ.
DAVID K. RITENOUR, ESQ. CHRISTINA L. VAIL, ESQ.
GRAHAM & JAMES LLP HELLER EHRMAN WHITE & MCAULIFFE
801 SOUTH FIGUEROA STREET, SUITE 1400 525 UNIVERSITY AVENUE
LOS ANGELES, CALIFORNIA 90017-5554 PALO ALTO, CALIFORNIA 94301-1900
TELEPHONE: (213) 624-2500 TELEPHONE: (650) 324-7000
FACSIMILE: (213) 623-4581 FACSIMILE: (650) 324-0638
--------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended (the "Securities Act"), check the following box: [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering: [_] ________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: [_] _________
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: [_] ________
If delivery of the prospectus is expected to be made pursuant to Rule 434
under the Securities Act, check the following box: [_]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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PROPOSED PROPOSED
AMOUNT MAXIMUM MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF TO BE OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED(1) PER SHARE(2) OFFERING PRICE(2) FEE
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock......................... 1,955,000 Shares $10.00 $19,550,000 $5,768
- -----------------------------------------------------------------------------------------------------
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</TABLE>
(1)Includes 255,000 shares that the Underwriters may purchase from the
Registrant to cover over-allotments, if any.
(2)Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(a) promulgated under the Securities Act.
--------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(a) OF THE SECURITIES ACT OR UNTIL THE REGISTRATION STATEMENT SHALL
BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
- -------------------------------------------------------------------------------
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE A SALE OF ANY OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, FEBRUARY 11, 1998
1,700,000 SHARES
[LOGO]
COMMON STOCK
All 1,700,000 shares of Common Stock offered hereby are being sold by ATG
Inc. (the "Company"). Prior to this offering (the "Offering") there has been no
public market for the Common Stock. It is currently estimated that the initial
public offering price will be between $8.00 and $10.00 per share. See
"Underwriting" for a discussion of the factors considered in determining the
initial public offering price. The Company has applied to have the Common Stock
included on the Nasdaq National Market upon completion of this Offering under
the symbol "ATGC."
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS," COMMENCING ON PAGE 6 OF THIS PROSPECTUS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
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PRICE PROCEEDS
TO UNDERWRITING TO
PUBLIC DISCOUNTS(1) COMPANY(2)
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<S> <C> <C> <C>
Per Share....................................... $ $ $
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Total(3)........................................ $ $ $
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</TABLE>
(1) Excludes a non-accountable expense allowance payable to the representative
of the Underwriters (the "Representative") and the value of warrants to be
issued to the Representative to purchase up to 170,000 shares of Common
Stock at a price per share equal to 120% of the Price to Public as shown
above (the "Representative's Warrants"). See "Underwriting" for information
relating to indemnification of the Underwriters.
(2) Before deducting expenses payable by the Company, estimated at $1 million,
including the non-accountable expense allowance payable to the
Representative.
(3) The Company has granted to the Underwriters a 45-day option to purchase up
to 255,000 additional shares of Common Stock, solely for the purpose of
covering over-allotments, if any. To the extent that the option is
exercised, the Underwriters will offer the additional shares at the Price
to Public as shown above. If the Underwriters exercise this option in full,
the total Price to Public, Underwriting Discounts and Proceeds to Company
will be $ , $ and $ , respectively. See
"Underwriting."
The shares of Common Stock are offered by the several Underwriters subject to
receipt and acceptance by them and subject to their right to reject any order
in whole or in part. It is expected that delivery of the certificates
representing such shares will be made against payment therefor at the offices
of Van Kasper & Company, San Francisco, California on or about ,
1998.
VAN KASPER & COMPANY
, 1998
<PAGE>
DESCRIPTION OF PHOTOGRAPHS
----------------
FORWARD-LOOKING STATEMENTS
THIS PROSPECTUS CONTAINS "FORWARD-LOOKING STATEMENTS," AS DEFINED UNDER
APPLICABLE LAW, THAT INVOLVE RISKS AND UNCERTAINTIES, SUCH AS STATEMENTS OF
THE COMPANY'S OR ITS MANAGEMENT'S PLANS, OBJECTIVES, EXPECTATIONS, INTENTIONS,
BELIEFS AND ESTIMATES. THE CAUTIONARY STATEMENTS MADE IN THIS PROSPECTUS
SHOULD BE READ AS BEING APPLICABLE TO ALL FORWARD-LOOKING STATEMENTS WHEREVER
THEY APPEAR IN THIS PROSPECTUS. THE COMPANY'S ACTUAL RESULTS COULD DIFFER
MATERIALLY FROM THOSE DISCUSSED HEREIN. FACTORS THAT COULD CAUSE OR CONTRIBUTE
TO SUCH DIFFERENCES INCLUDE THOSE DISCUSSED IN "RISK FACTORS" AND
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS," AS WELL AS THOSE DISCUSSED ELSEWHERE IN THIS PROSPECTUS.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING BY OVER-ALLOTMENT, ENTERING STABILIZING BIDS, EFFECTING SYNDICATE
COVERING TRANSACTIONS OR THE IMPOSITION OF PENALTY BIDS. FOR A DESCRIPTION OF
THESE ACTIVITIES, SEE "UNDERWRITING."
2
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information, including "Risk Factors" and the Company's Consolidated Financial
Statements and the Notes thereto, appearing elsewhere in this Prospectus.
THE COMPANY
The Company, founded in 1976, is a radioactive and hazardous waste management
company that offers comprehensive treatment solutions for low-level radioactive
waste ("LLRW") and low-level mixed waste ("LLMW") generated by the U.S.
Department of Defense ("DOD") and U.S. Department of Energy ("DOE"), as well as
commercial entities, such as nuclear power plants, medical facilities and
research institutions. The Company's thermal treatment technologies vitrify
waste into leach-resistant glass for long-term storage or disposal. Compared
with the more traditional incineration methods, the Company's vitrification
process results in significantly less effluents, provides a more stable end
product and achieves comparable volume and mass reduction at similar total
treatment and disposal costs.
The Company's growth strategy is to: (i) increase its share of the domestic
commercial LLRW treatment market; (ii) establish a significant position in the
emerging domestic LLMW treatment market; (iii) increase its participation in
large-scale domestic and international waste clean-up projects; (iv) expand
into selected Pacific Rim markets; and (v) enhance its on-site waste treatment
capabilities.
The Company operates one of only two commercial facilities in the United
States licensed to thermally treat a broad spectrum of LLRW, and is the only
company in the United States licensed to vitrify both commercial and
government-generated LLRW. The licensing process for constructing and operating
an LLRW treatment facility is lengthy and may require three to five years if
the license covers thermal treatment methods. The Company believes that U.S.
nuclear power plants, medical and research institutions and other commercial
generators currently spend in excess of $150 million annually on commercial
LLRW treatment. The Company's licensed facilities in Richland, Washington and
its proposed facilities in Aiken, South Carolina are strategically located
close to two major DOE sites, the Hanford and Savannah River Reservations. The
DOE estimates that the total treatment costs for the LLRW stored at its Hanford
and Savannah River Reservations alone will exceed $850 million through 2010. In
addition to these two DOE sites, the Company currently treats LLRW from other
DOE sites and expects to continue to do so in the future. Since 1988, the
Company has treated several million pounds of LLRW, over 115,000 pounds of
which have been treated since September 1997 using the Company's SAFGLAS
vitrification system.
In 1994, the Company commenced the licensing process for its Richland
facilities to treat LLMW, which is LLRW mixed with hazardous constituents. The
Company believes its Richland facilities will receive final approval in 1998
for full-scale thermal and non-thermal LLMW processing, which is anticipated to
begin in 1999. The Company believes that its mixed waste treatment facility
will be the first privately owned facility in the United States licensed to
thermally and non-thermally treat a broad spectrum of commercial and
government-generated LLMW. The Company has been awarded the first privatized
contracts to thermally and non-thermally treat LLMW from DOE-Hanford, with the
contract for thermal treatment having a maximum value of $24 million for
treating 175,000 cubic feet of waste over ten years. The DOE estimates that the
LLMW treatment costs for Hanford and Savannah River alone will exceed $580
million through 2010. The Company expects to compete for LLMW treatment
contracts at all DOE sites.
The Company operates through its Fixed Facilities Group, which manages its
waste treatment operations, and its Field Engineering Group, which addresses
on-site decontamination and decommissioning of radioactive facilities ("D&D")
and environmental restoration of sites contaminated with radioactive and
hazardous waste.
3
<PAGE>
Historically, a majority of the Company's revenue has been derived from on-site
services. The Company has completed over 150 environmental restoration projects
since 1989 and provided D&D services for over a decade. The synergies between
the on-site remediation services of its Field Engineering Group and the waste
treatment operations of its Fixed Facilities Group enhance the Company's
ability to compete for commercial and government LLRW and LLMW treatment
contracts.
In the last three years, the Company has formed teaming relationships with,
among others, Lockheed Martin Corporation ("Lockheed Martin"), Morrison Knudsen
Corporation ("Morrison Knudsen") and Jacobs Engineering Group Inc. ("Jacobs
Engineering") to pursue large contract awards requiring diverse waste
management and treatment expertise. The Company intends to continue to enter
into such relationships and is currently in the early stage of pursuing similar
strategic alliances with foreign entities in selected Pacific Rim markets with
established LLRW or LLMW clean-up initiatives or where scarcity of land and
high disposal costs create an opportunity for vitrification treatment
technologies.
The Company was incorporated in Texas in 1976 under the name "Allied Nuclear,
Inc.," reincorporated in California in 1980 and changed its name to "ATG Inc."
in 1987. Its principal executive offices are located at 47375 Fremont
Boulevard, Fremont, California 94538, and its telephone number is: (510) 490-
3008.
THE OFFERING
<TABLE>
<C> <S>
Common Stock offered....................... 1,700,000 shares
Common Stock to be outstanding after the
Offering.................................. 13,215,896 shares(1)
Use of proceeds............................ For capital expenditures,
repayment of short-term
indebtedness, and working capital
and general corporate purposes,
which may include acquisitions
and joint ventures.
Proposed Nasdaq National Market symbol .... ATGC
</TABLE>
- --------------------
(1) Based on the number of shares outstanding on December 31, 1997. Excludes
1,000,000 shares of Common Stock reserved for issuance upon exercise of
outstanding stock options at a weighted average exercise price of $2.09 per
share, 298,927 of which were exercisable on such date. See "Description of
Capital Stock--Options."
Unless otherwise indicated, all information in this Prospectus assumes (i)
that the Underwriters' over-allotment option and the Representative's Warrants
are not exercised, and (ii) that all of the outstanding shares of the Company's
Series A Preferred Stock, no par value per share (the "Preferred Stock"), and
all of the outstanding shares of the Series A and Series B Redeemable Non-
Voting Preferred Stock issued by the Company's consolidated subsidiary, ATG
Richland Corporation ("ATG Richland"), are converted prior to the closing of
the Offering into an aggregate of 3,983,595 shares of Common Stock. Unless the
context suggests otherwise, references in this Prospectus to the "Company" mean
ATG Inc. and its consolidated subsidiaries. SAFGLAS(TM), GASVIT(TM) and
PLASTIMELT(TM) are trademarks of the Company for which registration is pending.
All other trademarks, service marks or trade names referred to in this
Prospectus are the property of the respective owners thereof.
4
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------
1995 1996 1997
-------- -------- --------
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue.......................................... $ 16,070 $ 18,235 $ 19,107
Gross profit..................................... 6,411 7,153 7,935
Operating income................................. 209 497 915
Interest income (expense), net................... (141) 13 58
-------- -------- --------
Income before income taxes....................... 68 510 973
Provision (benefit) for income taxes............. 2 2 (45)
-------- -------- --------
Net income....................................... $ 66 $ 508 $ 1,018
======== ======== ========
Pro forma net income per share(1)
Basic.......................................... $ 0.09
Diluted........................................ 0.08
========
Pro forma weighted average shares outstanding(1)
Basic.......................................... 11,516
Diluted........................................ 12,284
========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1997
-----------------------------------
PRO FORMA
ACTUAL PRO FORMA(2) AS ADJUSTED(3)
------- ------------ --------------
<S> <C> <C> <C>
BALANCE SHEET DATA:
Working capital.......................... $ 1,652 $ 1,652 $14,881
Total assets............................. 37,227 37,227 50,456
Total indebtedness (including current
portion)................................ 7,582 7,582 7,582
Mandatorily redeemable preferred stock... 19,416 -- --
Shareholders' equity..................... 296 19,712 32,941
</TABLE>
- --------------------
(1) See Note 2 of Notes to Consolidated Financial Statements for an explanation
of the basis for calculating pro forma net income per share.
(2) Presented on a pro forma basis to give effect to the conversion of all
outstanding shares of Mandatorily Redeemable Preferred Stock into an
aggregate of 3,983,595 shares of Common Stock prior to the closing of the
Offering.
(3) Adjusted to reflect the sale of 1,700,000 shares of Common Stock offered
hereby. See "Use of Proceeds" and "Capitalization."
5
<PAGE>
RISK FACTORS
In addition to the other information set forth in this Prospectus, investors
should carefully consider the following risk factors when evaluating the
Company and its business before purchasing shares of the Common Stock offered
hereby.
DEPENDENCE ON GOVERNMENT LICENSES, PERMITS AND APPROVALS
The radioactive and hazardous waste management industry is highly regulated.
The Company is required to have federal, state and local governmental
licenses, permits and approvals for its waste treatment facilities and
services. Such licenses, permits or approvals are subject to denial,
revocation or modification under a variety of circumstances. Failure to
obtain, or to comply with the conditions of, applicable licenses, permits or
approvals could adversely affect the Company's business, financial condition
and results of operations. As its business expands and as it introduces new
technologies, the Company will be required to obtain additional operating
licenses, permits or approvals. It may be required to obtain additional
operating licenses, permits or approvals if new environmental legislation or
regulations are enacted or promulgated or existing legislation or regulations
are amended, re-interpreted or enforced differently than in the past. Any new
requirements which raise compliance standards may require the Company to
modify its waste treatment technologies to conform to more stringent
regulatory requirements. There can be no assurance that the Company will be
able to continue to comply with all of the environmental and other regulatory
requirements applicable to its business. See "Business--Environmental Laws and
Regulations; Licensing Processes Applicable to LLRW and LLMW Treatment
Facilities."
NO ASSURANCE OF SUCCESSFUL DEVELOPMENT, COMMERCIALIZATION OR ACCEPTANCE OF
TECHNOLOGIES
The Company is in the process of developing, refining and implementing its
technologies for the treatment of LLRW, LLMW and other wastes. The Company's
future growth will be dependent in part upon the acceptance and implementation
of these technologies, particularly its recently developed vitrification
technologies for the treatment of LLRW and LLMW. There can be no assurance
that successful development of all these technologies will occur in the near
future, or even if successfully developed, that the Company will be able to
successfully commercialize such technologies. The successful commercialization
of the Company's vitrification technologies may depend in part on ongoing
comparisons with other competing technologies and more traditional treatment,
storage and disposal alternatives, as well as the continuing high cost and
limited availability of commercial disposal options. There can be no assurance
that the Company's vitrification and related technologies will prove to be
commercially viable or cost-effective, or if commercially viable and cost-
effective, that the Company will be successful in timely securing the
requisite regulatory licenses, permits and approvals for such technologies or
that such technologies will be selected for use in future waste treatment
projects. The Company's LLMW thermal treatment contract with DOE-Hanford
requires the Company to obtain all of the required licenses, permits and
approvals for, and to build and place in operation, its LLMW treatment
facility by December 31, 1999. The Company's inability to develop,
commercialize or secure the requisite licenses, permits and approvals for its
waste treatment technologies on a timely basis could have a material adverse
effect on the Company's business, financial condition and results of
operations. See "Business--Waste Treatment Technologies."
DEPENDENCE ON ENVIRONMENTAL LAWS AND REGULATIONS
A substantial portion of the Company's revenue is generated as a result of
requirements arising under federal and state laws, regulations and programs
related to protection of the environment. Environmental laws and regulations
are, and will continue to be, a principal factor affecting demand for the
services offered by the Company. The level of enforcement activities by
federal, state and local environmental protection agencies and changes in such
laws and regulations also affect the demand for such services. If the
requirements of compliance with environmental laws and regulations were to be
modified in the future, particularly those relating to the transportation,
treatment, storage or disposal of LLRW, LLMW or other wastes, the demand for
the Company's services, and its business, financial condition and results of
operations, could be materially adversely affected.
6
<PAGE>
See "Business--Environmental Laws and Regulations; Licensing Processes
Applicable to LLRW and LLMW Treatment Facilities."
DEPENDENCE ON FEDERAL GOVERNMENT; LIMITS ON GOVERNMENT SPENDING; GOVERNMENT
CONTRACTING
For the fiscal years ended December 31, 1995, 1996 and 1997, approximately
86.3%, 76.8% and 71.3%, respectively, of the Company's total revenue was
derived from federal government contracts. The Company expects that the
percentage of its revenue attributable to such contracts will continue to be
substantial for the foreseeable future. The Company's government contracts
generally are subject to cancellation, delay or modification at the sole
option of the government. See "Management's Discussion and Analysis of
Financial Conditions and Results of Operations" and "Business--Customers."
The Company is dependent on government appropriations to fund many of its
contracts. Efforts to reduce the federal budget deficit could adversely affect
the availability and timing of government funding for the clean-up of DOE, DOD
and other federal government sites. The failure by the government to fund
future restoration of such sites could have an adverse effect on the Company's
business, financial condition and results of operations. In addition, the
taxing authority of the Comprehensive Environmental Response, Compensation and
Liability Act of 1980 ("CERCLA" or "Superfund") has expired. Although bills to
reauthorize Superfund were introduced in Congress in late calendar 1997 and
action is anticipated in 1998, the potential for further delay could adversely
affect the environmental remediation industry. See "Business--Environmental
Laws and Regulations; Licensing Processes Applicable to LLRW and LLMW
Treatment Facilities."
As a provider of services to federal and other government agencies, the
Company also faces risks associated with government contracting, which include
substantial fines and penalties for, among other matters, failure to follow
procurement integrity and bidding rules and employing improper billing
practices or otherwise failing to follow prescribed cost accounting standards.
Government contracting requirements are complex, highly technical and subject
to varying interpretations. As a result of its government contracting
business, the Company has been, and expects to be in the future, the subject
of audits, and may in the future be subject to investigations, by government
agencies. Failure to comply with the terms of one or more of its government
contracts could result in damage to the Company's business reputation and the
Company's suspension or disqualification from future government contract
projects for a significant period of time. The fines and penalties which could
result from noncompliance with applicable standards and regulations, or the
Company's suspension or disqualification, could have a material adverse effect
on the Company's business, financial condition and results of operations. See
"Business--Environmental Contractor Risks."
SEASONALITY AND FLUCTUATION IN QUARTERLY RESULTS
The Company's revenue is dependent on its contract backlog and the timing
and performance requirements of each contract. Revenue in the first and second
quarters has historically been lower than in the third and fourth quarters, as
the Company's customers have tended to be more cautious about transporting
radioactive waste during the months when transportation is more likely to be
adversely affected by severe weather conditions. The Company's revenue is also
affected by the timing of its clients' planned remediation activities and need
for waste treatment services, which generally increase during the third and
fourth quarters. Due to this variation in demand, the Company's quarterly
results fluctuate. Accordingly, specific quarterly or interim results should
not be considered indicative of results to be expected for any future quarter
or for the full year. Due to the foregoing factors, it is possible that in
future quarters the Company's operating results will not meet the expectations
of securities analysts and investors. In such event, the price of the Common
Stock could be materially adversely affected. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
MANAGEMENT OF GROWTH
Since 1994, the Company has experienced significant growth, attributable in
large part to an increase in the number and size of contracts awarded. The
Company is currently pursuing a growth strategy intended to expand its
business domestically and internationally. The Company's historical growth has
placed, and any future
7
<PAGE>
growth may place, significant demands on its operational, managerial and
financial resources. There can be no assurance that the Company's current
management and systems will be adequate to address any future expansion of the
Company's business. In such event, any inability to manage the Company's
growth effectively could have a material adverse effect on the Company's
business, financial condition and results of operations.
EQUIPMENT PERFORMANCE; SAFETY AND LICENSE VIOLATIONS
The Company's ability to perform under current waste treatment contracts and
to successfully bid for future contracts is dependent upon the consistent
performance of its waste treatment systems at its fixed facilities in
conformity with safety and other requirements of the licenses under which the
Company operates. The Company's fixed facilities are subject to frequent
routine inspections by the regulatory authorities issuing such licenses. In
the event that any of the Company's principal waste treatment systems were to
be shut down for any appreciable period of time, either due to equipment
breakdown or as the result of regulatory action in response to an alleged
safety or other violation of the terms of the licenses under which the Company
operates, the Company's business, financial condition and results of
operations could be materially adversely affected. See "Business--Waste
Treatment Technologies" and "--Operations and Services."
ENVIRONMENTAL CONTRACTOR AND REGULATORY MATTERS
The rapidly developing and changing regulatory framework governing the
Company's business creates significant risks, including potential liabilities
from violations of environmental statutes and regulations and liabilities to
customers and third parties for damages arising from services performed. The
Company's failure to comply with such statutes and regulations, or with the
terms and conditions of licenses and permits it holds under these and other
statutes and regulations, may result in the imposition of substantial fines
and penalties and could adversely affect the Company's ability to carry on its
business as presently constituted. In performing services, the Company could
potentially be liable for claims brought by its customers for breach of
contract, personal injury, property damage, and negligence, including claims
for lack of timely performance or for failure to deliver the service promised
(including improper or negligent performance or design, failure to meet
specifications, and breaches of express or implied warranties). The damages
available to a customer, should it prevail in its claims, are potentially
large and could include consequential damages. The Company's potential
liability is amplified by the increasing tendency to attempt to shift various
liabilities arising out of remediation of environmental contamination to
contractors through contractual indemnities, such as provisions seeking to
require the contractor to assume liabilities for damage or injury to third
parties and property and for environmental fines and penalties. Radioactive
and hazardous waste management contractors also potentially face liabilities
to third parties from various claims, including claims for property damage,
personal injury or wrongful death stemming from a release of radioactive or
hazardous substances, improper handling of explosives and other hazardous
materials, or otherwise. In addition, increasing numbers of claimants assert
that companies performing radioactive and hazardous waste management services
should be adjudged strictly liable (i.e., liable for damages even though their
services were performed using reasonable care), on the grounds that such
services involved "abnormally dangerous activities." The Company has adopted a
range of risk management programs designed to reduce these risks and potential
liabilities, including policies to seek contractual indemnities, other
contract administration procedures, and employee health, safety, training and
environmental monitoring programs; however, there can be no assurance that
such programs will protect the Company from such risks and liabilities. See
"Business--Operations and Services" and "--Risk Management and Insurance."
COMPETITION
In general, the market for radioactive and hazardous waste management
services is highly competitive. The Company faces competition in its principal
current and planned business lines from both established domestic companies
and foreign companies attempting to introduce European waste treatment
technologies into the United States. Many of the Company's competitors have
greater financial, managerial, technical and marketing resources than the
Company. To the extent that competitors possess or develop superior or more
cost-effective waste treatment solutions or field service capabilities, or
otherwise possess or acquire competitive advantages compared
8
<PAGE>
to the Company, the Company's ability to compete effectively could be
materially adversely affected. Any increase in the number of licensed
commercial LLRW treatment facilities or disposal sites in the United States or
any decrease in the treatment or disposal fees charged by such facilities or
sites could increase the competition faced by the Company or reduce the
competitive advantage of certain of the Company's treatment technologies. See
"Business--Market Overview" and "--Competition."
INTERNATIONAL EXPANSION
A key component of the Company's growth strategy is to expand its business
into selected Pacific Rim markets. There can be no assurance that the Company
or its strategic alliance partners will be able to market its technologies or
services successfully in foreign markets. In addition, there are certain risks
inherent in foreign operations, including general economic conditions in each
country, varying regulations applicable to the Company's business, seasonal
reductions in business activities, fluctuations in foreign currencies or the
U.S. Dollar, expropriation, nationalization, war, insurrection, terrorism and
other political risks, the overlap of different tax structures, risks of
increases in taxes, tariffs and other governmental fees and involuntary
renegotiation of contracts with foreign governments. There can be no assurance
that laws or administrative practices relating to taxation, foreign exchange
or other matters of foreign countries within which the Company operates or
will operate will not change. Any such change could have a material adverse
effect on the Company's business, financial condition and results of
operations. See "Business--Growth Strategy."
DEPENDENCE ON KEY PERSONNEL
The Company's future success depends on its continuing ability to attract,
retain and motivate highly qualified managerial, technical and marketing
personnel. The Company is highly dependent upon the continuing contributions
of its key managerial, technical and marketing personnel. The Company's
employees may voluntarily terminate their employment with the Company at any
time, and competition for qualified technical personnel, in particular, is
intense. The loss of the services of any of the Company's managerial,
technical or marketing personnel could materially adversely affect the
Company's business, financial condition and results of operations. The Company
maintains a $1.5 million key man life insurance policy on the life of each of
Doreen M. Chiu and Frank Y. Chiu. There can be no assurance that such amount
will be sufficient to compensate the Company for the loss of the services of
these individuals. See "Business--Employees" and "Management."
FOCUS ON LARGER PROJECTS
The Company increasingly pursues large, multi-year contracts as a method of
achieving more predictable revenue, more consistent utilization of equipment
and personnel, and greater leverage of sales and marketing costs. These larger
projects impose significant risks if actual costs are higher than those
estimated at the time of bid. A loss on one or more of such larger contracts
could have a material adverse effect on the business, financial condition and
results of operations of the Company. In addition, failure to obtain, or delay
in obtaining, targeted large, multi-year contracts could result in
significantly less revenue to the Company than anticipated. See "Business--
Customers," "--Sales and Marketing" and "Management's Discussion and Analysis
of Financial Condition and Results of Operations--Overview."
POTENTIAL ENVIRONMENTAL LIABILITY AND INSURANCE
Since the Company routinely works with radioactive and hazardous materials,
the Company may be subject to liability claims by employees, customers and
third parties. There can be no assurance that the Company's existing liability
insurance is adequate to cover claims asserted against the Company, that all
claims asserted against the Company will be covered by insurance or that the
Company will be able to maintain such insurance in the future. An uninsured
claim, if successful and of sufficient magnitude, could have a material
adverse effect on the Company's business, financial condition and results of
operations. See "Business--Risk Management and Insurance."
9
<PAGE>
DEPENDENCE ON AND LIMITED PROTECTION OF TECHNOLOGY AND INTELLECTUAL PROPERTY;
POTENTIAL LITIGATION
The Company's ability to compete effectively is dependent upon its
vitrification and other waste treatment technologies. The Company principally
relies upon a combination of trade secret and trademark laws, employee and
third party non-disclosure agreements, licenses from owners of patents and
other intellectual property rights, and other methods to establish and protect
the proprietary aspects of its waste treatment technologies. In addition, the
Company has filed one patent application currently pending in the U.S. Patent
and Trademark Office. There can be no assurance that the patent will issue,
and there can be no assurance regarding the scope, validity or value of any
patents or other methods of intellectual property rights protection relied
upon by the Company. Further, there can be no assurance that the steps taken
to protect proprietary technologies by the Company and the owners of any
licensed patents and other intellectual property rights will be adequate to
prevent the use of these technologies by third parties. There can be no
assurance that others will not develop proprietary technologies and processes
which are the same as or superior to those of the Company. In the event that
the Company pursues overseas projects, there can be no assurance that steps
taken by the Company and the owners of any licensed patents and other
intellectual property rights to protect their proprietary technologies will be
adequate under the laws of certain foreign countries. The loss of patent or
other forms of intellectual property rights protection on the Company's
technology or the circumvention of such protection by competitors could have a
material adverse effect on the Company's ability to compete successfully with
its waste treatment technologies. See "Business--Intellectual Property."
Many technology fields are characterized by the existence of a large number
of patents and frequent litigation regarding possible infringement. Although
the Company does not believe that any of its technologies infringes the patent
rights of third parties, there can be no assurance that infringement claims
will not be asserted against the Company in the future or that any such claims
will not require the Company to enter into royalty or other settlement
arrangements or result in costly litigation.
NEED FOR ADDITIONAL CAPITAL
In addition to the proceeds from the Offering, the Company believes that it
will need additional capital in order to implement its growth strategy. There
can be no assurance that the Company will be successful in raising the
requisite amount of financing when needed, or, that if successful, the terms
of such financing will be favorable to the Company. If the Company is not
successful in raising such financing, it will need to curtail or scale back
its planned expansion, which could adversely affect the Company's business,
financial condition and results of operations. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and "Business--
Growth Strategy."
ABSENCE OF PRIOR PUBLIC MARKET AND POSSIBLE VOLATILITY OF STOCK PRICE;
DILUTION
Prior to the Offering there has been no public market for the Common Stock.
Although the Company has applied to have the Common Stock included on the
Nasdaq National Market, there can be no assurance that an active trading
market for the Common Stock will develop or be sustained after the Offering.
The initial public offering price will be determined through negotiations
between the Company and the Representative, and may not be indicative of the
market price at which the Common Stock will trade after the Offering. (See
"Underwriting" for a discussion of the factors to be considered in determining
the initial public offering price.) Additionally, the market price of the
Common Stock may be subject to significant fluctuations in response to
variations in actual and anticipated quarterly operating results and other
factors, including announcements of new contracts or technical innovations by
the Company or its competitors, changes in government regulations relating to
the environment, the volume of market transactions in the Common Stock and
general market conditions.
Purchasers of the Common Stock offered hereby will incur immediate and
substantial dilution in the net tangible book value of their shares. See
"Dilution." To the extent that the Representative's Warrants, any of the
outstanding options to purchase an aggregate of 1,000,000 shares of Common
Stock or any options granted in the future under the Company's 1998 Stock
Ownership Incentive Plan or 1998 Non-Employee Directors' Stock Option Plan are
exercised, the percentage ownership interests of the Company's shareholders
will be diluted
10
<PAGE>
proportionately. See "Underwriting," "Description of Capital Stock--Options,"
"Management--Employee Benefit Plans--Stock Ownership Incentive Plan" and "--
Board of Directors--Non-Employee Directors' Stock Option Plan."
SHARES ELIGIBLE FOR FUTURE SALE
Future sales of substantial amounts of Common Stock in the public market
could have an adverse effect on the market price of the Common Stock. Upon
completion of the Offering, the Company will have outstanding approximately
13,215,896 shares of Common Stock (13,470,896 shares, if the Underwriters'
over-allotment option is exercised in full), of which 1,700,000 shares offered
hereby (1,955,000 shares if the Underwriters' over-allotment option is
exercised in full) will be freely tradeable without restriction or further
registration under the Securities Act to the extent they are not held by
"affiliates" of the Company, as that term is defined in Rule 144 ("Rule 144")
promulgated under the Securities Act of 1933, as amended (the "Securities
Act"). The remaining 11,515,896 shares of Common Stock outstanding upon
completion of the Offering will be "restricted securities" as that term is
defined in Rule 144. The Company's officers, directors and certain
shareholders have executed lock-up agreements generally providing that they
will not sell or otherwise dispose of Common Stock for a period of 180 days
after the date of this Prospectus without the prior written consent of Van
Kasper & Company. Taking into account the existence of such lock-up agreements
and assuming the shareholders are not released from these agreements, all
11,515,896 shares constituting restricted securities will become eligible for
sale under Rule 144 180 days after the date of this Prospectus, of which
2,520,926 shares will be held by affiliates. Shares eligible to be sold by
affiliates are generally subject to volume limitations under Rule 144. The
existence of a large number of shares eligible for future sale could have an
adverse effect on the Company's ability to raise additional equity capital or
on the price at which such equity capital could be raised. See "Shares
Eligible for Future Sale."
ABSENCE OF DIVIDENDS
The Company has never declared or paid any dividends on the Common Stock.
The Company currently anticipates that it will retain all future earnings for
use in the operation and growth of its business and does not anticipate paying
any cash dividends in the foreseeable future. In addition, the terms of the
Company's outstanding bank borrowings currently prohibit the payment by the
Company of dividends without the lender's prior approval. See "Dividend
Policy."
11
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the shares of Common Stock
offered hereby, at an assumed initial public offering price of $9.00 per share
(the midpoint of the price range set forth on the outside front cover page of
this Prospectus), and after deducting estimated offering expenses and
underwriting discounts, are estimated to be approximately $13,229,000
($15,329,000 if the Underwriters' over-allotment option is exercised in full).
The Company intends to use the net proceeds from the Offering approximately
as follows: (i) $4.0 million for capital equipment at its Richland, Washington
facilities; (ii) $2.0 million to develop its future U.S. east coast waste
treatment facilities; (iii) $4.0 million to repay all amounts of principal and
interest outstanding under its bank line of credit; and (iv) the balance for
working capital and general corporate purposes, which may include possible
acquisitions or joint ventures in connection with the expansion of its
existing business lines. The Company is not currently a party to any
commitments or agreements relating to, and is not currently involved in any
negotiations with respect to, any such acquisitions or joint ventures.
The Company expects that the net proceeds of the Offering, together with
anticipated cash flow from operations and available borrowings under the
Company's credit facility, will satisfy its cash requirements for the next 12
months. See "Risk Factors--Need for Additional Capital." Pending application
of the net proceeds of the Offering to the uses described above, the Company
intends to invest the proceeds in short-term investment grade, interest-
bearing securities.
DIVIDEND POLICY
The Company currently intends to retain any future earnings for use in the
operation and growth of its business. The Company does not anticipate paying
any cash dividends on the Common Stock in the foreseeable future. Any future
decision to declare or pay cash dividends on the Common Stock will depend upon
the results of operations, financial condition and capital expenditure plans
of the Company at that time, as well as other factors that the Company's Board
of Directors (the "Board"), in its sole discretion, may consider relevant. In
addition, the terms of the Company's bank borrowings currently prohibit the
payment by the Company of cash dividends on the Common Stock without the
lender's prior approval.
12
<PAGE>
DILUTION
As of December 31, 1997, the pro forma net tangible book value per share of
the Common Stock was $1.67. Pro forma net tangible book value per share of
Common Stock is equal to the total tangible assets of the Company less total
liabilities, divided by the number of shares of Common Stock deemed to be
outstanding. After giving effect to the issuance of shares in the Offering at
an assumed initial public offering price of $9.00 per share, and after
deducting estimated offering expenses and underwriting discounts, the adjusted
pro forma net tangible book value per share of Common Stock as of December 31,
1997 would have been $2.46. This represents an immediate dilution of $6.54 per
share to new investors purchasing Common Stock in the Offering. The following
table illustrates this per share dilution.
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share ................ $9.00
Pro forma net tangible book value per share as of December 31,
1997(1) ..................................................... $1.67
Increase attributable to the Offering ........................ .79
-----
Adjusted pro forma net tangible book value per share after
Offering ...................................................... 2.46
-----
Dilution to new investors....................................... $6.54
=====
</TABLE>
The following table summarizes, on a pro forma basis as of December 31,
1997, the number of shares purchased from the Company, the total consideration
paid and the average price per share paid by the existing shareholders of the
Company and new investors purchasing shares offered hereby, assuming an
initial public offering price of $9.00 per share:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
------------------ ------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing
shareholders(1)........ 11,515,896 87.1% $21,488,000 58.4% $1.87
New investors........... 1,700,000 12.9 15,300,000 41.6 9.00
---------- ----- ----------- -----
Total................. 13,215,896 100.0% $36,788,000 100.0%
========== ===== =========== =====
</TABLE>
- ---------------------
(1) The above computations assume no exercise after December 31, 1997 of any
of the outstanding options to purchase shares of the Common Stock. As of
December 31, 1997, there were options outstanding to purchase a total of
1,000,000 shares of Common Stock at a weighted average exercise price of
$2.09 per share, 298,927 of which were exercisable on such date. To the
extent these options are exercised, there will be further dilution to new
investors. See "Description of Capital Stock--Options."
13
<PAGE>
CAPITALIZATION
The following table sets forth the actual and pro forma capitalization of
the Company as of December 31, 1997, and the pro forma capitalization as
adjusted to give effect to the sale of 1,700,000 shares of Common Stock
offered hereby, and the receipt and application of the estimated net proceeds
therefrom. The pro forma capitalization gives effect to the conversion of all
outstanding shares of Mandatorily Redeemable Preferred Stock into an aggregate
of 3,983,595 shares of Common Stock prior to the closing of the Offering. The
capitalization information set forth in the table below is unaudited and
qualified by and should be read in conjunction with the Company's more
detailed Consolidated Financial Statements and the Notes thereto included
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
DECEMBER 31, 1997
------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
------- --------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Current portion of long-term debt............... $ 1,380 $ 1,380 $ 1,380
======= ======= =======
Long-term debt, less current portion............ $ 6,202 $ 6,202 $ 6,202
------- ------- -------
Mandatorily Redeemable Preferred Stock:
Series A and ATG Richland's Series A and B
Preferred Stock, no par value, 6,000,000
shares authorized, 3,029,291 shares issued
and outstanding (actual); none issued and
outstanding (pro forma and as adjusted)...... 19,416 -- --
------- ------- -------
Shareholders' equity:
Common Stock, no par value, 20,000,000 shares
authorized, 7,532,301 shares issued and
outstanding (actual); 11,515,896 shares
issued and outstanding (pro forma);
13,215,896 shares issued and outstanding (as
adjusted).................................... 6,337 21,795 35,024
Deferred compensation......................... (272) (272) (272)
Accumulated deficit........................... (5,769) (1,811) (1,811)
------- ------- -------
Total shareholders' equity.................. 296 19,712 32,941
------- ------- -------
Total capitalization...................... $25,914 $25,914 $39,143
======= ======= =======
</TABLE>
14
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The following selected statement of operations data for the years ended
December 31, 1995, 1996 and 1997 and the selected balance sheet data as of
December 31, 1996 and 1997 are derived from and are qualified by reference to
and should be read in conjunction with the more detailed Consolidated
Financial Statements and the Notes thereto included elsewhere in this
Prospectus, audited by Coopers & Lybrand L.L.P., independent accountants. The
selected statement of operations data for the year ended December 31, 1994 and
selected balance sheet data as of December 31, 1994 and 1995 are also derived
from audited financial statements of the Company which are not included
herein. The selected statement of operations data for the year ended
December 31, 1993 and the selected balance sheet data as of December 31, 1993
are derived from unaudited financial statements of the Company which are not
included herein.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------------
1993 1994 1995 1996 1997
----------- ------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue........................ $11,451 $11,723 $16,070 $18,235 $19,107
Cost of revenue................ 6,277 7,194 9,659 11,082 11,172
------- ------- ------- ------- -------
Gross profit................... 5,174 4,529 6,411 7,153 7,935
Sales, general and
administrative expenses....... 4,453 4,876 6,202 6,656 7,020
------- ------- ------- ------- -------
Operating income (loss)........ 721 (347) 209 497 915
Interest income (expense), net. (394) (19) (141) 13 58
------- ------- ------- ------- -------
Income (loss) before income
taxes......................... 327 (366) 68 510 973
Income tax expense (benefit)... -- (2) 2 2 (45)
------- ------- ------- ------- -------
Net income (loss).............. $ 327 $ (364) $ 66 $ 508 $ 1,018
======= ======= ======= ======= =======
Pro forma net income per
share(1)
Basic........................ $ 0.09
Diluted...................... 0.08
=======
Pro forma weighted average
shares outstanding(1)
Basic........................ 11,516
Diluted...................... 12,284
=======
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------------------------------
PRO FORMA
1993 1994 1995 1996 1997 1997
----------- ------- ------- ------- ------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital ........ $ 569 $ 2,359 $ 3,903 $ 4,333 $ 1,652 $ 1,652
Total assets............ 10,396 15,699 21,182 26,976 37,227 37,227
Total indebtedness
(including current
portion)............... 5,032 5,050 5,284 3,983 7,582 7,582
Mandatorily redeemable
preferred stock........ -- 5,444 9,403 16,319 19,416 --
Shareholders' equity.... 1,480 1,491 890 630 296 19,712
</TABLE>
- ---------------------
(1) See Note 2 of Notes to Consolidated Financial Statements--Computation of
Pro Forma Net Income Per Share. Historical income (loss) per share prior
to 1997 has not been presented since such amounts are not deemed
meaningful due to the significant change in the Company's capital
structure that will occur in connection with the Offering.
15
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the
Company's Consolidated Financial Statements and the Notes thereto and the
other financial information included elsewhere in this Prospectus. Except for
the historical information contained herein, the discussions in this
Prospectus contain forward-looking statements that involve risks and
uncertainties. The Company's actual results could differ materially from those
discussed herein. Factors that could cause or contribute to such differences
include, but are not limited to, those discussed below and in the section
entitled "Risk Factors" as well as those discussed elsewhere in this
Prospectus.
OVERVIEW
The Company is a radioactive and hazardous waste management company that
offers comprehensive treatment solutions for LLRW, LLMW and other waste
generated by the DOD, DOE and commercial entities such as nuclear power
plants, medical facilities and research institutions. Founded in 1976 to
provide technical consulting and support services to participants in the
nuclear power industry, the Company expanded into D&D services in 1980 when it
received its first multi-year contract for a DOE facility. Following an
employee leveraged buy-out in 1984, new management commenced the
diversification of the Company's business into waste processing and treatment.
The Company principally derives its revenue from the waste treatment
operations of its Fixed Facilities Group and the on-site remediation services
of its Field Engineering Group.
The U.S. government represented 86.3%, 76.8% and 71.3% of the Company's
total annual revenue for the years 1995, 1996 and 1997, respectively. Revenue
from commercial entities, primarily nuclear power plants, industrial concerns
and medical and research institutions, has increased in recent years and is
expected to represent an increasing portion of the Company's business. Revenue
from waste treatment processing is recognized as waste is processed. Field
engineering services are provided under fixed price, cost plus or unit price
contracts. Revenue from fixed price and cost plus contracts is recognized
utilizing the percentage of completion method of accounting; revenue from unit
price contracts is recognized as the units are processed and completed.
Revenue also includes non-refundable fees received under the terms of
technology transfer agreements.
The Company's revenue is dependent on the amount of its contract backlog,
the timing and performance requirements of each contract and, in the case of
government contracts, annual budget limitations and public sector budget
constraints. Revenue in the first and second quarters has historically been
lower than in the third and fourth quarters, as the Company's customers have
tended to be more cautious about transporting radioactive waste during the
months when transportation is more likely to be adversely affected by severe
weather conditions. The Company's revenue is also affected by the timing of
its clients' planned remediation activities and need for waste treatment
services, which generally increase during the third and fourth quarters. Due
to this variation in demand, the Company's quarterly results fluctuate.
Accordingly, specific quarterly or interim results should not be considered
indicative of results to be expected for any future quarter or for the full
year.
Gross profit percentages reflect the mix of the Company's business, which
varies from time to time. Gross profit margins are generally higher for
technology transfer agreements involving up-front, non-refundable, exclusive
licensing fees payable to the Company, and, due to the extensive expertise the
Company has developed in this area, when the Company is processing radioactive
waste, while margins on nonradioactive waste projects generally are lower. The
Company intends to focus a significant portion of its business on SAFGLAS
vitrification of LLRW in 1998 and on LLMW processing in 1999.
The Company operates its fixed facilities under regulation of, and licenses
and permits issued by, various federal, state and local agencies. There is no
assurance as to the successful outcome of any pending licensing and permitting
efforts. The licensing and permitting process is subject to regulatory
approval, time delays, community opposition and potentially stricter
governmental regulation. The Company's inability to obtain licenses or permits
on a timely basis, delays or changes in facility construction programs or the
cancellation of pending projects could have a material adverse effect on the
Company's financial position and results of operations.
16
<PAGE>
The Company has historically relied upon the integration of proven
technologies with the Company's know-how and processes, and has not incurred
significant levels of research and development spending. Most of the research
and development activities conducted to date have related to the design and
construction of its fixed operating facilities, particularly in connection
with the SAFGLAS system. The Company anticipates that its research and
development efforts will continue to be moderate and that the costs associated
with future research and development will not be material to the Company's
results of operations.
The Company increasingly pursues multi-year and longer term contracts as a
method of achieving more predictable revenue, more consistent utilization of
equipment and personnel, and greater leverage of sales and marketing costs.
The Company currently focuses on large, multi-year site-specific and term
contracts in the areas of LLRW and LLMW treatment, environmental restoration
and D&D, and has in recent years been awarded a number of large government
term contracts which, in most cases, require several years to complete. These
government term contracts are subject to cancellation, delay or modification
at the sole option of the government at any time, to annual funding
limitations and public sector budget constraints and, in many cases, to actual
delivery orders being released. Such projects, which may create an opportunity
for the Company to realize margins higher than on other types of contracts,
also impose heightened risks of loss if, for example, actual costs are higher
than those estimated at the time of bid. A loss on one or more of such larger
contracts could have a material adverse effect on the Company's financial
condition and results of operations. In addition, failure to obtain, or delay
in obtaining, targeted large, multi-year contracts could result in
significantly less revenue to the Company than anticipated.
RESULTS OF OPERATIONS
The following table sets forth certain statement of operations data as a
percentage of total revenue for the periods indicated:
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
-------------------
1995 1996 1997
----- ----- -----
<S> <C> <C> <C>
Revenue............................................... 100.0% 100.0% 100.0%
Cost of revenue....................................... 60.1 60.8 58.5
----- ----- -----
Gross profit.......................................... 39.9 39.2 41.5
Sales, general and administrative expenses............ 38.6 36.5 36.7
----- ----- -----
Operating income...................................... 1.3 2.7 4.8
Interest income (expense), net........................ (0.9) 0.1 0.3
Provision (benefit) for income taxes.................. -- -- (0.2)
----- ----- -----
Net income............................................ 0.4% 2.8% 5.3%
===== ===== =====
</TABLE>
COMPARISON OF YEARS ENDED DECEMBER 31, 1997 AND 1996
Revenue. Revenue for 1997 was $19.1 million, an increase of $0.9 million, or
4.8%, compared to $18.2 million in 1996. The growth in revenue resulted from a
change in mix of the business services and the receipt of fees for technology
transfer agreements. Revenue from waste treatment services was $9.6 million in
1997 compared to $8.9 million in 1996. Revenue from field engineering services
was $7.5 million in 1997 compared to $9.3 million in 1996. During 1997 the
Company entered into two technology transfer agreements (with total 1997
revenue of approximately $2.0 million derived from up-front, non-refundable,
exclusive licensing fees) that provided for the transfer of rights to the
processes and technology of the Company on an exclusive basis in selected
Asian territories. Revenue from various agencies of the U.S. government
accounted for 71.3% and 76.8% of total revenue in 1997 and 1996, respectively.
One contract with an agency of the U.S. government accounted for approximately
21.0% of the Company's total revenue for 1997. Two contracts with agencies of
the U.S. government accounted for 12.5% and 12.0%, respectively, of the
Company's total revenue for 1996.
Gross Profit. Gross profit for 1997 was $7.9 million, an increase of $0.7
million, or 10.9%, compared to $7.2 million for 1996. Gross profit as a
percentage of revenue increased to 41.5% in 1997 compared to 39.2% in 1996.
Gross profit percentages reflect the various mixes of the Company's business
services from time to time.
17
<PAGE>
Gross profit in 1997 includes the effect of the technology transfer licensing
fee revenue. Gross profit margins are generally higher for technology transfer
agreements and, due to the extensive expertise the Company has developed in
this area, when the Company is processing radioactive waste, while margins on
nonradioactive waste projects generally are lower. Although the gross profit
margins increased from 1997 to 1996, there can be no assurance that similar
margins will be attained in future periods. Any shift in the mix of business
in future periods to lower margin projects could adversely affect the
Company's results of operations.
Sales, General and Administrative Expenses. Sales, general and
administrative expenses (including stock-based compensation expense) were $7.0
million for 1997, an increase of $0.3 million, or 5.5%, compared to $6.7
million in 1996. Sales, general and administrative expenses were 36.7% of
revenue in 1997 compared to 36.5% of revenue in 1996. Sales, general and
administrative expenses support the domestic sales and marketing activities
and the financial, administrative, information systems and human resources
functions of the Company. The overall increase as a percentage of revenue is
attributable to the Company's hiring in 1997 of senior management personnel to
support the Company's future growth.
Interest Income and Interest Expense. Interest income was $58,000 in 1997
compared to $142,000 in 1996. The decrease in interest income is attributable
to a lower overall average of cash available for investment in 1997. In 1996
the Company sold $5.9 million of preferred stock and invested the net proceeds
in interest bearing accounts until they were needed for capital expenditures
and working capital. In 1997 the Company sold $1.7 million in additional
preferred stock. Interest expense was nil in 1997 as the result of the Company
capitalizing $891,000 of interest on construction in progress in accordance
with generally accepted accounting principles. (See Note 5 of Notes to
Consolidated Financial Statements.) Interest expense in 1996 was $129,000,
which was net of $446,000 of interest capitalized on construction in progress.
COMPARISON OF YEARS ENDED DECEMBER 31, 1996 AND 1995
Revenue. Revenue for 1996 was $18.2 million, an increase of $2.1 million, or
13.5%, compared to $16.1 million for 1995. The growth in revenue resulted from
increases in the size and number of both field engineering and waste treatment
projects, and an increase in the number of new customers. Revenue from waste
treatment services was $8.9 million in 1996 compared to $8.0 million in 1995.
Revenue from field engineering services was $9.3 million in 1996 compared to
$8.1 million in 1995. Revenue from various agencies of the U.S. government
accounted for 76.8% and 86.3% of total revenue in 1996 and 1995, respectively.
One contract with an agency of the U.S. government accounted for 12.5% and
21.9% of the Company's total revenue in 1996 and 1995, respectively. A
contract with one other agency of the U.S. government accounted for 12.0% of
the Company's total revenue for 1996.
Gross Profit. Gross profit for 1996 was $7.2 million, an increase of $0.8
million, or 11.6%, compared to $6.4 million in 1995. Gross profit as a
percentage of revenue remained relatively constant at 39.2% in 1996 compared
to 39.9% in 1995. Gross profit percentages reflect the various mixes of the
Company's business services from time to time. The decrease in the gross
profit percentage from 1995 to 1996 reflects this change in mix.
Sales, General and Administrative Expenses. Sales, general and
administrative expenses (including stock-based compensation expense) were $6.7
million for 1996, an increase of $0.5 million, or 7.3%, compared to $6.2
million for 1995. Sales, general and administrative expenses were 36.5% of
revenue in 1996 compared to 38.6% of revenue in 1995. The overall decrease as
a percentage of revenue is attributable to the Company's effort to maintain a
level of costs that does not increase at the same rate as revenue.
Interest Income and Interest Expense. Interest income was $142,000 in 1996
compared to $185,000 in 1995. The decrease in interest income is attributable
to a lower overall average of cash available for investment in 1996 than in
1995 due to the timing of sales of preferred stock and the use of the cash for
capital expenditures and working capital. Interest expense for 1996 was
$129,000 compared to $326,000 for 1995. The higher interest expense in 1995
resulted from an increase in working capital borrowing to finance the increase
in accounts receivable in 1995 over 1994. Accounts receivable increased from
approximately $3.9 million at fiscal year-end 1994 to $7.4 million at fiscal
year-end 1995. Additionally, in 1995 and 1996 the Company capitalized a
portion
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of its interest expense in accordance with generally accepted accounting
principles. The interest expense capitalized was directly attributable to
construction in progress on the SAFGLAS system.
LIQUIDITY AND CAPITAL RESOURCES
Prior to 1994, the Company financed its operations, acquired equipment and
met its working capital requirements through sales of common stock, borrowings
under its revolving line of credit and long-term loans and capital leases
secured by property and equipment. In 1994 the Company sold 900,000 shares of
Preferred Stock at $5.00 per share. The proceeds from this financing were used
to acquire property and equipment in the amount of $3.2 million, and the
balance for working capital needs.
In 1995 the Company's subsidiary, ATG Richland, sold 860,000 shares of its
Series A Redeemable Non-Voting Preferred Stock at $5.00 per share and in 1996
sold 990,355 shares of its Series B Redeemable Non-Voting Preferred Stock at
$6.00 per share. Of the $10.2 million raised in these two financings, $7.3
million was used to acquire property and equipment, and $2.9 million for
working capital. In 1997 ATG Richland sold an additional 278,936 shares of its
Series B Redeemable Non-Voting Preferred Stock at $6.00 per share. The
$1.7 million raised in this transaction was primarily used to fund the
installation and start-up of the SAFGLAS system at the Company's Richland
facilities.
During 1995 the Company used cash of $3.4 million in its operating
activities. Operating cash used in 1995 resulted primarily from an increase in
accounts receivable related to significant growth in sales. In 1996, cash of
$2.9 million was generated from operations, primarily from increased
profitability and reduction in accounts receivable as well as other working
capital changes. In 1997, cash of $1.0 million was generated from operations,
primarily from increased profitability.
Significant outlays of cash have been needed to acquire property and
equipment, primarily for the Company's Richland facilities. Property and
equipment acquisitions totaled $2.7 million, $4.6 million and $7.8 million in
1995, 1996 and 1997, respectively. The Company anticipates that continued
expansion of its Richland LLRW treatment facilities will cost approximately
$4.0 million, which the Company plans to finance from the proceeds of the
Offering. The Company currently expects to spend an additional approximately
$10 million for the construction of the mixed waste treatment facility to be
sited at its Richland facilities.
The working capital of the Company was approximately $1.7 million at
December 31, 1997. The Company's principal sources of liquidity at December
31, 1997 consisted of $2.6 million of cash and cash equivalents. It is
anticipated that bank borrowings will be repaid from the proceeds of the
Offering. The Company is presently in negotiations to increase the principal
amount of its bank line of credit to $10.0 million.
The Company believes that the net proceeds from the Offering, together with
the availability of its line of credit and cash generated from operations,
will be sufficient to meet the Company's capital requirements for the next 12
months. Depending on its rate of growth and profitability, the Company may
require additional equity or debt financing to meet its future working capital
or capital expenditure needs. There can be no assurance that such additional
financing will be available or, if available, that such financing can be
obtained on terms satisfactory to the Company.
ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board issued SFAS No. 130,
"Reporting Comprehensive Income." SFAS No. 130 establishes standards for
reporting and displaying comprehensive income and its components in the
consolidated financial statements. It does not, however, require a specific
format for the statement, but requires the Company to display an amount
representing total comprehensive income for the period in that financial
statement. SFAS No. 130 is effective for the Company's 1998 fiscal year.
YEAR 2000 MODIFICATIONS
The Company is not highly dependent on internal computer systems, and does
not, as a general matter, interact electronically with its customers or
suppliers. The Company is currently reviewing its computer systems in order to
evaluate what, if any, corrections or modifications may be necessary for the
year 2000.
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BUSINESS
See "Glossary" for definition of certain terms used in this section and
elsewhere in this Prospectus.
GENERAL
The Company, founded in 1976, is a radioactive and hazardous waste
management company that offers comprehensive treatment solutions for LLRW and
LLMW generated by the DOD, the DOE and commercial entities such as nuclear
power plants, medical facilities and research institutions. The Company's
thermal treatment technologies vitrify waste into leach-resistant glass for
long-term storage or disposal. Compared with the more traditional incineration
methods, the Company's vitrification process results in significantly less
effluents, provides a more stable end product and achieves comparable volume
and mass reduction at similar total treatment and disposal costs.
The Company operates through its Fixed Facilities Group, which manages its
waste treatment operations, and its Field Engineering Group, which addresses
D&D of radioactive facilities and environmental restoration of sites
contaminated with radioactive and hazardous waste. The synergies between the
on-site remediation services of its Field Engineering Group and the waste
treatment operations of its Fixed Facilities Group enhance the Company's
ability to compete for commercial and government LLRW and LLMW treatment
contracts. The Company directs waste removed from the field to its fixed
facilities for treatment when more cost-effective for the customer. In
addition, the Company's radioactive material license issued by the State of
Washington with respect to its Richland facilities includes reciprocity
provisions that the Company believes allow it to thermally and non-thermally
treat radioactive waste at customer sites in all fifty states.
The Company believes that it possesses a number of competitive advantages
which distinguish it from other radioactive and hazardous waste management
companies, including the broad and comprehensive spectrum of the services it
offers, the extensive portfolio of licenses and permits it holds or is in the
process of obtaining, the cost-efficiency and environmental integrity of its
waste treatment technologies, and its established positioning with both
commercial and government customers, as well as with U.S. federal, state and
local environmental regulators.
MARKET OVERVIEW
General. The worldwide environmental services industry is diverse and
growing. This growth has been driven by extensive legislation and governmental
regulation aimed at protecting the environment and requiring responsible
parties to clean up existing environmental hazards. According to industry
publications, the overall worldwide market for environmental services,
including solid waste management and water treatment services, was
approximately $300 billion in 1996, including approximately $140 billion in
the United States, and is expected to grow over the succeeding decade at an
annual rate of 5%, with the U.S. growth rate estimated at 4% annually and the
growth rate in Asia (excluding Japan) estimated at 17% annually over this same
period.
The Company believes that the specific environmental services markets within
which it competes have evolved so that actual remediation and site clean-up,
including the treatment and disposal of LLRW, LLMW and hazardous waste, will
command a growing portion of environmental resources worldwide. The following
is a description of each of these types of waste and a summary of the
potential market for the services offered by the Company.
LLRW Treatment Market. Radioactive waste is categorized as either high-level
radioactive waste or low-level radioactive waste. Such waste is generated by
government facilities and by commercial enterprises such as nuclear power
plants, medical laboratories and university and industrial research and
development facilities. LLRW is all radioactive material other than high-level
radioactive waste ("HLW"). HLW is primarily comprised of spent nuclear fuel
rods from nuclear reactors and highly radioactive waste generated by the
processing of nuclear materials for weapons production. Most LLRW consists of
relatively large amounts of
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waste materials contaminated with small amounts of radioactivity, such as
contaminated equipment, protective clothing, paper, rags, packing material,
liquids and sludge. The Company has been engaged in the business of handling,
treating, storing and disposing of LLRW since 1988.
The Company estimates that currently more than $150 million is spent
annually in the United States on the treatment of commercial LLRW. The Company
believes that the size of the commercial LLRW treatment market in the United
States will increase significantly as the result of the LLRW required to be
treated in connection with the expected decommissioning of up to ten nuclear
power plants in the United States over the next decade. Significant demand
exists in the United States for the volume and mass reduction of commercially
generated LLRW, as there are at present only two full-service disposal sites
in the nation accepting such waste. These sites, which are located in
Barnwell, South Carolina and Richland, Washington, base the disposal fees
charged to customers on the volume and mass of the waste to be disposed. The
Barnwell disposal site, which currently services the majority of commercial
LLRW generators in the United States, has increased its disposal fees by
approximately 300% over the past five years. The current disposal fees at this
site are approximately $400 per cubic foot, and from $4.00 to $7.00 per pound,
depending upon the waste's density and activity levels. The disposal fees
charged by the Richland site are significantly lower, but this site is only
permitted to accept waste generated in 11 states. In addition, there is a
disposal facility in Clive, Utah that also charges disposal fees significantly
lower than those charged by the Barnwell site, but it is currently permitted
to accept LLRW with only small concentrations of radioactivity. See "--
Competition." There are at present only two companies licensed to offer volume
and mass reduction by thermal treatment of a broad spectrum of commercial LLRW
in the United States: the Company, through its SAFGLAS vitrification
technology, and GTS Duratek, Inc. ("Duratek"), through its incineration
treatment processes.
Significant amounts of LLRW are also generated by and stored on federal
government sites, principally the former nuclear weapon production facilities
administered by the DOE. The DOE estimates that there is in excess of 53
million cubic feet of LLRW either currently stored or expected to be generated
during the next 20 years at DOE facilities throughout the United States alone.
Of this estimated total, DOE-Hanford and DOE-Savannah River account for
approximately 6% and 34%, respectively. The DOE also estimates that the total
treatment costs for the LLRW at these two sites alone will exceed $850 million
through the year 2010.
LLMW Treatment Market. Low-level mixed waste is low-level radioactive waste
co-mingled with hazardous substances regulated by the Resource Conservation
and Recovery Act of 1976 ("RCRA") and/or toxic substances regulated by the
Toxic Substances Control Act of 1976 ("TSCA"). LLMW results from a variety of
activities, including the processing of nuclear materials used in nuclear
weapon production, nuclear energy research and the generation of nuclear
energy. The clean-up of government-generated LLMW is driven by the Federal
Facilities Compliance Act of 1992 (the "FFCA"), which requires that
radioactivity-contaminated federal facilities meet waste clean-up targets by
specified dates. For example, DOE-Hanford is required to commence non-thermal
treatment of the LLMW stored there by September 30, 1999, and thermal
treatment of such waste by December 31, 2000.
Significant quantities of untreated LLMW have accumulated in the United
States, as approved treatment solutions applicable to a broad range of such
waste streams have previously not been available. The DOE estimates that there
is in excess of 7.7 million cubic feet of LLMW either currently stored or
anticipated to be generated over the next two decades throughout the United
States at DOE facilities alone, with approximately 16% and 9% of this
estimated total allocated to the DOE's Hanford and Savannah River
Reservations, respectively. The DOE also estimates that the treatment cost for
the LLMW at these sites alone will exceed $580 million through the year 2010.
The Company is not aware of any reliable estimates of the existing backlog of
commercially generated LLMW awaiting treatment at generators' sites. However,
according to a survey study sponsored by the Nuclear Regulatory Commission
("NRC") and the Environmental Protection Agency ("EPA"), approximately 140,000
cubic feet of LLMW was commercially generated in the United States in 1990.
The Company believes that the size of the commercial LLMW treatment market in
the United States will increase significantly as the result of the LLMW
required to be treated in connection with the expected decommissioning of up
to ten nuclear power plants in the United States over the next decade.
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<PAGE>
The Company believes that its mixed waste treatment facility will, upon
completion of its pending permitting process, be the first privately owned
facility in the United States licensed to thermally and non-thermally treat a
broad spectrum of commercial and government-generated LLMW.
Hazardous Waste Treatment Market. Hazardous waste is waste that is
classified as hazardous under RCRA and/or toxic under TSCA. The list of
"hazardous substances" covered by these laws is extensive and includes a large
number of chemicals, metals, pesticides, biological agents, toxic pollutants
and other substances. The Company to date has not attempted to penetrate the
large and highly competitive hazardous waste treatment market, except as a
component of the environmental restoration and D&D services provided by its
Field Engineering Group. Historically, the Company has processed a broad range
of hazardous substances at client sites in the execution of environmental
restoration and D&D projects.
GROWTH STRATEGY
To expand its business, the Company plans to (i) establish significant
positions in certain emerging or underserved, higher-margin segments within
the markets for treatment of LLRW, LLMW, hazardous and other waste, (ii)
increase its participation on teams bidding for and executing large-scale,
multi-year D&D and environmental restoration contracts, and (iii) enhance its
ability to provide on-site full-service solutions for D&D and environmental
restoration projects. The Company's growth strategy is focused on achieving
the following five objectives:
Increase Market Share in Domestic Commercial LLRW Treatment Market. The
Company intends to increase its share of the domestic commercial LLRW
treatment market by marketing its SAFGLAS vitrification system as a
competitive alternative to incineration, the only other thermal treatment
method widely available in the United States for commercial LLRW. As
disposal costs have increased significantly in recent years, the volume and
mass reduction achievable by thermal treatment has become a critical factor
in selecting a waste treatment solution for many commercial LLRW
generators. With the commencement of the commercial operation of its
SAFGLAS system in the third quarter of 1997, the Company now offers a non-
incineration thermal process that results in total treatment and disposal
costs for the customer comparable to those achieved by incineration.
Additionally, the end-stage glass product resulting from this process is
more suitable for long-term storage and disposal than incineration fly ash.
The Company believes that any competitor attempting to build and operate a
commercial LLRW thermal treatment facility in the United States would
require several years to secure the requisite regulatory approvals.
Establish Significant Position in Domestic LLMW Treatment Market. The
Company intends to establish a significant position in the United States
market for treatment of LLMW. The market for domestic LLMW treatment is in
an early stage because approved technologies capable of treating a broad
spectrum of low-level mixed waste streams previously have not been
available. The Company has developed its GASVIT vitrification system for
LLMW treatment and anticipates completing the pending licensing process for
both thermal and non-thermal LLMW treatment methods at its Richland
facilities in the fourth quarter of 1998. Thereafter, the Company expects
to take approximately six and 12 months, respectively, to place its non-
thermal and thermal treatment processes in operation. As a consequence, the
Company believes it is positioned to be the first company to own and
operate a private facility in the United States capable of thermally and
non-thermally treating a broad spectrum of low-level mixed waste streams
produced by commercial and government waste generators. The Company
believes that any competitor attempting to build and operate a commercial
LLMW thermal treatment facility in the United States would require a
significant start-up period in which to develop and commercialize its
technology and secure the requisite regulatory approvals. Consequently, the
Company may have several years in which to establish its position in this
market before experiencing significant competition.
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Enhance its Ability to Compete for Large Project Contract Awards. The
Company intends to increase its participation on project teams led by large
firms when such relationships are a practical requirement to compete
successfully for large project contract awards. Increasingly, large-scale,
multi-year D&D and environmental restoration contracts, whether to be
performed domestically or overseas, require a team of companies with
complementary expertise and skills within the industry, usually led by a
large, multinational engineering or construction company. The Company
believes that its expertise in niche areas within the radioactive and
hazardous waste management industry makes it an attractive candidate for
inclusion in teams competing for such contracts. In the last three years,
the Company has been a member of teams executing DOE and DOD projects led
by, among others, Lockheed Martin, Morrison Knudsen and Jacobs Engineering.
Expand into Pacific Rim Markets. The Company intends to offer its SAFGLAS
and GASVIT vitrification technologies for local treatment of LLRW and LLMW
in selected Pacific Rim markets. The high cost of LLRW and LLMW disposal
costs in a number of Pacific Rim countries favors thermal treatment for
such wastes, while regulatory restrictions and other environmental concerns
may limit incineration as a treatment process. The Company also believes
there is a significant market for vitrification in the treatment and
recycling of fly ash resulting from incineration of municipal waste in
certain Pacific Rim markets where scarce land resources make landfill
disposal of the ash uneconomical. Vitrification of fly ash through the
Company's GASVIT system will allow the ash to be recycled for use as
construction material and for other reuse purposes. To further promote use
of its technologies and to establish strategic alliance relationships
designed to accelerate penetration of these markets, the Company has
entered into exclusive technology transfer agreements covering its
technologies for Hong Kong, Taiwan and The People's Republic of China.
Enhance On-Site Full-Service Treatment Capabilities. In order to enhance
its ability to provide in-house a full range of D&D and environmental
restoration services, including the application of vitrification treatment
technology on-site, the Company is in the process of developing smaller-
scale, transportable field applications of its GASVIT technology. The
Company believes there is a significant trend in favor of D&D and
environmental restoration contractors able to provide in-house a full range
of such services on-site, including site assessment, feasibility study
preparation, remediation design, remediation and removal actions, and
thermal and non-thermal waste treatment. The Company believes that the
development of smaller-scale, transportable GASVIT units will further
distinguish it from most other radioactive and hazardous waste management
companies.
WASTE TREATMENT TECHNOLOGIES
A summary description of the Company's principal waste treatment
technologies for LLRW and LLMW is provided in the following table:
PRINCIPAL TECHNOLOGIES
<TABLE>
- ----------------------------------------------------------------------------
<CAPTION>
WASTE STREAMS NATURE OF
TECHNOLOGY TREATED PROCESS OPERATING STATUS
- ----------------------------------------------------------------------------
<C> <C> <C> <S>
SAFGLAS LLRW Thermal Commercial operation commenced
in September 1997.
- ----------------------------------------------------------------------------
GASVIT LLRW Thermal Commercial operation:
LLMW LLRW scheduled for mid-1998
LLMW scheduled for late 1999
- ----------------------------------------------------------------------------
PLASTIMELT LLMW Non-Thermal Commercial operation scheduled
for early 1999.
</TABLE>
The core technology employed in the SAFGLAS and GASVIT systems is
vitrification. Although not widely utilized in this country to date,
vitrification technologies have been successfully used in Europe for over
thirty
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years, principally in the area of HLW treatment. The EPA has identified
vitrification as the Best Demonstrated Achievable Technology (BDAT) for the
treatment of HLW, and the Company believes that vitrification will prove to be
equally effective in the treatment of waste contaminated with lower levels of
radioactivity. In addition, the vitrification process results in significantly
less effluents than the more traditional incineration methods of waste
treatment. Accordingly, the Company believes vitrification is widely perceived
as an environmentally superior waste treatment method. There can be no
assurance that the steps taken to protect the Company's technologies will be
adequate to prevent the use of such technologies by third parties. See "Risk
Factors--Dependence on and Limited Protection of Technology and Intellectual
Property; Potential Litigation."
[PLACE FOR SAFGLAS BLOCK DIAGRAM]
The SAFGLAS system is the only non-incineration thermal process at present
permitted in the United States
to treat both commercial and government-generated LLRW.
SAFGLAS--Thermal Treatment of LLRW by Vitrification. The SAFGLAS system
treats a broad spectrum of LLRW in the form of dry active wastes (protective
clothing, paper, rags, plastics, wood), low activity resins, aqueous based
liquids and sludges, and oils, which eliminates the customer's need to pre-
sort wastes to fit the specialized capabilities of a particular waste
processor's technology. The primary unit is a Joule-heated glass melter with a
multi-zone process chamber based on a technology that has been successfully
used for over 15 years in research on hazardous waste treatment. LLRW is fed
into a closed pool of molten glass at temperatures in excess of
2000(degrees)F. Most of the organic constituents are destroyed and the
radioactive solids are captured within the glass, which is periodically
drained into drums for disposal. The Company adapted the basic process to the
treatment of LLRW, including devising the systems for feed preparation, waste
feeding, and effluent treatment and monitoring. The SAFGLAS system can reduce
the volume of the input waste by a factor of up to 200 to 1 and the mass of
the input waste by a factor of up to 96%. The Company believes that the highly
stable and leach-resistant nature of the glass produced by the SAFGLAS
process, as compared to incineration ash, will be significant for waste
generators concerned with the potential long-term liabilities associated with
the land disposal of LLRW.
The basic SAFGLAS system is currently being enhanced through the addition of
a high temperature drum oven that will process biological LLRW as well as
materials with a high water content, and a small (100 lbs./hr.) version of the
Company's GASVIT system that will process wastes that either require small
batch processing or have very corrosive effluent gas that requires "scrubbing"
to remove corrosive constituents. Both the drum oven and the small GASVIT unit
exhaust into the second chamber of the basic SAFGLAS unit. The Company
therefore refers to the combination of these integrated technologies as the
SAFGLAS system. The combination of these processes is designed to treat
approximately 12,000 pounds per day at full capacity, which is presently
anticipated to occur in 1999. The Company's license allows it to operate the
SAFGLAS system 24 hours a day.
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[PLACE FOR GASVIT PICTURE]
GASVIT--Thermal Destruction of LLMW by Gasification/Vitrification. The
Company has acquired licensing rights to use a proprietary plasma arc
technology developed by Integrated Environmental Technologies, LLC ("IET"),
for the treatment of LLMW. The IET plasma arc technology is being integrated
with the Company's technologies to form the GASVIT system. The GASVIT system
will be used as part of the SAFGLAS system for processing LLRW and will also
be used as the primary component in the Company's LLMW thermal processing
facility. Materials are fed into a process chamber where a combination of a
carbon induced plasma and joule heating at temperatures in excess of
2200(degrees)F transforms complex organic materials into a "syngas," which is
a mixture of hydrogen and carbon monoxide. The syngas can be either used as
fuel or destroyed in a subsequent flameless oxidation process. As with the
SAFGLAS system process, the end result of the GASVIT system process is a
glass-like material. The GASVIT system can reduce the volume of the input
waste by a factor of up to 200 to 1, and the mass of the input waste by a
factor of up to 96%. A 50 lbs./hr. prototype gasification/vitrification
process chamber has been in operation at IET's facilities in Richland,
Washington since June 1997. IET's process chamber is based on several
prototype units constructed and tested for the DOE, including a 100 lbs./hr.
process chamber which has been tested at the DOE's Hanford Reservation since
1996. The GASVIT system is being licensed for a total throughput of 12,000
pounds per day; however, the initial unit will provide only 50% of the
permitted capacity. The Company intends to add another unit as its capacity
needs increase.
PLASTIMELT--Non-Thermal Encapsulation of LLMW. The Company has developed the
PLASTIMELT process for the encapsulation of LLMW in a plastic matrix when the
volume or mass reduction achievable by thermal treatment methods is
uneconomical or impractical. In this process, molten plastic is extruded into
or around the LLMW to create a waste form that meets applicable requirements
for land disposal. The Company has integrated this technology with its
supercompaction processes in a system which achieves a volume reduction factor
of greater than 9 to 1.
OPERATIONS AND SERVICES
The Company provides radioactive and hazardous waste management services
through two operating units, the Fixed Facilities Group and the Field
Engineering Group.
FIXED FACILITIES GROUP. The core of the Company's fixed facilities
operations, situated on a 45-acre site in Richland, Washington, is one of the
largest commercial radioactive waste treatment and storage centers in the
United States. This facility is currently licensed to handle, treat and store
a wide variety of LLRW and the Company is in the process of securing the
licenses, permits and approvals required in order for this facility to
thermally and non-thermally treat a broad spectrum of low-level mixed waste
streams produced by both commercial and government generators. The Company
also owns a four acre facility in Fremont, California which, in addition to
housing the Company's corporate offices, includes a mercury fluorescent tube
lamp recycling facility, and a LLRW storage and transfer station that supports
its Richland operations.
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In 1997, the Company purchased 30 acres of undeveloped industrial land in
Aiken, South Carolina, located adjacent to the DOE's Savannah River
Reservation. The Company presently intends to construct a fixed facility
principally devoted to LLRW treatment on this site. The construction of this
facility will provide the Company with two LLRW processing sites, each
situated adjacent to one of the two full-service commercial LLRW disposal
sites currently open in the United States.
LLRW Treatment Services. Since 1988, the Company has treated and recycled
several million pounds of LLRW at its Richland facilities. Since being placed
in operation in September 1997, through January 31, 1998, the SAFGLAS system
has operated continuously for 2,880 hours and processed in excess of 115,000
pounds of LLRW. In addition to the DOE, DOD and other agencies of the U.S.
government, customers for the Company's LLRW treatment services include over
20% of the nation's nuclear power plants, many major corporations, and
numerous universities, laboratories, hospitals and other research and medical
institutions. In 1995, the DOE awarded the Company, in a competitive bidding
process, a fixed unit price contract to process LLRW generated by the Hanford
Reservation. The maximum value of the contract to the Company is $17 million
over five years.
LLMW Treatment Services. In December 1994, the Company began the licensing,
design and facility construction process for a mixed waste treatment and
storage facility to be sited at its Richland facilities. The Company intends
to use the mixed waste facility to treat LLMW, initially from the Hanford
Reservation, and subsequently from other DOE and other U.S. government and
commercial generators of LLMW. The Company intends to thermally treat LLMW by
means of its GASVIT system; when it is uneconomical or impractical to treat
LLMW by a thermal method, the Company intends to employ a number of
stabilization and encapsulation processes, including the Company's PLASTIMELT
process.
In November 1995, the DOE awarded the Company, in a competitive bidding
process, the first privatized contract to thermally treat LLMW generated by
the Hanford Reservation. This contract has a maximum value to the Company of
$24 million for treating 175,000 cubic feet of waste over ten years. The
Company has until the year 1999 to permit and construct an LLMW treatment
facility and to commence LLMW treatment. In addition, the DOE awarded the
Company in September 1997, in a competitive bidding process, the first
privatized contract to non-thermally treat LLMW generated by the Hanford
Reservation. This contract has a maximum value to the Company of $5 million
over a three year period commencing when the Company begins LLMW treatment
thereunder.
Fluorescent Tube Recycling Services. The Company developed its own
technology for the recycling of mercury fluorescent light tubes and placed it
in operation at its Fremont facilities in 1994. The clients for this service
include large industrial concerns, electrical contractors, hazardous waste
disposal companies and various federal, state and local governmental agencies.
The Company's process involves the separation of the primary components of
glass, mercury and aluminum. The lamps are directed through the feed system,
mass transported and crushed and separated under negative pressure. The
crushed glass and aluminum are processed into storage bins for recycling. The
remaining phosphor powder is conveyed through a separate system and thermally
processed under vacuum to extract the constituent mercury to below regulated
levels. The recovered mercury is then recycled. The Company's system is
designed to accommodate the processing of 10 million lamps annually, and
currently processes approximately 1 million lamps annually.
FIELD ENGINEERING GROUP. The principal services provided by the Company's
Field Engineering Group are (i) D&D of nuclear power plants and other
facilities contaminated with LLRW, LLMW and hazardous waste, and (ii)
environmental restoration of sites contaminated with LLRW, LLMW and hazardous
waste. The Company's comprehensive capabilities include site investigation,
characterization and assessment, negotiation with regulatory agencies and
procurement of required regulatory approvals, preparation of feasibility and
remedial design studies, removal and remediation actions, waste brokerage and
transportation, waste treatment using the Company's technologies on-site or at
the Company's fixed facilities, and storage of waste at the Company's fixed
facilities.
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Decontamination and Decommissioning Services. Historically, D&D services
have been the Company's core specialty area. The Company has been involved in
D&D projects for over a decade and currently is involved in several D&D
projects for the DOE. Customers for the Company's D&D services include nuclear
power plants, universities and other research institutions that utilize
radioactive isotopes in a variety of research projects, hospitals with
radiological medicine departments, companies employing nuclear materials in
manufacturing and the DOE and DOD, which oversee the nation's nuclear weapon
production facilities.
The Company believes that there are significant near-term opportunities in
domestic D&D, particularly in the commercial D&D market, as up to ten U.S.
nuclear power plants are expected to be decommissioned over the next decade.
The Company estimates that the average total cost of decontaminating and
decommissioning a domestic nuclear power plant is approximately $300-$500
million. In addition, there are over 5,000 radioactivity-contaminated DOD and
DOE facilities which are scheduled to be decommissioned over the next decade.
Environmental Restoration Services. The Company has historically
concentrated on environmental removal and remediation actions at contaminated
DOD sites. There are over 420 DOD sites contaminated with LLRW or LLMW.
According to the Defense Environmental Restoration Program Annual Report to
Congress for Fiscal Year 1996, allocations for funding environmental
restoration work on DOD sites are projected to be $2 billion a year through
the year 2000.
Since 1989 the Company has executed more than 150 field engineering projects
relating to the environmental restoration of sites contaminated with LLRW,
LLMW, or hazardous waste throughout the United States and U.S. territories. In
addition, the Company is currently performing under three Total Environmental
Restoration Contracts (TERCs) with the U.S. Army Corps of Engineers, two Pre-
placed Remedial Action Contracts (PRACs) with the U.S. Army Corps of
Engineers, two Remedial Action Contracts (RACs) with the U.S. Navy and four
environmental restoration contracts with the DOE, collectively covering a 40
state area.
For its military and industrial clients, the Company executes environmental
restoration projects either on a planned or quick response basis. In the
execution of both planned and quick response environmental restoration
projects involving both LLRW and LLMW, the Company believes that it is one of
only six domestic companies having the in-house capability of providing on-
site full-service solutions from site investigation through the waste
treatment stage for D&D and environmental restoration projects involving LLRW
and LLMW. The Company believes that the reciprocity provisions of its
radioactive material license issued by the State of Washington with respect to
the Company's Richland facilities allow the Company to thermally and non-
thermally treat radioactive waste at customer sites in all fifty states.
BACKLOG
The Company's backlog consists of confirmed purchase order contracts that
have been received and which are scheduled for completion within 12 months. A
large percentage of these contracts are with agencies and facilities within
the U.S. government, principally the DOD and DOE, and many have been awarded
under indefinite delivery or quantity terms. These contracts are subject to
cancellation, delay or modification at the sole option of the government at
any time, to annual funding limitations and public sector budget constraints
and to actual delivery orders being released. Accordingly, the Company's
backlog as of a particular date may not be indicative of sales for any period
and the Company therefore believes that backlog is not a reliable indicator of
future revenue. The Company's backlog for contracts planned to be completed in
fiscal 1998 that are not subject to indefinite delivery or quantity terms is
$8.2 million. See "Risk Factors--Dependence on Federal Government; Limits on
Government Spending; Government Contracting" and "--Seasonality and
Fluctuation in Quarterly Results."
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<PAGE>
CUSTOMERS
The Company's services are provided to a broad range of federal, state and
local government and commercial clients in the United States. Demand for the
Company's services and the distribution of such demand are heavily influenced
by the level of implementation and enforcement of existing and new
environmental regulations, funding levels for government projects and spending
patterns of commercial clients.
Primarily due to its technical expertise, extensive portfolio of
environmental licenses and permits and full-service capabilities on-site, the
Company has successfully bid on and executed a substantial number of waste
treatment, environmental restoration, D&D and other contracts with the DOD,
DOE and a number of other federal government agencies, as both a prime
contractor and as a subcontractor. In fiscal 1995, 1996 and 1997, the
percentage of the Company's total revenue attributable to such contracts was
86.3%, 76.8% and 71.3%, respectively. One contract with the U.S. Army Corps of
Engineers-Sacramento District accounted for 21.0% of the Company's total
revenue in the year ended December 31, 1997. One contract with the U.S. Army--
Fort Irwin accounted for 21.9% and 12.5% of the Company's total revenue in the
years ended December 31, 1995 and 1996, respectively. A contract with the U.S.
Army--Presidio accounted for 12.0% of the Company's total revenue in the year
ended December 31, 1996. The Company also serves numerous commercial clients,
including large industrial concerns, nuclear power plants, hospitals,
laboratories and other medical institutions, and universities. A substantial
portion of the Company's commercial work represents new contracts awarded by
existing clients. No single commercial client accounted for 10% or more of the
Company's revenue in fiscal years 1995, 1996 or 1997. See "Risk Factors--
Dependence on Federal Government; Limits on Government Spending; Government
Contracting."
SALES AND MARKETING
The Company relies on a direct sales and marketing staff of six employees,
its executive management team and project managers, and brokers and other
intermediaries, to market its waste treatment and field engineering services
nationwide and internationally. Historically, the Company relied on discrete
waste treatment projects and limited term remediation projects that typically
involved planned clean-ups of sites that were contaminated in the normal
course of manufacturing activity or quick response clean-ups of spills. The
Company now targets its marketing efforts on large, multi-year private sector
and government site-specific and term contracts in the areas of LLRW and LLMW
treatment, environmental restoration and D&D.
The Company's key marketing strategy in the waste treatment area is to focus
its resources on emerging or underserved markets in which it has technological
or licensing advantages over existing and potential competitors. The Company
intends to further develop its network of strong client relationships with the
DOD, the DOE, other federal government agencies, leading domestic and foreign
industrial concerns and its other most significant clients, and with major
national and multinational engineering, construction and architectural
engineering firms and other of its co-participants in teams executing large,
multi-year environmental restoration and D&D projects. The Company believes
that these strategies have been validated by the significant number of
additional contracts awarded to it by existing customers for which it
previously provided significant services, and the number of teams on which it
has participated in recent years in the execution of large, multi-year
environmental restoration and D&D projects. See "Risk Factors--Focus on Larger
Projects."
To further promote use of its technologies and to establish strategic
alliances designed to accelerate its penetration of selected Pacific Rim
markets, the Company has entered into exclusive technology transfer agreements
covering its technologies for Hong Kong, Taiwan, and The People's Republic of
China. These agreements require the Company to provide assistance and know-how
to its alliance partners, which have the right to exclusively market the
Company's technologies in these territories. The Company will share in any
profits generated from these efforts and is also entitled to a royalty on
revenue generated by the use of its vitrification technologies in these
territories. The Company is entitled to independently pursue opportunities
within these territories if its alliance partners decline to do so, and, if
certain minimum revenue is not achieved in these territories within an agreed
upon period, the Company may terminate the agreements.
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<PAGE>
COMPETITION
In general, the radioactive and hazardous waste management industry is
highly competitive. The Company faces varying levels of competition in its
principal current and planned business lines. The Company believes that it
currently has only one principal competitor, Duratek, for the thermal
treatment of domestic LLRW, and a handful of small to mid-size competitors in
the non-thermal treatment of domestic LLRW. With respect to the domestic LLMW
treatment market, the Company believes that there are only four other
companies currently processing LLMW at their own facilities, all of which are
doing so under limited licenses which restrict them from accepting a broad
spectrum of low-level mixed waste streams. Upon completion of the pending
licensing process for its mixed waste treatment facility, the Company believes
that it will operate the first private facility in the nation licensed to
thermally and non-thermally treat a broad spectrum of low-level mixed waste
streams produced by both commercial and government generators.
The Company is aware that the commercial LLRW disposal site in Clive, Utah
is seeking to expand its acceptance criteria so that it can receive waste with
radioactivity levels higher than it is currently permitted to accept, and that
one or more additional domestic commercial LLRW disposal sites have commenced
the licensing process. Any increase in the number of licensed commercial LLRW
disposal sites in the United States or any decrease in the disposal fees for
LLRW charged by such sites could increase the competition faced by the Company
or reduce the competitive advantage of certain of the Company's treatment
technologies.
The market for D&D and environmental restoration services is highly
competitive, with numerous companies of varying size, geographical presence
and capabilities participating. The Company believes that fewer than six of
these companies have the in-house capability of providing on-site full-service
solutions from site investigation through the waste treatment stage for D&D
and environmental restoration projects involving LLRW and LLMW.
The Company believes that the principal competitive factors applicable to
all areas of its business are price, breadth of services offered, range and
breadth of environmental licenses and permits held, reputation for customer
service and dependability, technical proficiency and environmental integrity,
operational experience, quality of working relations with federal, state and
local environmental regulators and proximity to customers and licensed waste
disposal sites. The Company believes that it is, and will continue to be, able
to compete favorably on the basis of these factors. The Company also believes
that it has several competitive advantages, including its vitrification
technologies, broad range of environmental services offered, ability to
provide in-house full-service environmental solutions at customers' sites, the
range and breadth of environmental licenses and permits held and applied for,
geographical positioning, and integrated technological approach to waste
treatment solutions. Many of the Company's competitors have substantially
greater managerial, technical and marketing resources than the Company, and
there can be no assurance that one or more of the Company's competitors do not
possess or will not develop waste treatment technologies or field service
capabilities that are superior to or more cost effective than those of the
Company. In certain aspects of the Company's business, substantial capital
resources are required for facilities and equipment, and many of the Company's
competitors have substantially greater financial resources than the Company.
See "Risk Factors--Competition."
ENVIRONMENTAL CONTRACTOR RISKS
Although the Company believes that it generally benefits from increased
environmental regulations affecting business, and from enforcement of those
regulations, increased regulation and enforcement also create significant
risks for the Company. The assessment, remediation, analysis, handling,
treatment and management of radioactive or hazardous substances necessarily
involve significant risks, including the risk of potentially large liabilities
arising from violations of environmental laws and regulations and of
liabilities to customers and third parties for damages arising from performing
services, either of which could have a material adverse effect on the
Company's business, financial condition and results of operations. In
addition, the Company, as a provider of services to federal and other
government agencies, is also subject to the specific risks associated with
government contracting.
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<PAGE>
In May 1997, the U.S. Army terminated for default its contract with the
Company under which the Company acted as a prime contractor to "surface clear"
ordnance from a U.S. Army firing range at Fort Irwin, California. This
contract was otherwise scheduled to expire in June 1997. The termination
related to services provided by a Company subcontractor, and was based on the
U.S. Army's contention that scrap ordnance had been improperly certified by
the subcontractor as free of hazardous and explosive material. Subsequently,
the U.S. Army also demanded repayment from the Company of alleged
reprocurement costs totaling $945,000. The Company believes that it fully
complied with the terms of the contract and applicable laws and regulations,
and has challenged the default termination in the Court of Federal Claims.
Additionally, the Company believes it has no obligation to make repayments to
the U.S. Army because the costs sought are not proper reprocurement costs. The
Company has tendered the Army's claim to its insurance carrier and believes
that all costs and liability (if any) associated with the claim will be
covered by the Company's comprehensive general liability policy. The matter is
presently being handled on behalf of the Company by its insurer. See "Risk
Factors -- Environmental contractor and Regulatory Matters" and "Dependence on
Federal Government; Limits on Government Spending; Government contracting."
See "Risk Factors--Environmental Contractor and Regulatory Matters" and "--
Dependence on Federal Government; Limits on Government Spending; Government
Contracting."
RISK MANAGEMENT AND INSURANCE
The Company has adopted a range of risk management programs designed to
reduce potential liabilities, including policies to seek indemnity in its
contracts, other contract administration procedures, and employee health,
safety, training, and environmental monitoring programs. In addition, as a
result of the substantial number of government contracts it has been awarded
over the past several years, the Company has implemented a government
contracts compliance program. Although the Company believes its risk
management programs are appropriate, the Company cannot assure their adequacy
and their failure to adequately protect the Company could have a material
adverse effect on the Company's business, financial condition and results of
operations.
The Company carries nuclear liability, comprehensive general liability,
comprehensive property damage, workers' compensation and other insurance
coverage that management considers adequate for the protection of the
Company's assets and operations. However, there can be no assurance that the
coverage limits of such policies will be adequate or that insurance will
continue to be available to the Company on commercially reasonable terms in
the future. A successful claim against the Company in excess of its insurance
coverage, or outside the scope of such coverage, could have a material adverse
effect on the Company's business, financial condition and results of
operations. Claims against the Company, regardless of their merit or outcome,
and whether or not insured, may also have an adverse effect on the Company's
reputation, which could have a material adverse effect on the Company's
business, financial condition and results of operations. See "Risk Factors--
Potential Environmental Liability and Insurance."
INTELLECTUAL PROPERTY
The Company regards aspects of its waste treatment technologies and know-how
as proprietary and relies primarily on a combination of trade secret and
trademark laws, employee and third party non-disclosure agreements, licenses
from owners of patents and other intellectual property rights, and other
methods to protect such technologies and know-how. The Company presently has a
patent application pending for the SAFGLAS system as incorporating a multi-
zone process chamber; however, there can be no assurance that such application
will be granted. The Company believes that the ownership of patents is not
presently a significant factor in its business and that its success does not
depend on the ownership of patents. However, there can be no assurance that
the Company will be successful in protecting the proprietary aspects of its
technology, nor that its proprietary rights will preclude competitors from
developing waste treatment technologies equivalent or superior to that of the
Company. In addition, effective protection for the proprietary aspects of the
Company's technologies may be unavailable or limited in certain foreign
countries. While the Company is not aware that any of its waste treatment
technologies infringe the rights of any third parties, there can be no
assurance that third parties will not claim infringement by the Company with
respect to its existing or future waste treatment technologies. See "Risk
Factors--Dependence on and Limited Protection of Technology and Intellectual
Property; Potential Litigation."
30
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The Company from time to time licenses the rights to use the intellectual
property of third parties embodied in certain subsystems of the Company's
technologies. In particular, the Company licenses certain such rights from the
owner of the patented technology embodied in the basic SAFGLAS system melter
and from IET in connection with the design, construction and use of the melter
incorporated into the GASVIT system. The former license is non-exclusive and
royalty-free, but requires the Company to pay to the owner of the patent a
license fee in the amount of $35,000 for each SAFGLAS process chamber built by
the Company during a five-year period. With respect to any melter purchased by
the Company from IET, other than the two units it has initially contracted to
purchase, the Company's license with IET requires the payment of a royalty fee
to IET in the amount of 3% of the gross revenue generated by the Company from
processing radioactive waste using a treatment system incorporating such a
melter.
The Company requires each of its technical and engineering employees to
enter into standard agreements pursuant to which the employee agrees to keep
confidential all proprietary information of the Company and to assign to the
Company all rights in any proprietary information or technology developed by
the employee during his or her employment or made thereafter as a result of
any inventions conceived or work done during such employment. Despite these
precautions, it may be possible for a third party to copy or otherwise obtain
and use the Company's technology without authorization or to develop similar
technology independently.
ENVIRONMENTAL LAWS AND REGULATIONS; LICENSING PROCESSES APPLICABLE TO LLRW AND
LLMW TREATMENT FACILITIES
Environmental Laws and Regulations. Extensive and evolving environmental
protection laws and regulations have been adopted in the United States during
recent decades in response to public concern over the environment. The
operations of the Company and of the Company's customers are subject to these
evolving laws and regulations. The requirements of these laws and regulations
impose substantial potential liabilities. For example, a failure to comply
with current or future regulations could result in substantial fines,
suspension of production, alteration of manufacturing processes, cessation of
operations, or the expenditure of substantial clean-up costs. The requirements
also create a demand for many of the services offered by the Company.
Under the Atomic Energy Act of 1954 (the "AEA") and the Energy
Reorganization Act of 1974, the NRC regulates the receipt, possession, use and
transfer of radioactive materials. Pursuant to its authority under the AEA,
the NRC has adopted regulations that address the management and disposal of
LLRW and that require the licensing of commercial LLRW disposal sites.
RCRA provides a comprehensive framework for regulation of the handling,
transportation, treatment, storage and disposal of hazardous waste. Strict
standards are imposed under RCRA on hazardous waste generators and
transporters, and on operators of hazardous waste treatment, storage and
disposal facilities. The Land Disposal Restrictions developed under the
Hazardous and Solid Waste Amendments of 1984 prohibit land disposal of
specified wastes unless these wastes meet or are treated to meet Best
Demonstrated Achievable Technology (BDAT) treatment standards, subject to
certain exemptions. Under current regulations, waste residues derived from
listed hazardous wastes are generally considered to be hazardous wastes
subject to RCRA standards unless they are delisted through a formal rulemaking
process that may last for several years. Liability under RCRA may be imposed
for improper handling, transportation, treatment, storage or disposal of
hazardous wastes, or for failure to take corrective action to address releases
of hazardous wastes.
CERCLA, and subsequent amendments including the Superfund Amendments and
Reauthorization Act ("SARA"), imposes strict, joint and several liability upon
(among other parties) owners or operators of facilities where a release of
hazardous substances has occurred, upon parties who generated hazardous
substances that were released at such facilities and upon parties who arranged
for the transportation of hazardous substances to such facilities. Liability
under CERCLA may be imposed on the Company if releases of hazardous substances
occur at treatment, storage, or disposal sites used by the Company. This
liability potentially extends to off-site storage and disposal facilities used
by the Company, any LLMW treatment and storage facilities owned by the
Company, and releases at a customer's facility caused by the Company. Because
customers of the Company also
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face the same type of liabilities, CERCLA and SARA create incentives for
potential customers of the Company to avoid off-site treatment and disposal of
hazardous substances in favor of on-site treatment and recycling.
The Emergency Planning Community Right-to-Know Act, which is part of SARA,
requires full disclosure of certain environmental releases to the public and
contributes to public awareness and activism regarding corporate environmental
management issues. To the extent a generator's waste can be reported as being
recycled, public pressure can be eliminated or significantly reduced and the
generator's image enhanced.
The radioactive and hazardous components of LLMW are governed by separate
sets of laws and regulations discussed above. The radioactive component is
governed by the AEA and is regulated by the DOE for waste at DOE facilities
and by the NRC for commercially generated waste. The hazardous waste component
is governed by RCRA, CERCLA, and/or TSCA, and is regulated by the EPA, and by
the laws of the individual states. The Company designs its LLMW and hazardous
waste treatment and processing systems with the goal of minimizing the
potential for release of hazardous substances into the environment. In
addition, the Company has developed plans to manage and minimize the risk of
CERCLA or RCRA liability, including the training of operators, use of
operational controls and structuring of its relationships with the entities
responsible for the handling of waste materials and by-products.
In transporting radioactive materials, the Company is subject to the
requirements developed by the U.S. Department of Transportation under the
Hazardous Materials Transportation Act, as amended by the Hazardous Materials
Transportation Uniform Safety Act. Shippers and carriers of radioactive
materials must comply with both the general requirements for hazardous
materials transportation and with specific requirements for the transportation
of radioactive materials.
The Clean Air Act of 1970, as amended (the "Clean Air Act"), imposes strict
requirements upon owners and operators of facilities and equipment which emit
pollutants into the environment, including incinerators. Although the Company
believes that its waste treatment systems effectively trap particulates and
prevent hazardous emissions from being released into the environment, the
Clean Air Act may require additional controls.
The Clean Water Act of 1972 (the "Clean Water Act") establishes standards,
permits and procedures for controlling the discharge of pollutants from
industrial and municipal wastewater sources. The Company believes that its
waste treatment technologies generally will not be subject to the water
pollution control requirements of the Clean Water Act because they are
designed to have no residual wastewater discharge.
TSCA provides the EPA with the authority to regulate certain commercially
produced chemical substances. TSCA also established a comprehensive regulatory
program for polychlorinated biphenyls ("PCBs") which is analogous to the RCRA
program for hazardous waste.
Other federal, state, and local environmental, health and safety
requirements may also be applicable to the Company's business. For example,
the federal Occupational Safety and Health Act imposes requirements designed
to protect the health and safety of workers, and the NRC has set regulatory
standards for worker exposure to radioactive materials. In addition, the
requirements of various other statutes, including the FFCA and the Uranium
Mill Tailings Radiation Control Act, may create opportunities for additional
use of the Company's services.
Licensing Processes Applicable to LLRW and LLMW Treatment Facilities. The
process of applying for and obtaining the licenses and permits necessary to
operate a radioactive waste treatment facility is lengthy and complex. The
basic requirement is to obtain a radioactive material license from the state
in which the facility is to be located. The first step in this process is
securing site and land use designation approval from local authorities. Most
local authorities require a public hearing before such an approval is granted.
Due to public concern about the safety of radioactive material handling, the
initial site approval step is often the most difficult. Upon site approval,
the applicant must submit an application to the NRC or the state's nuclear
regulatory agency
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<PAGE>
if the state has signed an agreement to implement the NRC's regulations. This
stage of the process may take two years or longer, and in some cases, may
result in denial of a license. If the applicant intends to use a thermal
treatment method at its site, then additional permits would be needed from the
local authorities responsible for implementing the Clean Air Act regulations.
The process for approving a thermal treatment method will generally include
public hearings, environmental assessments and numerous interactions with
regulators to resolve licensing and permitting issues.
The licensing requirements applicable to a mixed waste facility are even
more complex. In addition to the steps summarized above, the applicant must
submit a RCRA Part A and Part B permit application to the appropriate
agencies. For processing of PCBs, a TSCA permit from the EPA must also be
obtained. In parallel with the RCRA/TSCA Part B permitting process, the
applicant must submit an application to the agencies that issue radioactive
material licenses and those that issue permits pursuant to the Clean Air Act.
Several revisions to each document submitted may have to be made before the
review process is complete and the application is granted. From the time the
initial application is filed, the mixed waste licensing and permitting process
could take as long as five years.
The Company initiated the mixed waste licensing process for its Richland
facilities in 1995 and expects to be able to commence non-thermal mixed waste
treatment there in the second quarter of 1999. In March of 1995, the Company
submitted a siting application to the Washington State Department of Ecology
("WDOE"). After conducting two different public hearings, WDOE approved the
Company's siting application in December of 1995. Immediately after procuring
this approval, the Company submitted a RCRA Part A and Part B permit
application to WDOE for an integrated waste treatment plant utilizing
stabilization, macro-encapsulation, physical extraction and other non-thermal
treatment processes. In 1996, the application was amended to include the
processing of mixed wastes using the GASVIT thermal treatment technology. A
copy of the application was also submitted to the EPA for a joint EPA/WDOE
permitting process covering PCBs under TSCA regulation. The Company is at
present involved in negotiations with the agencies to resolve their comments
thereon. The next step in the permitting process is the development of the
permit language by the agencies and the holding of public hearings to solicit
public comments, as required by RCRA and TSCA regulations. The Company
presently anticipates receiving final approval from WDOE and the EPA of its
applications relating to non-thermal and thermal treatment prior to the end of
the fourth quarter of fiscal 1998.
In the event that the Company were to engage in the business of treating
LLRW and LLMW received from foreign generators at its fixed facilities, it
would be required to obtain a radioactive waste import permit from the NRC.
The Company's fixed facilities may have to obtain permits under the Clean
Water Act, the Clean Air Act, RCRA and state equivalents. The requirement to
obtain such permits depends upon a facility's location and the expected
emissions from the facility. Additional state and local licenses or approvals
may also be required.
EMPLOYEES
At December 31, 1997, the Company employed 168 full-time employees. To date,
the Company has been successful in attracting and retaining qualified
managerial and technical personnel, although there can be no assurance that
this success will continue. See "Risk Factors--Dependence on Key Personnel."
At December 31, 1997, 34 of the Company's employees were represented by
labor unions under collective bargaining agreements. The Company cannot
predict whether any of its employees who currently are not represented by
unions will elect to be so represented in the future. The Company considers
its relations with its employees to be good and has never experienced a work
stoppage or strike.
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<PAGE>
PROPERTIES AND FACILITIES
The Company's principal properties, all of which are owned by the Company,
are located in Richland, Wash., Fremont, Calif. and Aiken, S.C., and occupy
45, four and 30 acres, respectively. The facilities sited on the Richland
property presently consist of 13 buildings, covering an area of approximately
100,000 square feet, devoted to the Company's existing LLRW and future LLMW
treatment operations. The Company presently plans to construct two additional
buildings on this site of approximately 14,000 square feet in aggregate. The
facilities sited on the Fremont property consist of a 10,000 square foot
corporate office building, a 20,000 square foot fluorescent tube recycling
facility, and a 10,000 square foot LLRW storage area. The Company currently
plans to construct three buildings on its Aiken property: a 4,000 square foot
office building, a 5,000 square foot laboratory and warehouse building, and a
23,000 square foot building to receive, sort, treat and store LLRW.
In addition, the Company leases an approximately 1,200 square foot project
management office in Honolulu, Hawaii, and an approximately 2,500 square foot
project management office in Oak Ridge, Tennessee (approximately one mile from
the DOE's Oak Ridge Reservation). The Honolulu lease expires in June 2000,
while the Oak Ridge lease is month-to-month.
The Company's Fremont property is encumbered by a deed of trust (the "First
Deed of Trust") securing the performance of the Company under a $1.5 million
Promissory Note held by Midland Loan Services. The First Deed of Trust
provides for an interest rate of 9.5% per annum, a maturity date of December
2001, monthly payments of principal and interest of $13,736 and a balloon
payment at maturity. At December 31, 1997, the principal amount secured by the
First Deed of Trust was $1,456,586.
The Company's Fremont property is also encumbered by a second deed of trust
(the "Second Deed of Trust") securing the performance of the Company under a
$400,000 Term Loan Agreement with Sanwa Bank California. The Term Loan
Agreement provides for a variable annual interest rate of prime plus 1.75%, a
maturity date of September 30, 2002, and monthly payments of principal and
interest of $6,667. At December 31, 1997, the principal amount secured by the
Second Deed of Trust was $379,999.
The Company's Richland property is encumbered by a deed of trust (the
"Richland Deed of Trust") securing the payment by the Company of a $750,000
Promissory Note held by West One Bank (the "West One Note"). The West One Note
provides for an interest rate of 8.75% during the first 42 months and an
interest rate of prime plus 2.75% (with a ceiling of 12% and a floor of 5.5%)
during the final 42 months until maturity. At December 31, 1997, the principal
balance secured by the Richland Deed of Trust was $342,589. There are no
encumbrances on the Company's Aiken, South Carolina property.
The Company believes that its existing and planned facilities will support
its operations for the foreseeable future and are adequately covered by
insurance.
LEGAL PROCEEDINGS
From time to time the Company is a party to litigation or administrative
proceedings relating to claims arising from its operations in the normal
course of business. Management of the Company, on the advice of counsel,
believes that the ultimate resolution of litigation currently pending against
the Company is unlikely, either individually or in the aggregate, to have a
material adverse effect on the Company's business, financial condition or
results of operations.
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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The executive officers, directors and director designees of the Company and
their ages as of the date of this Prospectus are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Doreen M. Chiu.......... 44 Chairman of the Board, President and Chief Executive Officer
Frank Y. Chiu........... 44 Executive Vice-President and Director
William M. Hewitt....... 51 President--Waste Management Services and Director Designee(1)
Steven J. Guerrettaz.... 52 Chief Financial Officer and Director Designee(1)
Fred Feizollahi......... 52 Vice-President--Technology and Engineering
Eric C. Su.............. 37 Vice-President--Marketing and Planning
Edward L. Vinecour...... 59 Director
Andrew C. Kadak......... 51 Director Designee(1)(2)
Earl E. Gjelde.......... 53 Director Designee(1)(2)
</TABLE>
- ---------------------
(1) Each Director Designee has consented to become a director of the Company
on or before completion of the Offering.
(2) Has agreed to serve as member of Audit and Compensation Committees upon
election to Board.
Doreen M. Chiu has served as President, Chief Executive Officer and Chairman
of the Board since joining the Company in 1984. Prior to joining the Company,
Ms. Chiu owned her own certified public accounting firm. Ms. Chiu is a
California CPA and holds a Bachelor of Arts degree in Business Administration
from the University of Wisconsin. Ms. Chiu is the wife of Frank Chiu.
Frank Y. Chiu joined the Company in 1980 as Financial Controller, became
Vice-President and a director of the Company in 1984, and became Executive
Vice-President in 1992. Mr. Chiu holds a Bachelor of Arts degree in Business
Administration and a Master's degree in Business Administration from the
University of Wisconsin. Mr. Chiu is the husband of Doreen Chiu.
William M. Hewitt joined the Company in April 1997 as President--Waste
Management Services, and has been nominated and has agreed to serve as a
director of the Company on or before completion of the Offering. Mr. Hewitt
has over 25 years of domestic and international professional management
experience, primarily in the waste minimization and environmental fields. From
1994 until joining the Company, Mr. Hewitt was the President of Hewitt
Management Services, Inc., a consulting firm providing strategic planning and
other business advice in the areas of pollution prevention, waste minimization
and strategic environmental management. During this period, Mr. Hewitt also
served as a Group President of Philip Environmental Services Companies, in
which capacity he designed and implemented the strategic, organizational and
marketing approach for integrating that group of companies. From 1990 to 1994,
he held a number of positions with companies in the WMX Technologies
Affiliates group, including Vice-President, Strategic Planning, of Rust
International, Inc. from 1993 to 1994, and President of Rust Federal
Environmental Services (formerly CWM FES) from 1991 to 1993. Prior to joining
WMX, Mr. Hewitt was the Vice-President for Major Programs and served on the
Board of Directors of Roy F. Weston Inc. Mr. Hewitt holds a Bachelor of
Science degree in Chemical Engineering from the University of Rhode Island and
a Master of Science degree in Mechanical/Nuclear Engineering from Catholic
University of America.
Steven J. Guerrettaz has served as Chief Financial Officer since joining the
Company in December 1997, and has been nominated and has agreed to serve as a
director of the Company on or before completion of the Offering. From May 1994
until joining the Company, Mr. Guerrettaz was the Vice President--Finance of
35
<PAGE>
Thermatrix Inc., a publicly traded supplier of flameless thermal oxidation
equipment for the thermal treatment of volatile organic compounds and
hazardous air pollutants. From 1988 to 1994, Mr. Guerrettaz was the Vice
President--Regional Controller for Chemical Waste Management, Inc. Mr.
Guerrettaz is a former audit partner of Arthur Andersen LLP. He is a
California CPA and holds a Bachelor of Science degree in accounting from San
Jose State University.
Fred Feizollahi joined the Company in 1995 as Director of Technology and
Engineering, and since 1995 has been Vice-President--Technology and
Engineering. Mr. Feizollahi has over 26 years of experience in radioactive and
hazardous waste remediation and management, decontamination and
decommissioning, and the design and operation of waste treatment equipment and
technologies. Prior to joining the Company, he worked as a Senior Project
Manager for Morrison Knudsen from 1991 to 1995 and as a Staff Engineer/Project
Engineer for Bechtel Power Corporation from 1981 to 1991. Mr. Feizollahi, who
holds a Bachelor of Science degree in Mechanical Engineering from the
University of Maryland, is a registered California Professional Engineer.
Eric C. Su has served as Vice-President--Marketing and Planning since 1995.
Mr. Su joined the Company in 1993 as Director of Business Development. Prior
to joining the Company, he acted as a sales and marketing consultant for a
number of companies, including the Company, from 1990 to 1993. From 1987 to
1990, Mr. Su held various marketing positions with General Electric Company.
Prior thereto, he held positions in sales and marketing with W.R. Grace and
Company from 1984 to 1987, and in process engineering with E.I. DuPont de
Nemours and Company from 1982 to 1984. Mr. Su holds a Bachelor of Science
degree in Chemical Engineering from Arizona State University.
Edward L. Vinecour has served as a director of the Company since 1984. Mr.
Vinecour joined the Company in 1984, serving as its Vice President--Marketing
before retiring and becoming a consultant to the Company in 1992. Mr. Vinecour
has a Bachelor of Science degree in Biochemistry from Suffolk University.
Andrew C. Kadak has been nominated and has agreed to serve as a director of
the Company on or before completion of the Offering. Mr. Kadak has over 30
years of experience in the nuclear power industry. Since 1997 he has been
President of Kadak Associates, Incorporated, a firm providing consulting
services to the nuclear power industry. From 1989 to 1997, Mr. Kadak served as
President and Chief Executive Officer of Yankee Atomic Electric Company
("Yankee"), a company which operates nuclear power plants in the Northeastern
United States. In that capacity, he oversaw the decommissioning of Yankee's
nuclear power plant in Rowe, Massachusetts. Mr. Kadak serves on the Board of
Directors of the American Nuclear Society, a nuclear industry trade group, and
is currently a visiting Senior Lecturer in the Nuclear Engineering Department
of the Massachusetts Institute of Technology ("MIT"). He holds a Bachelor of
Science degree in Mechanical Engineering from Union College, a Master's degree
in Business Administration from Northeastern University and a Master of
Science degree and a Ph.D. in Nuclear Engineering from MIT.
Earl E. Gjelde has been nominated and has agreed to serve as a director of
the Company on or before completion of the Offering. Since 1993 Mr. Gjelde has
been Managing Director of Summit Energy Group, Ltd., an energy development
company. From 1991 to 1993, he served as Vice President of Waste Management
Inc., and from 1989 to 1993 as Vice President of Chemical Waste Management,
Inc. From 1982 to 1989, he served in a number of senior federal government
positions, including Under Secretary of the U.S. Department of the Interior
("Interior") from 1987 to 1989, and as Chief Operating Officer of Interior
from 1985 to 1989. Mr. Gjelde is currently a member of the boards of directors
of two publicly held companies: DIDAX, Inc., a company in the Internet field,
and Electrosource, Inc., a technology company specializing in metals and bi-
metals extrusion and battery development and manufacturing. He holds a
Bachelor of Science degree in Engineering from Oregon State University.
BOARD OF DIRECTORS
There are currently three members of the Board. The Company intends to
increase the number of directors on or prior to completion of the Offering.
Management has nominated Messrs. Hewitt, Guerrettaz, Kadak and Gjelde to fill
the additional Board seats. The directors serve until the next annual meeting
of shareholders or
36
<PAGE>
until successors are elected and qualified. The Company's executive officers
are appointed by and serve at the discretion of the Board.
The Board has established an Audit Committee and a Compensation Committee.
The functions of the Audit Committee include recommending to the Board the
selection and retention of independent auditors, reviewing the scope of the
annual audit and the progress and results of the auditors' work, and reviewing
the Company's financial statements and internal accounting and auditing
procedures. The functions of the Compensation Committee include establishing
the compensation of the Chief Executive Officer, reviewing and approving
executive compensation policies and practices, reviewing salaries and bonuses
for certain executive officers, and considering such other matters as the
Board may, from time to time, delegate to the Compensation Committee.
Each non-employee director will receive a cash fee of $2,000 per Board
meeting attended and an additional $2,000 per Board committee meeting attended
if such committee meeting is held on a day different from that of a Board
meeting. The directors are reimbursed for expenses incurred in connection with
the performance of their services as directors.
Non-Employee Directors' Stock Option Plan
In February 1998, the Board adopted the Company's 1998 Non-Employee
Directors' Stock Option Plan (the "Directors' Plan") to provide for the
automatic grant of options to purchase shares of Common Stock to non-employee
directors of the Company. The Directors' Plan is administered by the Board. To
date, no options have been granted under the Directors' Plan.
The maximum number of shares of Common Stock that may be issued pursuant to
options granted under the Directors' Plan is 200,000. Pursuant to the terms of
the Directors' Plan, each person serving as a director of the Company who is
not an employee of the Company (a "Non-Employee Director") shall automatically
be granted an option to purchase 20,000 shares of Common Stock upon the later
of the date such person first becomes a Non-Employee Director or the date of
the effectiveness of the initial public offering of the Common Stock, with
5,000 of such shares vesting immediately and the balance vesting in three
equal installments on the three succeeding anniversaries of the grant date.
The exercise price of the options granted under the Directors' Plan must
equal or exceed the fair market value of the Common Stock on the date of
grant. No option granted under the Directors' Plan may be exercised after the
expiration of ten years from the date it was granted. Options granted under
the Directors' Plan are generally non-transferable except by will or by the
laws of descent and distribution. The Directors' Plan will terminate at the
discretion of the Board; provided, however, that in no event will the term of
the Directors' Plan extend beyond the tenth anniversary of its adoption by the
Board.
In the event of certain changes of control of the Company (as defined in the
Directors' Plan), any outstanding options will automatically become fully
vested and will terminate if not exercised prior to such change of control.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION
DECISIONS
During its fiscal year ended December 31, 1997, the Company had no
compensation committee or other committee of the Board performing similar
functions, and all decisions concerning compensation of executive officers
were made by the Chairman of the Board. On January 14, 1998, the Board created
a Compensation Committee consisting of Doreen M. Chiu, Frank Y. Chiu and
Edward L. Vinecour. No interlocking relationship exists between any member of
the Company's Compensation Committee and any member of any other company's
board of directors or compensation committee. See "Management--Executive
Officers and Directors."
37
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth information with respect to compensation paid
by the Company during the fiscal year ended December 31, 1997, to the Chief
Executive Officer and the three other most highly compensated executive
officers of the Company whose total salary and bonus during such year exceeded
$100,000 (collectively, the "Named Executive Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
--------------------
NAME AND PRINCIPAL POSITION SALARY BONUS
--------------------------- ---------- ---------
<S> <C> <C>
Doreen M. Chiu......................................... $ 150,000 $ 0
Chief Executive Officer
Frank Y. Chiu.......................................... 120,000 0
Executive Vice-President
William M. Hewitt(1)................................... 103,269 30,000
President--Waste Management Services
Eric C. Su............................................. 108,127 0
Vice-President--Marketing and Planning
</TABLE>
- ---------------------
(1) Mr. Hewitt joined the Company in April 1997 at an initial annual base
salary of $150,000. The amount of salary reflected in the table is the
prorated amount paid to him in 1997.
Steven J. Guerrettaz was appointed to the position of Chief Financial
Officer of the Company in December 1997, with an initial annual base salary of
$150,000. Options to purchase an aggregate of 60,000 shares of Common Stock,
at an exercise price of $5.00 per share, have been granted to Mr. Guerrettaz.
The options vest in four equal installments during the period beginning on
June 30, 1998 and ending on December 31, 2000, with accelerated vesting as to
options covering 10,000 shares upon an initial public offering of the Common
Stock and as to options covering 20,000 shares upon the Company's obtaining
specified financing for its LLMW treatment facility.
Each of the Named Executive Officers receives perquisites and other personal
benefits from the Company, the aggregate amount of which during fiscal 1997
did not exceed the lesser of $50,000 or 10% of the annual base salary reported
for such Named Executive Officer. The Named Executive Officers did not receive
any additional compensation in fiscal 1997. To date, the Company has not made
any awards under its 1998 Stock Ownership Incentive Plan to any of the Named
Executive Officers or any other person. None of the Named Executive Officers
is a party to an employment agreement with the Company.
38
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information with respect to grants of stock
options to the Named Executive Officers during fiscal 1997.
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE VALUE
AT ASSUMED
PERCENT OF ANNUAL RATES
NUMBER OF TOTAL OF STOCK PRICE
SHARES OPTIONS APPRECIATION FOR OPTION
UNDERLYING GRANTED TO EXERCISE FAIR VALUE TERM(4)
OPTIONS EMPLOYEES PRICE PER AT DATE -------------------------- EXPIRATION
NAME GRANTED IN YEAR SHARE OF GRANT 0% 5% 10% DATE
- ---- ---------- ---------- --------- ---------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Doreen M. Chiu(1)....... 150,000 27.8% $1.00 $2.00 12/31/06 $150,000 $338,668 $628,123
Frank Y. Chiu(1)........ 159,900 29.7% 1.00 2.00 12/31/06 159,900 361,021 669,579
William M. Hewitt(2).... 70,000 15.9% 5.00 5.00 03/31/07 -- 220,113 557,810
Eric C. Su(3)........... 20,000 3.7% 1.00 2.00 12/31/06 20,000 45,156 83,750
</TABLE>
- ---------------------
(1) 500 of the option shares vest on each of December 31, 1997, 1998 and 1999,
the balance vesting on December 31, 2000.
(2) 36,666 of the option shares vest on May 1, 1998, and 16,667 of the option
shares vest on each of May 1, 1999 and May 1, 2000.
(3) 500 of the option shares vest on December 31, 1997, 9,500 of the option
shares vest on December 31, 1998 and the remaining 10,000 option shares
vest on December 31, 1999.
(4) This column shows the hypothetical gains or option spreads of the options
granted based on (i) the fair market value of the Common Stock on the date
of grant, as determined by the Board, and (ii) assumed annual compound
stock appreciation rates of 0%, 5% and 10% over 10 years. The assumed
rates of appreciation are mandated by the rules of the Securities and
Exchange Commission and do not represent the Company's estimate or
projection of future Common Stock prices.
AGGREGATE OPTION EXERCISES AND YEAR-END OPTION VALUES
The following table sets forth certain information regarding the year-end
value of options held by the Named Executive Officers. No options were
exercised by the Named Executive Officers during 1997.
<TABLE>
<CAPTION>
NUMBER OF SHARES SUBJECT VALUE OF UNEXERCISED
TO UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
DECEMBER 31, 1997 DECEMBER 31, 1997(1)
------------------------- -------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Doreen M. Chiu........... 500 149,500 $ 3,000 $ 897,000
Frank Y. Chiu............ 3,500 222,400 23,700 1,391,100
William M. Hewitt........ 0 70,000 0 140,000
Eric C. Su............... 70,500 19,500 486,000 117,000
</TABLE>
- ---------------------
(1) Based on the estimated fair market value of the Common Stock as of
December 31, 1997 ($7.00), as determined by the Board, minus the per share
exercise price, multiplied by the number of shares underlying the option.
39
<PAGE>
EMPLOYEE BENEFIT PLANS
Stock Ownership Incentive Plan
In February 1998, the Board adopted the Company's 1998 Stock Ownership
Incentive Plan (the "Incentive Plan"). The Incentive Plan authorizes the award
of stock options, shares of restricted stock and performance units (which may
be paid in cash or shares of Common Stock). The Incentive Plan reserves for
issuance an aggregate of 500,000 shares of Common Stock, no more than 250,000
shares of which may be issued in the form of shares of restricted stock. The
Incentive Plan is intended to advance the interests of the Company by
encouraging the Company's employees who contribute to the Company's long-term
success and development to acquire and retain an ownership interest in the
Company. To date, no awards have been made under the Incentive Plan.
The Incentive Plan will be administered by the Board. The Board will select
employees to receive awards under the Incentive Plan and determine the terms,
conditions and limitations applicable to each award. Each award will be
evidenced by a grant letter from the Board to the recipient setting forth the
terms and conditions of the award. The Incentive Plan will terminate at the
discretion of the Board; provided, however, that in no event will the term of
the Incentive Plan extend beyond the tenth anniversary of its adoption by the
Board.
Stock options granted pursuant to the Incentive Plan may either be incentive
stock options ("ISOs") intended to qualify under Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code"), or stock options not intended
to so qualify. Each stock option awarded under the Incentive Plan must have an
exercise price equal to at least 100% of the fair market value of the Common
Stock on the date of grant, and ISOs granted to any employee possessing more
than 10% of the combined voting power of all classes of stock of the Company
must have an exercise price equal to at least 110% of such fair market value.
Optionees may exercise options under the Incentive Plan by paying cash, by
tendering shares of Common Stock, by using a cashless exercise procedure
provided for in the Incentive Plan, or by a combination thereof, as permitted
by the Board. Options vest in equal installments over a five year period and,
upon a change of control of the Company (as defined in the Incentive Plan),
any outstanding options become fully vested and immediately exercisable.
Options granted under the Incentive Plan are generally non-transferable except
by will or by the laws of descent and distribution. No option granted under
the Incentive Plan may be exercised after the expiration of ten years from the
date it was granted.
Employee Stock Purchase Plan
In February 1998, the Board approved the Company's Employee Stock Purchase
Plan (the "Purchase Plan") covering an aggregate of 200,000 shares of Common
Stock. The Purchase Plan is intended to qualify as an employee stock purchase
plan within the meaning of Section 423 of the Code. Under the Purchase Plan,
the Board may authorize participation by eligible employees of the Company,
including officers, in periodic offerings following the adoption of the
Purchase Plan. The offering period for any offering will be determined by the
Board, but in no event will be more than 27 months.
Employees are eligible to participate if they are employed by the Company or
an affiliate of the Company designated by the Board. Employees who participate
in an offering may have up to 15% of their earnings (provided that such amount
does not exceed $25,000 in value per calendar year) withheld pursuant to the
Purchase Plan and applied, on specified dates determined by the Board, to the
purchase of shares of Common Stock. The price of Common Stock purchased under
the Purchase Plan will be equal to 85% of the lower of the fair market value
of the Common Stock on the commencement date of each offering period or the
relevant purchase date. Employees may end their participation in the offering
at any time during the offering period, and participation ends automatically
on termination of employment with the Company.
In the event of certain changes of control of the Company (as defined in the
Purchase Plan), the Board has discretion to provide that each right to
purchase Common Stock will be assumed or an equivalent right substituted by
the successor corporation, or the Board may shorten the offering period and
provide for all sums
40
<PAGE>
collected by payroll deductions to be applied to purchase stock immediately
prior to the change in control. The Purchase Plan will terminate at the
discretion of the Board.
401(k) Plan
In 1995, the Company established a tax-qualified employee savings and
retirement plan (the "401(k) Plan") covering all of its employees. Pursuant to
the 401(k) Plan, employees may elect to reduce their current compensation by
up to the lower of 15% of such compensation or the annual limit prescribed by
statute ($9,500 in 1997) and contribute the amount of such reduction to the
401(k) Plan. The 401(k) Plan allows for matching contributions to the 401(k)
Plan by the Company, such matching and the amount of such matching to be
determined at the sole discretion of the Board. To date, no such matching
contributions have been made with respect to the 401(k) Plan. The trustee
under the 401(k) Plan, at the direction of each participant, invests the
assets of the 401(k) Plan in numerous investment options. The 401(k) Plan is
intended to qualify under Section 401 of the Code so that contributions by
employees to the 401(k) Plan, and income earned on plan contributions, are not
taxable until withdrawn, and so that the contributions by employees will be
deductible by the Company when made.
LIMITATION ON DIRECTORS' LIABILITY
The Company's Articles of Incorporation (the "Articles") provide that,
pursuant to the California Corporations Code, the liability of the directors
of the Company for monetary damages shall be eliminated to the fullest extent
permissible under California law. This is intended to eliminate the personal
liability of a director for monetary damages in an action brought by, or in
the right of, the Company for breach of a director's duties to the Company or
its shareholders. This provision in the Articles does not eliminate the
directors' fiduciary duty and does not apply to certain liabilities: (i) for
acts or omissions that involve intentional misconduct or a knowing and
culpable violation of law; (ii) for acts or omissions that a director believes
to be contrary to the best interests of the Company or its shareholders or
that involve the absence of good faith on the part of the director; (iii) for
any transaction from which a director derived an improper personal benefit;
(iv) for acts or omissions that show a reckless disregard for the director's
duty to the Company or its shareholders in circumstances in which the director
was aware, or should have been aware, in the ordinary course of performing a
director's duties, of a risk of serious injury to the Company or its
shareholders; (v) for acts or omissions that constitute an unexcused pattern
of inattention that amounts to an abdication of the director's duty to the
Company or its shareholders; (vi) with respect to certain transactions or the
approval of transactions in which a director has a material financial
interest; and (vii) expressly imposed by statute for approval of certain
improper distributions to shareholders or certain loans or guarantees. This
provision also does not limit or eliminate the rights of the Company or any
shareholder to seek non-monetary relief such as an injunction or rescission in
the event of a breach of a director's duty of care.
The inclusion of the above provision in the Articles may have the effect of
reducing the likelihood of shareholder derivative suits against directors and
may discourage or deter shareholders or management from bringing a lawsuit
against directors for breach of their duty of care, even though such an
action, if successful, might otherwise have benefitted the Company and its
shareholders. The Company believes that it is the position of the Securities
and Exchange Commission (the "Commission") that insofar as the foregoing
provision may be invoked to disclaim liability for damages arising under the
Securities Act, the provision is against public policy as expressed in the
Securities Act and is therefore unenforceable. The Company believes that the
foregoing provision of its Articles is necessary to attract and retain
qualified persons as directors.
41
<PAGE>
CERTAIN TRANSACTIONS
The following is a summary of certain transactions to which the Company was
or is a party and in which certain executive officers, directors or
shareholders of the Company had or have a direct or indirect material
interest.
From 1992 to 1997, Doreen M. Chiu, the Company's Chairman of the Board and
Chief Executive Officer, extended a series of loans to the Company, each of
which is repayable in full upon demand (collectively, the "Loan"). The Loan,
which is unsecured, bears interest at an annual rate of 10%, payable
concurrently with principal. The outstanding principal balance of the Loan,
including accrued interest, at December 31, 1997 was $1,280,180.
Doreen M. Chiu and Frank Y. Chiu, the Executive Vice-President and a
director of the Company, have guaranteed the obligations of the Company under
(i) an Accounts Receivable Credit Agreement between the Company and Sanwa Bank
California pursuant to which the Company may borrow an aggregate of
$4,000,000; (ii) a Promissory Note in the principal amount of $3,000,500 held
by Safeco Credit Company, Inc.; (iii) a Term Loan Agreement in the principal
amount of $400,000 held by Sanwa Bank California; (iv) an Equipment Lease
between the Company and Great Western Leasing that provides for an aggregate
rental amount of $215,673; (v) an Equipment Lease between the Company and The
CIT Group/Equipment Financing, Inc. that provides for an aggregate rental
amount of $174,640; and (vi) a Commercial Lease Agreement between the Company
and California Thrift and Loan with an aggregate rental amount of $125,767.
In connection with the sale by the Company of shares of Preferred Stock,
Doreen M. Chiu and Frank Y. Chiu granted a security interest in certain of
their personal assets to the holders of the Preferred Stock to secure the
performance of the obligations of the Chius to purchase the Preferred Stock
from such holders in certain defined circumstances under the Co-Sale and Put
Option Agreement among the Company, the Chius and each such holder.
In connection with the repurchase by the Company of all of the shares of
Common Stock owned by him, Edward L. Vinecour, a director of the Company, in
1992 entered with the Company into (i) a Consultant Agreement, pursuant to
which, in consideration of certain future consulting services to be rendered
by Mr. Vinecour to the Company, the Company agreed to pay him consulting fees
in a monthly amount of $5,000 for a period of 10 years commencing in August of
1992 and assumed the payment obligations under a mortgage loan with a then
remaining principal balance of $146,351, requiring monthly mortgage payments
of $1,816 over a period of 15 years, and (ii) a Non-Competition Agreement,
pursuant to which, in consideration of Mr. Vinecour's agreement not to compete
with the business of the Company, the Company agreed to pay him the sum of
$290,000 in installments. Of the original sum of $290,000 due to Mr. Vinecour
under the Non-Competition Agreement, $65,000 has been paid by the Company as
of December 31, 1997, with Mr. Vinecour agreeing to extend payment of the
entire balance until the year 2000.
The Company believes that each of the foregoing transactions was on terms at
least as favorable to the Company as those that could have been obtained from
nonaffiliated third parties. The Company currently intends that any future
transactions with affiliates of the Company will be on terms at least as
favorable to the Company as those that can be obtained from nonaffiliated
third parties.
42
<PAGE>
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information regarding beneficial
ownership of Common Stock as of December 31, 1997, and immediately following
the completion of the Offering, by (i) each person who is known by the Company
to own beneficially more than 5% of the outstanding shares of Common Stock,
(ii) each director, director designee and Named Executive Officer having
beneficial ownership of Common Stock, and (iii) all executive officers,
directors and director designees as a group:
<TABLE>
<CAPTION>
PERCENT OF SHARES
OUTSTANDING
-----------------
NAME AND ADDRESS OF BENEFICIAL SHARES BENEFICIALLY BEFORE AFTER
OWNER(2) OWNED(1) OFFERING OFFERING
------------------------------ ------------------- -------- --------
<S> <C> <C> <C>
Doreen M. Chiu(3)..................... 2,511,426 21.81% 19.0 %
Edward L. Vinecour.................... 100,000 * *
Eric C. Su............................ 80,500 * *
William M. Hewitt..................... 36,666 * *
Frank Y. Chiu(3)...................... 3,500 * *
All executive officers, directors and
director designees as a group
(9 persons).......................... 2,787,092 23.66% 20.67%
</TABLE>
- ---------------------
* Less than 1%.
(1) Beneficial ownership is determined in accordance with the rules of the
Commission. In computing the number of shares beneficially owned by a
person and the percentage ownership of that person, shares of Common Stock
subject to options or warrants held by that person that are currently
exercisable, or will become exercisable within 60 days from the date
hereof, are deemed outstanding. Such shares, however, are not deemed
outstanding for purposes of computing the percentage ownership of any
other person.
(2) The address of each beneficial owner identified is care of the Company,
47375 Fremont Boulevard, Fremont, California 94538. Each person has sole
voting and investment power over the shares of Common Stock listed
opposite his or her name, subject to community property laws where
applicable.
(3) Does not include shares beneficially owned by spouse.
43
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The following description of the capital stock of the Company and certain
provisions of the Articles is a summary and is qualified in its entirety by
the provisions of the Articles, which have been filed as an exhibit to the
Company's Registration Statement of which this Prospectus is a part.
The authorized capital stock of the Company currently consists of 20,000,000
shares of Common Stock, no par value per share ("Common Stock"), of which
7,532,301 shares are currently outstanding, and 1,000,000 shares of Preferred
Stock, of which 900,000 shares are currently outstanding. As of December 31,
1997, there were 66 record holders of the Common Stock.
COMMON STOCK
The holders of Common Stock are entitled to one vote for each share held of
record on all matters submitted to a vote of the shareholders. The holders of
Common Stock are entitled to cumulative voting rights with respect to the
election of directors so long as at least one shareholder has given notice at
the meeting of shareholders prior to the voting of that shareholder's desire
to cumulate votes. Subject to preferences that may be applicable to any shares
of preferred stock issued in the future, holders of Common Stock are entitled
to receive ratably such dividends as may be declared by the Board out of funds
legally available therefor. See "Dividend Policy." In the event of a
liquidation, dissolution or winding up of the Company, holders of the Common
Stock are entitled to share ratably with the holders of any then outstanding
preferred stock in all assets remaining after payment of liabilities and the
liquidation preference of any then outstanding preferred stock. Holders of
Common Stock have no preemptive rights and no right to convert their Common
Stock into any other securities. There are no redemption or sinking fund
provisions applicable to the Common Stock. All outstanding shares of Common
Stock are, and all shares of Common Stock to be outstanding upon completion of
the Offering will be, fully paid and nonassessable.
PREFERRED STOCK
The following is a brief summary of certain of the rights, preferences,
privileges, restrictions and limitations of the outstanding shares of
Preferred Stock.
Dividends. Any dividends declared by the Board are to be distributed pari
passu among all holders of Preferred Stock and all holders of Common Stock in
proportion to the number of shares of Common Stock which would be held by each
such holder if all shares of Preferred Stock were converted into Common Stock
at the then effective Conversion Price (as defined below).
Liquidation Preference; Right of First Offer. In the event of a liquidation,
dissolution or winding up of the Company, the holders of Preferred Stock are
entitled to a cash payment equal to the Liquidation Value (as defined below)
of each share held, before any distribution of the Company's assets to holders
of the Common Stock. The "Liquidation Value" per share means an amount equal
to (i) $5.00 plus (ii) a premium equal to an annual rate of ten percent (10%)
of such amount compounded annually from the date the share was issued (the
"Issue Date"), plus (iii) all declared but unpaid dividends thereon. Each
holder of Preferred Stock has certain rights of first offer to subscribe for
new issuances of securities by the Company (not including securities offered
to the public pursuant to a registration statement filed under the Securities
Act).
Voluntary Conversion. Each share of Preferred Stock is, at the option of the
holder, convertible into such number of shares as results from dividing $5.00
by the Conversion Price then in effect. The initial Conversion Price is $5.00,
subject to adjustments for subsequent dilutive issuances of securities by the
Company. In addition, the Conversion Price is specifically adjusted upon the
closing of an underwritten public offering of the Common Stock after July 1,
1996 to the lower of (i) the then current Conversion Price and (ii) the price
determined by multiplying the price to the public in such underwriting by .25.
The Conversion Price is currently $5.00.
44
<PAGE>
Automatic Conversion. Immediately prior to the closing of a firm commitment,
underwritten public offering of the Common Stock having an aggregate price to
the public of not less than $12 million and closing on or prior to June 30,
1998, each share of Preferred Stock is automatically converted into 1 2/3
shares of Common Stock. Each such share is also automatically converted into
shares of Common Stock at the then effective Conversion Price at the election
of the holders of a majority of the outstanding shares of Preferred Stock.
Redemption. Commencing on or about the third anniversary of the Issue Date,
each holder of Preferred Stock will have the right to demand that the Company
redeem all or any part of the shares of Preferred Stock held by him at a
redemption price per share consisting of a base redemption price of $6.67,
plus any declared but unpaid dividends thereon.
Voting Rights. Except as otherwise required by law and as to certain matters
set forth in the Articles as requiring the prior affirmative vote or written
consent of the holders of not less than a majority of the outstanding shares
of Preferred Stock, the Preferred Stock is non-voting. The matters set forth
in the Articles include (i) the payment by the Company of cash dividends, (ii)
the redemption or repurchase by the Company of any of the Common Stock (other
than from employees, officers, directors and consultants of the Company upon
the termination of their relationship with the Company), (iii) the sale of all
or substantially all of the assets of the Company or the consummation by the
Company of any transaction or series of transactions resulting in a change of
control of the Company, and (iv) the Company's incurrence of any indebtedness
or grant of any security interest in any of the Company's assets, other than
in connection with equipment leases entered into in the ordinary course of
business, a revolving credit line from a commercial bank that does not exceed
80% of eligible accounts receivable or the refinancing of existing mortgages.
Registration Rights. Pursuant to the terms of a Shareholder Rights Agreement
between the Company and each purchaser of Preferred Stock, if the Company
determines to register any of its securities (other than a registration
relating solely to employee benefit plans or a transaction covered by Rule 145
promulgated under the Securities Act), then the holders of Preferred Stock
have piggyback registration rights to cause the Company to include the shares
of Common Stock issued upon conversion of the Preferred Stock (the
"Registrable Shares") to be included in the related registration statement (a
"Piggyback Registration"). The Company may, however, reduce on a pro rata
basis, to the extent so advised by the underwriters of the offering, the
amount of Registrable Shares to be included in any such registration.
Additionally, the holders of an aggregate of at least 300,000 Registrable
Shares (as adjusted for stock splits or reverse stock splits), or a lesser
number, if the offering thereof results in aggregate proceeds (net of selling
expenses) exceeding $15 million, have a demand right on two separate occasions
to cause the Company to register such Registrable Shares, and each holder of
Registrable Shares has the additional right on an unlimited number of
occasions, subject to certain timing limitations, to cause the Company to
register his Registrable Shares on Form S-3 under the Securities Act, if the
aggregate price to the public of the shares offered thereby exceeds $1.5
million (each, a "Demand Registration"). The Company is obligated to pay all
registration expenses (other than underwriting discounts and commissions and
subject to certain limitations) incurred by virtue of including shares of
Common Stock subject to such registration rights in either a Demand
Registration or Piggyback Registration.
OTHER CONVERSION RIGHTS
Immediately prior to the closing of a firm commitment, underwritten public
offering of the Common Stock having an aggregate price to the public of not
less than $12 million and closing on or prior to June 30, 1998, each
outstanding share of the Series A and Series B Redeemable Non-Voting Preferred
Stock issued by ATG Richland is automatically converted into Common Stock at a
stated conversion ratio of one share of Series A Redeemable Non-Voting
Preferred Stock into 1.4119814 shares of Common Stock and one share of Series
B Redeemable Non-Voting Preferred Stock into 1 share of Common Stock. As of
December 31, 1997, 860,000 shares of Series A Redeemable Non-Voting Preferred
Stock and 1,269,291 shares of Series B Redeemable Non-Voting Preferred Stock
were outstanding.
45
<PAGE>
OTHER REGISTRATION RIGHTS
As parties to certain portions of the Shareholder Rights Agreement between
the Company and each purchaser of Preferred Stock, certain holders of Common
Stock have acquired piggyback registration rights, with respect to all shares
of Common Stock owned by them, identical to those held by the purchasers of
Preferred Stock with respect to the Registrable Shares owned by them. Certain
other holders of Common Stock who are not parties to certain portions of the
Shareholder Rights Agreement have piggyback registration rights, with respect
to all shares of Common Stock owned by them, similar to the piggyback
registration rights held by the purchasers of the Preferred Stock.
OPTIONS
At December 31, 1997, options to purchase up to 1,000,000 shares of Common
Stock, at a weighted average exercise price of $2.09, were outstanding,
298,927 of which were exercisable on such date.
OVER-ALLOTMENT OPTION AND REPRESENTATIVE'S WARRANTS
The Company has granted the Underwriters an over-allotment option, pursuant
to which the Underwriters have the right, exercisable during the 45-day period
after the date of this Prospectus, to purchase up to 255,000 additional shares
of Common Stock from the Company at the same price per share as the Company
will receive for the 1,700,000 shares that the Underwriters have agreed to
purchase in the Offering. In addition, the Company has agreed to issue to Van
Kasper & Company, as the Representative, for nominal consideration, the
Representative's Warrants, pursuant to which the Representative will have the
right, exercisable for a period of four years beginning one year from the date
of this Prospectus, to purchase up to 170,000 shares of Common Stock at an
exercise price per share equal to 120% of the initial public offering price of
the Offering. See "Underwriting."
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is Boston EquiServe.
46
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offering, the Company will have 13,215,896 shares of
Common Stock outstanding (assuming no exercise of outstanding stock options
after December 31, 1997). Of these shares, the 1,700,000 shares sold in the
Offering will be freely tradeable without restriction or registration under
the Securities Act unless they are held by "affiliates" of the Company, as
that term is defined in Rule 144. The remaining 11,515,896 shares will be
"restricted securities" as defined in Rule 144 ("Restricted Shares"). Of such
Restricted Shares, 10,222,584 Restricted Shares are subject to lock-up
agreements with the Underwriters. As a result of the lock-up agreements and
the provisions of Rule 144(k) and Rule 144 generally, all currently
outstanding shares will be available for sale in the public market upon
expiration of the lock-up agreements 180 days after the date of this
Prospectus, subject to the provisions of Rule 144. See "Underwriting."
In general, under Rule 144 as currently in effect, any person (or persons
whose shares are aggregated) who has beneficially owned Restricted Shares for
at least one year is entitled to sell, within any three-month period, a number
of such shares that does not exceed the greater of (i) 1.0% of the then
outstanding shares of the Common Stock (approximately 132,159 shares
immediately after the Offering) and (ii) the average weekly trading volume
during the four calendar weeks preceding such sale. Sales under Rule 144 are
also currently subject to certain requirements as to the manner of sale,
notice and availability of current public information about the Company. Rule
144 also provides that affiliates who own securities that are not Restricted
Shares must nonetheless comply with the same restrictions applicable
thereunder to Restricted Shares, as if such securities were Restricted Shares,
with the exception of the one-year holding period requirement. A person who
has not been an affiliate of the Company at any time within three months prior
to the sale and has beneficially owned the Restricted Shares for at least two
years is entitled to sell such shares under Rule 144(k) without regard to the
volume limitations or any of the other requirements described above.
An employee, officer or director of or consultant to the Company who
purchased or was awarded shares or options to purchase shares pursuant to a
written compensatory plan or contract is entitled to rely on the resale
provisions of Rule 701 promulgated under the Securities Act, which permits
affiliates and non-affiliates to sell their Rule 701 shares without having to
comply with Rule 144's holding period restrictions, in each case commencing 90
days after the date of this Prospectus. In addition, non-affiliates may sell
Rule 701 shares without complying with the public information, volume and
notice provisions of Rule 144.
The Company intends to file with the Commission registration statements on
Form S-8 under the Securities Act to register the shares of Common Stock
reserved for issuance under the Incentive Plan, the Directors' Plan and the
Purchase Plan, thus permitting the resale of shares issued under such plans by
non-affiliates in the public market without restriction under the Securities
Act. Such registration statements will be filed at management's discretion
following the closing of the Offering and will be automatically effective upon
filing.
Prior to the Offering, there has been no public market for the Common Stock,
and any sale of substantial amounts of Common Stock in the open market may
adversely affect the market price of Common Stock offered hereby.
47
<PAGE>
UNDERWRITING
The Underwriters, acting through the Representative, have severally agreed,
subject to the terms and conditions set forth in the Underwriting Agreement
with the Company, to purchase from the Company the number of shares of Common
Stock set forth opposite their respective names:
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
----------- ---------
<S> <C>
Van Kasper & Company...............................................
---------
Total............................................................ 1,700,000
=========
</TABLE>
The shares of Common Stock are being offered by the Underwriters named
herein, subject to their right to reject any order in whole or in part, and to
certain other conditions. The Underwriters are committed to purchase all of
the above shares of Common Stock if any are purchased.
The Representative has advised the Company that the Underwriters propose to
offer the shares of Common Stock at the offering price set forth on the
outside front cover page of this Prospectus: (i) to the public; and (ii) to
certain dealers at that price less a concession of not more than $0. per
share, of which a discount of $0. may be reallowed to other dealers. After
the consummation of the Offering, the public offering price, concession and
reallowance to dealers may be changed by the Representative as a result of
market conditions and other factors. No such change shall affect the amount of
proceeds to be received by the Company as set forth on the outside front cover
page of this Prospectus.
The Company has granted the Underwriters the over-allotment option, pursuant
to which the Underwriters have the right, exercisable during the 45-day period
after the date of this Prospectus, to purchase up to 255,000 additional shares
of Common Stock from the Company at the initial offering price, less
underwriting discounts. The Underwriters may exercise such option only to
cover over-allotments made in connection with the sale of Common Stock offered
hereby. To the extent that the Underwriters exercise such option, each of the
Underwriters will have a firm commitment to purchase approximately the same
percentage of the additional Common Stock that the number of shares of Common
Stock to be purchased by the Underwriter set forth in the above table bears to
the total number of shares of Common Stock listed in such table.
Upon completion of the Offering, the Company has agreed to sell to the
Representative, for nominal consideration, the Representative's Warrants,
pursuant to which the Representative will have the right to purchase up to
170,000 shares of Common Stock at an exercise price per share equal to 120% of
the initial public offering price. The Representative's Warrants are
exercisable for a period of four years beginning one year from the date of
this Prospectus. The Representative's Warrants will contain provisions
providing for adjustment of exercise price and number and type of securities
issuable upon exercise should one or more of certain specified events occur.
In addition, the Company has granted certain rights to the holders of the
Representative's Warrants to register the Representative's Warrants and the
Common Stock underlying the Representative's Warrants under the Securities
Act.
The Company has agreed to pay the Representative a non-accountable expense
allowance equal to 1.5% of the total proceeds of the Offering (including with
respect to shares of Common Stock underlying the over-allotment option, if and
to the extent it is exercised) for expenses in connection with the Offering,
payable at the close of the Offering.
48
<PAGE>
The Underwriting Agreement contains covenants of indemnity among the
Underwriters and the Company against certain civil liabilities, including
liabilities under the Securities Act.
The Company's officers and directors and certain beneficial owners of the
Common Stock have agreed not to, directly or indirectly, offer to sell,
contract to sell, sell or otherwise dispose of any shares of Common Stock or
any securities convertible into or exchangeable for shares of Common Stock or
any rights to purchase or acquire Common Stock for the 180-day period
commencing with the date of this Prospectus (the "lock-up period") without the
prior written consent of Van Kasper & Company. All 10,222,584 shares of Common
Stock subject to the lock-up agreements will become eligible for immediate
public sale following expiration of the lock-up period, subject to the
provisions of the Securities Act and the rules promulgated thereunder,
including Rule 144. Van Kasper & Company may, in its sole discretion, and at
any time without notice, release all or a portion of the securities subject to
the lock-up agreements. In addition, the Company has agreed that until the
expiration of the lock-up period, the Company will not, without the prior
written consent of Van Kasper & Company, offer, sell, contract to sell or
otherwise dispose of any shares of Common Stock, any options or warrants to
purchase Common Stock or any securities convertible into or exchangeable for
shares of Common Stock, except for sales of shares of Common Stock in the
Offering, the issuance of shares of Common Stock upon the exercise of
outstanding options, warrants and rights or pursuant to the conversion of all
of the outstanding shares of the Preferred Stock and of ATG Richland's Series
A and Series B Redeemable Non-Voting Preferred Stock into an aggregate of
3,983,595 shares of Common Stock, and the grant of options to purchase or the
issuance of shares of Common Stock under the Incentive Plan, the Directors'
Plan or the Purchase Plan.
The Representative has advised the Company that, pursuant to Regulation M
promulgated under the Securities Exchange Act of 1934, as amended, certain
persons participating in the Offering may engage in transactions, including
stabilizing bids, syndicate covering transactions or the imposition of penalty
bids, which may have the effect of stabilizing or maintaining the market price
of the Common Stock at a level above that which might otherwise prevail in the
open market. A "stabilizing bid" is a bid for or the purchase of the Common
Stock on behalf of the Underwriters for the purpose of pegging, fixing or
maintaining the price of the Common Stock. A "syndicate covering transaction"
is the bid for or the purchase of the Common Stock on behalf of the
Underwriters to reduce a short position created in connection with the
Offering. The Underwriters may also cover all or a portion of such short
position by exercising the over-allotment option. A "penalty bid" is an
arrangement permitting the Representative to reclaim the selling concession
otherwise accruing to an Underwriter or syndicate member in connection with
the Offering if the Common Stock originally sold by such Underwriter or
syndicate member is purchased by the Representative in a syndicate covering
transaction and has therefore not been effectively placed by such Underwriter
or syndicate member. The Representative has advised the Company that such
transactions may be effected on the Nasdaq National Market or otherwise and,
if commenced, may be discontinued at any time.
The Representative has advised the Company that the Underwriters do not
intend to confirm sales to any accounts over which they exercise discretionary
authority.
Prior to the Offering, there has been no public market for the Company's
securities. The initial public offering price of the Common Stock was
determined by negotiations between the Company and the Representative. Among
the factors considered in such negotiations were prevailing market conditions,
the results of operations of the Company in recent periods, market valuations
of publicly traded companies that the Company and the Representative believe
to be comparable to the Company, estimates of the business potential of the
Company, the present state of the Company's development, the current state of
the Company's industry and the economy as a whole, and other factors deemed
relevant by the Company and the Representative.
49
<PAGE>
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for the
Company by Graham & James LLP, Los Angeles, California. Certain legal matters
with respect to the Offering will be passed upon for the Underwriters by
Heller Ehrman White & McAuliffe, Palo Alto, California.
EXPERTS
The Consolidated Financial Statements of the Company as of December 31, 1996
and 1997, and for each of the three years in the period ended December 31,
1997, included in this Prospectus, have been included herein in reliance on
the report thereon of Coopers & Lybrand L.L.P., independent accountants, given
upon the authority of that firm as experts in accounting and auditing.
In May 1996, the Board appointed Coopers & Lybrand L.L.P. as the Company's
independent certified public accountants. Prior thereto, Storek, Carlson &
Strutz ("SC&S") served as the Company's independent accountants. The change in
accountants from SC&S to Coopers & Lybrand L.L.P. was effective for fiscal
1995, was unanimously approved by the Board and was not due to any
disagreements between the Company and SC&S on any matter of accounting
principles or practices, financial statement disclosure or auditing scope or
procedures.
ADDITIONAL INFORMATION
The Company has filed with the Commission in Washington, D.C. a Registration
Statement on Form S-1 under the Securities Act with respect to the Common
Stock being offered hereby. As permitted by the rules and regulations of the
Commission, this Prospectus does not contain all the information set forth in
the Registration Statement and the exhibits and schedules thereto. For further
information with respect to the Company and the Common Stock offered hereby,
reference is made to the Registration Statement, and such exhibits and
schedules. A copy of the Registration Statement, and the exhibits and
schedules thereto, may be inspected without charge at the public reference
facilities maintained by the Commission in Room 1024, Judiciary Plaza, 450
Fifth Street N.W., Washington, D.C. 20549, and at the Commission's regional
offices located at the Northwestern Atrium Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661, and Seven World Trade Center, 13th Floor,
New York, New York 10048, and copies of all or any part of the Registration
Statement may be obtained from such offices upon payment of the fees
prescribed by the Commission. In addition, the Registration Statement may be
accessed at the Commission's site on the World Wide Web located at
(http://www.sec.gov). Statements contained in this Prospectus as to the
contents of any contract or other document are not necessarily complete and,
in each instance, reference is made to the copy of such contract or document
filed as an exhibit to the Registration Statement, each such statement being
qualified in all respects by such reference.
50
<PAGE>
GLOSSARY
The following is a glossary of certain environmental industry and Company-
specific terms used in this Prospectus:
<TABLE>
<C> <S>
AEA.............................. The U.S. Atomic Energy Act of 1954.
BDAT............................. Best Demonstrated Achievable Technology. As
identified by the EPA, the most effective
commercially available means of treating
specific types of hazardous waste. BDATs
may change with advances in treatment
technologies.
CERCLA........................... The U.S. Comprehensive Environmental
Response, Compensation and Liability Act of
1980. Also known as "Superfund."
Clean Air Act.................... The U.S. Clean Air Act of 1970.
Clean Water Act.................. The U.S. Clean Water Act of 1972.
D&D.............................. Decontamination and decommissioning of
facilities contaminated with radioactivity.
DOD.............................. The U.S. Department of Defense.
DOE.............................. The U.S. Department of Energy.
EPA.............................. The U.S. Environmental Protection Agency.
FFCA............................. The U.S. Federal Facilities Compliance Act
of 1992.
GASVIT........................... The Company's name and trademark for a
vitrification technology developed by the
Company for treatment of LLRW and LLMW
streams.
High-level radioactive waste..... Radioactive waste primarily composed of
spent nuclear fuel rods from nuclear
reactors and highly radioactive waste
generated by the processing of nuclear
materials for weapons production.
HLW.............................. High-level radioactive waste.
LLMW............................. Low-level mixed waste.
LLRW............................. Low-level radioactive waste.
Low-level mixed waste............ LLRW co-mingled with hazardous substances
regulated by RCRA and/or toxic substances
regulated by TSCA.
Low-level radioactive waste...... All radioactive waste other than HLW.
NRC.............................. The U.S. Nuclear Regulatory Commission.
PCBs............................. Polychlorinated biphenyls, a substance
regulated under TSCA.
PLASTIMELT....................... The Company's name and trademark for a
technology developed by the Company for the
macroencapsulation of LLMW.
RCRA............................. The U.S. Resource Conservation and Recovery
Act of 1976.
SAFGLAS.......................... The Company's name and trademark for a
vitrification technology developed by the
Company for treatment of LLRW streams.
</TABLE>
51
<PAGE>
GLOSSARY--(CONTINUED)
<TABLE>
<C> <S>
SARA............................. The U.S. Superfund Amendments and
Reauthorization Act of 1986.
Superfund........................ See "CERCLA."
TSCA............................. The U.S. Toxic Substances Control Act of
1976.
Vitrification.................... A non-incineration, thermal treatment
process which converts radioactive and
other waste into an environmentally stable,
leach-resistant glass product. The EPA has
identified vitrification as the BDAT for
HLW.
WDOE............................. The Washington State Department of Ecology.
</TABLE>
52
<PAGE>
ATG INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Accountants.......................................... F-2
Consolidated Balance Sheets................................................ F-3
Consolidated Statements of Operations...................................... F-4
Consolidated Statements of Shareholders' Equity............................ F-5
Consolidated Statements of Cash Flows...................................... F-6
Notes to Consolidated Financial Statements................................. F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders
ATG Inc. and Subsidiary:
We have audited the accompanying consolidated balance sheets of ATG Inc. and
its subsidiary as of December 31, 1996 and 1997, and the related consolidated
statements of operations, shareholders' equity and cash flows for each of the
three years in the period ended December 31, 1997. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of ATG Inc. and
its subsidiary as of December 31, 1996 and 1997 and the consolidated results
of their operations and their cash flows for each of the three years in the
period ended December 31, 1997, in conformity with generally accepted
accounting principles.
Coopers & Lybrand L.L.P.
San Jose, California
January 31, 1998 (except for Note 16
as to which the date is February , 1998)
- -------------------------------------------------------------------------------
To the Board of Directors and Shareholders of ATG Inc. and Subsidiary:
The consolidated financial statements and notes thereto included herein have
been adjusted to give effect to the proposed conversion of the ATG Inc. Series
A Preferred Stock, ATG Richland Series A Preferred Stock and ATG Richland
Series B Preferred Stock into 3,983,595 shares of common stock of ATG Inc.,
which is more fully described in Note 16 to the financial statements. The
above report is in the form that will be signed by Coopers & Lybrand L.L.P.
upon obtaining the approval of the preferred shareholders for the revised
conversion ratios, assuming that from January 31, 1998 to the effective date
of such conversion, no other events shall have occurred that would affect the
accompanying consolidated financial statements or notes thereto.
Coopers & Lybrand L.L.P.
San Jose, California
January 31, 1998
F-2
<PAGE>
ATG INC.
CONSOLIDATED BALANCE SHEETS
(dollar amounts in thousands)
--------
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------
1997 PRO FORMA
SHAREHOLDERS' EQUITY
1996 1997 (NOTE 2)
------- ------- --------------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............. $ 2,969 $ 2,586
Accounts receivable, net of allowance
for doubtful accounts of $46 in 1996
and $119 in 1997..................... 6,907 8,435
Prepayments and other current assets.. 1,554 1,477
------- -------
Total current assets................ 11,430 12,498
Property and equipment, net............. 15,045 22,104
Intangible and other assets, net........ 501 1,928
Deferred income taxes................... -- 697
------- -------
Total assets........................ $26,976 $37,227
======= =======
LIABILITIES
Current liabilities:
Short-term borrowings................. $ 2,836 $ 3,996
Current portion of long-term debt and
capitalized leases................... 1,053 1,380
Accounts payable...................... 2,014 3,246
Accrued liabilities................... 1,091 944
Payable to related parties............ 103 1,280
------- -------
Total current liabilities........... 7,097 10,846
Long-term debt and capitalized leases,
net.................................... 2,930 6,202
Deferred income taxes................... -- 467
------- -------
Total liabilities................... 10,027 17,515
------- -------
Commitments and contingencies (Note 10)
Mandatorily Redeemable Preferred Stock:
Series A and ATG Richland Series A and
B, no par value
Authorized: 6,000,000 shares in 1996
and 1997
Issued and outstanding: 2,750,355
shares in 1996; 3,029,291 shares in
1997; and none pro forma; stated at
liquidation value.................... 16,319 19,416
------- -------
SHAREHOLDERS' EQUITY
Common Stock, no par value:
Authorized: 20,000,000 shares in 1996
and 1997
Issued and outstanding: 7,532,301
shares in 1996 and 1997 and
11,515,896 pro forma................. 5,948 6,337 21,795
Deferred compensation................. -- (272) (272)
Accumulated deficit..................... (5,318) (5,769) (1,811)
------- ------- -------
Total common stock, deferred
compensation and accumulated
deficit............................ 630 296 $19,712
======= ======= =======
Total liabilities and shareholders'
equity............................. $26,976 $37,227
======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE>
ATG INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(amounts in thousands, except per share data)
--------
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
----------------------------------
1995 1996 1997
---------- ---------- ----------
<S> <C> <C> <C>
Revenue (Note 2).......................... $ 16,070 $ 18,235 $ 19,107
Cost of revenue........................... 9,659 11,082 11,172
---------- ---------- ----------
Gross profit.......................... 6,411 7,153 7,935
Sales, general and administrative
expenses................................. 6,033 6,487 6,903
Stock-based compensation expense.......... 169 169 117
---------- ---------- ----------
Operating income...................... 209 497 915
---------- ---------- ----------
Interest income (expense):
Interest income......................... 185 142 58
Interest expense........................ (326) (129) --
---------- ---------- ----------
Interest income (expense), net........ (141) 13 58
---------- ---------- ----------
Income before income taxes................ 68 510 973
Provision (benefit) for income taxes...... 2 2 (45)
---------- ---------- ----------
Net income............................ $ 66 $ 508 $ 1,018
========== ========== ==========
Pro forma net income per share
Basic................................... $ 0.09
Diluted................................. 0.08
==========
Pro forma shares used in calculating pro
forma net income per share
Basic................................... 11,516
Diluted................................. 12,284
==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
ATG INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
(amounts in thousands)
--------
<TABLE>
<CAPTION>
TOTAL COMMON
STOCK, DEFERRED
COMMON STOCK COMPENSATION
------------- DEFERRED ACCUMULATED AND ACCUMULATED
SHARES AMOUNT COMPENSATION DEFICIT DEFICIT
------ ------ ------------ ----------- ---------------
<S> <C> <C> <C> <C> <C>
Balance, January 1,
1995................... 7,439 $5,598 $(338) $(3,768) $ 1,492
Accretion on
redeemable preferred
stock................ -- -- -- (836) (836)
Amortized deferred
compensation......... -- -- 169 -- 169
Net income............ -- -- -- 66 66
----- ------ ----- ------- -------
Balance, December 31,
1995................... 7,439 5,598 (169) (4,538) 891
Issuance of common
stock................ 93 350 -- -- 350
Accretion on
redeemable preferred
stock................ -- -- -- (1,288) (1,288)
Amortized deferred
compensation......... -- -- 169 -- 169
Net income............ -- -- -- 508 508
----- ------ ----- ------- -------
Balance, December 31,
1996................... 7,532 5,948 -- (5,318) 630
Accretion on
redeemable preferred
stock................ -- -- -- (1,469) (1,469)
Stock based
compensation......... -- 389 (389) -- --
Amortized deferred
compensation......... -- -- 117 117
Net income............ -- -- -- 1,018 1,018
----- ------ ----- ------- -------
Balance, December 31,
1997................... 7,532 $6,337 $(272) $(5,769) $ 296
===== ====== ===== ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
ATG INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(amounts in thousands)
--------
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
----------------------------------
1995 1996 1997
---------- ---------- ----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income............................... $ 66 $ 508 $ 1,018
Adjustments to reconcile net income with
cash flow from operations:
Depreciation and amortization.......... 458 671 746
Provision for doubtful accounts........ -- 6 73
Compensation expense for shares issued
and options granted................... 169 169 117
Income tax benefit..................... -- -- (45)
Change in current assets and
liabilities:
Accounts receivable.................. (3,560) 534 (1,601)
Prepayments and other current assets. (369) 230 (140)
Other assets......................... (444) 290 --
Accounts payable and accrued
liabilities......................... 255 455 1,085
Deferred income taxes................ -- -- (230)
---------- ---------- ----------
Net cash provided by (used in)
operating activities.............. (3,425) 2,863 1,023
---------- ---------- ----------
Cash flows from investing activities:
Property and equipment acquisitions...... (1,249) (4,647) (3,505)
Other assets............................. 131 (23) (1,210)
---------- ---------- ----------
Net cash used in investing activities.. (1,118) (4,670) (4,715)
---------- ---------- ----------
Cash flows from financing activities:
Loans from (payments to) related parties. -- (61) 1,177
Repayment of capital leases.............. (466) (735) (461)
Repayment of long-term debt.............. (842) (216) (196)
Bank borrowings, net of repayments....... 1,771 48 1,160
Proceeds from issuance of preferred
stock, net.............................. 3,123 5,627 1,629
---------- ---------- ----------
Net cash provided by financing
activities............................ 3,586 4,663 3,309
---------- ---------- ----------
Increase (decrease) in cash and cash
equivalents............................... (957) 2,856 (383)
Cash and cash equivalents, beginning of
year...................................... 1,070 113 2,969
---------- ---------- ----------
Cash and cash equivalents, end of year..... $ 113 $ 2,969 $ 2,586
========== ========== ==========
Supplemental Disclosures of non-cash
investing and financing activities:
Income taxes paid........................ $ 1 $ 2 $ 2
========== ========== ==========
Interest paid, net of interest
capitalized............................. $ 266 $ 622 $ --
========== ========== ==========
Acquisition of equipment with capital
lease financing......................... $ 1,407 $ -- $ 4,256
========== ========== ==========
Compensation expense for shares issued
and options granted..................... $ 169 $ 169 $ 117
========== ========== ==========
Conversion of notes payable to common
stock................................... $ -- $ 350 $ --
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE>
ATG INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(all dollar amounts in thousands, except per share data)
--------
1. FORMATION AND BUSINESS OF THE COMPANY:
The accompanying consolidated financial statements of ATG Inc. (the
"Company" or "ATG") include the accounts of its wholly-owned subsidiary, ATG
Richland Corporation ("ATG Richland"). The Company provides technical
personnel and specialized services and products primarily to the U.S.
Government and the nuclear power industry throughout the United States.
Services principally consist of compaction, reduction, decontamination,
vitrification and disposal of low-level dry active nuclear and other hazardous
waste, site remediation and fluorescent lamp recycling.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Basis of Presentation
The consolidated financial statements include the accounts of ATG and its
wholly-owned subsidiary. All significant intercompany balances and
transactions have been eliminated.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the consolidated financial
statements and accompanying disclosures. These estimates include assessing the
collectibility of accounts receivable and the recoverability of self-
constructed assets and provisions for contingencies. Actual results could
materially differ from the Company's estimates.
Revenue Recognition
Revenue includes fees for waste processing services and technology license
fees. Revenue under cost plus fixed fee and fixed unit price contracts mainly
relating to site remediation is recorded as costs are incurred or units are
completed and includes estimated fees earned according to the terms of the
contracts. Revenue from U.S. government contracts includes estimates of
reimbursable overhead and general and administrative expenses, which are
subject to final determination by the U.S. federal government upon project
completion. Revisions to costs and income resulting from contract settlements,
which are due to differences between actual and budgeted performance, are
recognized in the period in which the revisions are determined. Revenue from
waste processing is generally recognized upon the completion of the waste
treatment process. Revenue from licensing or technology transfer agreements is
recognized when received unless there are future commitments, in which case
the revenues are recognized over the term of the agreement. Revenues of $1,975
were recognized pursuant to technology transfer agreements in 1997. Losses on
contracts are charged to cost of revenue as soon as such losses become known.
Cash and Cash Equivalents
The Company considers all highly liquid investments with original maturities
of three months or less to be cash equivalents.
Property and Equipment
Property and equipment are stated at cost and are depreciated on the
straight-line basis over the estimated useful lives of the assets, which range
from three to fifteen years. Cost includes expenditures for major
F-7
<PAGE>
ATG INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(all dollar amounts in thousands, except per share data)
--------
improvements and replacements and the net amount of interest costs related to
qualifying construction projects. Expenditures for major renewals and
betterments are capitalized and expenditures for maintenance and repair
expenses are charged to expense as incurred. The Company's policy is to
regularly review the carrying amount of specialized assets and to evaluate the
remaining life and recoverability of such equipment in light of current market
conditions.
Risks and Uncertainties
The Company operates its fixed facilities under regulations of, and permits
issued by, various state and federal agencies. The Company, typically, is in
the process of seeking new permits, renewals and/or expansion permits. There
is no assurance of the outcome of any permitting efforts. The permitting
process is subject to regulatory approval, time delays, local opposition and
potentially stricter governmental regulation. Substantial losses which would
have a material adverse effect on the Company's consolidated financial
position, could be incurred by the Company in the event a permit is not
granted, if facility construction programs are delayed or changed, or if
projects are otherwise abandoned. The Company reviews the status of permitting
projects on a periodic basis to assess realizability of related asset values.
As of December 31, 1997, management believes that assets which could currently
be affected by permitting efforts are recoverable at their recorded values.
The market for the Company's services is substantially dependent on state
and federal legislation and regulations. The availability of new contracts
depends largely on governmental authorities. In order to build or retain its
market share the Company must continue to successfully compete for new
government and private sector contracts.
Income Taxes
The Company accounts for income taxes under the liability method, whereby
deferred tax assets and liabilities are determined based on the difference
between the financial statement and tax bases of assets and liabilities using
enacted tax rates in effect for the year in which the differences are expected
to affect taxable income. Valuation allowances are established when necessary
to reduce deferred tax assets to the amounts expected to be realized.
Concentration of Credit Risk
The majority of the Company's cash, cash equivalents and short-term
investments are held with major banks in the United States. The Company's
customers mainly consist of agencies of the U.S. government and large U.S.
companies. The Company performs ongoing credit evaluation of its customers'
financial condition. As of December 31, 1997, agencies of the U.S. government
represented 46.6% of accounts receivable and 71.3% of total revenue for the
year then ended. As of December 31, 1996, agencies of the U.S. government
represented 70.0% of accounts receivable and 76.8% of total revenue for the
year then ended. As of December 31, 1995, agencies of the U.S. government
represented 84.0% of accounts receivable and 86.3% of total revenue for the
year then ended. The Company generally does not require collateral.
Computation of Pro Forma Net Income Per Share
The Company has adopted the provisions of Statement of Financial Accounting
Standards No. 128, Earnings Per Share ("SFAS 128"), effective December 31,
1997. SFAS 128 requires the presentation of basic and diluted earnings per
share. Basic income per share is computed by dividing income available to
common
F-8
<PAGE>
ATG INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(all dollar amounts in thousands, except per share data)
--------
shareholders by the weighted average number of common shares outstanding for
the period. Diluted income per share is computed giving effect to all dilutive
potential common shares that were outstanding during the period. Dilutive
potential common shares consist of the incremental common shares issuable upon
the conversion of convertible preferred stock (using the "if converted"
method) and exercise of stock options for all periods. Pro forma basic net
income per share and pro forma diluted net income per share are computed using
the weighted average number of shares of Common Stock outstanding and the
incremental inclusion of 3,983,595 shares of common stock issuable upon the
conversion of preferred stock.
Unaudited Pro Forma Consolidated Balance Sheet
Upon closing of the Company's proposed initial public offering, all
outstanding shares of mandatorily redeemable preferred stock will be converted
into 3,983,595 shares of common stock. (See Note 16.) The unaudited pro forma
consolidated balance sheet as of December 31, 1997, reflects this conversion.
Accretion of $3,958 has been reclassified from pro forma mandatorily
redeemable preferred stock to pro forma accumulated deficit.
Recent Accounting Pronouncements
In June 1997, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 130, "Reporting Comprehensive Income." SFAS No. 130 establishes standards
for the reporting and display of comprehensive income and its components in a
full set of general purpose financial statements. Comprehensive income is
defined as the change in equity of a business enterprise during a period,
resulting from transactions and other events and circumstances from nonowner
sources. The Company is reviewing the impact of adopting SFAS No. 130, which
is effective for the Company in 1998.
In June, 1997, the FASB issued SFAS No. 131, "Disclosure about Segments of
an Enterprise and Related Information." SFAS No. 131 requires publicly-held
companies to report financial and other information about key revenue-
producing segments of the entity for which such information is available and
is utilized by the chief operating decision maker. Specific information to be
reported for individual segments includes profit or loss, certain revenue and
expense items and total assets. A reconciliation of segment financial
information to amounts reported in the financial statements would be provided.
SFAS No. 131 is effective for the Company in 1998. The Company currently
evaluates its operations as one segment.
F-9
<PAGE>
ATG INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(all dollar amounts in thousands, except per share data)
--------
3. ACCOUNTS RECEIVABLE:
<TABLE>
<CAPTION>
1996 1997
------ ------
<S> <C> <C>
U.S. Government:
Amounts billed................................................ $3,502 $3,142
Amounts unbilled.............................................. 1,433 845
------ ------
Total U.S. Government....................................... 4,935 3,987
Commercial customers:
Amounts billed................................................ -- 2,067
Amounts unbilled.............................................. 2,018 2,500
------ ------
Total commercial 2,018 4,567
------ ------
Total accounts receivable..................................... 6,953 8,554
Less: allowance for doubtful receivables........................ (46) (119)
------ ------
$6,907 $8,435
====== ======
</TABLE>
Recoverable costs and accrued profit on progress completed but not billed on
U.S. government contracts is based on estimates of reimbursable overhead and
general and administrative expenses calculated in accordance with
contractually determined methods of calculation. These amounts are subject to
final determination by the U.S. federal government after the contracts have
been completed. As such, the actual recoverable amounts on these contracts may
differ from these estimates. The U.S. federal government has reviewed and
approved reimbursable expenses for contracts in progress through 1995.
4. RESTRICTED INVESTMENTS:
The Company owns several certificates of deposit, Treasury Bills and Bonds,
which are collateral for performance bonds. The certificates of deposit, which
are included in intangible and other assets, have an aggregate value of $30
and $210 at December 31, 1996 and 1997, respectively, bear interest at 4.7%
per annum, and have an original maturity of twelve months. The Treasury Bills,
which are included in intangible and other assets, have an aggregate value of
$254 at December 31, 1996 and 1997, respectively, bear interest at 5.7% and
have an original maturity of twelve months. The Bonds, which are included in
prepayments and other current assets, have an aggregate value of $133 and $959
at December 31, 1996 and 1997 respectively, and have an original maturity of
between one and five years.
5. PROPERTY AND EQUIPMENT:
<TABLE>
<CAPTION>
1996 1997
------- -------
<S> <C> <C>
Land.......................................................... $ 581 $ 761
Buildings..................................................... 2,864 2,848
Machinery and equipment....................................... 7,429 5,183
Office furniture and equipment................................ 662 1,427
------- -------
Property and equipment at cost................................ 11,536 10,219
Less: accumulated depreciation and amortization............... (3,060) (2,840)
------- -------
8,476 7,379
Construction-in-progress...................................... 6,569 14,725
------- -------
$15,045 $22,104
======= =======
</TABLE>
F-10
<PAGE>
ATG INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(all dollar amounts in thousands, except per share data)
--------
Depreciation and amortization expense was $417, $630 and $698 for 1995, 1996
and 1997, respectively.
Property and equipment costs include capitalized labor and overhead,
including interest costs related to the construction of buildings, building
improvements and equipment. Capitalized interest costs totaled $479, $446 and
$891 in 1995, 1996 and 1997, respectively. All property and equipment serve as
collateral to holders of the Company's Series A Preferred Stock, notes payable
agreements to a bank and other creditors.
As of December 31, 1996 and 1997, machinery and equipment included assets
acquired under capital leases with a capitalized cost of $3,000 and $7,256,
respectively. Related accumulated amortization totaled $1,945 and $2,318, in
1996 and 1997, respectively.
6. PAYABLE TO RELATED PARTIES
The Company has a payable to its Chairman and Chief Executive Officer of
$1,280 at December 31, 1997 and $103 at December 31, 1996. The amount is
repayable on demand and bears interest at 10% per annum.
The Company has a payable to a Director of $225 at December 31, 1997 and
December 31, 1996. The amount is repayable on July 1, 2000 and is non-interest
bearing. The amount is included in long term debt.
7. BANK LINE OF CREDIT:
Under a revolving credit facility with a bank, the Company may borrow up to
the lesser of 90% of eligible accounts receivable or $4,000. Borrowings under
this credit agreement were $3,996 at December 31, 1997, bear interest at prime
plus 0.50% (9.0% at December 31, 1997) and are collateralized by accounts
receivable, property and equipment and the personal guarantees of the majority
shareholder. Borrowings under the credit agreement were $2,836 as of December
31, 1996, and bore interest at prime plus 1.25% (9.5% at December 31, 1996).
The facility agreement expires June 1998.
The credit agreement requires the Company to comply with certain covenants
including capital asset acquisition limits, limits on additional debt, minimum
levels of tangible net worth and dividend payment restrictions. At December
31, 1997 and at various dates throughout the year the Company was in violation
of certain covenants. The Company has obtained waivers in respect of these
violations as of December 31, 1997.
8. LONG TERM DEBT:
Long term debt consists of mortgage debt, notes payable and equipment notes
payable. The mortgage debt bears interest at annual rates between 8.75% and
10.5%, matures between the years 2000 and 2007, and is collateralized by
certain of the Company's buildings. The notes payable bear interest at annual
rates between 8% and 10%, mature between 1998 and 2002, and are collateralized
by the Company's equipment. Equipment notes bear interest at annual rates
between 7.9% and 11.9%, mature between 1999 and 2000, and are collateralized
by specific equipment.
F-11
<PAGE>
ATG INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(all dollar amounts in thousands, except per share data)
--------
Future minimum principal payments are as follows:
<TABLE>
<CAPTION>
MORTGAGE NOTES EQUIPMENT TOTAL LONG
DEBT PAYABLE NOTES TERM DEBT
-------- ------- --------- ----------
<S> <C> <C> <C> <C>
1998...................................... $ 177 $ 11 $24 $ 212
1999...................................... 170 12 24 206
2000...................................... 139 237 17 393
2001...................................... 1,382 13 -- 1,395
2002...................................... 15 25 -- 40
Thereafter................................ 82 -- -- 82
------ ---- --- ------
1,965 298 65 2,328
Less: current portion..................... 177 11 24 212
------ ---- --- ------
$1,788 $287 $41 $2,116
====== ==== === ======
</TABLE>
9. CAPITAL LEASE OBLIGATIONS:
As of December 31, 1997, future minimum lease payments under non-cancelable
capital leases are as follows:
<TABLE>
<S> <C>
1998.................................................................... $1,667
1999.................................................................... 1,392
2000.................................................................... 1,175
2001.................................................................... 917
2002.................................................................... 746
Thereafter.............................................................. 799
------
Total minimum lease payments............................................ 6,696
Less amount representing interest....................................... 1,442
------
Present value of future minimum lease payments.......................... 5,254
Less: current portion................................................... 1,168
------
Total capital lease obligations, net of current portion................. $4,086
======
</TABLE>
10. COMMITMENTS AND CONTINGENCIES:
The Company retained the services of a former shareholder, who is also a
current director, as a technical consultant, for the ten year period beginning
August 1, 1992, for an annual fee of $60.
From time to time the Company is a party to litigation or administrative
proceedings relating to claims arising from its operations in the normal
course of business. Management of the Company, on the advice of counsel,
believes that the ultimate resolution of litigation currently pending against
the Company is unlikely, either individually or in the aggregate, to have a
material adverse effect on the Company's business, financial condition or
results of operations.
F-12
<PAGE>
ATG INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(all dollar amounts in thousands, except per share data)
--------
11. STOCK BASED COMPENSATION PLANS:
Stock Options
The Company has issued non-qualified stock options to employees and
consultants. The following option activity occurred in the three years ended
December 31, 1997:
<TABLE>
<CAPTION>
OPTIONS GRANTED AND OUTSTANDING
-------------------------------
WEIGHTED
AVERAGE
EXERCISE
EXERCISE PRICE PER
SHARES PRICE SHARE
--------- ----------- ---------
<S> <C> <C> <C>
Balance, January 1, 1995........................ 100,000 $0.10 $0.10
Options granted................................. 295,000 $0.10-$7.50 $3.11
--------- ----------- -----
Balance, December 31, 1995...................... 395,000 $0.10-$7.50 $2.34
Options granted................................. 51,000 $0.10 $0.10
--------- ----------- -----
Balance, December 31, 1996...................... 446,000 $0.10-$7.50 $2.09
Options granted................................. 554,000 $1.00-$5.00 $2.10
--------- ----------- -----
Balance, December 31, 1997...................... 1,000,000 $0.10-$7.50 $2.09
========= =========== =====
</TABLE>
In connection with the grant of options for the purchase of 554,000 shares
of Common Stock to employees during the period from January 1, 1997 through
December 31, 1997, the Company recorded aggregate deferred compensation
expense of approximately $389 representing the difference between the deemed
fair value of the Common Stock and the option exercise price at date of grant.
Such deferred compensation will be amortized over the vesting period relating
to these options, of which $117 has been amortized during the year ended
December 31, 1997, and is included in the statement of operations within the
caption "Stock-based compensation expense".
Stock Compensation
Effective January 1, 1996 the Company has adopted the disclosure-only
provision of Statement of Financial Accounting Standards No. 123, "Accounting
for Stock-Based Compensation" (SFAS No. 123). The Company, however, applies
APB Opinion No. 25, "Accounting for Stock Issued to Employees" and related
interpretations in accounting for its stock-based compensation. Determination
of compensation cost for stock-based compensation based on the fair value of
the grant date for awards consistent with provisions of SFAS No. 123 would not
result in a significant difference from the reported net income for the
periods presented.
<TABLE>
<CAPTION>
1996 1997
------ ------
<S> <C> <C>
Net income.................................................. $ 508 $1,018
Accretion on mandatorily redeemable preferred stock......... (1,288) (1,469)
------ ------
Net (loss) available to common shareholders................. $ (780) $ (451)
Net (loss)--FAS 123 adjusted ............................... $ (780) $ (593)
Earnings per share--as reported (Note 14)
Basic and diluted........................................... $(0.10) $(0.06)
Earnings per share--FAS 123 adjusted
Basic and diluted........................................... $(0.10) $(0.08)
</TABLE>
F-13
<PAGE>
ATG INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(all dollar amounts in thousands, except per share data)
--------
The fair value of each option grant for the Plan is estimated on the date of
the grant using the Black-Scholes option-pricing model with weighted average
risk free interest rates of 6.47% and 6.16% in 1996 and 1997, respectively,
and an expected life of 5 years, no dividends and 0% volatility in all
periods.
The following table summarizes the stock options outstanding at December 31,
1997:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
-------------------- -----------------------------------
WEIGHTED
AVERAGE WEIGHTED WEIGHTED WEIGHTED
RANGE OF REMAINING AVERAGE AVERAGE AVERAGE FAIR
EXERCISE NUMBER CONTRACTUAL EXERCISE NUMBER EXERCISE VALUE AT DATE
PRICES OUTSTANDING LIFE PRICE EXERCISABLE PRICE OF GRANT
-------- ----------- ----------- -------- ----------- -------- --------------
<S> <C> <C> <C> <C> <C> <C>
$0.10 316,000 -- $0.10 221,492 $0.10 $ 0.10
$1.00 403,500 -- $1.00 47,435 $1.00 $ 2.00
$5.00 180,500 -- $5.00 30,000 $5.00 $ 5.00 - $7.00
$7.50 100,000 -- $7.50 -- $7.50 $0.10
</TABLE>
Restricted Stock
During 1992, 1993 and 1994, the Company agreed to issue at no cost a total
of 1,013,475 common shares to its majority shareholder and president. The
agreement required that the shareholder/president remain employed by the
Company through December 31, 1996. Deferred compensation expense represents
the difference between the issue price of the restricted stock and the deemed
fair value of the shares for financial statement purposes. Deferred
compensation was amortized over the employment period during which the shares
were restricted. Compensation expense of $169 was recognized in both 1995 and
1996.
12. MANDATORILY REDEEMABLE PREFERRED STOCK:
ATG issued 900,000 shares of Series A Preferred Stock in 1994 at $5.00 per
share. ATG Richland issued 860,000 shares of Series A Preferred Stock in 1995
at $5.00 per share and 990,355 and 278,936 shares of Series B Preferred Stock
in 1996 and 1997, respectively, at $6.00 per share, under the following terms
and conditions:
Upon the written request of the holders of the Preferred Stock, but not
before the fifth anniversary of the issue date (third anniversary in the case
of the ATG Richland Series B Preferred Stock), the issuing corporation is
required to redeem the Preferred Stock held by holders thereof requesting such
redemption. The redemption price is $6.67 for ATG Series A Preferred Stock and
ATG Richland Series A Preferred Stock and $8.00 for ATG Richland Series B
Preferred Stock.
In the event of liquidation, dissolution or winding up of the issuing
corporation, the holders of Preferred Stock are entitled to a distribution in
preference to holders of Common Stock of the issuing corporation, equivalent
to the issue price plus a premium equal to 10% interest from the date of the
issue. If funds are insufficient for full payment of these amounts, the entire
assets and funds of the issuing corporation legally available are distributed
ratably among the holders of Preferred Stock. Certain property and equipment
has been provided as collateral for the Company's Series A Preferred Stock
issued in 1994.
Any dividends declared by the issuing corporation are to be distributed pari
passu among all holders of its Preferred Stock and all holders of its Common
Stock in proportion to the number of shares of Common Stock which would be
held by each such holder if all classes of Preferred Stock were converted into
Common Stock at the then effective conversion price.
F-14
<PAGE>
ATG INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(all dollar amounts in thousands, except per share data)
--------
Except as otherwise required by law and as to certain matters set forth in
the issuing corporation's articles of incorporation as requiring the prior
affirmative vote or written consent of the holders of not less than a majority
of the outstanding shares of Preferred Stock, the Preferred Stock is non-
voting.
The shares of each series of Preferred Stock are automatically converted
under defined circumstances into shares of the Company's Common Stock at
specified conversion ratios upon the occurrence of an initial public offering
of such Common Stock.
13. INCOME TAXES:
The components of income tax expense (benefit) are approximately as follows:
<TABLE>
<CAPTION>
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
Current
Federal.................................................... -- -- (383)
State...................................................... 2 2 158
Deferred:
Federal.................................................... -- -- 214
State...................................................... -- -- (34)
--- --- ----
Total.................................................... 2 2 (45)
--- --- ----
</TABLE>
The Company's effective tax rate differs from the U.S. federal statutory tax
rate, as follows:
<TABLE>
<CAPTION>
1995 1996 1997
----- ----- -----
<S> <C> <C> <C>
Income tax provision at statutory rate.................... 34.0% 34.0% 34.0%
State taxes, net of federal tax effect.................... 0.8 0.1 1.6
Non-deductible items...................................... -- 0.5 3.2
Net operating loss benefit................................ (32.5) (29.5) (48.3)
Other..................................................... -- (4.8) 4.9
----- ----- -----
Effective tax rate........................................ 2.3% 0.3% (4.6)%
===== ===== =====
</TABLE>
Components of the deferred income tax balance are as follows:
<TABLE>
<CAPTION>
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
Deferred tax assets...........................................
Net operating loss carryforwards............................ $741 $569 $308
Accrued expenses............................................ 25 34 245
Tax credits................................................. 100 100 120
Other....................................................... 14 17 24
---- ---- ----
Deferred tax assets....................................... $880 $720 $697
==== ==== ====
Deferred tax liabilities
Depreciation and amortization............................... $348 $310 $467
==== ==== ====
Valuation allowance........................................... (532) (410) --
---- ---- ----
Net deferred tax asset........................................ $-- $-- $230
==== ==== ====
</TABLE>
F-15
<PAGE>
ATG INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(all dollar amounts in thousands, except per share data)
--------
Although realization of the deferred tax assets is not assured, the Company
believes that all deferred tax assets will be realized.
As of December 31, 1997, the Company had Federal net operating loss
carryforwards (NOLs) of approximately $905,231 available to offset future
taxable income. These NOLs expire in the years 2009 through 2011. NOL's may be
limited pursuant to the limitation rules of Internal Revenue Code Section 382.
The change in valuation allowance was a net decrease of $410 for the year
ended December 31, 1997.
14. EARNINGS PER SHARE (EPS) DISCLOSURES:
In accordance with the disclosure requirements of SFAS 128, a reconciliation
of the numerator and denominator of basic and diluted EPS is provided as
follows:
<TABLE>
<CAPTION>
1997
1995 1996 1997 PRO FORMA
------ ------ ------ -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Numerator--Basic and Diluted EPS
Net income............................... $ 66 $ 508 $1,018 $1,018
Accretion on mandatorily redeemable
preferred stock......................... (836) (1,288) (1,469) (1,469)
------ ------ ------ ------
Net loss available to common
shareholders............................ $ (770) $ (780) $ (451) (451)
====== ====== ======
Reversal of accretion on mandatorily
redeemable preferred stock.............. 1,469
------
Pro forma net income available to common
shareholders............................ $1,018
======
Denominator--Basic EPS
Common shares outstanding................ 7,439 7,532 7,532 7,532
Conversion of mandatorily redeemable
preferred stock......................... -- -- -- 3,984
Common equivalent shares pursuant to
Staff Accounting Bulletin No. 98........ -- -- -- --
------ ------ ------ ------
7,439 7,532 7,532 11,516
------ ------ ------ ------
Basic earnings (loss) per share............ $(0.10) $(0.10) $(0.06) $ 0.09
====== ====== ====== ======
Denominator--Diluted EPS
Denominator--Basic EPS..................... 7,589 7,682 7,682 11,516
Effect of Dilutive Securities
Common stock options..................... -- -- -- 768
------ ------ ------ ------
7,589 7,682 7,682 12,284
------ ------ ------ ------
Diluted earnings (loss) per share.......... $(0.10) $(0.10) $(0.06) $ 0.08
====== ====== ====== ======
</TABLE>
15. EMPLOYEE RETIREMENT PLAN:
The Company maintains a Qualified Retirement Plan (401(k) Plan) which covers
substantially all employees. Eligible employees may contribute up to 15% of
their annual compensation, as defined, to this plan. The Company may also make
a discretionary contribution. To date the Company has not made contributions
to the 401(k) Plan.
F-16
<PAGE>
ATG INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(all dollar amounts in thousands, except per share data)
--------
16. SUBSEQUENT EVENTS:
In February 1998, the Company's Board of Directors ("the Board") authorized
the filing of a registration statement with the Securities and Exchange
Commission for the Company's initial public offering (the "Offering") of its
common stock. The Company and preferred shareholders agreed that all
outstanding shares of ATG Series A Preferred Stock and ATG Richland Series A
and Series B Preferred Stock automatically convert into 3,983,595 shares of
common stock of the Company upon completion of the Offering, assuming the
Offering gross proceeds are not less than $12,000 and the Offering is
completed on or prior to June 30, 1998. Such conversion is reflected in the
unaudited pro forma shareholders equity at December 31, 1997 in the
accompanying consolidated balance sheet. The underwriters of the public
Offering have been granted warrants, exercisable for a period of four years
beginning one year from the Offering date, to purchase up to 170,000 shares of
common stock at an exercise price per share equal to 120% of the initial
offering price to the public.
In February 1998, the Board approved the Company's Employee Stock Purchase
Plan ("the Purchase Plan") covering an aggregate of 200,000 shares of common
stock. The Purchase Plan is intended to qualify as an employee stock purchase
plan within the meaning of Section 423 of the Internal Revenue Code of 1986.
Under the Purchase Plan, the Board may authorize participation by eligible
employees of the Company, including officers, in periodic offerings following
the adoption of the Purchase Plan.
In February 1998, the Board adopted the Company's 1998 Stock Ownership
Incentive Plan (the "Incentive Plan"). The Incentive Plan authorizes the award
of stock options, shares of restricted stock and performance units (which may
be paid in cash or shares of Common Stock). The Incentive Plan reserves for
issuance an aggregate of 500,000 shares of Common Stock, no more than 250,000
shares of which may be issued in the form of shares of restricted stock. The
Incentive Plan is intended to advance the interests of the Company by
encouraging the Company's employees who contribute to the Company's long-term
success and development to acquire and retain an ownership interest in the
Company. To date, no awards have been made under the Incentive Plan.
Stock options granted pursuant to the Incentive Plan may either be incentive
stock options ("ISOs") intended to qualify under Section 422 of the Internal
Revenue Code of 1986, as amended, or stock options not intended to so qualify.
In February 1998, the Board adopted the Company's 1998 Non-Employee
Directors' Stock Option Plan (the "Directors' Plan") to provide for the
automatic grant of options to purchase shares of Common Stock to non-employee
directors of the Company. The Directors' Plan is administered by the Board. To
date, no options have been granted under the Directors' Plan.
The maximum number of shares of Common Stock that may be issued pursuant to
options granted under the Directors' Plan is 200,000. Pursuant to the terms of
the Directors' Plan, each person serving as a director of the Company who is
not an employee of the Company (a "Non-Employee Director") shall automatically
be granted an option to purchase 20,000 shares of Common Stock upon the later
of the date such person first becomes a Non-Employee Director or the date of
the effectiveness of the initial public offering of the Common Stock, with
5,000 of such shares vesting immediately and the balance vesting in three
equal installments on the three succeeding anniversaries of the grant date.
F-17
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO DEALER, SALESMAN OR ANY PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION
OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS,
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY OF THE UNDERWRITERS. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR SOLICITATION OF AN OFFER TO
BUY ANY SECURITY OTHER THAN THE SECURITIES OFFERED BY THIS PROSPECTUS OR ANY
OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY THE SECURITIES IN ANY JU-
RISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICI-
TATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY
SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION
THAT INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE
DATE HEREOF.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Forward-Looking Statements................................................ 2
Prospectus Summary........................................................ 3
Risk Factors.............................................................. 6
Use of Proceeds........................................................... 12
Dividend Policy........................................................... 12
Dilution.................................................................. 13
Capitalization............................................................ 14
Selected Consolidated Financial Data...................................... 15
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 16
Business.................................................................. 20
Management................................................................ 35
Certain Transactions...................................................... 42
Principal Shareholders.................................................... 43
Description of Capital Stock.............................................. 44
Shares Eligible for Future Sale........................................... 47
Underwriting.............................................................. 48
Legal Matters............................................................. 50
Experts................................................................... 50
Additional Information.................................................... 50
Glossary.................................................................. 51
Index to Financial Statements............................................. F-1
</TABLE>
----------------
UNTIL , 1998 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE SECURITIES, WHETHER OR NOT PARTICIPATING
IN THE DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN
ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
1,700,000 SHARES
[LOGO]
COMMON STOCK
----------------
PROSPECTUS
----------------
VAN KASPER & COMPANY
, 1998
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth an itemized statement of all expenses to be
incurred in connection with the issuance and distribution of the securities
that are the subject of this Registration Statement other than underwriting
discounts and commissions. All expenses incurred with respect to the
distribution will be paid by the Company, and such amounts, other than the
Securities and Exchange Commission registration fee and the NASD filing fee,
are estimates only.
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee.............. $ 5,768
NASD filing fee.................................................. 2,455
Nasdaq National Market listing fee............................... 50,000
Printing and engraving expenses.................................. 100,000
Transfer agent and registrar fees................................ 10,000
Legal fees and expenses.......................................... 250,000
Accounting fees and expenses..................................... 150,000
"Blue sky" fees and expenses..................................... 15,000
Directors and Officers Insurance................................. 100,000
Representative's non-accountable expense allowance............... 255,000
Other expenses................................................... 61,777
----------
Total........................................................ $1,000,000
==========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's Articles of Incorporation ("Articles") provide that, pursuant
to the California Corporations Code, the liability of the directors of the
Company for monetary damages shall be eliminated to the fullest extent
permissible under California law. This is intended to eliminate the personal
liability of a director for monetary damages in an action brought by, or in
the right of, the Company for breach of a director's duties to the Company or
its shareholders. This provision in the Articles does not eliminate the
directors' fiduciary duty and does not apply for certain liabilities: (i) for
acts or omissions that involve intentional misconduct or a knowing and
culpable violation of law; (ii) for acts or omissions that a director believes
to be contrary to the best interests of the Company or its shareholders or
that involve the absence of good faith on the part of the director; (iii) for
any transaction from which a director derived an improper personal benefit;
(iv) for acts or omissions that show a reckless disregard for the director's
duty to the Company or its shareholders in circumstances in which the director
was aware, or should have been aware, in the ordinary course of performing a
director's duties, of a risk of serious injury to the Company or its
shareholders; (v) for acts or omissions that constitute an unexcused pattern
of inattention that amounts to an abdication of the director's duty to the
Company or its shareholders; (vi) with respect to certain transactions or the
approval of transactions in which a director has a material financial
interest; and (vii) expressly imposed by statute for approval of certain
improper distributions to shareholders or certain loans or guarantees. This
provision also does not limit or eliminate the rights of the Company or any
shareholder to seek non-monetary relief such as an injunction or rescission in
the event of a breach of a director's duty of care.
Section 317 of the California Corporations Code ("Section 317") provides
that a California corporation 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 civil, criminal, administrative or investigative
(other than action by or in the right of the corporation) by reason of the
fact that he is or was a director, officer, employee, or agent of the
corporation or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation or enterprise,
against expenses, judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with such action or proceeding if he
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation, and, with respect to any
criminal action or proceeding, had no cause to believe his conduct was
unlawful.
II-1
<PAGE>
Section 317 also provides that a California corporation 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 suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that such
person acted in any of the capacities set forth above, against expenses
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted under similar standards, except
that no indemnification may be made in respect to any claim, issue or matter
as to which such person shall have been adjudged to be liable to the
corporation unless and only to the extent that the court in which such action
or suit was brought shall determine that despite the adjudication of
liability, such person is fairly and reasonably entitled to be indemnified for
such expenses which the court shall deem proper.
Section 317 provides further that to the extent a director or officer of a
California corporation has been successful in the defense of any action, suit
or proceeding referred to in the previous paragraphs or in the defense of any
claim, issue or matter therein, he shall be indemnified against expenses
actually and reasonably incurred by him in connection therewith; that
indemnification authorized by Section 317 shall not be deemed exclusive of any
other rights to which the indemnified party may be entitled; and that the
corporation may purchase and maintain insurance on behalf of a director or
officer of the corporation against any liability asserted against him or
incurred by him in any such capacity or arising out of his status as such
whether or not the corporation would have the power to indemnify him against
such liabilities under Section 317.
The Underwriting Agreement to be filed as Exhibit 1.1 to this Registration
Statement provides for indemnification by the Underwriters of the Company and
its officers and directors for certain liabilities arising under the
Securities Act or otherwise.
The Company believes that it is the position of the Commission that insofar
as any of the foregoing provisions may be invoked to disclaim liability for
damages arising under the Securities Act, the provision is against public
policy as expressed in the Securities Act and is therefore unenforceable. Such
limitation of liability also does not affect the availability of equitable
remedies such as injunctive relief or rescission.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Except as set forth in this item, no securities of the Registrant have been
sold by the Registrant since January 1, 1994 without registration under the
Securities Act.
In February 1994, the Company sold 900,000 shares of its Series A Preferred
Stock for an aggregate purchase price of $4,500,000 to a number of Taiwanese
investors and Taiwanese expatriates in the United States. The Company employed
the services of a private placement agent to whom it paid a placement fee of
5% in connection with this transaction.
In March 1995, the Company's subsidiary, ATG Richland Corporation ("ATG
Richland"), sold 860,000 shares of its Series A Redeemable Non-Voting
Preferred Stock for an aggregate purchase price of $4,300,000 to a number of
Taiwanese investors and Taiwanese expatriates in the United States. The
Company employed the services of a private placement agent to whom it paid a
placement fee of 5% in connection with this transaction.
In June 1996, ATG Richland sold 990,355 shares of its Series B Redeemable
Non-Voting Preferred Stock for an aggregate purchase price of $5,942,130 to a
number of Taiwanese investors and Taiwanese expatriates in the United States.
The Company employed the services of a private placement agent to whom it paid
a placement fee of 5% in connection with this transaction.
In August 1997, ATG Richland sold 278,936 shares of its Series B Redeemable
Non-Voting Preferred Stock for an aggregate purchase price of $1,673,616 to a
number of Taiwanese investors and Taiwanese expatriates in the United States.
The Company employed the services of a private placement agent to whom it paid
a placement fee of 5% in connection with this transaction.
Since January 1, 1994, the Company has issued options to purchase a total of
1,000,000 shares of its Common Stock to a total of 45 officers, directors and
employees of the Company. The exercise price of the foregoing options granted
by the Company ranged from $0.10 to $7.50 per share.
II-2
<PAGE>
The Company believes that the issuances of preferred stock described above
were exempt from the registration requirements of the Securities Act, by
virtue of Section 4(2) thereof and/or Regulation S promulgated under the
Securities Act ("Regulation S"). The Company believes that the issuances of
options described above were exempt from the registration requirements of the
Securities Act by virtue of Section 4(2) thereof or because the issuances of
such options did not involve the "sale," as such term is defined in Section
2(3) of the Securities Act, of a security.
The Company is in the process of seeking shareholder approval to amend its
Articles of Incorporation and those of ATG Richland to modify the terms of the
conversion rights attached to the Preferred Stock authorized to be issued by
each such entity. The Company does not intend to pay or give, directly or
indirectly, any commission or other remuneration in connection with seeking
such approval. The Company believes that any offer and sale of Common Stock
deemed to occur in connection with the modification of such rights will be
exempt from the registration requirements of the Securities Act by virtue of
Section 3(a)(9) thereof and/or Regulation S.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) The following exhibits, which are furnished with this Registration
Statement, are filed as a part of this Registration Statement:
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIALLY
NUMBER EXHIBIT DESCRIPTION NUMBERED PAGE
------- ------------------- -------------
<C> <S> <C>
1.1 Form of Underwriting Agreement
1.2 Form of Representative's Warrants
3.1 Articles of Incorporation of the Company
3.2 Bylaws of the Company
4.1 Specimen Common Stock Certificate*
5.1 Opinion and Consent of Graham & James LLP*
9.1 Voting Trust Agreement
10.1 Assumption Agreement, dated September 2, 1992, between
the Company, as transferee, Tippett-Richardson, as
transferor, and Confederation Life Insurance Company,
as lender
10.2 Deed of Trust (Non-Construction) & Assignment of
Rents, dated September 18, 1997, between the Company,
as trustor, First Bancorp, as trustee, and Sanwa Bank
California, as beneficiary
10.3 Deed of Trust, dated August 5, 1993, between the
Company and ATG Richland, collectively as trustor,
Chicago Title Insurance Company, as trustee, and West
One Bank, as beneficiary
10.4 Accounts Receivable Credit Agreement, dated April 19,
1996, between the Company and Sanwa Bank California
10.5 Amendment of Commercial Credit Agreement, dated April
30, 1997, between the Company and Sanwa Bank
California
10.6 Amendment of Commercial Credit Agreement, dated June
26, 1997, between the Company and Sanwa Bank
California
10.7 Third Amendment to Accounts Receivable Credit
Agreement, dated August 1, 1997, between the Company
and Sanwa Bank California
10.8 Term Loan Agreement, dated September 18, 1997, between
the Company and Sanwa Bank California
10.9 Letter from the Company to Steve Guerrettaz, dated
December 2, 1997, regarding terms of employment
10.10 Letter from the Company to Fred Feizollahi, dated
February 20, 1995, regarding terms of employment
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIALLY
NUMBER EXHIBIT DESCRIPTION NUMBERED PAGE
------- ------------------- -------------
<C> <S> <C>
10.11 Consultant Agreement, dated as of July 1, 1992,
between the Company and Edward Vinecour
10.12 Non-Competition Agreement, dated as of July 1, 1992,
between the Company and Edward Vinecour
10.13 Collective Bargaining Agreement between the Company
and the International Union of Operating Engineers No.
280
10.14 Form of Stock Purchase Agreement
10.15 Continuing Guaranty, dated as of April 19, 1996,
provided by Doreen Chiu in favor of Sanwa Bank
10.16 Continuing Guaranty, dated as of April 19, 1996,
provided by Frank Chiu in favor of Sanwa Bank
10.17 Continuing Guaranty, dated as of May 20, 1997,
provided by Doreen Chiu in favor of Safeco Credit
Company, Inc.
10.18 Continuing Guaranty, dated as of May 20, 1997,
provided by Frank Chiu in favor of Safeco Credit
Company, Inc.
10.19 Small Business Administration (SBA) Guaranty, dated
August 6, 1993, provided by Doreen Chiu and Frank Chiu
in favor of West One Bank
10.20 Guaranty Agreement, dated September 1, 1994, provided
by Doreen Chiu and Frank Chiu in favor of Great
Western Leasing
10.21 Guaranty, dated January 13, 1994, provided by Doreen
Chiu and Frank Chiu in favor of The CIT
Group/Equipment Financing Inc.
10.22 Guaranty of Commercial Lease Agreement, dated December
20, 1994, provided by Doreen Chiu and Frank Chiu in
favor of California Thrift & Loan
10.23 Contract No. MGK-SBB-A26602, dated September 5, 1997,
awarded to the Company by Waste Management Federal
Services of Hanford, Inc.+*
10.24 Purchase Order No. MW6-SBV-357079, dated November 3,
1995, issued to the Company by Westinghouse Hanford
Company+*
10.25 Contract No. DE-AC06-95RL13129, dated January 4, 1995,
among the U.S. Department of Energy, as the procuring
agency, the U.S. Small Business Administration, as
contractor, and the Company, as subcontractor+*
10.26 Gasification Vitrification Chamber Purchase and
License Agreement, dated August 1997, between the
Company and Integrated Environmental Technologies,
LLC+*
10.27 Purchase Agreement between the Company and Integrated
Environmental Technologies, LLC+*
10.28 Technology Transfer Purchase and Royalty Fee
Agreement, dated September 30, 1997, between the
Company and Regent Star Ltd.+*
10.29 Technology Transfer and Purchase Agreement, dated June
28, 1997, between the Company and Pacific Trading
Company+*
10.30 Contract No. N62474-97-D-1511 among Engineering Field
Activity West, Naval Facilities Engineering Command,
Code 0222, as the procuring agency, the U.S. Small
Business Administration, as contractor, and the
Company, as subcontractor+*
10.31 Contract No. DACW05-98-C-0001, dated September 24,
1997, awarded to the Company by the U.S. Army Corps of
Engineers, Sacramento District+*
10.32 Contract No. DACA05-97-R-0003, dated October 25, 1996,
awarded to the Company by the U.S. Army Corps of
Engineers+*
10.33 Contract No. N62742-96-D-1314, dated January 21, 1997,
awarded to the Company by the Pacific Division Naval
Facilities Engineering Command+*
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIALLY
NUMBER EXHIBIT DESCRIPTION NUMBERED PAGE
------- ------------------- -------------
<C> <S> <C>
10.34 Contract No. DAAA09-95-G-0007, dated September 7,
1996, among the U.S. Army Corps of Engineers, as the
procuring agency, the U.S. Small Business
Administration, as contractor, and the Company, as
subcontractor+*
10.35 Contract No. DAKF04-92-D-0007, dated February 8, 1991,
among the Fort Irwin Directorate of Contracting, as
the procuring agency, the U.S. Small Business
Administration, as contractor, and the Company, as
subcontractor+*
10.36 Subcontract Agreement, dated May 26, 1995, between the
Company and Morrison Knudsen Corporation+*
10.37 Subcontract No. QB00205K, dated December 18, 1997,
between the Company and Bechtel Savannah River, Inc.+*
10.38 Contract No. C30314, dated August 1991, awarded to the
Company by the Washington Public Power Supply System+*
10.39 Promissory Note, dated December 31, 1997, provided by
the Company to Doreen M. Chiu
10.40 1998 Stock Ownership Incentive Plan*
10.41 Employee Stock Purchase Plan*
10.42 1998 Non-Employee Directors' Stock Option Plan*
21.1 List of Subsidiaries of Registrant
23.1 Consent of Graham & James LLP (included in its opinion
to be filed as Exhibit 5.1 hereto)*
23.2 Consent of Coopers & Lybrand L.L.P.
24.1 Power of Attorney (included in signature page)
27.1 Financial Data Schedule
99.1 Consent of Andrew C. Kadak
99.2 Consent of Earl E. Gjelde
99.3 Consent of William M. Hewitt
99.4 Consent of Steven J. Guerrettaz
</TABLE>
- ---------------------
* To be filed by amendment.
+ Certain portions of this agreement have been omitted and filed separately
with the Securities and Exchange Commission pursuant to a request for an
order granting confidential treatment pursuant to Rule 406 of the General
Rules and Regulations under the Securities Act.
(b) The following financial statement schedule is included herein:
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Schedule II--Valuation and Qualifying Accounts.......................... S-2
</TABLE>
ITEM 17. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes to provide to the
Underwriters at the closing specified in the Underwriting Agreement
certificates in such denominations and registered in such names as required by
the Underwriters to permit prompt delivery to each purchaser.
II-5
<PAGE>
(b) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers, and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer, or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question of
whether such indemnification by it is against public policy as expressed in
the Securities Act and will be governed by the final adjudication of such
issue.
(c) The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
Rule 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Fremont, State of
California, on February 11, 1998.
ATG INC.
/s/ Doreen M. Chiu
By: _________________________________
Doreen M. Chiu
Chairman, Chief Executive Officer
and President
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints Doreen M.
Chiu and Steven J. Guerrettaz, and each of them, as his true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any or all amendments (including post-effective
amendments) to this Registration Statement and a new Registration Statement
filed pursuant to Rule 462(b) under the Securities Act of 1933 and to file the
same, with all exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said attorneys-in-
fact and agents, and each of them, full power and authority to do and perform
each and every act and thing requisite and necessary to be done in and about
the foregoing, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or their substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Doreen M. Chiu Chairman, Chief Executive February 11, 1998
____________________________________ Officer and President
Doreen M. Chiu (Principal Executive
Officer)
/s/ Steven J. Guerrettaz Chief Financial Officer February 11, 1998
____________________________________ (Principal Financial and
Steven J. Guerrettaz Accounting Officer)
/s/ Frank Y. Chiu Director February 11, 1998
____________________________________
Frank Y. Chiu
/s/ Edward L. Vinecour Director February 11, 1998
____________________________________
Edward L. Vinecour
</TABLE>
II-7
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders
ATG Inc. and Subsidiary:
Our report on the consolidated financial statements of ATG Inc. and
subsidiary is included on page F-2 of this Form S-1. In connection with our
audits of the financial statements, we have also audited the related financial
statement schedule on page S-2.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.
Coopers & Lybrand L.L.P.
San Jose California
January 31, 1998
S-1
<PAGE>
ATG INC.
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO
BEGINNING COSTS AND BALANCE AT
ACCOUNT DESCRIPTION OF PERIOD EXPENSES DEDUCTIONS END OF PERIOD
------------------- ---------- ---------- ---------- -------------
<S> <C> <C> <C> <C>
Allowance for doubtful
accounts:
Year ended December 31,
1995................... $40 $-- $-- $ 40
Year ended December 31,
1996................... 40 6 -- 46
Year ended December 31,
1997................... 46 73 -- 119
</TABLE>
S-2
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIALLY
NUMBER EXHIBIT DESCRIPTION NUMBERED PAGE
------- ------------------- -------------
<C> <S> <C>
1.1 Form of Underwriting Agreement
1.2 Form of Representative's Warrants
3.1 Articles of Incorporation of the Company
3.2 Bylaws of the Company
4.1 Specimen Common Stock Certificate*
5.1 Opinion and Consent of Graham & James LLP*
9.1 Voting Trust Agreement
10.1 Assumption Agreement, dated September 2, 1992, between
the Company, as transferee, Tippett-Richardson, as
transferor, and Confederation Life Insurance Company,
as lender
10.2 Deed of Trust (Non-Construction) & Assignment of
Rents, dated September 18, 1997, between the Company,
as trustor, First Bancorp, as trustee, and Sanwa Bank
California, as beneficiary
10.3 Deed of Trust, dated August 5, 1993, between the
Company and ATG Richland, collectively as trustor,
Chicago Title Insurance Company, as trustee, and West
One Bank, as beneficiary
10.4 Accounts Receivable Credit Agreement, dated April 19,
1996, between the Company and Sanwa Bank California
10.5 Amendment of Commercial Credit Agreement, dated April
30, 1997, between the Company and Sanwa Bank
California
10.6 Amendment of Commercial Credit Agreement, dated June
26, 1997, between the Company and Sanwa Bank
California
10.7 Third Amendment to Accounts Receivable Credit
Agreement, dated August 1, 1997, between the Company
and Sanwa Bank California
10.8 Term Loan Agreement, dated September 18, 1997, between
the Company and Sanwa Bank California
10.9 Letter from the Company to Steve Guerrettaz, dated
December 2, 1997, regarding terms of employment
10.10 Letter from the Company to Fred Feizollahi, dated
February 20, 1995, regarding terms of employment
10.11 Consultant Agreement, dated as of July 1, 1992,
between the Company and Edward Vinecour
10.12 Non-Competition Agreement, dated as of July 1, 1992,
between the Company and Edward Vinecour
10.13 Collective Bargaining Agreement between the Company
and the International Union of Operating Engineers No.
280
10.14 Form of Stock Purchase Agreement
10.15 Continuing Guaranty, dated as of April 19, 1996,
provided by Doreen Chiu in favor of Sanwa Bank
10.16 Continuing Guaranty, dated as of April 19, 1996,
provided by Frank Chiu in favor of Sanwa Bank
</TABLE>
<PAGE>
EXHIBIT INDEX--(CONTINUED)
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIALLY
NUMBER EXHIBIT DESCRIPTION NUMBERED PAGE
------- ------------------- -------------
<C> <S> <C>
10.17 Continuing Guaranty, dated as of May 20, 1997,
provided by Doreen Chiu in favor of Safeco Credit
Company, Inc.
10.18 Continuing Guaranty, dated as of May 20, 1997,
provided by Frank Chiu in favor of Safeco Credit
Company, Inc.
10.19 Small Business Administration (SBA) Guaranty, dated
August 6, 1993, provided by Doreen Chiu and Frank Chiu
in favor of West One Bank
10.20 Guaranty Agreement, dated September 1, 1994, provided
by Doreen Chiu and Frank Chiu in favor of Great
Western Leasing
10.21 Guaranty, dated January 13, 1994, provided by Doreen
Chiu and Frank Chiu in favor of The CIT
Group/Equipment Financing Inc.
10.22 Guaranty of Commercial Lease Agreement, dated December
20, 1994, provided by Doreen Chiu and Frank Chiu in
favor of California Thrift & Loan
10.23 Contract No. MGK-SBB-A26602, dated September 5, 1997,
awarded to the Company by Waste Management Federal
Services of Hanford, Inc.+*
10.24 Purchase Order No. MW6-SBV-357079, dated November 3,
1995, issued to the Company by Westinghouse Hanford
Company+*
10.25 Contract No. DE-AC06-95RL13129, dated January 4, 1995,
among the U.S. Department of Energy, as the procuring
agency, the U.S. Small Business Administration, as
contractor, and the Company, as subcontractor+*
10.26 Gasification Vitrification Chamber Purchase and
License Agreement, dated August 1997, between the
Company and Integrated Environmental Technologies,
LLC+*
10.27 Purchase Agreement between the Company and Integrated
Environmental Technologies, LLC+*
10.28 Technology Transfer Purchase and Royalty Fee
Agreement, dated September 30, 1997, between the
Company and Regent Star Ltd.+*
10.29 Technology Transfer and Purchase Agreement, dated June
28, 1997, between the Company and Pacific Trading
Company+*
10.30 Contract No. N62474-97-D-1511 among Engineering Field
Activity West, Naval Facilities Engineering Command,
Code 0222, as the procuring agency, the U.S. Small
Business Administration, as contractor, and the
Company, as subcontractor+*
10.31 Contract No. DACW05-98-C-0001, dated September 24,
1997, awarded to the Company by the U.S. Army Corps of
Engineers, Sacramento District+*
10.32 Contract No. DACA05-97-R-0003, dated October 25, 1996,
awarded to the Company by the U.S. Army Corps of
Engineers+*
10.33 Contract No. N62742-96-D-1314, dated January 21, 1997,
awarded to the Company by the Pacific Division Naval
Facilities Engineering Command+*
10.34 Contract No. DAAA09-95-G-0007, dated September 7,
1996, among the U.S. Army Corps of Engineers, as the
procuring agency, the U.S. Small Business
Administration, as contractor, and the Company, as
subcontractor+*
10.35 Contract No. DAKF04-92-D-0007, dated February 8, 1991,
among the Fort Irwin Directorate of Contracting, as
the procuring agency, the U.S. Small Business
Administration, as contractor, and the Company, as
subcontractor+*
10.36 Subcontract Agreement, dated May 26, 1995, between the
Company and Morrison Knudsen Corporation+*
</TABLE>
<PAGE>
EXHIBIT INDEX--(CONTINUED)
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIALLY
NUMBER EXHIBIT DESCRIPTION NUMBERED PAGE
------- ------------------- -------------
<C> <S> <C>
10.37 Subcontract No. QB00205K, dated December 18, 1997,
between the Company and Bechtel Savannah River, Inc.+*
10.38 Contract No. C30314, dated August 1991, awarded to the
Company by the Washington Public Power Supply System+*
10.39 Promissory Note, dated December 31, 1997, provided by
the Company to Doreen M. Chiu
10.40 1998 Stock Ownership Incentive Plan*
10.41 Employee Stock Purchase Plan*
10.42 1998 Non-Employee Directors' Stock Option Plan*
21.1 List of Subsidiaries of Registrant
23.1 Consent of Graham & James LLP (included in its opinion
to be filed as Exhibit 5.1 hereto)*
23.2 Consent of Coopers & Lybrand L.L.P.
24.1 Power of Attorney (included in signature page)
27.1 Financial Data Schedule
99.1 Consent of Andrew C. Kadak
99.2 Consent of Earl E. Gjelde
99.3 Consent of William M. Hewitt
99.4 Consent of Steven J. Guerrettaz
</TABLE>
- ---------------------
* To be filed by amendment.
+ Certain portions of this agreement have been omitted and filed separately
with the Securities and Exchange Commission pursuant to a request for an
order granting confidential treatment pursuant to Rule 406 of the General
Rules and Regulations under the Securities Act.
<PAGE>
EXHIBIT 1.1
ATG Inc.
(a California corporation)
1,700,000 Shares of Common Stock
UNDERWRITING AGREEMENT
____________, 1998
VAN KASPER & COMPANY
As Representative of the several
Underwriters named in Schedule I
600 California Street, Suite 1700
San Francisco, California 94108-2704
Ladies and Gentlemen:
ATG Inc., a California corporation (the "Company"), proposes to issue and
sell to the several Underwriters named in Schedule I hereto (the "Underwriters")
1,700,000 shares (the "Firm Shares") of the Company's no par value Common Stock
(the "Common Stock"). In addition, the Company also proposes to grant to the
Underwriters an option to purchase up to an additional 255,000 shares of the
Common Stock on the terms and for the purposes set forth in Section 2(b) (the
"Option Shares"). The Firm Shares and any Option Shares purchased pursuant to
this Agreement are referred to below as the "Shares". Van Kasper & Company is
acting as representative of the several Underwriters and in that capacity is
referred to in this Agreement as the "Representative".
The Company hereby confirms its agreements with the several Underwriters as
set forth below.
1. Representations and Warranties of the Company. The Company hereby
---------------------------------------------
represents and warrants to and agrees with each Underwriter as follows:
(a) A Registration Statement (Registration No. 333-______) on Form S-
1 under the Securities Act of 1933, as amended (the "Securities Act"), including
such amendments to such Registration Statement as may have been required to the
date of this Agreement, relating to the Shares has been prepared by the Company
under and in conformity with the provisions of the Securities Act, the rules and
regulations (the "Rules and Regulations") of the Securities and Exchange
Commission (the "Commission") thereunder and has been filed with the Commission.
After the execution of this Agreement, the Company will file with the Commission
either (i) if such Registration Statement, as it may have been amended, has been
declared by the Commission to be effective under the Securities Act, either (A)
if the Company relies on Rule 434 of the
<PAGE>
Rules and Regulations, a Term Sheet (defined below) relating to the Shares, that
identifies the Preliminary Prospectus (defined below) that it supplements and
contains such information as is required or permitted by Rules 434, 430A and
424(b) of the Rules and Regulations or (B) if the Company does not rely on Rule
434, a prospectus in the form most recently included in an amendment to such
Registration Statement (or, if no such amendment has been filed, in such
Registration Statement), with such changes or insertions as are required by Rule
430A of the Rules and Regulations or permitted by Rule 424(b) of the Rules and
Regulations, and in the case of either (i)(A) or (i)(B) of this sentence, as has
been provided to and approved by the Representative prior to the execution of
this Agreement, or (ii) if such Registration Statement, as it may have been
amended, has not been declared by the Commission to be effective pursuant to
Section 8 of the Securities Act, an amendment to such Registration Statement,
including a form of prospectus, a copy of which amendment has been furnished to
and approved by the Representative prior to the execution of this Agreement. As
used in this Agreement, the term "Registration Statement" means such
Registration Statement, including all financial schedules and exhibits thereto
and including any information omitted therefrom pursuant to Rule 430A of the
Rules and Regulations and included in the Prospectus (defined below), in the
form in which it became effective from and after the time it became effective,
and any Registration Statement filed pursuant to Rule 462(b) of the Rules and
Regulations with respect to the Common Stock (a "Rule 462(b) Registration
Statement"), and, in the event of any amendment thereto after the effective date
of such Registration Statement (the "Effective Date"), shall also mean (from and
after the effectiveness of such amendment) such registration statement as so
amended (including any 462(b) Registration Statement); the term "Preliminary
Prospectus" means each prospectus subject to completion filed with such
registration statement or any amendment thereto (including the prospectus
subject to completion, if any, included in the Registration Statement or any
amendment thereto at the time it was or is declared effective); the term
"Prospectus" means:
(A) if the Company relies on Rule 434, the Term Sheet relating
to the Shares that is first filed pursuant to Rule 424(b)(7), together with the
Preliminary Prospectus identified therein that such Term Sheet supplements;
(B) if the Company does not rely on Rule 434, the prospectus
first filed with the Commission pursuant to Rule 424(b); or
(C) if the Company does not rely on Rule 434 and if no
prospectus is required to be filed pursuant to Rule 424(b), the prospectus
included in the Registration Statement;
provided, that if any revised prospectus that is provided to the Underwriters by
- --------
the Company for "use in connection with the offering of the Shares" differs from
the
2
<PAGE>
prospectus on file with the Commission at the time the Registration Statement
became or becomes, as the case may be, effective, whether or not the revised
prospectus is required to be filed with the Commission pursuant to Rule
424(b)(3) of the Rules and Regulations, the term "Prospectus" shall mean such
revised prospectus from and after the time it is first provided to the
Underwriters for such use. The term "Term Sheet" as used in this Agreement means
any term sheet that satisfies the requirements of Rule 434. Any reference in
this Agreement to the "date" of a prospectus that includes a Term Sheet means
the date of such Term Sheet.
(b) No order suspending the effectiveness of the Registration
Statement or preventing or suspending the use of any Preliminary Prospectus or
the Prospectus has been issued and no proceedings for that purpose are pending
or, to the best knowledge of the Company, threatened or contemplated by the
Commission; no order suspending the sale of the Shares in any jurisdiction has
been issued and no proceedings for that purpose are pending or, to the best
knowledge of the Company, threatened or contemplated, and any request of the
Commission for additional information (to be included in the Registration
Statement, any Preliminary Prospectus or the Prospectus or otherwise) has been
complied with.
(c) When the Preliminary Prospectus was filed with the Commission it
(i) contained all statements required to be contained therein and complied in
all respects with the requirements of the Securities Act, the Rules and
Regulations, the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and the rules and regulations of the Commission thereunder (the "Exchange
Act Rules and Regulations") and (ii) did not include any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. When the Registration Statement or any amendment thereto
was or is declared effective, it (i) contained or will contain all statements
required to be contained therein and complied or will comply in all respects
with the requirements of the Securities Act, the Rules and Regulations, the
Exchange Act and the Exchange Act Rules and Regulations and (ii) did not or will
not include any untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein not misleading. When the
Prospectus or any amendment or supplement to the Prospectus is filed with the
Commission pursuant to Rule 424(b) (or, if the Prospectus or such amendment or
supplement is not required to be so filed, when the Registration Statement or
the amendment thereto containing such amendment or supplement to the Prospectus
was or is declared effective) and at all times subsequent thereto up to and
including the Closing Date (defined below) and any date on which Option Shares
are to be purchased, the Prospectus, as amended or supplemented at any such
time, (i) contained or will contain all statements required to be contained
therein and complied or will comply in all respects with the requirements of the
Securities Act, the Rules and Regulations, the Exchange Act and the Exchange Act
Rules and Regulations,
3
<PAGE>
and (ii) did not or will not include any untrue statement of a material fact or
omit to state any material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading. The foregoing provisions of this paragraph (c) do not apply to
statements or omissions made in any Preliminary Prospectus, the Registration
Statement or any amendment thereto or the Prospectus or any amendment or
supplement thereto in reliance upon and in conformity with written information
furnished to the Company by any Underwriter through the Representative
specifically for use therein.
(d) The subsidiaries (each, a "Subsidiary" and collectively the
"Subsidiaries") of the Company and the jurisdiction of incorporation of each
Subsidiary are listed on Exhibit A hereto. As used in this Agreement, the word
"subsidiary" means any corporation, partnership, joint venture, limited
liability company or other entity of which the Company directly or indirectly
owns 50 percent or more of the equity or that the Company directly or indirectly
controls. The Company has no subsidiaries other than the Subsidiaries listed on
Exhibit A to this Agreement, and except as set forth on such Exhibit, the
Company owns 100 percent of the issued and outstanding stock of each of the
Subsidiaries. Exhibit B hereto lists each entity in which the Company or any
Subsidiary holds an equity interest, whether as a shareholder, partner, member,
joint venturer or otherwise. Except as set forth on Exhibit B, neither the
Company nor any Subsidiary has any equity interest in any person.
(e) Each of the Company and its Subsidiaries has been duly
incorporated and is validly existing as a corporation in good standing under the
laws of the jurisdiction of its incorporation, has full power (corporate and
other) and authority to own or lease its properties and conduct its business as
described in the Registration Statement and the Prospectus (or, if the
Prospectus is not in existence, the most recent Preliminary Prospectus) and as
currently being conducted and proposed to be conducted by it and is duly
qualified as a foreign corporation and in good standing in all jurisdictions in
which the character of the property owned or leased or the nature of the
business transacted by it makes qualification necessary (except where the
failure to be so qualified would not have a material adverse effect on the
business, properties, condition (financial or otherwise), results of operations
or prospects of the Company or such Subsidiary). Each of the Company and its
Subsidiaries is in possession of and operating in compliance with all
authorizations, licenses, certificates, consents, orders and permits from
federal, state, local, foreign and other governmental or regulatory authorities
that are material to the conduct of its business, all of which are valid and in
full force and effect.
(f) Since the respective dates as of which information is given in
the Registration Statement and the Prospectus (or, if the Prospectus is not in
existence, the most recent Preliminary Prospectus), there has not been any
material loss or interference with the business of the Company or any Subsidiary
from fire, explosion, flood,
4
<PAGE>
earthquake or other calamity, whether or not covered by insurance, or from any
court or governmental action, order or decree, or any changes in the capital
stock or long-term debt of the Company or any Subsidiary, or any dividend or
distribution of any kind declared, paid or made on the capital stock of the
Company or any Subsidiary, or any material change, or a development known to the
Company that might cause or result in a material change, in or affecting the
business, properties, condition (financial or otherwise), results of operation
or prospects of the Company or any Subsidiary, whether or not arising from
transactions in the ordinary course of business, in each case other than as is
set forth in the Registration Statement and the Prospectus (or, if the
Prospectus is not in existence, the most recent Preliminary Prospectus), and
since such dates, except in the ordinary course of business, neither the Company
nor any Subsidiary has entered into any material transaction not described in
the Registration Statement and the Prospectus (or, if the Prospectus is not in
existence, the most recent Preliminary Prospectus).
(g) There is no agreement, contract, license, lease or other document
required to be described in the Registration Statement or the Prospectus (or, if
the Prospectus is not in existence, the most recent Preliminary Prospectus) or
to be filed as an exhibit to the Registration Statement which is not described
or filed as required. All contracts described in the Prospectus (or, if the
Prospectus is not in existence, the most recent Preliminary Prospectus), if any,
are in full force and effect on the date hereof, and none of the Company, its
Subsidiaries or any other party thereto is in material breach of or default
under any such contract.
(h) The authorized and outstanding capital stock of the Company is
set forth in the Prospectus (or, if the Prospectus is not in existence, the most
recent Preliminary Prospectus), and the description of the Common Stock and of
the Shares therein conforms with and accurately describes the rights set forth
in the instruments defining the same. The Shares have been duly and validly
authorized and, when issued and delivered against payment therefor as provided
herein, will be duly and validly issued, fully paid and nonassessable, and the
issuance of the Shares is not subject to any preemptive or similar rights.
(i) All of the outstanding shares of Common Stock of the Company have
been duly authorized and validly issued and are fully paid and nonassessable,
have been issued in compliance with all applicable federal and state securities
laws and were not issued in violation of and are not subject to any preemptive
rights or other rights to subscribe for or purchase securities of the Company.
The description of the Company's stock option, stock bonus and other stock plans
or arrangements and the options or other rights granted or exercised thereunder
or otherwise set forth in the Prospectus (or, if the Prospectus is not in
existence, the most recent Preliminary Prospectus), accurately and fairly
presents the information required to be shown with respect to such plans,
arrangements, options and rights. Other than pursuant to this Agreement and the
options,
5
<PAGE>
warrants and rights to purchase or acquire the Common Stock described in the
Prospectus, there are no options, warrants or other rights outstanding to
subscribe for or purchase or acquire any shares of the Company's capital stock.
There are no preemptive rights applicable to any shares of capital stock of the
Company.
(j) All of the stock in the Subsidiaries owned by the Company as set
forth on Exhibit A is owned by the Company free and clear of any pledge, lien,
security interest, encumbrance, claim or equitable interest of any type, kind or
nature. All of the outstanding stock of each of the Subsidiaries has been duly
authorized and validly issued and is fully paid and nonassessable, has been
issued in compliance with all applicable laws, including securities laws, and
was not issued in violation of or subject to any preemptive rights or other
rights to subscribe for or purchase securities of such Subsidiary. There are no
options, warrants or other rights outstanding to subscribe for or purchase any
shares of the capital stock or registered capital of any Subsidiary and no
Subsidiary is subject to any obligation, commitment, plan, arrangement or court
or administrative order with respect to same. There are no preemptive rights
applicable to any shares of capital stock or registered capital of the
Subsidiaries.
(k) This Agreement has been duly authorized, executed and delivered
by, and constitutes the valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms, except as rights to
indemnification hereunder may be limited by applicable federal or state
securities laws. Other than the registration rights set forth in the Prospectus
(or, if the Prospectus is not in existence, the most recent Preliminary
Prospectus) there are no rights for or relating to the registration of any
capital stock of the Company. The filing of the Registration Statement does not
give rise to any rights, other than those which have been waived in writing, for
or relating to the registration of any capital stock of the Company.
(l) Neither the Company nor any of its Subsidiaries is, or with the
giving of notice or lapse of time or both would be, in violation of or in
default under, nor will the execution or delivery of this Agreement or the
completion of the transactions contemplated by this Agreement result in a
violation of or constitute a breach of or a default (including without
limitation with the giving of notice, the passage of time or otherwise) under,
the articles of incorporation, bylaws or other governing documents of the
Company or such Subsidiary or any obligation, agreement, covenant or condition
contained in any bond, debenture, note or other evidence of indebtedness or in
any contract, indenture, mortgage, deed of trust, loan agreement, lease,
license, joint venture or other agreement or instrument to which the Company or
any Subsidiary is a party or by which any properties of the Company or any
Subsidiary may be bound or affected. The Company has not incurred any liability,
direct or indirect, for any finders' or similar fees payable on behalf of the
Company or the Underwriters in connection with the transactions contemplated by
this Agreement. The performance by the Company of its obligations
6
<PAGE>
under this Agreement will not violate any law, ordinance, rule or regulation, or
any order, writ, injunction, judgment or decree of any governmental agency or
body or of any court having jurisdiction over the Company or any Subsidiary or
any properties of the Company or any Subsidiary, or result in the creation or
imposition of any lien, charge, claim or encumbrance upon any property or asset
of the Company or any Subsidiary. Except for permits and similar authorizations
required under the Securities Act, the Exchange Act or under other securities or
Blue Sky laws of certain jurisdictions and for permits, authorizations, consents
and approvals that have been obtained, no consent, permit, approval,
authorization or order of any court, governmental agency or body, financial
institution or any other person is required in connection with the completion by
the Company of the transactions contemplated by this Agreement.
(m) Each of the Company and its Subsidiaries owns, or has valid
rights to use, all items of real and personal property which are material to the
business of the Company or such Subsidiary (including, without limitation, all
real property on which the Company's facilities are located) and, except as
described in the Registration Statement and the Prospectus (or, if the
Prospectus is not in existence, the most recent Preliminary Prospectus), free
and clear of all liens, encumbrances and claims that might materially interfere
with the business, properties, condition (financial or otherwise), results of
operations or prospects of the Company or such Subsidiary .
(n) The Company or the appropriate Subsidiary, as the case may be,
owns or possesses adequate rights to use all material patents, patent rights,
inventions, trade secrets, know-how, trademarks, service marks, trade names and
copyrights (collectively, the "Intellectual Property") described or referred to
in the Registration Statement and the Prospectus (or, if the Prospectus is not
in existence, the most recent Preliminary Prospectus), as owned by or used by
the Company or such Subsidiary, or which are necessary for the conduct of the
business of the Company or such Subsidiary as described in the Registration
Statement and the Prospectus (or, if the Prospectus is not in existence, the
most recent Preliminary Prospectus); and neither the Company nor any Subsidiary
has received any notice of infringement of or conflict with asserted rights of
others with respect to any Intellectual Property which, singly or in the
aggregate, if the subject of an unfavorable decision, ruling or finding, would
have a material effect on the business, properties, condition (financial or
otherwise), results of operations or prospects of the Company or any Subsidiary.
Except as described in the Registration Statement and the Prospectus (or, if the
Prospectus is not in existence, the most recent Preliminary Prospectus), neither
the Company nor any Subsidiary is a party to any material options, licenses, or
agreements of any kind that grant rights to any other party to manufacture,
license, produce, assemble, market or sell the products of the Company, nor is
the Company or any Subsidiary bound by or a party to any options, licenses, or
agreements of any kind with respect to any Intellectual Property of any other
party material to the business of the Company. No employee of the Company or of
any Subsidiary is obligated under any
7
<PAGE>
contract (including licenses, covenants, or commitments of any nature) or other
agreement known to the Company, or subject to any judgment, decree, or order of
any court or administrative agency known to the Company, that would interfere
with the use of such employee's best efforts to promote the interests of the
Company or such Subsidiary or that would conflict with the business of the
Company or such Subsidiary as presently conducted or proposed to be conducted.
(o) There is no litigation or governmental proceeding to which the
Company or any Subsidiary is a party or to which any property of the Company or
any Subsidiary is subject which is pending or, to the best knowledge of the
Company, is threatened or contemplated against the Company that is required to
be disclosed in the Registration Statement or Prospectus (or, if the Prospectus
is not in existence, the most recent Preliminary Prospectus) or that might
prevent consummation of the transactions contemplated by this Agreement and is
not so disclosed.
(p) None of the Company or any Subsidiary is in violation of, or has
received any notice or claim from any governmental agency or third party that
any of them is in violation of, any law, ordinance, rule or regulation, or any
order, writ, injunction, judgment or decree of any agency or body or of any
court, to which it or its properties (whether owned or leased) may be subject,
which violation might have a material effect on the business, properties,
condition (financial or otherwise), results of operations or prospects of the
Company or any Subsidiary.
(q) The Company has not taken and shall not take, directly or
indirectly, any action designed to cause or result in, or which has constituted
or which might reasonably be expected to cause or result in, under the Exchange
Act, the Exchange Act Rules and Regulations or otherwise, the stabilization or
manipulation of the price of any security of the Company to facilitate the sale
or resale of the Shares. No bid or purchase by the Company and, to the best
knowledge of the Company, no bid or purchase that could be attributed to the
Company (as a result of bids or purchases by an "affiliated purchaser" within
the meaning of Regulation M under the Exchange Act) for or of the Shares, the
Common Stock, any securities of the same class or series as the Common Stock or
any securities convertible into or exchangeable for or that represent any right
to acquire the Common Stock is now pending or in progress or will have commenced
at any time prior to the completion of the distribution of the Shares that is or
will be in violation of Regulation M under the Exchange Act.
(r) Coopers & Lybrand, L.L.P., whose reports appear in the
Registration Statement and the Prospectus (or, if the Prospectus is not in
existence, the most recent Preliminary Prospectus), are, and during the periods
covered by their reports in the Registration Statement were, independent
accountants as required by the Securities Act and the Rules and Regulations. The
financial statements and schedules included in the Registration Statement, each
Preliminary Prospectus and the Prospectus present fairly (or,
8
<PAGE>
if the Prospectus has not been filed with the Commission, as to the Prospectus,
will present fairly) the financial condition, results of operations, cash flow
and changes in shareholders' equity and the financial statements and schedules
included in the Registration Statement present fairly the information required
to be stated therein. Such financial statements and schedules have been prepared
in accordance with generally accepted accounting principles applied on a
consistent basis throughout the periods presented. The selected and summary
financial and statistical data included in the Registration Statement and the
Prospectus present fairly (or, if the Prospectus has not been filed with the
Commission, as to the Prospectus, will present fairly) the information shown
therein and have been compiled on a basis consistent with the audited financial
statements presented therein. No other financial statements or schedules are
required to be included in the Registration Statement. Except as set forth in
such financial statements or as set forth in the Prospectus (or, if the
Prospectus is not in existence, the most recent Preliminary Prospectus), the
Company has no material debts, liabilities or obligations (whether absolute,
accrued, contingent or otherwise) of any nature whatsoever, including, without
limitation, any tax liabilities or deferred tax liabilities or any other debts,
liabilities or obligations.
(s) The books, records and accounts of the Company and each
Subsidiary accurately and fairly reflect, in reasonable detail, the transactions
in and dispositions of the assets of the Company and such Subsidiary. The
systems of internal accounting controls maintained by the Company and each
Subsidiary are sufficient to provide reasonable assurances that: (i)
transactions are executed in accordance with management's general or specific
authorization; (ii) transactions are recorded as necessary (x) to permit
preparation of financial statements in conformity with generally accepted
accounting principles and (y) to maintain accountability for assets; (iii)
access to assets is permitted only in accordance with management's general or
specific authorization; and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.
(t) For a period of 180 days following the date of the Prospectus,
the Company shall not offer, sell, contract to sell or otherwise dispose of, or
announce the offer of, any Common Stock, warrants, options or other securities
exchangeable for or convertible into Common Stock without the prior written
consent of the Representative; except that the Company during this period (i)
may issue to employees, officers, directors and consultants of the Company,
options to purchase Common Stock; provided, that such options shall not be
exercisable during this 180 day period, (ii) may issue shares of Common Stock
upon the exercise of previously outstanding options, warrants or rights and
(iii) may issue shares of Common Stock on conversion of the preferred stock as
described in the Registration Statement and the Prospectus (or, if the
Prospectus is not in existence, the most recent Preliminary Prospectus).
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(u) No labor disturbance by the employees of the Company or any
Subsidiary exists, is imminent or, to the best knowledge of the Company, is
contemplated or threatened; and the Company is not aware of an existing,
imminent or threatened labor disturbance by the employees of any principal
suppliers or contractors that might be expected to result in any material change
in the business, properties, condition (financial or otherwise), results of
operations or prospects of the Company. Except as disclosed in the Registration
Statement and the Prospectus (or, if the Prospectus is not in existence, the
most recent Preliminary Prospectus), no collective bargaining agreement exists
with any employees of the Company or any Subsidiary and, to the best knowledge
of the Company, no such agreement is imminent. Except as disclosed in the
Registration Statement, no officer, employee or consultant of the Company or any
Subsidiary whose continued services are material to the conduct of the business
of the Company or any Subsidiary has any plans to terminate employment with the
Company or any Subsidiary nor does the Company or any Subsidiary have a present
intention to terminate the employment or contract of any such person.
(v) Each of the Company and its Subsidiaries has filed all federal,
state, local and foreign tax returns that are required to be filed or has
requested extension thereof and has paid all taxes, including withholding taxes,
penalties and interest, assessments, fees and other charges to the extent that
the same have become due and payable. No tax assessment or deficiency has been
made or proposed against the Company or any of its Subsidiaries nor has the
Company or any Subsidiary received any notice of any proposed tax assessment or
deficiency.
(w) Except as set forth in the Prospectus (or if the Prospectus is
not in existence, the most recent Preliminary Prospectus) there are no
outstanding loans, advances or guaranties of indebtedness by the Company to or
for the benefit of any of (i) its "affiliates", as such term is defined in the
Rules and Regulations, (ii) any of the officers or directors of any of its
Subsidiaries or (iii) any of the members of the families of any of them.
(x) Neither the Company nor any Subsidiary has, directly or
indirectly, at any time: (i) made any contributions to any candidate for
political office in violation of law; (ii) made any payment in violation of law
to any local, state, federal or foreign governmental officer or official, or
other person charged with similar public or quasi-public duties; or (iii)
violated any provision of the Foreign Corrupt Practices Act of 1977, as amended.
(y) Neither the Company nor any Subsidiary has any material
liability, absolute or contingent, relating to: (i) public health or safety;
(ii) worker health or safety; (iii) product defect or warranty; or (iv) except
as may be disclosed in the Registration Statement and Prospectus (or, if the
Prospectus is not in existence, the most recent
10
<PAGE>
Preliminary Prospectus) pollution, damage to or protection of the environment,
including, without limitation, relating to damage to natural resources,
emissions, discharges, releases or threatened releases of hazardous materials
into the environment (including, without limitation, ambient air, surface water,
groundwater, land surface or subsurface strata) or otherwise relating to the
manufacture, processing, use, treatment, storage, generation, disposal,
transport or handling of any hazardous materials, which could have a material
adverse effect on the general affairs, management and financial position of the
Company. As used herein, "hazardous material" includes chemical substances, or
wastes, pollutants, contaminants, hazardous, radioactive or toxic substances,
constituents, materials or wastes, whether solid, gaseous or liquid in nature.
(z) The Company has not distributed and will not distribute prior to
the Closing Date or prior to any date on which the Option Shares are to be
purchased, as the case may be, any prospectus or other offering material in
connection with the offering and sale of the Shares other than the Prospectus,
the Registration Statement and any other material which may be permitted by the
Securities Act and the Rules and Regulations.
(aa) The Company has filed and will file in a timely manner all
reports and other documents required to be filed with the Commission under the
Exchange Act and with the National Association of Securities Dealers, Inc. (the
"NASD"), and each such report or other document contained, at the time it was
filed, such information as was required to be included in such report or other
document and all such information was correct and complete in all material
respects; except as disclosed in the Registration Statement, no event has
occurred or is likely to occur that required or would require an amendment to
any report or document referred to in this section that has not been filed or
distributed as required.
(bb) The Shares have been designated for inclusion on the Nasdaq
National Market, subject only to official notice of issuance.
(cc) The Company is not now, and intends to conduct its affairs in the
future in such a manner so that it will not become, an investment company within
the meaning of the Investment Company Act of 1940, as amended.
(dd) Each of the Company and its Subsidiaries is in compliance in all
material respects with all presently applicable provisions of the Employee
Retirement Income Security Act of 1974, as amended, including the regulations
and published interpretations thereunder ("ERISA"); no "reportable event" (as
defined in ERISA) for which the Company would have any liability has occurred;
the Company has not incurred and does not expect to incur liability under (i)
Title IV of ERISA with respect to termination of, or withdrawal from, any
"pension plan" or (ii) Sections 412 or 4971 of the Internal Revenue Code of
1986, as amended, including the regulations and published
11
<PAGE>
interpretations thereunder (the "Code"); and each "pension plan" for which the
Company or any Subsidiary would have any liability that is intended to be
qualified under Section 401(a) of the Code is so qualified in all material
respects and nothing has occurred, whether by action or by failure to act, that
would cause the loss of such qualification.
(ee) There has been no storage, disposal, generation, manufacture,
refinement, transportation, handling or treatment of toxic wastes, medical
wastes, hazardous wastes or hazardous substances by the Company or any
Subsidiary (or, to the best knowledge of the Company, any of their predecessors
in interest) at, upon or from any of the property now or previously owned or
leased by the Company or any Subsidiary in violation of any applicable law,
ordinance, rule, regulation, order, judgment, decree or permit or which would
require remedial action under any applicable law, ordinance, rule, regulation,
order, judgment, decree or permit, except for any violation or remedial action
which would not have, or would not be reasonably likely to have, singularly or
in the aggregate with all such violations and remedial actions, a material
adverse effect on the general affairs, management, financial position,
shareholders' equity or results of operations of the Company or any Subsidiary;
there has been no material spill, discharge, leak, emission, injection, escape,
dumping or release of any kind onto such property or into the environment
surrounding such property of any toxic wastes, medical wastes, solid wastes,
hazardous wastes, radioactive wastes, mixed wastes or hazardous substances due
to or caused by the Company or any Subsidiary or with respect to which the
Company has knowledge, except for any such spill, discharge, leak, emission,
injection, escape, dumping or release which would not have or would not be
reasonably likely to have, singularly or in the aggregate with all such spills,
discharges, leaks, emissions, injections, escapes, dumpings and releases, a
material effect on the general affairs, management, financial position,
shareholders' equity or results of operations of the Company or any Subsidiary.
The terms "radioactive wastes", "mixed wastes", "hazardous wastes", "toxic
wastes", "hazardous substances" and "medical wastes" shall have the meanings
specified in any applicable local, state, federal and foreign laws or
regulations with respect to environmental protection.
(ff) The Company satisfies the requirements for filing a registration
statement on Form S-1.
(gg) Each certificate signed by any officer of the Company or any
Subsidiary and delivered to the Representative's or Underwriter's counsel shall
be deemed to be a representation and warranty by the Company or such Subsidiary
to each Underwriter as to matters covered thereby.
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<PAGE>
2. Purchase, Sale and Delivery of the Stock.
----------------------------------------
(a) On the basis of the representations, warranties, covenants and
agreements of the Company contained in this Agreement and subject to the terms
and conditions set forth in this Agreement, the Company agrees to sell to the
several Underwriters, and each of the Underwriters agrees, severally and not
jointly, to purchase from the Company, at a purchase price of $______ per Share
("Purchase Price"), the respective number of Firm Shares set forth opposite the
name of such Underwriter on Schedule I to this Agreement (subject to adjustment
as provided in Section 8 of this Agreement).
(b) On the basis of the several (and not joint) representations,
warranties, covenants and agreements of the Underwriters contained in this
Agreement and subject to the terms and conditions set forth in this Agreement,
the Company grants an option to the several Underwriters to purchase from the
Company all or any portion of the Option Shares at the Purchase Price. This
option may be exercised only to cover over-allotments in the sale of the Firm
Shares by the Underwriters and may be exercised in whole or in part at any time
(but not more than once) on or before the 45th day after the date of the
Prospectus upon written, telecopied or telegraphic notice by the Representative
to the Company setting forth the aggregate number of Option Shares as to which
the several Underwriters are exercising the option and the settlement date. If
the option to purchase the Option Shares is exercised, the Option Shares shall
be purchased severally, and not jointly, by each Underwriter, in the same
proportion that the number of Firm Shares set forth opposite the name of the
Underwriter in Schedule I to this Agreement bears to the total number of Firm
Shares to be purchased by the Underwriters under Section 2(a) above, subject to
such adjustments as the Representative in its absolute discretion shall make to
eliminate any fractional Shares. Delivery of Option Shares, and payment
therefor, shall be made as provided in Section 2(c), Section 2(d) and Section
2(e) below.
(c) Delivery of the Firm Shares and the Option Shares (if the option
granted by the Company in Section 2(b) above has been exercised not later than
7:00 a.m., San Francisco time, on the date two business days preceding the
Closing Date), and payment therefor, shall be made at the office of Van Kasper &
Company, 600 California Street, San Francisco, California at 7:00 a.m., San
Francisco time, on the third business day after the effective date of this
Agreement, or at such time on such other day, not later than seven full business
days after such third business day, as shall be agreed upon in writing by the
Company and the Representative, or as provided in Section 8 of this Agreement.
The date and hour of delivery and payment for the Firm Shares are referred to in
this Agreement as the "Closing Date". As used in this Agreement, "business day"
means a day on which the Nasdaq National Market is operating and on which banks
in
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New York and California are open for business and not permitted by law or
executive order to be closed.
(d) If the option granted by the Company in Section 2(b) above is
exercised after 7:00 a.m., San Francisco time, on the date two business days
preceding the Closing Date, delivery of the Option Shares and payment therefor
shall be made at the office of Van Kasper & Company, 600 California Street, San
Francisco, California at 7:00 a.m., San Francisco time, on the date specified by
the Representative (which shall be three or four or fewer business days after
the exercise of the option, but not in excess of the period specified in the
Rules and Regulations).
(e) Payment of the Purchase Price for the Shares by the several
Underwriters shall be made by certified or official bank check or checks drawn
in next-day funds, payable to the order of the Company. Such payment shall be
made upon delivery of Shares to the Representative for the respective accounts
of the several Underwriters. The Shares to be delivered to the Representative
shall be registered in such name or names and shall be in such denominations as
the Representative may request at least two business days before the Closing
Date, in the case of Firm Shares, and at least one business day prior to the
purchase of the Option Shares, in the case of the Option Shares. The
Representative, individually and not on behalf of the Underwriters, may (but
shall not be obligated to) make payment to the Company for Shares to be
purchased by any Underwriter whose check shall not have been received by the
Representative on the Closing Date or any later date on which Option Shares are
purchased for the account of such Underwriter. Any such payment shall not
relieve such Underwriter from any of its obligations hereunder.
(f) The several Underwriters propose to offer the Shares for sale
to the public as soon as the Representative deems it advisable to do so. The
Firm Shares are to be initially offered to the public at the public offering
price set forth (or to be set forth) in the Prospectus. The Representative may
from time to time thereafter change the public offering price and other selling
terms.
(g) The information set forth in the last paragraph on the front
cover page (insofar as such information relates to the Underwriters), the legend
respecting stabilization set forth on the inside front cover page and the
statements set forth under the caption "Underwriting" in the Registration
Statement, any Preliminary Prospectus and in the Prospectus constitute the only
information furnished by the Underwriters to the Company for inclusion in any
Preliminary Prospectus, the Prospectus or the Registration Statement.
(h) In addition to the other compensation payable to the Underwriters
pursuant to this Agreement, the Company shall issue on the Closing Date to the
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<PAGE>
Representative a warrant to purchase up to 10% of the number of shares of Common
Stock sold to the Underwriters (excluding the Option Shares) at a price per
share equal to 120% of the Purchase Price, in the form included as an exhibit to
the Registration Statement.
3. Further Agreements of the Company. The Company covenants and agrees
---------------------------------
with the several Underwriters as follows :
(a) The Company will use its best efforts to cause the Registration
Statement, and any amendment thereof, if not effective at the time of execution
of this Agreement, to become effective as promptly as possible. If the
Registration Statement has become or becomes effective pursuant to Rule 430A, or
filing of the Prospectus is otherwise required under Rule 424(b), the Company
will file the Prospectus, properly completed (and in form and substance
reasonably satisfactory to the Underwriters) pursuant to Rule 424(b) within the
time period prescribed and will provide evidence satisfactory to the
Representative of such timely filing. The Company will not file the Prospectus,
any amended Prospectus, any amendment (including post-effective amendments) of
the Registration Statement or any supplement to the Prospectus without (i)
advising the Representative of the proposed filing of such document, amendment
or supplement within a reasonable time prior to the proposed filing, and
furnishing the Representative with copies thereof and (ii) obtaining the prior
consent of the Representative to such filing. The Company will prepare and file
with the Commission, promptly upon the request of the Representative, any
amendment to the Registration Statement or supplement to the Prospectus that may
be necessary or advisable in the reasonable opinion of the Representative in
connection with the distribution of the Shares by the Underwriters and shall use
its best efforts to cause the same to become effective as promptly as possible.
(b) The Company will promptly advise the Representative (i) when the
Registration Statement becomes effective, (ii) when any post-effective amendment
thereof becomes effective, (iii) of any request by the Commission for any
amendment of or supplement to the Registration Statement or the Prospectus or
for any additional information, (iv) of the issuance by the Commission of any
stop order suspending the effectiveness of the Registration Statement or the
institution or threatening of any proceeding for that purpose, and (v) of the
receipt by the Company of any notification with respect to the suspension of the
registration, qualification or exemption from registration or qualification of
the Shares for sale in any jurisdiction or the initiation or threatening of any
proceeding for such purpose. The Company will use its best efforts to prevent
the issuance of any such stop order or suspension and, if issued, to obtain as
soon as possible the withdrawal thereof.
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<PAGE>
(c) The Company will (i) on or before the Closing Date, deliver to the
Representative and its counsel a signed copy of the Registration Statement as
originally filed and of each amendment thereto filed prior to the time the
Registration Statement becomes effective and, promptly upon the filing thereof,
a signed copy of each post-effective amendment, if any, to the Registration
Statement (together with, in each case, all exhibits thereto unless previously
furnished to the Representative) and will also deliver to the Representative,
for distribution to the several Underwriters, a sufficient number of additional
conformed copies of each of the foregoing (excluding exhibits) so that one copy
of each may be distributed to each Underwriter, (ii) as promptly as possible
deliver to the Representative and send to the several Underwriters, at such
office or offices as the Representative may designate, as many copies of the
Prospectus as the Representative may reasonably request and (iii) thereafter
from time to time during the period in which a prospectus is required by law to
be delivered by an Underwriter or a dealer, likewise to send to the Underwriters
as many additional copies of the Prospectus and as many copies of any supplement
to the Prospectus and of any amended Prospectus, filed by the Company with the
Commission, as the Representative may reasonably request for the purposes
contemplated by the Securities Act.
(d) If at any time during the period in which a prospectus is
required by law to be delivered by an Underwriter or a dealer any event shall
occur as a result of which it is necessary to supplement or amend the Prospectus
in order to make the Prospectus not misleading or so that the Prospectus will
not omit to state a material fact necessary to be stated therein, in each case
at the time the Prospectus is delivered to a purchaser of the Shares, or if it
shall be necessary to amend or to supplement the Prospectus to comply with the
Securities Act or the Rules and Regulations, the Company will forthwith prepare
and file with the Commission a supplement to the Prospectus or an amended
Prospectus so that the Prospectus as so supplemented or amended will not contain
any untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements therein not misleading and so that it
then will otherwise comply with the Securities Act and the Rules and
Regulations. If, after the initial public offering of the Shares by the
Underwriters and during such period, the Underwriters propose to vary the terms
of offering thereof by reason of changes in general market conditions or
otherwise, the Representative will advise the Company in writing of the proposed
variation and if, in the opinion either of counsel for the Company or counsel
for the Underwriters, such proposed variation requires that the Prospectus be
supplemented or amended, the Company will forthwith prepare and file with the
Commission a supplement to the Prospectus setting forth such variation. The
Company authorizes the Underwriters and all dealers to whom any of the Shares
may be sold by the Underwriters to use the Prospectus, as from time to time so
amended or supplemented, in connection with the sale of the Shares in accordance
with the applicable provisions of the Securities Act and the Rules and
Regulations for such period.
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(e) The Company will cooperate with the Representative and its counsel
in the qualification or registration of the Shares for offer and sale under the
securities or blue sky laws of such jurisdictions as the Representative may
designate and, if applicable, in connection with exemptions from such
qualification or registration and, during the period in which a Prospectus is
required by law to be delivered by an Underwriter or a dealer, in keeping such
qualifications, registrations and exemptions in effect; provided, however, that
-------- -------
the Company shall not be obligated to file any general consent to service of
process or to qualify to do business as a foreign corporation in any
jurisdiction in which it is not so qualified. The Company will, from time to
time, prepare and file such statements, reports and other documents as are or
may be required to continue such qualifications, registrations and exemptions in
effect for so long a period as the Representative may reasonably request for the
distribution of the Shares.
(f) During a period of five years commencing with the date of this
Agreement, the Company will promptly furnish to the Representative and to each
Underwriter who may so request in writing copies of (i) all periodic and special
reports furnished by it to shareholders of the Company, (ii) all information,
documents and reports filed by it with the Commission, any securities exchange
on which any securities of the Company are then listed, the Nasdaq National
Market or the NASD, (iii) all press releases and material news items or articles
in respect of the Company or its affairs released or prepared by the Company
(other than promotional and marketing materials disseminated solely to customers
and potential customers of the Company in the ordinary course of business) and
(iv) any additional information concerning the Company or its business which the
Representative may reasonably request.
(g) Within 90 days of the Closing Date, the Company will furnish the
Representative with four bound volumes which shall be standard for an
underwriting transaction of the type contemplated by this Agreement.
(h) As soon as practicable, but not later than the 45th day following
the end of the fiscal quarter first ending after the first anniversary of the
Effective Date, the Company will make generally available to its securities
holders and furnish to the Representative an earnings statement or statements
(which need not be audited) in accordance with Section 11(a) of the Securities
Act and Rule 158 of the Rules and Regulations.
(i) The Company will apply the net proceeds from the offering of the
Shares in the manner set forth under the caption "Use of Proceeds" in the
Prospectus.
(j) The Company will comply with all provisions of all undertakings
contained in the Registration Statement.
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(k) The Company will, at all times for a period of at least five
years after the date of this Agreement, cause the Common Stock (including the
Shares) to be included on the Nasdaq National Market to the extent that the
Common Stock satisfies the then applicable criteria for inclusion, and the
Company will comply with all registration, filing, reporting, listing and other
requirements of the Exchange Act and the Nasdaq National Market, which may from
time to time be applicable to the Company.
(l) The Company will use its best efforts to maintain insurance of
the types and in the amounts which it deems adequate for its business consistent
with insurance coverage maintained by companies of similar size and engaged in
similar businesses in similar geographic locations, including, but not limited
to, product liability insurance and general liability insurance covering all
real and personal property owned or leased by the Company against theft, damage,
destruction, acts of vandalism and all other risks customarily insured against.
(m) The Company will issue no press release prior to the Closing Date
with respect to the offering of the Shares without the Representative's prior
written consent.
(n) The Company will not effect a change in its accounting firm to
any other firm other than a "big six" accounting firm for a period of three
years from the date of this Agreement without the written consent of the
Representative.
(o) The Company has not and will not, without the prior written
consent of the Representative, seek any exemption from the requirements for
inclusion on the Nasdaq National Market.
(p) The Company will take all steps necessary to comply with the
requirements of the NASD in connection with the issuance and sale of the Shares.
4. Fees and Expenses.
--------------------
(a) The Company agrees with each Underwriter that:
(i) The Company will pay and bear all costs and expenses in
connection with: the preparation, printing and filing of the Registration
Statement (including financial statements, schedules and exhibits), Preliminary
Prospectuses and the Prospectus, any drafts of each of them and any amendments
or supplements to any of them; the duplication or, if applicable, printing
(including all drafts thereof) of this Agreement, the Agreement Among
Underwriters, any Selected Dealer Agreements, the Preliminary Blue Sky Survey
and any Supplemental Blue Sky Survey, the Underwriters' Questionnaire and the
Power of Attorney and the duplication and printing (including of drafts thereof)
of any other underwriting documents and underwriting material (including
18
<PAGE>
but not limited to marketing memoranda and other marketing material) approved
by the Company and used in connection with the offering, purchase, sale and
delivery of the Shares; the issuance and delivery of the Shares under this
Agreement to the several Underwriters, including all expenses, taxes, duties,
fees and commissions on the purchase and sale of the Shares, stock exchange
brokerage and transaction levies with respect to the purchase and, if applicable
the sale of the Shares; the cost of printing the certificates for the Shares;
the Transfer Agents' and Registrars' fees; the fees and disbursements of counsel
for the Company; all fees and other charges of the Company's independent public
accountants and any other experts named in the Prospectus; the cost of
furnishing to the several Underwriters copies of the Registration Statement
(including appropriate exhibits), Preliminary Prospectus and the Prospectus, the
agreements and other documents and instruments referred to above and any
amendments or supplements to any of the foregoing; the NASD filing fees; the
cost of qualifying or registering the Shares (or obtaining exemptions from
qualification or registration) under the laws of such jurisdictions as the
Representative may designate (including filing fees and fees and
costs/disbursements of Underwriters' counsel in connection with such NASD
filings and state securities or Blue Sky qualifications, registrations and
exemptions and in preparing the preliminary and any final Blue Sky Memorandum);
all fees and expenses in connection with designating the Shares for inclusion on
the Nasdaq National Market; all Company advertising and road show expenses; and
all other expenses incurred by the Company in connection with the performance of
its obligations hereunder. In addition, the Company will pay the Representative
on the Closing Date and, if applicable, on the date on which Option Shares are
purchased, a non-accountable expense allowance of one and one-half percent (1
1/2%) of the gross proceeds (prior to deducting underwriting discounts and
commissions) of the offering of the Shares.
(ii) In addition to its obligations under Section 7(a) of this
Agreement, the Company agrees that, as an interim measure during the pendency of
any claim, action, investigation, inquiry or other proceeding arising out of or
based upon any loss, claim, damage or liability described in Section 7(a) of
this Agreement, it will reimburse or advance to or for the benefit of the
Underwriters, and each of them, on a monthly basis (or more often, if requested)
for all legal and other expenses incurred in connection with investigating or
defending any such claim, action, investigation, inquiry or other proceeding,
notwithstanding the absence of a judicial determination as to the propriety and
enforceability of the Company's obligation to reimburse or advance for the
benefit of the Underwriters for such expenses or the possibility that such
payments might later be held to have been improper by a court of competent
jurisdiction. To the extent that any portion, or all, of any such interim
reimbursement payments or advances are so held to have been improper, the
Underwriters receiving the same shall promptly return
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<PAGE>
such amounts to the Company together with interest, compounded daily, at the
prime rate (or other commercial lending rate for borrowers of the highest credit
standing) announced from time to time by Bank of America, NT&SA, San Francisco,
California (the "Prime Rate"), but not in excess of the maximum rate permitted
by applicable law. Any such interim reimbursement payments or advances that are
not made to or for the Underwriters within 30 days of a request for
reimbursement or for an advance shall bear interest at the Prime Rate,
compounded daily, but not in excess of the maximum rate permitted by applicable
law, from the date of such request until the date paid.
(b) In addition to their obligations under Section 7(b) of this
Agreement, the Underwriters severally and in proportion to their obligation to
purchase Firm Shares as set forth on Schedule I hereto, agree that, as an
interim measure during the pendency of any claim, action, investigation, inquiry
or other proceeding arising out of or based upon any loss, claim, damage or
liability described in Section 7(b) of this Agreement, they will reimburse or
advance to or for the benefit of the Company on a monthly basis (or more often,
if requested) for all legal and other expenses incurred by the Company in
connection with investigating or defending any such claim, action,
investigation, inquiry or other proceeding, notwithstanding the absence of a
judicial determination as to the propriety or enforceability of the
Underwriters' obligation to reimburse or advance for the benefit of the Company
for such expenses and the possibility that such payments or advances might later
be held to have been improper by a court of competent jurisdiction. To the
extent that any portion, or all, of any such interim reimbursement payments or
advances are so held to have been improper, the Company shall promptly return
such amounts to the Underwriters together with interest, compounded daily, at
the Prime Rate, but not in excess of the maximum rate permitted by applicable
law. Any such interim reimbursement payments or advances that are not made to
the Company within 30 days of a request for reimbursement or for an advance
shall bear interest at the Prime Rate, compounded daily, but not in excess of
the maximum rate permitted by applicable law, from the date of such request
until the date paid.
(c) Any controversy arising out of the operation of the interim
reimbursement and advance arrangements set forth in Sections 4(a)(ii) and 4(b)
above, including the amounts of any requested reimbursement payments or
advances, the method of determining such amounts and the basis on which such
amounts shall be apportioned among the indemnifying parties, shall be settled by
arbitration conducted under the provisions of the Code of Arbitration Procedure
of the NASD. Any such arbitration must be commenced by service of a written
demand for arbitration or a written notice of intention to arbitrate, therein
electing the arbitration tribunal. If the party demanding arbitration does not
make such designation of an arbitration tribunal in such demand or notice, then
the party responding to the demand or notice is authorized to do so. Any such
arbitration will be limited to the interpretation and obligations of the parties
under the interim reimbursement and advance provisions contained in Sections
4(a)(ii) and 4(b)
20
<PAGE>
above and will not resolve the ultimate propriety or enforceability of the
obligation to indemnify for or contribute to expenses that is created by the
provisions of Section 7 of this Agreement.
(d) If the sale of the Shares provided for herein is not consummated
because any condition to the obligations of the Underwriters set forth in
Section 5 of this Agreement is not satisfied, or because of any termination
pursuant to Section 9(b) of this Agreement, or because of any refusal, inability
or failure on the part of the Company to perform any covenant or agreement set
forth in this Agreement or to comply with any provision of this Agreement other
than by reason of a default by any of the Underwriters, the Company agrees to
reimburse the several Underwriters upon demand for all out-of-pocket accountable
expenses reasonably incurred (including fees and disbursements of counsel) that
shall have been incurred by any or all of them in connection with investigating,
preparing to market or marketing the Shares or otherwise in connection with this
Agreement.
5. Conditions of Underwriters' Obligations. The several obligations of
---------------------------------------
the Underwriters to purchase and pay for the Shares shall be subject, in the
reasonable determination of the Representative, to the accuracy as of the date
of execution of this Agreement, the Closing Date and the date and time at which
the Option Shares are to be purchased, as the case may be, of the
representations and warranties of the Company set forth in this Agreement, to
the accuracy of the statements of the Company and its officers made in any
certificate delivered pursuant to this Agreement, to the performance by the
Company of all of its obligations to be performed under this Agreement at or
prior to the Closing Date or any later date on which Option Shares are to be
purchased, as the case may be, and to the satisfaction of all conditions to be
satisfied or performed by the Company at or prior to that date and to the
following additional conditions:
(a) The Registration Statement shall have become effective (or, if a
post-effective amendment is required to be filed pursuant to Rule 430A under the
Act, such post-effective amendment shall become effective and the Company shall
have provided evidence satisfactory to the Representative of such filing and
effectiveness) not later than 5:00 p.m., New York time, on the date of this
Agreement or at such later date and time as the Representative may approve in
writing and, at the Closing Date or, with respect to the Option Shares, the date
on which such Option Shares are to be purchased, no stop order suspending the
effectiveness of the Registration Statement or any qualification, registration
or exemption from qualification or registration for the sale of the Shares in
any jurisdiction shall have been issued and no proceedings for that purpose
shall have been instituted or threatened; and any request for additional
information on the part of the Commission shall have been complied with to the
reasonable satisfaction of the Representative and its counsel.
21
<PAGE>
(b) The Representative shall have received from Heller Ehrman White &
McAuliffe, counsel for the Underwriters, an opinion, on and dated as of the
Closing Date or, if applicable, the date on which Option Shares are to be
purchased, with respect to the issuance and sale of the Shares and such other
related matters as the Representative may reasonably require, and the Company
shall have furnished such counsel with all documents which they may request for
the purpose of enabling them to pass upon such matters.
(c) The Representative shall have received on the Closing Date or, if
applicable, the later date on which Option Shares are purchased, the opinion of
Graham & James LLP, counsel for the Company, addressed to the Underwriters and
dated the Closing Date or such later date, with reproduced copies or signed
counterparts thereof for each of the Underwriters, covering the matters set
forth in Exhibit C to this Agreement and in form and substance satisfactory to
the Representative.
(d) The Representative shall be satisfied that there has not been any
material change in the market for securities in general or in political,
financial or economic conditions as to render it impracticable, in the
Representative's judgment, to make a public offering of the Shares, or a
material adverse change in market levels for securities in general (or those of
companies in particular) or financial or economic conditions which render it
inadvisable to proceed.
(e) The Representative shall have received on the Closing Date and on
any later date on which Option Shares are purchased a certificate, dated the
Closing Date or such later date, as the case may be, and signed by the President
and the Chief Financial Officer of the Company confirming certain of the
representations and warranties of the Company, as follows:
(i) the representations and warranties of the Company set
forth in Section 1 of this Agreement are true and correct with the same force
and effect as if expressly made at and as of the Closing Date or such later date
on which the Option Shares are purchased, and the Company has complied in all
material respects with all the agreements and satisfied all the conditions on
its part to be performed or satisfied at or prior to the Closing Date or such
later date;
(ii) no stop order suspending the effectiveness of the
Registration Statement has been issued, and no proceedings for that purpose have
been instituted or are pending or are threatened under the Securities Act;
(iii) the Common Stock has been designated for inclusion on the
Nasdaq National Market, subject only to notice of issuance; and
22
<PAGE>
(iv) (A) the respective signers of such certificate have
carefully examined the Registration Statement in the form in which it originally
became effective and the Prospectus and any supplements or amendments to any of
them and, as of the Effective Date, the statements made in the Registration
Statement and the Prospectus were true and correct in all material respects and
neither the Registration Statement nor the Prospectus omitted to state any
material fact required to be stated therein or necessary in order to make the
statements therein not misleading, (B) since the Effective Date, no event has
occurred that should have been set forth in an amendment to the Registration
Statement or a supplement or amendment to the Prospectus that has not been set
forth in such an amendment or supplement, (C) since the respective dates as of
which information is given in the Registration Statement in the form in which it
originally became effective and the Prospectus, there has not been any material
change or any development involving a prospective material change in or
affecting the business, properties, condition (financial or otherwise), results
of operations or prospects of the Company and its Subsidiaries taken as a whole
and, since such dates, neither the Company nor any of its Subsidiaries has
entered into any material transaction not referred to in the Registration
Statement in the form in which it originally became effective and the
Prospectus, (D) there are not any pending or threatened legal proceedings to
which the Company or any Subsidiary is a party or of which property of the
Company or any Subsidiary is the subject which are material and which are not
disclosed in the Registration Statement and the Prospectus and (E) there are not
any license agreements, contracts, leases or other documents that are required
to be filed as exhibits to the Registration Statement that have not been filed
as required.
(f) The Representative shall have received from Coopers & Lybrand
L.L.P., accountants to the Company, a letter or letters, addressed to the
Underwriters and dated the Closing Date and any later date on which Option
Shares are purchased, confirming that they are independent accountants with
respect to the Company within the meaning of the Securities Act and the
applicable Rules and Regulations and, based upon the procedures described in
their letter delivered to the Representative concurrently with the execution of
this Agreement (the "Original Letter"), but carried out to a date not more than
five business days prior to the Closing Date or such later date on which Option
Shares are purchased, (i) confirming, to the extent true, that the statements
and conclusions set forth in the Original Letter are accurate as of the Closing
Date or such later date, as the case may be, and (ii) setting forth any
revisions and additions to the statements and conclusions set forth in the
Original Letter that are necessary to reflect any changes in the facts described
in the Original Letter since the date of the Original Letter or to reflect the
availability of more recent financial statements, data or information. Such
letters reflect that there is not any change, or any development involving a
prospective change, in or affecting the business, properties or condition
(financial or otherwise), results of operations or prospects of the Company
which, in the
23
<PAGE>
Representative's sole judgment, makes it impracticable or inadvisable to proceed
with the public offering of the Shares or the purchase of the Option Shares as
contemplated by the Prospectus. In addition, the Representative shall have
received from Coopers & Lybrand L.L.P., on or prior to the Closing Date, a
letter addressed to the Company and made available to the Representative for the
use of the Underwriters stating that their review of the Company's system of
internal controls, to the extent they deemed necessary in establishing the scope
of their examination of the Company's consolidated financial statements as of
December 31, 1997, or in delivering the Original Letter, did not disclose any
weaknesses in internal controls that they considered to be material weaknesses.
(g) Prior to the Closing Date, the Common Stock shall have been
designated for inclusion on the Nasdaq National Market, subject only to official
notice of issuance.
(h) The Representative shall have received executed agreements from
each of the Company's officers and directors, each person known to the Company
to own ________ shares or more of Common Stock and shareholders who in the
aggregate own ________ shares of Common Stock to the effect that each such
person or entity will not for a period of 180 days following the date of the
Prospectus, in each case without prior written consent of the Representative,
offer, sell or contract to sell, or otherwise dispose of, or announce the offer
of, any Common Stock or options or convertible securities exercisable or
exchangeable for, or convertible into, Common Stock. The Company acknowledges
that the Representative has provided the Company with the form of agreement
described above and that such form of agreement is acceptable for the purposes
of this section.
(i) The Company shall have furnished to the Representative such
further certificates and documents as the Representative shall reasonably
request (including certificates of officers of the Company) as to the accuracy
of the representations and warranties of the Company or any Subsidiary set forth
in this Agreement, the performance by the Company of its obligations under this
Agreement and such other matters as the Representative may have then reasonably
requested.
All the agreements, opinions, certificates and letters mentioned above or
elsewhere in this Agreement will be in compliance with the provisions of this
Agreement only if they are reasonably satisfactory to the Representative and its
counsel. The Company will furnish the Representative with such number of
conformed copies of such opinions, certificates, letters and documents as the
Representative shall reasonably request.
If any of the conditions specified in this Section 5 shall not have been
fulfilled in all material respects when and as provided in this Agreement, time
being of the essence, or if any of the opinions and certificates mentioned above
or elsewhere in this Agreement
24
<PAGE>
shall not be in all material respects reasonably satisfactory in form and
substance to the Representative and its counsel, this Agreement and all
obligations of the Underwriters hereunder may be canceled by the Representative
at or at any time prior to, the Closing Date or, with respect to the Option
Shares, prior to the date on which the Option Shares are to be purchased, as the
case may be. Notice of such cancellation shall be given to the Company in
writing or by telephone, telecopy or telegraph confirmed in writing. Any such
termination shall be without liability of the Company to the Underwriters
(except as provided in Section 4 or Section 7 of this Agreement) and without
liability of the Underwriters to the Company (except as provided in Section 7 of
this Agreement).
6. Conditions of the Obligation of the Company. The obligations of the
-------------------------------------------
Company to sell and deliver the Shares required to be delivered as and when
specified in this Agreement shall be subject to the condition that, at the
Closing Date or, with respect to the Option Shares, the date and time at which
the Option Shares are to be purchased, no stop order suspending the
effectiveness of the Registration Statement shall be in effect and no
proceedings therefor shall be pending or threatened by the Commission.
7. Indemnification and Contribution.
--------------------------------
(a) The Company agrees to indemnify and hold harmless each
Underwriter and each person (including each partner or officer thereof) who
controls any Underwriter within the meaning of Section 15 of the Securities Act
from and against any and all losses, claims, damages or liabilities, joint or
several, to which such indemnified parties or any of them may become subject
under the Securities Act, the Exchange Act or any other federal or state
statute, law or regulation, at common law or otherwise, specifically including
but not limited to losses, claims, damages or liabilities (or action in respect
thereof) related to negligence on the part of any Underwriter, and the Company
agrees to reimburse each such Underwriter and controlling person for any legal
or other expenses (including, except as otherwise provided below, settlement
expenses and fees and disbursements of counsel) incurred by the respective
indemnified parties in connection with defending against any such losses,
claims, damages or liabilities or in connection with any investigation or
inquiry of, or other proceeding that may be brought against, the respective
indemnified parties, in each case insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon, in
whole or in part, (i) any breach of any representation, warranty, covenant or
agreement of the Company contained in this Agreement, (ii) any untrue statement
or alleged untrue statement of a material fact contained in the Registration
Statement in the form declared effective by the Commission (including the
Prospectus as part thereof) or any post-effective amendment thereto, or the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading or
(iii) any untrue statement or alleged untrue statement of a material fact
contained in any Preliminary Prospectus (as amended or as supplemented if the
Company shall have filed with the Commission any
25
<PAGE>
amendment thereof or supplement thereto) or the omission or alleged omission to
state therein a material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading or (iv) any untrue statement or alleged
untrue statement of a material fact contained in any application or other
document, or any amendment or supplement thereto, executed by the Company or
based upon written information furnished by or on behalf of the Company filed in
any jurisdiction in order to qualify or register the Shares under the securities
or Blue Sky laws thereof or to obtain an exception from such qualification or
registration or filed with the Commission, any registered national securities
association or the Nasdaq National Market, or the omission or alleged omission
to state therein a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they
were made, not misleading; provided, however, that (1) the indemnity agreements
-------- -------
of the Company contained in this Section 7(a) shall not apply to such losses,
claims, damages, liabilities or expenses if such statement or omission was made
in reliance upon and in conformity with information furnished in writing to the
Company by or on behalf of any Underwriter through the Representative
specifically for use in any Preliminary Prospectus or the Registration Statement
or the Prospectus or any such amendment thereof or supplement thereto and (2)
the indemnity agreement contained in this Section 7(a) with respect to any
Preliminary Prospectus shall not inure to the benefit of any Underwriter from
whom the person asserting any such losses, claims, damages, liabilities or
expenses purchased the Shares that is the subject thereof (or to the benefit of
any person controlling such Underwriter) if the Company can demonstrate that at
or prior to the written confirmation of the sale of such Shares a copy of the
Prospectus (or the Prospectus as amended or supplemented) or, for this purpose,
if applicable, a copy of the then most recent Preliminary Prospectus, was not
sent or delivered to such person and the untrue statement or omission of a
material fact contained in such Preliminary Prospectus or, if applicable, prior
Preliminary Prospectus, was corrected in the Prospectus (or the Prospectus as
amended or supplemented) or, if applicable, the then most recent Preliminary
Prospectus, unless the failure is the result of noncompliance by the Company
with Section 3 of this Agreement. The indemnity agreements of the Company
contained in this Section 7(a) and the representations and warranties of the
Company contained in Section 1 of this Agreement shall remain operative and in
full force and effect regardless of any investigation made by or behalf of any
indemnified party and shall survive the delivery of and payment for the Shares.
This indemnity agreement shall be in addition to any liabilities which the
Company may otherwise have.
(b) Each Underwriter, severally and not jointly, agrees to indemnify
and hold harmless the Company, each of its officers who signs the Registration
Statement, each of its directors, each other Underwriter and each person
(including each partner or officer thereof) who controls the Company or any such
other Underwriter within the
26
<PAGE>
meaning of Section 15 of the Securities Act from and against any and all losses,
claims, damages or liabilities, joint or several, to which such indemnified
parties or any of them may become subject under the Securities Act, the Exchange
Act, or other federal or state statute, law or regulation or at common law or
otherwise and to reimburse each of them for any legal or other expenses
(including, except as otherwise hereinafter provided, settlement expenses and
fees and disbursements of counsel) incurred by the respective indemnified
parties in connection with defending against any such losses, claims, damages or
liabilities or in connection with any investigation or inquiry of, or other
proceeding that may be brought against, the respective indemnified parties, in
each case arising out of or based upon (i) any breach of any covenant or
agreement of the indemnifying Underwriter contained in this Agreement, (ii) any
untrue statement or alleged untrue statement of a material fact contained in the
Registration Statement in the form declared effective by the Commission
(including the Prospectus included as part thereof) or any post-effective
amendment thereto, or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading or (iii) any untrue statement or alleged untrue statement of a
material fact contained in any Preliminary Prospectus (as amended or as
supplemented if the Company shall have filed with the Commission any amendment
thereof or supplement thereto) or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary in order to
make the statements therein, in the light of the circumstances under which they
were made, not misleading, but in each case under clauses (ii) and (iii) above,
as the case may be, only if such statement or omission was made in reliance upon
and in connection with information furnished in writing to the Company by or on
behalf of such indemnifying Underwriter through the Representative specifically
for use in any Preliminary Prospectus, the Registration Statement or the
Prospectus or any such amendment thereof or supplement thereto. The Company
acknowledges and agrees that the matters described in Section 2(g) of this
Agreement constitute the only information furnished in writing by or on behalf
of any of the several Underwriters for inclusion in the Registration Statement
or the Prospectus or in any Preliminary Prospectus. The several indemnity
agreement of each Underwriter contained in this Section 7(b) shall remain
operative and in full force and effect regardless of any investigation made by
or on behalf of any indemnified party and shall survive the delivery of and
payment for the Shares. This indemnity agreement shall be in addition to any
liabilities which each Underwriter may otherwise have.
(c) Each person or entity indemnified under the provisions of
Sections 7(a) and 7(b) above agrees that, upon the service of a summons or other
initial legal process upon it in any action or suit instituted against it or
upon its receipt of written notification of the commencement of any
investigation or inquiry of, or proceeding against, it in respect of which
indemnity may be sought on account of any indemnity
27
<PAGE>
agreement contained in such Sections, it will, if a claim in respect thereunder
is to be made against the indemnifying party or parties under this Section 7,
promptly give written notice (the "Notice") of such service or notification to
the party or parties from whom indemnification may be sought hereunder. No
indemnification provided for in Sections 7(a) or 7(b) above shall be available
to any person who fails to so give the Notice if the party to whom such Notice
was not given was unaware of the action, suit, investigation, inquiry or
proceeding to which the Notice would have related, but only to the extent such
party was materially prejudiced by the failure to receive the Notice, and the
omission to so notify such indemnifying party or parties shall not relieve such
indemnifying party or parties from any liability which it or they may have to
the indemnified party for contribution or otherwise than on account of Sections
7(a) and 7(b). Any indemnifying party shall be entitled at its own expense to
participate in the defense of any action, suit or proceeding against, or
investigation or inquiry of, an indemnified party. Any indemnifying party shall
be entitled, if it so elects within a reasonable time after receipt of the
Notice by giving written notice (the "Notice of Defense") to the indemnified
party, to assume (alone or in conjunction with any other indemnifying party or
parties) the entire defense of such action, suit, investigation, inquiry or
proceeding, in which event such defense shall be conducted, at the expense of
the indemnifying party or parties, by counsel chosen by such indemnifying, party
or parties and reasonably satisfactory to the indemnified party or parties;
provided, however, that (i) if the indemnified party or parties reasonably
- -------- -------
determine that there may be a conflict between the positions of the indemnifying
party or parties and of the indemnified party or parties in conducting the
defense of such action, suit, investigation, inquiry or proceeding or that there
may be legal defenses or rights available to such indemnified party or parties
different from or in addition to those available to the indemnifying party or
parties, then separate counsel for and selected by the indemnified party or
parties shall be entitled, at the expense of the indemnifying parties, to
conduct the defense of the indemnified parties to the extent determined by
counsel to the indemnified parties to be necessary to protect the interests of
the indemnified party or parties and (ii) in any event, the indemnified party or
parties shall be entitled to have counsel selected by such indemnified party or
parties participate in, but not conduct, the defense. If, within a reasonable
time after receipt of the Notice, an indemnifying party gives a Notice of
Defense and, unless separate counsel is to be chosen by the indemnified party or
parties as provided above, the counsel chosen by the indemnifying party or
parties is reasonably satisfactory to the indemnified party or parties, the
indemnifying party or parties will not be liable under Sections 7(a) through
7(c) for any legal or other expenses subsequently incurred by the indemnified
party or parties in connection with the defense of the action, suit,
investigation, inquiry or proceeding, except that (A) the indemnifying party or
parties shall bear and pay the legal and other expenses incurred in connection
with the conduct of the defense as referred to in clause (i) of the "provided,
--------
however" clause in the preceding sentence and (B) the indemnifying party or
- -------
parties shall bear and pay such other expenses as it or they have authorized to
be
28
<PAGE>
incurred by the indemnified party or parties. If, within a reasonable time after
receipt of the Notice, no Notice of Defense has been given, the indemnifying
party or parties shall be responsible for any legal or other expenses incurred
by the indemnified party or parties in connection with the defense of the
action, suit, investigation, inquiry or proceeding.
(d) In order to provide for just and equitable contribution in any
action in which a claim for indemnification is made pursuant to this Section 7
but is judicially determined (by the entry of a final judgment or decree by a
court of competent jurisdiction and the expiration of time to appeal or the
denial of the last right to appeal) that such indemnification may not be
enforced in such case notwithstanding the fact that this Section 7 provides for
indemnification in such case, each indemnifying party shall contribute to the
amount paid or payable by such indemnified party as a result of the losses,
claims, damages, liabilities and expenses referred to in Section 7(a) or 7(b)
above (i) in such proportion as is appropriate to reflect the relative benefits
received by each indemnifying party from the offering of the Shares or (ii) if
the allocation provided by clause (i) above is not permitted by applicable law,
in such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of each indemnifying
party in connection with the statements or omissions that resulted in such
losses, claims, damages or liabilities, or actions in respect thereof, as well
as any other relevant equitable considerations. The relative benefits received
by the Company and the Underwriters shall be deemed to be in the same respective
proportion as the total proceeds from the offering of the Shares, net of the
underwriting discounts, received by the Company and the total underwriting
discount retained by the Underwriters bear to the aggregate public offering
price of the Shares. Relative fault shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by each indemnifying party and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such untrue statement or omission.
The parties agree that it would not be just and equitable if contribution
pursuant to this Section 7(d) were to be determined by pro rata allocation which
does not take into account the equitable considerations referred to in the first
sentence of the first paragraph of this Section 7(d) and to the considerations
referred to in the third sentence of the first paragraph of this Section 7(d).
The amount paid by an indemnified party as a result of the losses, claims,
damages or liabilities, or actions in respect thereof, referred to in the first
sentence of the first paragraph of this Section 7(d) shall be deemed to include
any legal or other expenses incurred by such indemnified party in connection
with investigating, preparing to defend or defending against any action or claim
which is the subject of this Section 7(d). Notwithstanding the provisions of
this Section 7(d), no Underwriter shall be required to contribute any amount in
excess of the underwriting discount applicable to the Shares purchased by that
Underwriter. For purposes of this Section 7(d), each person
29
<PAGE>
who controls an Underwriter within the meaning of Section 15 of the Securities
Act shall have the same rights to contribution as such Underwriter, and each
person who controls the Company within the meaning of Section 15 of the
Securities Act, each officer of the Company who signed the Registration
Statement and each director of the Company shall have the same rights to
contribution as the Company; provided, however, in each case that no person
-------- -------
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation. The Underwriters' obligations
to contribute in this Section 7(d) are several in proportion to their respective
underwriting obligations and not joint.
Each party or other entity entitled to contribution agrees that upon the
service of a summons or other initial legal process upon it in any action
instituted against it in respect of which contribution may be sought, it will
promptly give written notice of such service to the party or parties from whom
contribution may be sought, but the omission to so notify such party or parties
of any such service shall not relieve the party from whom contribution may be
sought from any obligation it may have hereunder or otherwise (except to the
extent such party is materially prejudiced by the failure to receive written
notice).
(e) The Company shall not, without the prior written consent of each
Underwriter and any person who controls such Underwriter within the meaning of
Section 15 of the Securities Act, settle or compromise or consent to the entry
of any judgment in any pending or threatened claim, action, suit or proceeding
in respect of which indemnification or contribution may be sought hereunder
(whether or not such Underwriter or any person who controls such Underwriter
within the meaning of Section 15 of the Securities Act is a party to such claim,
action, suit or proceeding) unless such settlement, compromise or consent
includes an unconditional release of each such Underwriter and each such
controlling person from any and all liability arising out of such claim, action,
suit or proceeding.
(f) The parties to this Agreement hereby acknowledge that they are
sophisticated business persons who were represented by counsel during the
negotiations regarding the provisions of this Agreement, including, without
limitation, the provisions of Sections 4(a)(ii), 4(b) and 4(c) and this Section
7 of this Agreement and that they are fully informed regarding all such
provisions. They further acknowledge that the provisions of Sections 4(a)(ii),
4(b) and 4(c) and this Section 7 of this Agreement fairly allocate the risks in
light of the ability of the parties to investigate the Company and its business
in order to assure that adequate disclosure is made in the Registration
Statement and Prospectus as required by the Securities Act, the Rules and
Regulations, the Exchange Act and the Exchange Act Rules and Regulations. The
parties are advised that federal or state policy, as interpreted by the courts
in certain jurisdictions, may be contrary
30
<PAGE>
to certain provisions of Sections 4(a)(ii), 4(b) and 4(c) and this Section 7 of
this Agreement and, to the extent permitted by law, the parties hereto hereby
expressly waive and relinquish any right or ability to assert such public policy
as a defense to a claim under Sections 4(a)(ii), 4(b) or 4(c) or this Section 7
of this Agreement and further agree not to assert any such defense.
8. Substitution of Underwriters. If for any reason one or more of the
----------------------------
Underwriters fails or refuses (otherwise than for a reason sufficient to justify
the termination of this Agreement under the provisions of Section 5 or Section 9
of this Agreement) to purchase and pay for the number of Firm Shares agreed to
be purchased by such Underwriter or Underwriters, the Representative shall
immediately give notice thereof to the Company and the non-defaulting
Underwriters, and the non-defaulting Underwriters shall have the right within 24
hours after their receipt of such notice to purchase, or procure one or more
other Underwriters to purchase, in such proportions as may be agreed upon among
the Representative and such purchasing Underwriter or Underwriters and upon the
terms set forth herein, all or any part of the Firm Shares that such defaulting
Underwriter or Underwriters agreed to purchase. If the non-defaulting
Underwriters fail to make such arrangements with respect to all such Shares, the
number of Firm Shares that each non-defaulting Underwriter is otherwise
obligated to purchase under this Agreement shall be automatically increased on a
pro rata basis to absorb the remaining Shares that the defaulting Underwriter or
Underwriters agreed to purchase; provided, however, that the non-defaulting
-------- -------
Underwriters shall not be obligated to purchase the Shares that the defaulting
Underwriter or Underwriters agreed to purchase if the aggregate amount of such
Shares exceeds 10% of the aggregate amount of Firm Shares that all Underwriters
agreed to purchase under this Agreement. If the total number of Firm Shares
that the defaulting Underwriter or Underwriters agreed to purchase shall not be
purchased or absorbed in accordance with the two preceding sentences, the
Company shall have the right, within 24 hours next succeeding the first 24-hour
period above referred to, to make arrangements with other underwriters or
purchasers satisfactory to the Representative for purchase of such Shares on the
terms set forth in this Agreement. In any such case, either the Representative
or the Company shall have the right to postpone the Closing Date determined as
provided in Section 2(c) of this Agreement for not more than seven business days
after the date originally fixed as the Closing Date pursuant to Section 2(c) in
order that any necessary changes in the Registration Statement, the Prospectus
or any other documents or arrangements may be made.
If neither the non-defaulting Underwriters nor the Company shall make
arrangements within the time periods set forth above for the purchase of all the
Firm Shares that the defaulting Underwriter or Underwriters agreed to purchase
hereunder, this Agreement shall be terminated without further act or deed and
without any liability on the part of the Company to any non-defaulting
Underwriter (except as provided in Section 4
31
<PAGE>
or Section 7 of this Agreement) and without any liability on the part of any
nondefaulting Underwriters to the Company (except to the extent provided in
Section 4 or Section 7 of this Agreement). Nothing in this Section 8, and no
action taken hereunder, shall relieve any defaulting Underwriter from liability,
if any, to the Company or any nondefaulting Underwriter for damages occasioned
by its default under this Agreement. If this Agreement is terminated pursuant to
the provisions of this Section 8, the Company shall not be obligated to
reimburse any defaulting Underwriter for expenses pursuant to the provisions of
Section 4 hereof or otherwise. The term "Underwriter" in this Agreement shall
include any persons substituted for an Underwriter under this Section 8.
9. Effective Date of Agreement and Termination.
-------------------------------------------
(a) If the Registration Statement has not been declared effective
prior to the date of this Agreement, this Agreement shall become effective at
such time, after notification of the effectiveness of the Registration Statement
has been released by the Commission, as the Representative and the Company shall
agree upon the public offering price and other terms and the purchase price of
the Shares. If the public offering price and other terms and the purchase price
of the Shares shall not have been determined prior to 5:00 p.m., New York time,
on the third full business day after the Registration Statement has become
effective, this Agreement shall thereupon terminate without liability on the
part of the Company to the Underwriters (except as provided in Section 4 or
Section 7 of this Agreement). By giving notice before the time this Agreement
becomes effective, the Representative, as representative of the several
Underwriters, may prevent this Agreement from becoming effective without
liability of any party to the other party, except that the Company shall remain
obligated to pay costs and expenses to the extent provided in Section 4 and
Section 7 of this Agreement. If the Registration Statement has been declared
effective prior to the date of this Agreement, this Agreement shall become
effective upon execution and delivery by the Representative and the Company.
(b) This Agreement may be terminated by the Representative in its
absolute discretion by giving written notice to the Company at any time on or
prior to the Closing Date or, with respect to the purchase of the Option Shares,
on or prior to any later date on which the Option Shares are to be purchased, as
the case may be, if prior to such time any of the following has occurred or, in
the Representative's opinion, is likely to occur: (i) after the respective dates
as of which information is given in the Registration Statement and the
Prospectus, any material change or development involving a prospective adverse
change in or affecting the business, properties, condition (financial or
otherwise), results of operations or prospects of the Company and its
subsidiaries taken as a whole, which would, in the Representative's sole
judgment, make the offering or the delivery of the Shares impracticable or
inadvisable; or (ii) trading in securities of the Company has been suspended by
the Commission or if trading generally on the New
32
<PAGE>
York Stock Exchange, American Stock Exchange, Nasdaq National Market or
over-the-counter market has been suspended or minimum or maximum prices for
trading have been fixed, or maximum ranges for prices for securities have been
required, by either of such exchanges, by the NASD or by the Commission; or
(iii) there shall have been the enactment, publication, decree or other
promulgation of any federal or state statute, regulation, rule or order of, or
commencement of any proceeding or investigation by, any court, legislative body,
agency or other governmental authority which in the Representative's sole
judgment materially affects or may materially affect the business, properties,
condition (financial or otherwise), results of operations or prospects of the
Company and its subsidiaries taken as a whole; (iv) there shall have been the
declaration of a banking moratorium by federal, New York or California
authorities; (v) existing international monetary conditions shall have undergone
a material change which, in the Representative's sole judgment, makes the
offering or delivery of the Shares impracticable or inadvisable; or (vi) there
has occurred any material change in the financial markets in the United States
or internationally or any outbreak of hostilities or escalation of existing
hostilities or other crisis, the effect of which in the Representative's
reasonable judgment makes the offering or delivery of the Shares impracticable
or inadvisable. If this Agreement shall be terminated pursuant to this Section
9, there shall be no liability of the Company to the Underwriters (except
pursuant to Section 4 and Section 7 of this Agreement) and no liability of the
Underwriters to the Company (except pursuant to Section 4 and Section 7 of this
Agreement).
10. Notices. Except as otherwise provided herein, all communications
-------
hereunder shall be in writing or by either telecopier or telegraph and, if to
the Underwriters, shall be mailed, telecopied or telegraphed or delivered to Van
Kasper & Company, 600 California Street, Suite 1700, San Francisco, California
94108, Attention: Bruce P. Emmeluth (telecopier: (415) 954-8309); and if to the
Company, shall be mailed, telecopied, telegraphed or delivered to it at its
office at 47375 Fremont Boulevard, Fremont, California 94538 (telecopier: (510)
651-3731) Attention: Doreen Chiu. All notices given by telecopy or telegraph
shall be promptly confirmed by letter.
11. Persons Entitled to the Benefit of This Agreement. This Agreement
-------------------------------------------------
shall inure to the benefit of the Company and the several Underwriters and, with
respect to the provisions of Section 4 and Section 7 of this Agreement, the
several parties (in addition to the Company and the several Underwriters)
indemnified under the provisions of Section 4 and Section 7 and their respective
personal representatives, successors and assigns (whether such succession or
assignment is by sale, assignment, merger, reverse merger, consolidation,
operation of law or, without limitation, otherwise). Nothing in this Agreement
is intended or shall be construed to give to any other person, firm or
corporation any legal or equitable remedy or claim under or in respect of this
Agreement or any provision contained herein. The term "successors and assigns"
as herein used shall not include any purchaser, as such, of any of the Shares
from the several Underwriters.
33
<PAGE>
12. General. Notwithstanding any provision of this Agreement to the
-------
contrary, the reimbursement, indemnification and contribution agreements
contained in this Agreement and the representations, warranties, covenants and
agreements in this Agreement shall remain in full force and effect regardless of
(a) any termination of this Agreement, (b) any investigation made by or on
behalf of any Underwriter or controlling person thereof or by or on behalf of
the Company, any controlling person thereof or their respective directors or
officers and (c) delivery and payment for the Shares under this Agreement;
provided, however, that if this Agreement is terminated prior to the Closing
- -------- -------
Date, the provisions of Sections 3(f) through 3(p), inclusive, of this Agreement
shall be of no further force or effect.
This Agreement may be executed in two or more counterparts, each of which
shall constitute an original, but all of which together shall constitute one and
the same instrument.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
INTERNAL LAWS, AND NOT THE LAWS PERTAINING TO CHOICE OR CONFLICT OF LAWS, OF THE
STATE OF CALIFORNIA.
13. Jurisdiction. The parties agree that any litigation arising out of or
------------
in any way related to this Agreement will be adjudicated in a state or district
court sitting in the City of San Francisco, California, and the parties hereby
consent to the jurisdiction of such court. The parties hereby waive any right to
object to such jurisdiction, including, without limitation, any objection based
on a claim of improper venue or forum non conveniens.
14. Authority of the Representative. In connection with this Agreement,
-------------------------------
the Representative will act for and on behalf of the several Underwriters, and
any action taken under this Agreement by the Representative, as representative
of the several Underwriters, will be binding on all of the Underwriters.
If the foregoing correctly sets forth your understanding, please so
indicate by signing in the space provided below for that purpose, whereupon this
letter shall constitute a binding agreement among the Company and the several
Underwriters.
Very truly yours,
ATG INC.
By:_________________________
34
<PAGE>
Doreen Chiu
President
The foregoing Agreement is hereby confirmed and accepted as of the date first
above written.
VAN KASPER & COMPANY
By:____________________________________
Bruce P. Emmeluth, Managing Director
On its behalf and on behalf of each of the
several Underwriters named in Schedule I hereto
35
<PAGE>
SCHEDULE I
UNDERWRITERS
Number of Firm Shares
Underwriters to be Purchased
- ---------------------------- ----------------------------
Van Kasper & Company
36
<PAGE>
EXHIBIT A
SUBSIDIARIES OF THE COMPANY
ATG Richland Corporation, a Washington corporation
37
<PAGE>
EXHIBIT B
EQUITY INTERESTS OF THE COMPANY AND ITS SUBSIDIARIES
38
<PAGE>
EXHIBIT C
Matters to be Covered in the Opinion of
Graham & James LLP/1/
(i) The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of its jurisdiction of
incorporation.
(ii) The Company has the corporate power to own, lease and operate its
properties and to conduct its business as described in the Prospectus.
(iii) The Company is duly qualified to do business as a foreign corporation
and is in good standing in all jurisdictions in which the ownership or leasing
of its properties or the conduct of its business requires such qualification,
except where the failure so to qualify would not have a material adverse effect
on the business, properties, condition (financial or otherwise), results of
operations or prospects of the Company.
(iv) The authorized, issued and outstanding capital stock of the Company
is as set forth in the Prospectus under the caption "Capitalization" as of the
dates stated therein; the issued and outstanding shares of capital stock of the
Company have been duly and validly authorized and issued, are fully paid and
nonassessable and have not been issued in violation of any preemptive right or
other rights to subscribe for or purchase securities or, except to the extent
any such violations would not be material to the Company (whether because of the
magnitude of the violation, because any claims thereof would be barred by the
statute of limitations or otherwise), in violation of the registration
provisions of the Securities Act of 1933, as amended (the "Securities Act"), or
any registration or qualification requirements of all states in which such
registration or qualification was necessary; provided, that in rendering their
opinion as to non-violation of federal and state securities laws, such counsel
may assume, unless counsel has knowledge of facts that may render such
assumption unreasonable; that any purchasers had, to the extent relevant and
represented by such purchasers in writing, any required investment intent and
the Company directly or indirectly owns all of the issued and
______________________
/1/ In rendering this opinion, counsel may rely as to questions of law not
involving the laws of the United States or the State of California on opinions
of local counsel (provided that such counsel states that they believe they and
the Underwriters are justified in relying thereon) and, as to questions of fact,
upon representations or certificates of officers of the Company and government
officials, in which case their opinion is explicitly to state that they are so
relying thereon and that they have no knowledge of any material misstatement or
inaccuracy in such opinions, representations or certificate. Copies of any
opinion, representation or certificate so relied upon shall be delivered to the
Representative and counsel to the Underwriters.
<PAGE>
outstanding equity securities of each of its subsidiaries and there are no
outstanding options, warrants or other rights to acquire any equity securities
of any such subsidiary.
(v) The authorized capital stock of ATG Richland Corporation consists of
_________ shares of ATG Richland Common Stock, ___________ shares of Series A
Preferred Stock and ___________ shares of Series B Preferred Stock. All issued
and outstanding shares of ATG Richland Corporation's capital stock have been
duly and validly authorized and issued, are fully paid and nonassessable and
have not been issued in violation of any preemptive right or other rights to
subscribe for or purchase securities or, except to the extent any such
violation would not be material to the Company (whether because of the
magnitude of the violation, because any claims thereof would be barred by the
statute of limitations or otherwise), in violation of the registration
provisions of the Securities Act, or any registration or qualification
requirements of all states in which such registration or qualification was
necessary; provided, that in rendering their opinion as to non-violation of
federal and state securities laws, such counsel may assume, unless counsel has
knowledge of facts that may render such assumption unreasonable, that any
purchasers had, to the extent relevant and represented by such purchasers in
writing, any required investment intent; and there are no outstanding options,
warrants or other rights to acquire any equity securities of ATG Richland
Corporation. Immediately prior to the Closing Date, there were ________ shares
of ATG Richland Common Stock issued and outstanding.
(vi) The Company has the corporate power and authority to enter into the
Underwriting Agreement and to issue, sell and deliver the Shares to the
Underwriters.
(vii) The execution, delivery and performance of this Agreement and the
issuance and sale of the Shares do not (A) conflict with, violate, result in a
breach of or constitute a default (or an event that with notice or lapse of
time, or both, would constitute a default) under the Articles of Incorporation
or Bylaws of the Company or any agreement (including, without limitation, an
agreement with respect to registration rights) known to such counsel to which
the Company is a party or by which it or any of its properties or assets is
bound or (B) result in violation of any material federal, California law, rule
or regulation or any writ, judgment, order, injunction or decree of any
government, governmental body, agency or court or any arbitration tribunal
having jurisdiction over the Company or any of its properties, in each case,
known to such counsel.
(viii) The Shares are duly authorized and, when issued and delivered
against payment in full therefor pursuant to the terms of the Underwriting
Agreement, will be validly issued, fully paid, nonassessable, and free of
preemptive rights.
(ix) The Underwriting Agreement has been duly authorized by all necessary
corporate action on the part of the Company and has been duly executed and
delivered by
<PAGE>
the Company and, assuming the due authorization, execution and delivery of the
Underwriting Agreement by the Representative on behalf of the Underwriters, is
the valid and binding agreement of the Company, except insofar as the
enforceability of the indemnification and contribution provisions of the
Underwriting Agreement may be limited as a matter of public policy and except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting creditors' rights generally or by general
equitable principles.
(x) Except for the order of the Commission making the Registration
Statement effective and similar authorizations required under the securities or
"Blue Sky" laws of certain jurisdictions (as to which such counsel need express
no opinion), no consent, approval, authorization or other order of any federal
or California governmental body or, to the knowledge of such counsel, other
person is required which has not been obtained in connection with the
authorization, issuance, sale and delivery of the Shares and the execution,
delivery and performance by the Company of the Underwriting Agreement.
(xi) The Registration Statement has become effective under the Securities
Act and, to the actual knowledge of such counsel, no stop order suspending the
effectiveness of the Registration Statement has been issued and no proceedings
for that purpose have been instituted or are pending or threatened under the
Securities Act.
(xii) The Registration Statement and the Prospectus, and each amendment or
supplement thereto (other than the financial statements, financial data and
supporting schedules included therein, as to which such counsel need express no
opinion), as of the effective date of the Registration Statement, complied as to
form in all material respects with the requirements of the Securities Act and
the applicable Rules and Regulations.
(xiii) To the best knowledge of such counsel, the Company satisfies the
requirements for filing a registration statement on Form S-1.
(xiv) The terms and provisions of the capital stock of the Company conform
in all material respects to the description thereof contained in the
Registration Statement and Prospectus, and the information in the Prospectus
under the caption "Description of Capital Stock", to the extent it constitutes
matters of law or legal conclusions, has been reviewed by such counsel and is
correct and the form of certificate for the Shares complies with California law.
(xv) The description in the Registration Statement and the Prospectus of
the Articles of Incorporation and Bylaws of the Company and of statutes and
contracts are accurate in all material respects and fairly present in all
material respects the information required to be presented by the Securities Act
and the Rules and Regulations.
<PAGE>
(xvi) To the actual knowledge of such counsel, there are no agreements,
contracts, licenses, leases or documents of a character required to be described
or referred to in the Registration Statement or Prospectus or to be filed as an
exhibit to the Registration Statement that are not described or referred to
therein and filed as required.
(xvii) To the actual knowledge of such counsel, there are no legal or
governmental proceedings pending or threatened against the Company of a
character which are required to be disclosed in the Registration Statement or
the Prospectus by the Securities Act or the applicable Rules and Regulations,
other than those described therein.
(xviii) To the actual knowledge of such counsel, the Company is not
presently in breach of, or in default under, any bond, debenture, note or other
evidence of indebtedness or any contract, indenture, mortgage, deed of trust,
loan agreement, lease, license or, without limitation, other agreement or
instrument to which the Company is a party or by which any of its properties is
bound that, individually or in the aggregate, is material to the business,
properties, condition (financial or otherwise), prospects or results of
operations of the Company.
(xix) To the actual knowledge of such counsel, except as set forth in the
Registration Statement and Prospectus, no holders of Common Stock or other
securities of the Company have registration rights with respect to any
securities of the Company.
In addition, such counsel shall state that such counsel has participated in
conferences with officers and other representatives of the Company, the
independent public accountants of the Company, the Representative and counsel to
the Underwriters, at which conferences the contents of the Registration
Statement and the Prospectus and related matters were discussed and, although
they have not independently verified the accuracy, completeness or fairness of
the statements contained in the Registration Statement or the Prospectus,
nothing has come to the attention of such counsel that caused them to believe
that, at the time the Registration Statement became effective, the Registration
Statement (except as to financial statements, financial data and supporting
schedules contained therein, as to which such counsel need express no opinion)
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading, or at the Closing Date or any later date on which the Option
Shares are to be purchased, as the case may be, the Prospectus contained any
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading.
<PAGE>
EXHIBIT 1.2
THIS WARRANT AND ANY SHARES ACQUIRED UPON THE EXERCISE OF THIS WARRANT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE
SOLD OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT FILED UNDER SUCH ACT OR PURSUANT TO AN EXEMPTION FROM REGISTRATION
UNDER SUCH ACT.
THIS WARRANT MAY NOT BE SOLD, TRANSFERRED, HYPOTHECATED OR ASSIGNED TO ANY OTHER
PERSON OR ENTITY FOR A PERIOD OF ONE YEAR EXCEPT TO OFFICERS OF VAN KASPER &
COMPANY.
______________, 1998
WARRANT
TO SUBSCRIBE FOR AND PURCHASE
COMMON STOCK OF ATG INC.
VOID AFTER 5:00 P.M., SAN FRANCISCO TIME, ON _________, 2003
OR IF NOT A BUSINESS DAY, AS DEFINED HEREIN, AT 5:00 P.M.,
SAN FRANCISCO TIME, ON THE IMMEDIATELY
PRECEDING BUSINESS DAY
NO. ______
THIS CERTIFIES that for and in consideration of $.01 per Warrant Share (as
defined below) issuable hereunder, VAN KASPER & COMPANY ("Van Kasper"), or
registered assigns, is entitled to subscribe for and purchase from ATG Inc., a
California corporation (hereinafter called the "Company"), at the price of
$_______ per share, an amount equal to 120% of the price per share to the public
in the Company's initial public offering of the Common Stock (as defined below)
(such price, as from time to time to be adjusted as hereinafter provided, being
hereinafter called the "Warrant Price"), at any time and from time to time but
not earlier than the Commencement Date (as defined below) or later than the
Expiration Date (as defined below), up to 170,000 fully paid, nonassessable
shares of no par value Common Stock of the Company ("Common Stock"), subject,
however, to the provisions and upon the terms and conditions hereinafter set
forth, including without limitation the provisions of Section 2 hereof. The
shares of Common Stock purchasable upon exercise of this Warrant are herein
referred to as the "Warrant Shares." "Commencement Date" shall mean
____________, 1999, which is one year from the date hereof. "Expiration Date"
shall mean 5:00 p.m., San Francisco time, on ___________, 2003, which is five
years from the date hereof, or if not a Business Day, as defined herein, at 5:00
p.m., San Francisco time, on the immediately
<PAGE>
preceding Business Day. "Business Day" shall mean a day other than a Saturday,
Sunday or other day on which banks in the State of California are authorized by
law to remain closed.
This Warrant may represent a portion of a warrant that was originally
issued to Van Kasper on ____________, 1998 to purchase up to 170,000 shares of
Common Stock (the "Original Warrant"). To the extent that Van Kasper may have
transferred all or a portion of such warrant, the capitalized term "Warrants" as
used in this Warrant shall mean all warrants (including this Warrant) that
constituted a portion of the Original Warrant.
1. Exercise of Warrant
-------------------
(a) Cash Exercise. This Warrant may be exercised, at any time and
-------------
from time to time but not earlier than the Commencement Date or later than the
Expiration Date, by the holder hereof or its permitted assigns (hereinafter
referred to as the "Warrantholder"), in whole or in part (but not as to a
fractional share of Common Stock and in no event for less than 100 shares
(unless less than an aggregate of 100 shares are then purchasable under all
outstanding Warrants held by a Warrantholder)), by the completion of the
subscription form attached hereto and by the surrender of this Warrant (properly
endorsed) at the Company's offices at 47375 Fremont Boulevard, Fremont,
California 94538 (or at such other location in the United States as it may
designate by notice in writing to the Warrantholder at the address of the
Warrantholder appearing on the books of the Company), and by payment to the
Company of the Warrant Price, in cash or by certified or official bank check,
for each share being purchased.
(b) Net Exercise. Notwithstanding anything to the contrary contained
------------
in Subsection 1(a), the Warrantholder may elect to exercise this Warrant and
receive shares on a "net exercise" basis in an amount equal to the value of this
Warrant by delivery of the subscription form attached hereto and surrender of
this Warrant at the principal office of the Company, in which event the Company
shall issue to Warrantholder a number of shares computed using the following
formula:
X = (P)(Y)(A-B)
-----------
A
Where: X = the number of shares of Common Stock to be issued to
Warrantholder.
P = the portion of the Warrant, expressed as a percentage, being
exercised.
2
<PAGE>
Y = the number of shares of Common Stock issuable upon exercise
of this Warrant.
A = the Current Market Price (as defined in Subsection 1(d)) of
one share of Common Stock on the date of exercise.
B = Warrant Price.
(c) Procedure for Exercise. In the event of any exercise of the share
----------------------
purchase rights represented by this Warrant, a certificate or certificates for
the total number of whole shares of Common Stock so purchased, registered in the
name of the Warrantholder, shall be delivered to the Warrantholder within a
reasonable time, not exceeding five Business Days, after the share purchase
rights represented by this Warrant shall have been so exercised; and, unless
this Warrant has expired, a new Warrant representing the number of shares
(except a remaining fractional share), if any, with respect to which this
Warrant shall not then have been exercised shall also be issued to the
Warrantholder within such time. With respect to any such exercise, the
Warrantholder shall for all purposes be deemed to have become the holder of
record of the number of shares of Common Stock evidenced by such certificate or
certificates from the date on which this Warrant was surrendered and if exercise
is pursuant to Section 1(a), payment of the Warrant Price was made, irrespective
of the date of delivery of such certificate, except that, if the date of such
surrender and payment is a date on which the stock transfer books of the Company
are closed, such person shall be deemed to have been the holder of such shares
at the close of business on the next succeeding date on which the stock transfer
books are open. No fractional shares shall be issued upon exercise of this
Warrant and no payment or adjustment shall be made upon any exercise on account
of any cash dividends on the Common Stock issued upon such exercise. If any
fractional interest in a share of Common Stock would, except for the provisions
of this Section 1, be delivered upon any such exercise, the Company, in lieu of
delivering the fractional share thereof, shall pay to the Warrantholder an
amount in cash equal to the Current Market Price of such fractional interest, as
defined below.
(d) Current Market Price. For any computation hereunder, the "Current
--------------------
Market Price" per share of Common Stock on any date shall be deemed to be the
average of the daily Market Price per share for the 30 consecutive Trading Days
commencing 45 Trading Days before the date in question. "Market Price" is
defined as the closing sale price (or, if no closing sale price is reported, the
closing bid price) of the Common Stock in the over-the-counter market, and
reported by the National Association of Securities Dealers Automated Quotation
System ("Nasdaq"), or, if the Common Stock is not quoted on Nasdaq, as reported
by the National Quotation Bureau Incorporated. In the event that the Common
Stock is hereafter listed for trading on one or more United States national or
regional securities exchanges, Market Price shall be the closing price on the
exchange or
3
<PAGE>
system designated by the Board of Directors of the Company as the principal
United States market in which the Common Stock is traded. If Market Price cannot
be established as described above, Market Price shall be the fair market value
of the Common Stock as determined in good faith by the Board of Directors. The
term "Trading Day" shall mean a day on which Nasdaq or the principal registered
national securities exchange on which the Common Stock is listed or admitted to
trading is open for the transaction of business.
2. Adjustment of Warrant Price and Number and Kind of Warrant Shares
-----------------------------------------------------------------
The Warrant Price and the number and kind of shares issuable hereunder
shall be subject to adjustment from time to time upon the happening of certain
events as provided in this Section 2. For purposes hereof, the "Total Warrant
Price" shall mean the product of multiplying the total number of Warrant Shares
issuable hereunder by the Warrant Price, in each case as in effect from time to
time.
(a) Adjustments
-----------
(1) if at any time prior to the exercise of this Warrant in
full, the Company shall (A) declare a dividend or make a distribution on the
Common Stock payable in shares of its capital stock (whether shares of Common
Stock or of capital stock of any other class); (B) subdivide, reclassify or
recapitalize its outstanding Common Stock into a greater number of shares; (C)
combine, reclassify or recapitalize its outstanding Common Stock into a smaller
number of shares, or (D) issue any shares of its capital stock by
reclassification of its Common Stock (excluding any such reclassification in
connection with a consolidation or a merger), the Warrant Price, and the number
and kind of shares covered by this Warrant, in effect at the time of the record
date of such dividend, distribution, subdivision, combination, reclassification
or recapitalization shall be proportionately adjusted so that the Warrantholder
shall be entitled to receive, against payment of the Total Warrant Price, the
aggregate number and kind of shares which, if this Warrant had been exercised in
full by payment of the Total Warrant Price immediately prior to such event, it
would have owned upon such exercise and been entitled to receive by virtue of
such dividend, distribution, subdivision, combination, reclassification or
recapitalization. Any adjustment required by this Section 2(a) shall be made
immediately after the record date, in the case of a dividend or distribution, or
the effective date, in the case of a subdivision, combination, reclassification
or recapitalization, to allow the purchase of such aggregate number and kind of
shares.
(2) If at any time prior to the exercise of this Warrant in
full, the Company shall make a distribution to all holders of the Common Stock
of stock of a subsidiary or securities convertible into or exercisable for such
stock, then in lieu of an adjustment in the Warrant Price or the number of
shares of Common Stock purchasable upon the exercise of this Warrant, the
Warrantholder, upon the exercise hereof at any time
4
<PAGE>
after such distribution, shall be entitled to receive from the Company, such
subsidiary or both, as the Company shall determine, the stock or other
securities to which the Warrantholder would have been entitled if the
Warrantholder had exercised this Warrant immediately prior thereto, all subject
to further adjustment as provided in this Section 2, and the Company shall
reserve, for the life of the Warrant such securities of such subsidiary;
provided, however, that no adjustment in respect of dividends or interest on
such stock or other securities shall be made during the term of this Warrant or
upon its exercise.
(3) If at any time prior to the exercise of this Warrant in
full, the Company shall issue rights or warrants to all holders of Common Stock
as such entitling them (for a period expiring within sixty days after the record
date of the determination of shareholders entitled to receive the same) to
subscribe for or purchase Common Stock at a price per share less than the
Current Market Price per share (as defined above) on such record date, then, in
each such case the number of Warrant Shares shall be adjusted by multiplying the
number of shares of Common Stock theretofore purchasable upon exercise of this
Warrant by a fraction, the numerator of which shall be the number of shares of
Common Stock outstanding on the date of issuance of such rights or warrants,
plus the number of additional shares of Common Stock offered for subscription or
purchase, and the denominator of which shall be the number of shares of Common
Stock outstanding on the date of issuance of such rights or warrants plus the
number of shares that the aggregate offering price of the total number of shares
of Common Stock so offered would purchase at such Current Market Price. For
purposes of this Section 2(a)(3), the issuance of rights or warrants to
subscribe for or purchase securities convertible into Common Stock shall be
deemed to be the issuance of rights or warrants to purchase the Common Stock
into which such securities are convertible at an aggregate offering price equal
to the aggregate offering price of such securities plus the minimum aggregate
amount (if any) payable upon conversion of such securities into Common Stock.
(4) If at any time prior to the exercise of this Warrant in
full, the Company shall distribute to all holders of its Common Stock evidence
of indebtedness of the Company or assets of the Company (excluding cash
dividends or distributions out of retained earnings) or rights or warrants to
subscribe for securities of the Company (excluding those referred to in Sections
2(a)(2) or (3) above), then in each case the Warrant Price shall be adjusted to
a price determined by multiplying the Warrant Price in effect immediately prior
to such distribution by a fraction, the numerator of which shall be the then
Current Market Price per share of Common Stock (as defined above) on the record
date for determination of shareholders entitled to receive such distribution,
less the then fair value (as determined by the Board of Directors of the
Company, whose determination shall be conclusive) of the portion of the assets
or evidences of indebtedness so distributed or of such subscription rights or
warrants which are applicable
5
<PAGE>
to one share of Common Stock, and the denominator of which shall be the Current
Market Price per share of Common Stock; provided, however, that if the then
Current Market Price per share of Common Stock on the record date for
determination of shareholders entitled to receive such distribution is less than
the then fair value of the portion of the assets or evidences of indebtedness so
distributed or of such subscription rights or warrants which are applicable to
one share of Common Stock, the foregoing adjustment of the Warrant Price shall
not be made and in lieu thereof, this Warrant shall be adjusted so that the
holder of this Warrant shall be entitled to receive upon exercise of this
Warrant only the kind and number of assets, evidences of indebtedness,
subscription rights and warrants (or, in the event of the redemption of such
evidences of indebtedness, subscription rights or warrants, any cash paid in
respect of such redemption) that such Warrantholder would have owned or have
been entitled to receive after the happening of such distribution had this
Warrant been exercised immediately prior to the record date of such distribution
by payment of the Total Warrant Price.
(5) No adjustment in the Warrant Price shall be required unless
such adjustment would require an increase or decrease of at least five cents
($.05) in such price; provided, however, that any adjustments which by reason of
this Section 2(a)(5) are not required to be made shall be carried forward and
taken into account in any subsequent adjustment. All calculations under this
Section 2(a) shall be made to the nearest cent or to the nearest one hundredth
of a share, as the case may be. Notwithstanding anything in this Section 2(a) to
the contrary, the Warrant Price shall not be reduced to less than the then
existing par value of the Common Stock as a result of any adjustment made
hereunder.
(6) In the event that at any time, as the result of any
adjustment made pursuant to this Section 2(a), the Warrantholder thereafter
shall become entitled to receive any securities other than Common Stock,
thereafter the number of such other securities so receivable, upon exercise of
any Warrant shall be subject to adjustment from time to time in a manner and on
terms as nearly equivalent as practicable to the provisions with respect to the
Common Stock contained in this Section 2(a).
(7) Notwithstanding the foregoing, no adjustments shall be made
pursuant to Sections 2(a)(2), (3) or (4) hereof unless the Company directly or
indirectly shall make substantially similar adjustments to any stock options
granted pursuant to any stock option plan or otherwise grant similar benefits in
lieu of such adjustments to the holder of such stock options.
(b) No Adjustment for Dividends. No adjustment in respect of any cash
---------------------------
dividends shall be made during the term of this Warrant or upon the exercise of
this Warrant.
6
<PAGE>
(c) Termination of Purchase Rights in Certain Transactions. In case
------------------------------------------------------
of any reclassification, capital reorganization or other change of outstanding
shares of Common Stock (other than a subdivision or combination of the
outstanding Common Stock and other than a change in the par value of the Common
Stock) or in case of any consolidation or merger of the Company with or into
another corporation (other than a merger with a subsidiary in which the Company
is the continuing corporation and that does not result in any reclassification,
capital reorganization or other change of outstanding shares of Common Stock) or
in the case of any sale, lease, transfer or conveyance to another corporation of
the property and assets of the Company as an entirety or substantially as an
entirety, this Warrant shall become exercisable on the record date for such
event if this Warrant was not previously exercisable. If this Warrant is not
exercised on or prior to the consummation of any event described in the previous
sentence, then this Warrant shall then terminate, if notice of such event was
properly given pursuant to Section 7 of this Warrant.
(d) Form of Warrant After Adjustments. The form of this Warrant need
---------------------------------
not be changed because of any adjustments in the Warrant Price or the number or
kind of the shares purchasable pursuant to this Warrant, and Warrants
theretofore or thereafter issued may continue to express the same price and
number and kind of shares as are stated in this Warrant, as initially issued;
provided, however, that the Company may, at any time in its sole discretion
(which shall be conclusive), make any change in the form of Warrant certificate
that it may deem appropriate and that does not affect the substance thereof. Any
Warrant certificate thereafter issued, whether upon registration of transfer of,
or in exchange or substitution for, an outstanding Warrant certificate may be in
the form so changed.
(e) Treatment of Warrantholder. Prior to due presentment for
--------------------------
registration of transfer of this Warrant, the Company may deem and treat the
Warrantholder as the absolute owner of this Warrant (notwithstanding any
notation of ownership or other writing hereon) for all purposes and shall not be
affected by any notice to the contrary.
(f) Notice of Adjustment. Upon any adjustment of the Warrant Price,
--------------------
then and in each such case the Company shall give written notice thereof, by
first-class mail, postage prepaid, addressed to each Warrantholder at his, her
or its address as shown on the books of the Company, which notice shall state
the Warrant Price resulting from such adjustment, setting forth in reasonable
detail the method of calculation and the facts upon which such calculation is
based.
(g) Stock to Be Reserved. The Company will at all times reserve and
--------------------
keep available out of its authorized Common Stock, solely for the purpose of
issuance upon the exercise of this Warrant as herein provided, such number of
shares of Common Stock as shall then be issuable upon the exercise of this
Warrant. The Company
7
<PAGE>
covenants that all shares of Common Stock which shall be so issued upon full
payment of the Warrant Price therefor or as otherwise set forth herein, shall be
duly and validly issued and fully paid and nonassessable and free from all
taxes, liens and charges with respect to the issue thereof, and, without
limiting the generality of the foregoing, the Company covenants that it will
from time to time take all such action as may be required to ensure that the par
value per share, if any, of the Common Stock is at all times equal to or less
than the effective Warrant Price. The Company will take all such action as may
be necessary to ensure that all such shares of Common Stock may be so issued
without violation of any applicable law or regulation, or of any requirement of
any registered national securities exchange or automated quotation system upon
which the Common Stock may be listed. The Company will not take any action which
results in any adjustment of the Warrant Price if the total number of shares of
Common Stock issued and issuable after such action upon exercise of this Warrant
would exceed the total number of shares of Common Stock then authorized by the
Company's Articles of Incorporation. The Company has not granted and will not
grant any right of first refusal with respect to shares issuable upon exercise
of this Warrant, and there are no preemptive rights associated with such shares.
(h) Issue Tax. The issuance of certificates for shares of Common
---------
Stock upon exercise of any Warrant shall be made without a charge to the
Warrantholder for any issuance tax in respect thereof, provided that the Company
shall not be required to pay any tax which may be payable in respect of any
transfer involved in the issuance and delivery of any certificate in a name
other than that of the Warrantholder.
(i) Closing of Books. The Company will at no time close its transfer
----------------
books against the transfer of the shares of Common Stock issued or issuable upon
the exercise of this Warrant in any manner which interferes with the timely
exercise of this Warrant.
(j) Definition of Common Stock. As used herein the term "Common
--------------------------
Stock" shall mean and include the no par value Common Stock of the Company, or
securities of any class or classes resulting from any recapitalization or
reclassification thereof.
3. Registration Rights
-------------------
(a) Demand Registration. Beginning as of the Commencement Date and
-------------------
ending on ____________, 2003, if at any time the holder or holders of Warrants
to purchase not less than 50% of the Warrant Shares or the holder or holders of
not less than 50% of all outstanding Warrant Shares (the "Initiating Holders")
shall request that the Company register the offer and sale such number of
Warrants and/or Warrant Shares to the public under the Securities Act of 1933,
as amended (the "Securities Act"), the Company shall file a registration
statement with the Securities and Exchange Commission
8
<PAGE>
("SEC") for the purpose of registering such Warrants and/or Warrant Shares under
the Securities Act. The request described above shall be made in writing
directed to the Company at the address set forth in Section 7 of this Warrant
(the "Demand Registration Notice").
Within ten days after receiving a Demand Registration Notice, the
Company shall issue a notice ("Company's Notice") informing all holders of
Warrants or Warrant Shares who did not issue a Demand Registration Notice
("Other Holders") offering to include the Warrants and/or Warrant Shares of the
Other Holders in that registration statement for sale to the public. Each Other
Holder must notify the Company by no later than 10 days after the Company's
Notice is sent whether that Other Holder wishes to include his, her or its
Warrants and/or Warrant Shares in the registration statement. If any Other
Holder delivers such a notice to the Company in a timely manner, that Other
Holder's Warrants and/or Warrant Shares will be included in the Registration
Statement. If any Other Holder does not inform the Company in writing that his,
her or its Warrants and/or Warrant Shares are to be included in such
registration statement, that Other Holder will be deemed to have waived all
rights to include his, her or its Warrants and/or Warrant Shares in the
registration statement.
For the purposes of this Warrant, all Warrants and/or Warrant
Shares for which a request for registration has been made pursuant to this
Section 3(a) or Section 3(b) shall be referred to as "Subject Securities."
Promptly upon receipt of a Demand Notice and after the expiration of the period
by which the Other Holders must submit a notice requesting inclusion of their
Warrants and/or Warrant Shares in the registration statement, the Company shall
prepare and file with the SEC a registration statement on the applicable form
for the registration of the Subject Securities and use its best efforts to cause
such registration statement to become effective (including without limitation,
filing post-effective amendments, appropriate qualifications under applicable
blue sky or other state securities laws, and appropriate compliance with the
rules and regulations promulgated under the Securities Act (the "Regulations"))
as soon as practicable to permit or facilitate the sale and distribution of the
Subject Securities. The Company shall be obligated to effect only one (1) such
registration pursuant to this Section 3(a).
Notwithstanding the provisions of this Section 3(a), if the
Company shall furnish to the Warrantholder a certificate signed by the Chief
Executive Officer of the Company stating that in the good faith judgment of the
Board of Directors of the Company it would be seriously detrimental to the
Company and its shareholders for such a registration statement to be filed and
it is therefore appropriate to defer a filing of such registration statement,
the Company shall have the right to defer such filing for a period of not more
than one hundred twenty (120) days after receipt of the request from the
Warrantholder to effect such a registration; provided, however, that the Company
may not utilize this right more than once in any twenty-four month period; and
provided, further,
9
<PAGE>
that the Warrantholder may, at any time in writing, withdraw such request for
such registration and therefore preserve the right provided in this Section 3(a)
for the Warrantholder to request such registration.
If the Initiating Holders intend to distribute the Subject
Securities by means of an underwriting, they shall so advise the Company in the
Demand Registration Notice, and the Company shall so advise the Other Holders in
the Company's Notice. The right of any holder of Warrants and/or Warrant Shares
pursuant to this Section 3(a) shall be conditioned on such holder's agreement to
participate in such underwriting. The Company shall enter into an underwriting
agreement with the managing underwriter selected by the holders of a majority of
the Subject Securities being registered and agreed to by the Company in its
reasonable business judgment. In the event that the managing underwriter
determines in its best judgment that market conditions require a limitation on
the number of shares to be registered, then (i) if other selling shareholders
without contractual registration rights have requested registration of
securities in the proposed offering, the Company will reduce or eliminate such
securities held by selling shareholders without registration rights before any
reduction or elimination of the Subject Securities, (ii) any shares included by
the Company in such registration shall be reduced or eliminated before any
reduction or elimination of the Subject Securities, (iii) any shares requested
to be registered by other selling shareholders with contractual registration
rights shall be reduced or eliminated before any reduction or elimination of the
Subject Securities and (iv) lastly, the number of Subject Securities may be
reduced, provided that any such reduction (after taking into account the effect
of clauses (i), (ii) and (iii) shall be pro rata to all selling holders of
Subject Securities.
(b) Preparation of Documents. Prior to filing a registration
------------------------
statement or any amendments or supplements thereto with the SEC required hereby,
the Company will furnish to the counsel selected by the Warrantholder copies of
all documents proposed to be filed, which documents will be subject to the
timely review of such counsel. In connection therewith, the Company shall
prepare and file a registration statement to effect such registration. The
Warrantholder agrees to provide all such information and materials and take all
such action as may be reasonably required in order to permit the Company to
comply with all applicable requirements of the SEC and to obtain any desired
acceleration of the effective date of such registration statement.
(c) Piggyback Registration. If (but without any obligation to do so)
----------------------
the Company proposes to register, prior to ____________, 2003, with the SEC any
of the Common Stock under the Securities Act (other than pursuant to a request
under Section 3(a) and other than securities to be issued pursuant to a stock
option or other employee benefit or similar plan, or in connection with a
merger, acquisition, or a transaction pursuant to Rule 145 under the Securities
Act), the Company shall as promptly as practicable, but at least 30 days prior
to the filing of the applicable registration statement, give written notice to
the Warrantholder of its intention to effect such registration. If, within 20
days after receipt of such notice and after the Commencement Date but before
10
<PAGE>
the Expiration Date, the Warrantholder submits a written request to the Company
specifying the amount of Warrant Shares that the Warrantholder proposes to sell,
the Company shall include the shares (but not this Warrant) specified in such
request in such registration statement (and any related qualification under blue
sky laws or other compliance) and the Company shall keep each such registration
statement in effect and maintain compliance with each federal and state law and
regulation as set forth in Section 3(d).
Prior to filing a registration statement under the Securities Act
under which the Warrant Shares may be included pursuant to this Section 2(c),
the Company shall give reasonable notice to the holder(s) of this Warrant or
Warrant Shares as provided for above and shall allow such Warrant Shares to be
included in such registration statement subject to the following terms and
conditions: (i) such shares need not be included in any underwritten offering if
and to the extent that the managing underwriter determines in its best judgment
that their inclusion would impair the success of the offering provided that (A)
if other selling shareholders without contractual registration rights have
requested registration of securities in the proposed offering, the Company will
reduce or eliminate such securities held by selling shareholders without
registration rights before any reduction or elimination of Warrant Shares, and
(B) any such reduction or elimination (after taking into account the effect of
clause (A)) shall be pro rata to all other selling shareholders with contractual
registration rights; and (ii) the Company shall have no obligation pursuant to
this Section if at the time the registration statement is proposed to be filed
the holders may freely sell the Warrant Shares pursuant to the Regulations.
(d) Covenants of the Company. In connection with any offering of
------------------------
Subject Securities registered pursuant to the terms of this Warrant, the Company
shall (i) furnish to the Warrantholder such number of copies of any registration
statement (including any preliminary prospectus) as it may reasonably request in
order to effect the offering and sale of the Subject Securities to be offered
and sold, but only while the Company shall be required under the provisions
hereof to cause the registration statement to remain current; (ii) take such
action as shall be desirable or necessary to qualify the Subject Securities
covered by such registration statement under such blue sky or other state
securities laws for offer and sale as the Warrantholder shall request, and (iii)
keep the Warrantholder advised in writing as to the initiation of each
registration and as to the completion thereof. Upon any registration becoming
effective pursuant to this Section 3, the Company shall use its best efforts to:
(A) keep such registration statement current for a period of 120 days; (B)
prepare and file with the SEC such amendments and supplements to such
registration statement as may be necessary to comply with the provisions of the
Regulations with respect to the disposition of all securities covered by such
registration statement; (C) cause all such Subject Securities registered
pursuant to such registration statement to be listed on each securities exchange
or automated
11
<PAGE>
quotation system on which the Common Stock is then listed; (D) provide a
transfer agent and registrar for all Subject Securities registered pursuant to
such registration statement and CUSIP number for all such Subject Securities in
each case not later than the effective date of such registration; and (E)
otherwise use its best efforts to comply with all applicable rules and
regulations of the SEC.
(e) Sales by the Company. In connection with any offering of Subject
--------------------
Securities pursuant to Section 3(a), the Company agrees not to effect any public
sale or distribution of Common Stock for the seven-day period preceding, and the
90-day period following, the effective date of any such registration; provided
that during this period the Company may issue (i) to employees, officers and
directors of the Company options, to purchase Common Stock (provided that such
options may not be exercisable within the 90-day period) and (ii) shares of
Common Stock upon the exercise of previously outstanding options, warrants or
rights.
(f) Expenses. With respect to the registration of Subject Securities
--------
pursuant to Section 3(a), together with any inclusion of the Subject Securities
in a so-called piggyback registration pursuant to Section 3(c), the Company will
pay all expenses incident to its performance of or compliance with this Section
3 including, without limitation, all registration and filing fees, fees and
expenses of compliance with securities or blue sky laws, printing expenses,
messenger, telephone and delivery expenses, and fees and disbursements of its
counsel and independent certified public accountants; provided that, if a
registration of Subject Securities pursuant to Section 3(a) is withdrawn at the
request of the Warrantholder, the Warrantholder shall reimburse the Company for
all expenses the Company has reasonably incurred in connection with such
registration. Notwithstanding the foregoing, the Company shall not bear the
underwriting discounts or commissions relating to the offering of Subject
Securities pursuant to Section 3(a) or 3(c), and the fees and expense (if any)
of legal counsel to the holders of the Subject Securities being registered. The
Warrantholder will also be responsible for any stock transfer taxes, broker's
fees or other direct marketing expenses, all internal management and personnel
and administrative costs of the Warrantholder, if any, incurred by it in
connection with effecting any such transactions.
(g) Indemnification. The Company will indemnify, to the maximum
---------------
extent permitted by law, the Warrantholder, its officers and directors and each
person who controls the Warrantholder (within the meaning of Section 15 the
Securities Act) against all losses, claims, damages, liabilities and expenses
(or actions, proceedings or settlements in respect thereof) caused by, arising
out of or based on any untrue or alleged untrue statement of a material fact
contained in any registration statement (or any amendment or supplement thereto)
of the Company relating to the sale of Subject Securities registered pursuant to
this Section 3, or any exhibits or materials incorporated by reference therein,
filed with the SEC, or any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
12
<PAGE>
therein not misleading, except insofar as the same are caused by or contained in
any information furnished in writing to the Company by the Warrantholder
expressly for use therein.
The Warrantholder will indemnify, to the maximum extent permitted by
law, the Company, its officers and directors and each person who controls the
Company (within the meaning of the Section 15 of the Securities Act) against all
losses, claims, damages, liabilities and expenses (or actions, proceedings or
settlements in respect thereof) caused by, arising out of or based on any untrue
or alleged untrue statement of a material fact contained in any registration
statement (or any amendment or supplement thereto) of the Company relating to
the sale of Subject Securities registered pursuant to this Section 3, or any
exhibits or materials incorporated by reference therein, filed with the SEC, or
any omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, but
only insofar as the same are caused by or contained in any information furnished
in writing to the Company by the Warrantholder expressly for use therein.
Any person entitled to indemnification under this Section 3(g) will
(i) give prompt written notice to the indemnifying party of any claim with
respect to which it seeks indemnification and (ii) unless in such indemnified
party's reasonable judgment a conflict of interest between such indemnified and
indemnifying parties may exist with respect to such claim, permit such
indemnifying party to assume the defense of such claim with counsel reasonably
satisfactory to the indemnified party. If such defense is assumed, the
indemnifying party will not be subject to any liability for any settlement made
by the indemnified party without its consent (but such consent will not be
unreasonably withheld). An indemnifying party who is not entitled to, or elects
not to, assume the defense of a claim will not be obligated to pay the fees and
expenses of more than one counsel for all parties indemnified by such
indemnifying party with respect to such claim, unless in the reasonable judgment
of any indemnified party a conflict of interest may exist between such
indemnified party and any other of such indemnified parties with respect to such
claim in which case, the indemnifying party shall be obligated to pay the fees
and expenses of up to two counsel for all parties indemnified by such
indemnifying party with respect to such claim.
The indemnifications set forth in this Section 3(g) shall survive the
termination or expiration of this Warrant.
4. Notices of Record Dates
-----------------------
In the event of:
(a) any taking by the Company of a record of the holders of any class
of securities for the purpose of determining the holders thereof who are
entitled to receive
13
<PAGE>
any dividend or other distribution (other than cash dividends out of retained
earnings), or any right to subscribe for, purchase or otherwise acquire any
shares of stock of any class or any other securities or property, or to receive
any right to sell shares of stock of any class or any other right, or
(b) any capital reorganization of the Company, any reclassification
or recapitalization of the capital stock of the Company or any transfer of all
or substantially all the assets of the Company to or consolidation or merger of
the Company with or into any other corporation or entity, or
(c) any voluntary or involuntary dissolution, liquidation or winding-
up of the Company,
then and in each such event the Company will give notice to the Warrantholder
specifying (1) the date on which any such record is to be taken for the purpose
of such dividend, distribution or right and stating the amount and character of
such dividend, distribution or right, and (2) the date on which any such
reorganization, reclassification, recapitalization, transfer, consolidation,
merger, dissolution, liquidation or winding-up is to take place, and the time,
if any is to be fixed, as of which the holders of record of Common Stock will be
entitled to exchange their shares of Common Stock for securities or other
property deliverable upon such reorganization, reclassification,
recapitalization, transfer, consolidation, merger, dissolution, liquidation or
winding-up. Such notice shall be given at least 10 days and not more than 90
days prior to the date therein specified, and such notice shall state that the
action in question or the record date is subject to the effectiveness of a
registration statement under the Securities Act, or to a favorable vote of
shareholders, if either is required. Failure to mail or receive such notice or
any defect therein shall not affect the validity of any such action.
5. No Shareholder Rights or Liabilities
------------------------------------
This Warrant shall not entitle the Warrantholder to any voting rights
or other rights as a shareholder of the Company. No provision hereof, in the
absence of affirmative action by the Warrantholder to purchase shares of Common
Stock, and no mere enumeration herein of the rights or privileges of the
Warrantholder, shall give rise to any liability of such Warrantholder for the
Warrant Price or as a shareholder of the Company, whether such liability is
asserted by the Company or by creditors of the Company.
6. Lost, Stolen, Mutilated or Destroyed Warrant
--------------------------------------------
In case the certificate or certificates evidencing the Warrant shall
be mutilated, lost, stolen or destroyed, the Company shall, at the request of
the Warrantholder, issue and deliver in exchange and substitution for and upon
cancellation
14
<PAGE>
of the mutilated certificate or certificates, or in lieu of and substitution for
the certificate or certificates lost, stolen or destroyed, a new Warrant
certificate or certificates of like tenor and representing an equivalent right
or interest, but only upon receipt of evidence satisfactory to the Company of
such loss, theft or destruction of such Warrant and a bond of indemnity, if
requested, also satisfactory in form and amount at the applicant's cost.
Applicants for such substitute Warrant certificate or certificates shall also
comply with such other reasonable regulations and pay such other reasonable
charges as the Company may prescribe.
7. Notices
-------
All notices, requests and other communications required or permitted
to be given or delivered hereunder shall be in writing, and shall be delivered
or shall be sent by certified or registered mail or overnight courier, postage
prepaid and addressed, or by facsimile, and if to the Warrantholder to such
Warrantholder at such address or facsimile number as shall have been furnished
to the Company by notice from such Warrantholder and if to the Company, at 47375
Fremont Boulevard, Fremont, California 94538, Attention: President, facsimile
number (510) 651-3731, or at such other address or facsimile number as shall
have been furnished to the Warrantholder by notice from the Company.
8. Restrictions on Transfer
------------------------
This Warrant may not be sold, transferred, hypothecated or assigned to
any other person or entity for a period of one year from the date of this
Warrant, except to officers of Van Kasper in accordance with all applicable
laws. This Warrant shall bear a legend setting forth the foregoing restriction.
9. Compliance with Securities Act
------------------------------
This Warrant and the Warrant Shares may not be offered or sold except
in compliance with the Securities Act of 1933, as amended, and then only against
receipt of an agreement of such person to whom such offer or sale is made to
comply with the provisions of this Section 9 with respect to any resale or
other disposition of the Warrant or Warrant Shares. The Company may cause the
following legend to be set forth on this Warrant and each certificate
representing the Warrant Shares to the extent that the offer and sale of the
Warrant Shares has not been registered under the Securities Act pursuant to
Section 3 hereof, unless counsel for the Company is of the opinion as to any
such certificate that such legend is unnecessary;
THIS WARRANT [THESE SHARES] HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD
OR OTHERWISE TRANSFERRED EXCEPT
15
<PAGE>
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT FILED UNDER
SUCH ACT OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER
SUCH ACT.
10. Amendments and Waivers
----------------------
This Warrant and any term hereof may be changed, waived, discharged or
terminated only by an instrument in writing signed by the party against which
enforcement of such change, waiver, discharge or termination is sought.
11. Severability
------------
If one or more provisions of this Warrant are held to be unenforceable
under applicable law, such provisions shall be excluded from this Warrant, and
the balance of this Warrant shall be interpreted as if such provision were so
excluded and shall be enforceable in accordance with its terms.
12. Governing Law
-------------
This Warrant shall be governed by and construed under the laws of the
State of California without regard to conflict of law principles.
13. Headings
--------
The headings in this Warrant are for purposes of reference only and
shall not limit or otherwise affect any of the terms hereof.
IN WITNESS WHEREOF, the Company has executed this Warrant on and as of
the day and year first above written.
ATG INC.,
a California corporation
________________________________________
Doreen M. Chiu
Chief Executive Officer
16
<PAGE>
SUBSCRIPTION FORM
(To be executed upon exercise of this Warrant)
___________________ :
The undersigned hereby irrevocably elects to exercise the right of
purchase represented by the within Warrant for, and to purchase thereunder,
___________ shares of Common Stock, as provided for therein, and either tenders
herewith payment of the purchase price in full in the form of cash or a
certified or official bank check in the amount of $__________ or, if the
undersigned elects pursuant to Section 1(b) of the within Warrant to convert
such Warrant into Common Stock on a net exercise basis, the undersigned
exercises the within Warrant by exchange under the terms of said Section 1(b).
Please issue a certificate or certificates for such Common Stock in the
name of and pay any cash for any fractional share to:
Name:___________________________________
Address:________________________________
Social Security No:_____________________
If said number of shares shall not be all the shares purchasable under the
within Warrant, a new Warrant is to be issued in the name of said undersigned
for the balance remaining of the shares purchasable thereunder rounded up to the
next higher number of shares.
Dated:_____________ Signature: _____________________________
Note: The above signature must
correspond exactly with the name
of the original Warrantholder on
the first page of this Warrant or
with the name of the assignee
appearing in the assignment form
below.
Dated:_____________ Signature Guaranteed: __________________
(Signature must be guaranteed by a bank or trust company having an office
or correspondent in the United States or by a member firm of a registered
national securities exchange or the National Association of Securities Dealers,
Inc.)
17
<PAGE>
ASSIGNMENT
(To be executed only upon assignment of Warrant)
For value received, ___________________________ hereby sells, assigns, and
transfers unto ______________________ the within Warrant Certificate, together
with all right, title and interest therein, and does hereby irrevocably
constitute and appoint ___________________________ as his attorney to transfer
said Warrant on the books of the within-named Company with respect to the number
of shares of Common Stock set forth below, with full power of substitution in
the premises:
Names of Assignee(s)/Address No. of Shares
---------------------------- -------------
And if said number of shares shall not be all the shares covered by the Warrant,
a new Warrant is to be issued in the name of said undersigned for the balance
remaining of the shares covered by said Warrant.
Dated:_____________ Signature:______________________________
Note: The above signature must
correspond with the name of the
original Warrantholder on the
face of this Warrant
Dated:_____________ Signature Guaranteed:_______________________________
(Signature must be guaranteed by a bank or trust company having an office
or correspondent in the United States or by a member firm of a registered
national securities exchange or the National Association of Securities Dealers,
Inc.)
<PAGE>
EXHIBIT 3.1
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF ATG INC.
Doreen Chiu and Frank Chiu certify that:
1. They are the President and Secretary, respectively, of ATG Inc., a
California corporation.
2. The Articles of Incorporation of this Corporation are amended and
restated in their entirety to read as follows:
I
The name of this Corporation is ATG Inc.
II
The purpose of this Corporation is to engage in any lawful act or activity
for which a corporation may be organized under the General Corporation Law of
California other than the banking business, the trust company business or the
practice of a profession permitted to be incorporated by the California
Corporations Code.
III
(a) This Corporation is authorized to issue two classes of shares,
designated "Preferred Stock" and "Common Stock." The total number of shares
which this Corporation shall have authority to issue is 21,000,000 of which
20,000,000 shares shall be Common Stock and 1,000,000 shares shall be Preferred
Stock, all of which shall be designated "Series A Preferred Stock."
(b) A statement of the rights, preferences, privileges and restrictions
granted to or imposed on the Series A Preferred Stock and the holders thereof is
as follows:
(1) Dividends. Any dividends declared by the Board of Directors shall
be distributed among all holders of Series A Preferred Stock and all holders of
Common Stock in proportion to the number of shares of Common Stock which would
be held by each such holder if all shares of Series A Preferred Stock were
converted into Common Stock at the then effective Conversion Price (as defined
in paragraph 3(a) below).
<PAGE>
In the event that the Corporation shall have declared but unpaid dividends
outstanding immediately prior to, and in the event of, a conversion of Series A
Preferred Stock (as provided in paragraph 3 hereof), the Corporation shall, at
the option of each holder, pay in cash to each holder of Series A Preferred
Stock subject to conversion the full amount of any such dividends or allow such
dividends to be converted into Common Stock in accordance with, and pursuant to
the terms specified in, paragraph 3 hereof.
(2) Liquidation Preference.
(a) In the event of any liquidation, dissolution or winding up
of the Corporation, either voluntary or involuntary, the holders of the Series A
Preferred Stock shall be entitled to receive, prior and in preference to any
distribution of any of the assets or surplus funds of the Corporation to the
holders of the Common Stock by reason of their ownership thereof, for each share
of Series A Preferred Stock then held by them an amount equal to (i) $5.00 plus
(ii) a premium equal to an annual rate of ten percent (10%) of such amount,
compounded annually from the date a share of Series A Preferred is first issued
plus (iii) all declared but unpaid dividends on the Series A Preferred Stock
(the "Liquidation Preference"). If, upon occurrence of such event the assets and
funds thus distributed among the holders of the Series A Preferred Stock shall
be insufficient to permit the payment to such holders of the full preferential
amount, then the entire assets and funds of the Corporation legally available
for distribution shall be distributed among the holders of the Series A
Preferred Stock in proportion to the number of shares of Series A Preferred
Stock held by each such holder.
After payment has been made to the holders of the Series A Preferred Stock
of the Liquidation Preference the holders of the Common Stock shall be entitled
to receive the remaining assets of the Corporation.
(b) For purposes of this paragraph 2, a liquidation, dissolution
or winding up of the Corporation shall be deemed to be occasioned by, and to
include, (i) the Corporation's sale of all or substantially all of its assets or
(ii) any transaction or series of related transactions (including, without
limitation, any reorganization, merger or consolidation) which will result in
the holders of the outstanding voting equity securities of the Corporation
immediately prior to such transaction holding less than fifty percent (50%) of
the voting equity securities of the surviving entity immediately following such
transaction.
(c) For purposes of this paragraph 2, the amount of assets and
surplus funds of this Corporation available for distribution upon a liquidation,
dissolution or winding up of this Corporation shall be determined as follows:
(i) insofar as it consists of cash, be computed at the
aggregate amount of cash held by this Corporation at the time of the
liquidation, dissolution or winding up, excluding amounts paid or payable for
accrued interest or accrued dividends: and
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(ii) insofar as it consists of property other than cash, be
computed at the fair value thereof at the time of the liquidation, dissolution
or winding up, as determined in good faith by the Board.
(3) Conversion. The holders of the Series A Preferred Stock shall
have conversion rights as follows (the "Conversion Rights"):
(a) Right to Convert. Each share of Series A Preferred Stock
shall be convertible, at the option of the holder thereof at any time prior to
5:00 p.m., Pacific Time, on the day preceding the Redemption Date for any such
share as to which a Redemption Call has been delivered to the Corporation
pursuant to Section 9 below, into such number of fully paid and nonassessable
shares of Common Stock as is determined by dividing $5.00 (the "Original
Purchase Price") by the Conversion Price, determined as hereinafter provided, in
effect at the time of conversion. The price at which shares of Common Stock
shall be deliverable upon conversion (the "Conversion Price") shall initially be
$5.00 per share of Common Stock. Such initial Conversion Price shall be subject
to adjustment as hereinafter provided.
Each share of Series A Preferred Stock shall automatically be converted
into shares of Common Stock at the then effective Conversion Price (i) in the
event of the effectiveness of a firm commitment underwritten public offering
pursuant to an effective registration statement under the Securities Act of
1933, as amended, covering the offer and sale of Common Stock for the account of
the Corporation to the public at a price per share of at least $10.00 (as
adjusted for stock splits, reverse stock splits and the like effected after the
date on which the first share of Series A Preferred Stock is issued (the
"Original Issue Date")) and an aggregate offering price to the public of not
less than $15,000,000 or (ii) at the election of the holders of a majority of
the outstanding shares of Series A Preferred Stock. In the event of such an
offering, the person(s) entitled to receive the Common Stock issuable upon such
conversion of Series A Preferred Stock shall not be deemed to have converted
such Series A Preferred Stock until immediately prior to the closing of such
underwritten public offering.
(b) Mechanics of Conversion. No fractional shares of Common
Stock shall be issued upon conversion of Series A Preferred Stock. In lieu of
any fractional share to which a holder would otherwise be entitled, the
Corporation shall pay cash equal to such fraction multiplied by the fair market
value of the Common Stock as determined by the Board of Directors. Before any
holder of Series A Preferred Stock shall be entitled to convert the same into
full shares of Common Stock, he shall surrender the certificate or certificates
therefor, duly endorsed, at the office of the Corporation or of any transfer
agent for the Series A Preferred Stock, and shall give written notice to the
Corporation at such office that he elects to convert the same. Such notice shall
also state whether the holder elects, pursuant to paragraph 1 hereof, to receive
declared but unpaid dividends on the Series A Preferred Stock proposed to be
converted in cash, or to convert such dividends into shares of Common Stock at
their fair market value as determined by the Board of Directors. The Corporation
shall, as soon as practicable thereafter, issue and deliver at such office to
such holder of Series A Preferred Stock, a certificate or certificates for the
number of shares of Common Stock to which he shall be entitled as aforesaid
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<PAGE>
and a check payable to the holder in the amount of any cash amounts payable as
the result of a conversion into a fractional share of Common Stock, and any
declared but unpaid dividends on the converted Series A Preferred Stock which
the holder elected to receive in cash. Such conversion shall be deemed to have
been made immediately prior to the close of business on the date of such
surrender of the shares of Series A Preferred Stock to be converted, and the
person or persons entitled to receive the shares of Common Stock issuable upon
such conversion shall be treated for all purposes as the record holder or
holders of such shares of Common Stock on such date. If the conversion is in
connection with an underwritten public offering of securities registered
pursuant to the Securities Act of 1933, the conversion shall be conditioned upon
the closing of such public offering, in which event the person(s) entitled to
receive the Common Stock issuable upon such conversion of the Series A Preferred
Stock shall not be deemed to have converted such Series A Preferred Stock until
immediately prior to such closing.
(c) Adjustments to Conversion Price for Diluting Issues.
(i) Special Definitions. For purposes of this paragraph 3,
the following definitions shall apply:
(1) "Options" shall mean rights, options or warrants
to subscribe for, purchase or otherwise acquire either Common Stock or
Convertible Securities.
(2) "Convertible Securities" shall mean any evidences
of indebtedness, shares (other than the Series A Preferred Stock) or other
securities convertible into or exchangeable for Common Stock.
(3) "Series A Original Issue Date" shall mean the date
on which a share of Series A Preferred was first issued.
(4) "Additional Shares of Common Stock" shall mean all
shares of Common Stock issued (or, pursuant to paragraph 3(c)(iii), deemed to be
issued) by the Corporation after the Series A Original Issue Date, other than
shares of Common Stock issued or issuable:
(A) upon conversion of shares of Series A
Preferred Stock;
(B) to directors, officers or employees of, or
consultants to, the Corporation pursuant to a stock grant, option plan or
purchase plan or other stock incentive program or issuance (collectively, the
"Plans") unanimously approved by the Board of Directors;
(C) upon exercise or conversion of warrants to
purchase shares of the capital stock of the Corporation issued to First Taiwan
Investment & Development Inc. ("First Taiwan") (or entities designated by First
Taiwan) pursuant to Section
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<PAGE>
8.3 of the Stock Purchase Agreement for Series A Preferred Stock among the
Corporation, First Interstate and other certain other parties, or warrants to
purchase shares of the capital stock of the Corporation issued in connection
with equipment lease financing transactions or bank financing transactions
unanimously approved by the Board of Directors, where the issuance of such
warrants is not principally for the purpose of raising additional equity capital
for the Corporation;
(D) pursuant to the acquisition of another
corporation by the Corporation or any subsidiary of the Corporation by merger,
purchase of substantially all of the assets, or other reorganization unanimously
approved by the Board of Directors whereby the Corporation owns more than fifty
percent (50%) of the voting power of such other corporation following such
acquisition;
(E) as a dividend or distribution on the Series A
Preferred Stock; and
(F) by way of dividend or other distribution on
shares of Common Stock excluded from the definition of Additional Shares of
Common Stock by the foregoing clauses (A), (B), (C), (D) or (E) or on shares of
Common Stock so excluded.
(ii) No Adjustment of Conversion Price. No adjustment in
the Conversion Price of Series A Preferred Stock shall be made in respect of the
issuance of Additional Shares of Common Stock unless the consideration per
share for an Additional Share of Common Stock issued or deemed to be issued by
the Corporation is less than the Conversion Price in effect on the date of, and
immediately prior to such issue, for such share of Series A Preferred Stock.
(iii) Deemed Issue of Additional Shares of Common Stock. In
the event the Corporation at any time or from time to time after the Series A
Original Issue Date, as the case may be, shall issue any Options or Convertible
Securities or shall fix a record date for the determination of holders of any
class of securities entitled to receive any such Options or Convertible
Securities, then the maximum number of shares (as set forth in the instrument
relating thereto without regard to any provisions contained therein for a
subsequent adjustment of such number) of Common Stock issuable upon the exercise
of such Options or, in the case of Convertible Securities and Options therefor,
the conversion or exchange of such Convertible Securities, shall be deemed to be
Additional Shares of Common Stock issued as of the time of such issue or, in
case such a record date shall have been fixed, as of the close of business on
such record date, provided that Additional Shares of Common Stock shall not be
deemed to have been issued unless the consideration per share (determined
pursuant to paragraph 3(c)(v) hereof) of such Additional Shares of Common Stock
would be less than the Series A Conversion Price in effect on the date of and
immediately prior to such issue, or such record date, as the case may be, and
provided further that in any such case in which Additional Shares of Common
Stock are deemed to be issued:
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<PAGE>
(1) no further adjustment in the applicable Conversion
Price shall be made upon the subsequent issue of Convertible Securities or
shares of Common Stock upon the exercise of such Options or conversion or
exchange of such Convertible Securities;
(2) if such Options or Convertible Securities by their
terms provide, with the passage of time or otherwise, for any increase or
decrease in the consideration payable to the Corporation, or increase or
decrease in the number of shares of Common Stock issuable, upon the exercise,
conversion or exchange thereof, the applicable Conversion Price computed upon
the original issue thereof (or upon the occurrence of a record date with respect
thereto), and any subsequent adjustments based thereon, shall, upon any such
increase or decrease becoming effective, be recomputed to reflect such increase
or decrease insofar as it affects such Options or the rights of conversion or
exchange under such Convertible Securities; and
(3) no readjustment pursuant to clause (2) above shall
have the effect of increasing the applicable Conversion Price to an amount which
exceeds the lower of (i) the Conversion Price on the original adjustment date,
or (ii) the Conversion Price that would have resulted from any issuance of
Additional Shares of Common Stock between the original adjustment date and such
readjustment date.
(iv) Adjustment of Conversion Price Upon Issuance of
Additional Shares of Common Stock.
(1) In the event this Corporation shall issue
Additional Shares of Common Stock (including Additional Shares of Common Stock
deemed to be issued pursuant to paragraph 3(c)(iii)) without consideration or
for a consideration per share less than the Series A Conversion Price in effect
on the date of and immediately prior to such issuance, then and in such event,
such Conversion Price shall be reduced, concurrently with such issue, to a price
(calculated to the nearest cent) determined by multiplying such Conversion Price
by a fraction, the numerator of which shall be the number of shares of Common
Stock issuable upon conversion of the Series A Preferred Stock outstanding
immediately prior to such issue plus the number of shares of Common Stock which
the aggregate consideration received by the Corporation for the total number of
Additional Shares of Common Stock so issued would purchase at such Conversion
Price; and the denominator of which shall be the number of shares of Common
Stock issuable upon conversion of the Series A Preferred Stock outstanding
immediately prior to such issue plus the number of such Additional Shares of
Common Stock so issued.
(v) Determination of Consideration. For purposes of this
paragraph 3(c), the consideration received by the Corporation for the issue of
any Additional Shares of Common Stock shall be computed as follows:
(1) Cash and Property: Such consideration shall:
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<PAGE>
(A) insofar as it consists of cash, be computed
at the aggregate amount of cash received by the Corporation excluding amounts
paid or payable for accrued interest or accrued dividends;
(B) insofar as it consists of property other than
cash, be computed at the fair value thereof at the time of such issue, as
determined by the Board of Directors in the good faith exercise of its
reasonable business judgment; and
(C) in the event Additional Shares of Common
Stock are issued together with other shares or securities or other assets of the
Corporation for consideration which covers both, be the proportion of such
consideration so received, computed as provided in clauses (A) and (B) above, as
determined in good faith by the Board of Directors.
(2) Options and Convertible Securities. The
consideration per share received by the Corporation for Additional Shares of
Common Stock deemed to have been issued pursuant to paragraph 3(c)(iii)(1),
relating to Options and Convertible Securities, shall be determined by dividing
(x) the total amount, if any, received or
receivable by the Corporation as consideration for the issue of such Options or
Convertible Securities, plus the minimum aggregate amount of additional
consideration (as set forth in the instruments relating thereto, without regard
to any provision contained therein for a subsequent adjustment of such
consideration) payable to the Corporation upon the exercise of such Options or
the conversion or exchange of such Convertible Securities, or in the case of
Options for Convertible Securities, the exercise of such Options for Convertible
Securities and the conversion or exchange of such Convertible Securities by
(y) the maximum number of shares of Common Stock
(as set forth in the instruments relating thereto, without regard to any
provision contained therein for a subsequent adjustment of such number) issuable
upon the exercise of such Options or the conversion or exchange of such
Convertible Securities.
(vi) Adjustments for Stock Dividends, Subdivisions,
Combinations or Consolidations. In the event the Corporation shall pay a stock
dividend on the Common Stock, or the outstanding shares of Common Stock shall be
subdivided, combined or consolidated, by reclassification or otherwise, into a
greater or lesser number of shares of Common Stock, the Conversion Price in
effect immediately prior to such subdivision or combination shall, concurrently
with the effectiveness of such subdivision, combination or consolidation, be
proportionately adjusted.
(d) Special Adjustment Upon Initial Public Offering. Upon the
closing of an underwritten public offering pursuant to an effective registration
statement under the Securities Act of 1933, as amended, covering the offering
and sale of Common Stock of the Company, then the Conversion Price of the Series
A Preferred Stock shall be the lower of (i) the
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<PAGE>
then current Conversion Price or (ii) the price determined by multiplying the
Price To The Public in such underwritten public offering by the discount factor
appropriate for the year in which such closing occurs applicable to the date of
such closing.
Calendar Year in which
Closing of Underwritten
Public Offering Occurs Discount Factor
June 30, 1995 or earlier .5
July 1, 1995 through .333333
June 30, 1996
July 1, 1996 or later .25
For purposes of this paragraph (d), the "Price To The Public" shall mean
the aggregate price per share paid by the purchasers, without reduction for any
underwriting discounts or commissions or expenses of the offering.
(e) No Impairment. The Corporation will not, by amendment of its
Articles of Incorporation or through any reorganization, transfer of assets,
merger, dissolution, issue or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed hereunder by the Corporation but will at all times in good
faith assist in the carrying out of all the provisions of this paragraph 3 and
in the taking of all such action as may be necessary or appropriate in order to
protect the Conversion Rights of the holders of the Series A Preferred Stock
against impairment.
(f) Notices of Record Date. In the event that this Corporation
shall propose at any time:
(i) to declare any dividend or distribution upon its
Common Stock, whether in cash, property, stock or other securities, whether or
not a regular cash dividend and whether or not out of earnings or earned
surplus;
(ii) to offer for subscription pro rata to the holders of
any class or series of its stock any additional shares of stock of any class or
series or other rights;
(iii) to effect any reclassification or recapitalization of
its Common Stock outstanding involving a change in the Common Stock; or
(iv) to merge with or into any other corporation (other
than a merger in which the holders of the outstanding voting equity securities
of the Corporation immediately prior to such merger hold more than fifty percent
(50%) of the voting power of the surviving entity immediately following such
merger), or sell, lease or convey all or substantially all its property or
business, or to liquidate, dissolve or wind up; then, in connection with each
such event, this Corporation shall send to the holders of the Series A Preferred
Stock:
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<PAGE>
(1) at least twenty (20) days' prior written notice of
the date on which a record shall be taken for such dividend, distribution or
subscription rights (and specifying the date on which the holders of Common
Stock shall be entitled thereto) or for determining rights to vote in respect of
the matters referred to in (iii) and (iv) above; and
(2) in the case of the matters referred to in (iii)
and (iv) above, at least twenty (20) days' prior written notice of the date when
the same shall take place (and specifying the date on which the holders of
Common Stock shall be entitled to exchange their Common Stock for securities or
other property deliverable upon the occurrence of such event).
Each such written notice shall be given by first class mail, postage
prepaid, addressed to the holders of Series A Preferred Stock shares at the
address for each such holder as shown on the books of this Corporation.
(g) Recapitalization. If at any time or from time to time there
shall be a recapitalization of the Common Stock (other than a subdivision,
combination or merger or sale of assets transaction provided for elsewhere in
this paragraph 3 or paragraph 2) provision shall be made so that the holders of
the Series A Preferred Stock shall thereafter be entitled to receive upon
conversion of the Series A Preferred Stock the number of shares of stock or
other securities or property of the Corporation or otherwise, to which a holder
of Common Stock deliverable upon conversion of each share of such series would
have been entitled on such recapitalization. In any such case, appropriate
adjustment shall be made in the application of the provisions of this paragraph
3 with respect to the rights of the holders of the Series A Preferred Stock
after the recapitalization to the end that the provisions of this paragraph 3
(including adjustment of the Conversion Price then in effect and the number of
shares purchasable upon conversion of the Series A Preferred Stock) shall be
applicable after that event as nearly equivalent as may be practicable.
(4) Voting Rights. Except as otherwise required by law and as set
forth in Section 5 below, the Series A Preferred Stock shall be non-voting. The
holders of Common Stock shall be entitled to notice of any shareholders' meeting
and to vote upon any matter submitted to the shareholders for a vote.
(5) Protective Provisions. In addition to any other rights provided
by law, so long as any Series A Preferred Stock shall be outstanding, this
Corporation shall not, without first obtaining the affirmative vote or written
consent of the holders of not less than a majority of such outstanding shares of
Series A Preferred Stock:
(a) amend or repeal any provision of or add any provision to,
this Corporation's Articles of Incorporation or Bylaws if such action would
alter or change adversely the preferences, rights, privileges or powers of or
the restrictions provided for the benefit of, the Series A Preferred Stock;
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<PAGE>
(b) authorize or issue shares of any class of stock having any
preference or priority as to dividends or assets superior to or on a parity with
any such preference or priority of the Series A Preferred Stock, or authorize or
issue shares of stock of any class or any bonds, debentures, notes or other
obligations convertible into or exchangeable for, or having option rights to
purchase, any shares of stock of this Corporation having any preference or
priority as to dividends or assets superior to or on a parity with any such
preference or priority of the Series A Preferred Stock;
(c) reclassify any Common Stock into shares having any preference
or priority as to dividends or assets superior to or on a parity with any such
preference or priority of the Series A Preferred Stock.
(d) pay any cash dividends;
(e) redeem or purchase any of the Common Stock, provided,
however, that this restriction shall not apply to the repurchase of shares of
Common Stock from employees, officers, directors, consultants or other persons
performing services for the Corporation upon the termination of the employment,
consulting or other relationship between the Corporation and such persons;
(f) consummate a sale of all or substantially all of the
Corporation's assets or any transaction or series of related transactions
(including, without limitation, any reorganization, merger or consolidation)
which would result in the holders of the outstanding voting equity securities of
the Corporation immediately prior to such transaction holding less than fifty
percent (50%) of the voting power of the surviving entity immediately following
such transaction;
(g) increase the total number of authorized shares of Series A
Preferred Stock; or
(h) incur any indebtedness or grant any security interest in or
otherwise pledge or mortgage any of the Corporation's assets, other than in
connection with equipment leases entered into the ordinary course of business, a
revolving credit line from a commercial bank that does not exceed 80% of
eligible accounts receivable, or the refinancing of mortgages existing as of the
Series A Original Issue Date.
(6) Status of Converted Stock. In the event any shares of Series A
Preferred Stock shall be converted pursuant to paragraph 3 hereof, the shares so
converted shall be canceled and shall not be issuable by the Corporation, and
the Articles of Incorporation of this Corporation shall be appropriately amended
to effect the corresponding reduction in the Corporation's authorized capital
stock.
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<PAGE>
(7) Residual Rights. All rights accruing to the outstanding shares of
this Corporation not expressly provided for to the contrary herein shall be
vested in the Common Stock.
(8) Consent for Certain Repurchases of Common Stock Deemed to be
Distributions. Each holder of Series A Preferred Stock shall be deemed to have
consented, for purposes of Section 502, 503 and 506 of the California
Corporations Code, to distributions made by the Corporation in connection with
the repurchase of shares of Common Stock issued to or held by employees or
consultants upon termination of their employment or services pursuant to
agreements providing for such right of repurchase between the Corporation and
such persons.
(9) Redemption.
(a) Commencing on the later of (i) the third anniversary of the
Series A Original Issue Date and (ii) the date on which the Corporation sends
written notice to all holders of Series A Preferred Stock of their redemption
rights (the later of such dates shall be called the "Redemption Start Date"),
and continuing for 30 days from the Redemption Start Date, the holders of the
outstanding Series A Preferred Stock shall have the right to demand that the
Corporation redeem all or any part of the Series A Preferred Stock held by them
as set forth in this Section. The Corporation shall pay for each share it is
requested to redeem a sum per share (the "Redemption Price") equal to (i) $6.67
plus (ii) any declared but unpaid dividends as of the date fixed by the
Corporation for redemption of such share (the "Redemption Date"), all as
adjusted for any combinations, consolidations, stock distributions or stock
dividends with respect to any such shares. The Corporation shall be obligated to
send a written notice notifying the holders of Series A Preferred Stock of the
redemption right set forth in this Section. Such notice may not be sent,
however, more than 30 days in advance of the third anniversary of the Series A
Original Issue Date. Any demand for redemption of Series A Preferred Stock shall
be made in writing delivered to the Corporation on or before 5:00 p.m., Pacific
time, on the 30th day following the Redemption Start Date. Such demand (the
"Redemption Call") shall specify the number of shares to be redeemed.
(b) Upon receipt of the written demand for redemption from any
holder of outstanding Series A Preferred Stock in accordance with paragraph (a)
(a "Redemption Call"), the Corporation shall send written notice mailed first
class, postage prepaid to each holder of Series A Preferred Stock (other than
the holder delivering the Redemption Call) at the close of business on the
business day next preceding the day on which the Corporation sends such notice.
Such notice shall be sent to the address last shown on the records of the
Corporation for such holder or given by the holder to the Corporation for the
purpose of notice or, if no such address appears or is given, at the place where
the principal executive office of the Corporation is located. Such notice shall
state that a holder of Series A Preferred Stock has delivered to the Corporation
a Redemption Call, the date on which the right to require the Corporation to
redeem shares of Series A Preferred Stock shall terminate as set forth in
paragraph (a) and the date on which the Corporation will effect such redemption
(the "Redemption Date"). The Redemption
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<PAGE>
Date shall be no later than 120 days following the date the first Redemption
Call is delivered to the Corporation.
(c) Immediately following the expiration of the time period
within which a holder of Series A Preferred Stock shall have the right to
deliver a Redemption Call to the Corporation, as set forth in paragraph (a), the
Corporation shall send written notice to all holders of Series A Preferred Stock
who have delivered to the Corporation a Redemption Call (the "Redemption
Notice"). The Redemption Notice shall notify each such holder of the Redemption
to be effected, specifying the number of shares to be redeemed from such holder,
the Redemption Date, the date on which such holders' rights to convert such
shares into Common Stock terminate and calling upon such holder to surrender to
the Corporation, in the manner and at the place designated, the certificate(s)
representing the shares to be redeemed. Except as provided in paragraph 9(d), on
or after such Redemption Date, each holder of Series A Preferred Stock to be
redeemed shall surrender to this Corporation the certificate or certificates
representing such shares, in the manner and at the place designated in the
Redemption Notice, and thereupon the Redemption Price in respect of each such
shares shall be payable to the order of the person whose name appears on such
certificate or certificates as the owner thereof and each surrendered
certificate shall be canceled. In the event less than all the shares represented
by any such certificate are redeemed on the Redemption Date, a new certificate
shall be issued to the holder representing the unredeemed shares.
(d) From and after the Redemption Date, unless there shall have
been a default in payment of the Redemption Price, all rights of the holders of
shares of Series A Preferred Stock designated for redemption on such Redemption
Date as holders of Series A Preferred Stock (except the right to receive the
Redemption Price without interest upon surrender of their certificate or
certificates) shall cease with respect to such shares, and such shares shall not
thereafter be transferred on the books of this Corporation or be deemed to be
outstanding for any purpose whatsoever. If the funds of this Corporation legally
available on the Redemption Date for redemption of shares of Series A Preferred
Stock are insufficient to redeem the total number of shares of Series A
Preferred Stock as to which a Redemption Call has been delivered by the holder
thereof to the Corporation, those funds which are legally available will be used
to redeem the maximum possible number of such shares ratably among the holders
of such shares to be redeemed based upon their holdings of Series A Preferred
Stock. The shares of Series A Preferred Stock not redeemed shall remain
outstanding and entitled to all the rights and preferences provided herein. At
any time thereafter when additional funds of this Corporation are legally
available for the redemption of shares of Series A Preferred Stock, such funds
will immediately be used to redeem the balance of the shares which this
Corporation has become obligated to redeem on the Redemption Date but which it
has not redeemed.
(e) Three (3) days prior to the Redemption Date, this Corporation
shall deposit the Redemption Price of all outstanding shares of Series A
Preferred Stock designated for redemption on such Redemption Date, and not yet
converted, with a bank or trust company having aggregate capital and surplus in
excess of $200,000,000 as a trust fund for the benefit of the respective holders
of the shares designated for redemption and not yet redeemed.
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Simultaneously, this Corporation shall deposit irrevocable instruction and
authority to such bank or trust company to publish the notice of redemption
thereof (or to complete such publication if theretofore commenced) and to pay,
on and after the date fixed for redemption or prior thereto, the Redemption
Price of the Series A Preferred Stock to be redeemed to the holders thereof upon
surrender of their certificates. Any moneys deposited by this Corporation
pursuant to this paragraph for the redemption of shares which are thereafter
converted into shares of Common Stock no later than the close of business on the
Redemption Date shall be returned to this Corporation forthwith upon such
conversion. The balance of any moneys deposited by this Corporation pursuant to
this paragraph remaining unclaimed at the expiration of three (3) months
following the Redemption Date shall thereafter be returned to this Corporation,
provided that the shareholder to which such moneys would be payable hereunder
shall be entitled, upon proof of its ownership of the shares of Series A
Preferred Stock and payment of any bond requested by this Corporation, to
receive such moneys but without interest from the Redemption Date.
IV
(a) Limitation of Directors' Liability. The liability of the directors
of this Corporation for monetary damages shall be eliminated to the fullest
extent permissible under California law.
(b) Indemnification of Corporate Agents. This Corporation is
authorized to indemnify the directors and officers of the Corporation to the
fullest extent permissible under California law.
(c) Repeal or Modification. Any repeal or modification of the
foregoing provisions of this Article IV by the shareholders of the Corporation
shall not adversely affect any right or protection of a director of the
Corporation existing at the time of such repeal or modification.
3. The foregoing Amended and Restated Articles of Incorporation have been
duly approved by the Board of Directors.
4. The foregoing Amended and Restated Articles of Incorporation have been
duly approved by the required vote of shareholders in accordance with Sections
902 and 903 of the Corporations Code. The total number of outstanding shares of
the Corporation is 4,948,786 shares of Common Stock and the Corporation has no
other class of securities outstanding. The number of shares voting in favor of
the amendment equaled or exceeded the vote required. The percentage vote
required was more than fifty percent (50%) of the Common Stock.
The undersigned declares under penalty of perjury that the matters set
forth in the foregoing certificate are true of her or his own knowledge.
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IN WITNESS WHEREOF, the undersigned have executed this certificate in Palo
Alto, California, this 23 day of February, 1994.
___________________________________
Doreen Chiu, President
___________________________________
Frank Chiu, Secretary
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EXHIBIT 3.2
BY-LAWS
of
NEW ANI, INC.
ARTICLE I
Principal Office
Section 1. The principal executive office for the transaction of the
business of the corporation is hereby fixed and located at 39187 Liberty Street,
Fremont, California. The board of directors may change said principal executive
office from one location to another.
ARTICLE II
Meetings of Shareholders
Section 1. All meetings of the shareholders shall be held at any
place within or without the State of California which may be designated either
by the board of directors or by the written consent of all shareholders entitled
to vote thereat and not present at the meeting given either before or after the
meeting and filed with the secretary of the corporation. In the absence of any
such designation, shareholders' meetings shall be held at the principal
executive office of the corporation.
Section 2. The annual meeting of the shareholders of the corporation
shall be held on the second Tuesday of March of each year, at 10 A.M. of said
day; provided, however, that should said day fall upon a Saturday, Sunday or
legal
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holiday, then any such annual meeting of the shareholders shall be held at the
same time and place on the next business day thereafter ensuing which is not a
legal holiday. At such meeting, directors shall be elected and any other proper
business may be transacted which is within the powers of the shareholders.
Written notice of each annual meeting shall be given to each shareholder
entitled to vote either personally or by first-class mail or other means of
written communication (which includes, without limitation and wherever used in
these by-laws, telegraphic and facsimile communication), charges prepaid,
addressed to each shareholder at the address appearing on the books of the
corporation, or given by the shareholder to the corporation for the purpose of
notice. If any notice or report addressed to the shareholder at the address of
such shareholder appearing on the books of the corporation is returned to the
corporation by the United States Postal Service marked to indicate that the
United States Postal Service is unable to deliver the notice or report to the
shareholder at such address, all future notices or reports shall be deemed to
have been duly given without further mailing if the same shall be available for
the shareholder upon written demand of the shareholder at the principal
executive office of the corporation for a period of one (1) year from the date
of the giving of the notice or report to all other shareholders. If no address
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of a shareholder appears on the books of the corporation or is given by the
shareholder to the corporation, notice is duly given to him if sent by mail or
other means of written communication addressed to the place where the principal
executive office of the corporation is located or if published at least once in
a newspaper of general circulation in the county in which said principal
executive office is located.
All such notices shall be given to each shareholder entitled thereto
not less than ten (10) days nor more than sixty (60) days before each annual
meeting. Any such notice shall be deemed to have been given at the time when
delivered personally or deposited in the United States mail or delivered to a
common carrier for transmission to the recipient or actually transmitted by the
person giving the notice by electronic means to the recipient or sent by other
means of written communication.
Such notices shall state:
(a) the place, date and hour of the meeting;
(b) those matters which the board, at the time of the mailing of the
notice, intends to present for action by the shareholders;
(c) if directors are to be elected, the names of nominees intended at
the time of the notice to be presented by management for election;
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(d) such other matters, if any, as may be expressly required by
statute.
Section 3. Special meetings of the shareholders for the purpose of
taking any action permitted to be taken by the shareholders under the General
Corporation Law and the articles of incorporation of this corporation, may be
called by the chairman of the board or the president, or by any vice president,
or by the board of directors, or by the holders of shares entitled to cast not
less than ten per cent (10%) of the votes at the meeting. Except in special
cases where other express provision is made by statute, notice of such special
meetings shall be given in the same manner and contain the same statements as
required for annual meetings of shareholders. Notice of any special meeting
shall also specify the general nature of the business to be transacted, and no
other business may be transacted at such meeting.
Section 4. The presence in person or by proxy of the holders of a
majority of the shares entitled to vote at any meeting shall constitute a quorum
for the transaction of business. The shareholders present at a duly called or
held meeting at which a quorum is present may continue to transact business
until adjournment, notwithstanding the withdrawal
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of enough shareholders to leave less than a quorum, if any action taken (other
than adjournment) is approved by at least a majority of the shares required to
constitute a quorum. In the absence of a quorum, any meeting of shareholders
may be adjourned from time to time by the vote of a majority of the shares
represented either in person or by proxy, but no other business may be
transacted except as provided in the preceding sentence.
ARTICLE III
Board of Directors
Section 1. Subject to the provisions of the California General
Corporation Law and any limitations in the articles of incorporation and these
by-laws as to action to be authorized or approved by the shareholders, the
business and affairs of the corporation shall be managed and all corporate
powers shall be exercised by or under the direction of the board of directors.
Without prejudice to such general powers, but subject to the same limitations,
it is hereby expressly declared that the board of directors shall have the
following powers, to wit:
First: To conduct, manage and control the affairs and
business of the corporation and to make such rules and
regulations therefor, not
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inconsistent with law or with the articles of incorporation or
with the by-laws, as they may deem best;
Second: To elect and remove at pleasure the officers, agents
and employees of the corporation, prescribe their duties and fix
their compensation;
Third: To authorize the issue of shares of stock of the
corporation from time to time upon such terms as may be lawful;
Fourth: To borrow money and incur indebtedness for the
purposes of the corporation and to cause to be executed and
delivered therefor, in the corporate name, promissory notes,
bonds, debentures, deeds of trust, mortgages, pledges,
hypothecations or other evidences of debt and securities
therefor; and
Fifth: To alter, repeal or amend, from time to timer, and at
any time, these by-laws and any and all amendments of the same,
and from time to time, and at any time, to make and adopt such
new and additional by-laws as may be necessary and proper,
subject to the power of the shareholders to adopt, amend or
repeal such by-laws, or to revoke the delegation of authority of
the directors, as provided by law or by Article VI of these by-
laws.
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Section 2. The authorized number of directors shall be one (1).
Section 3. The directors shall be elected at each annual meeting of
shareholders, but if any such annual meeting is not held or the directors are
not elected thereat, the directors nay be elected at any special meeting of
shareholders held for that purpose. Each director, including a director elected
to fill a vacancy, shall hold office until his successor is elected, except as
otherwise provided by statute.
Section 4. Vacancies in the board of directors, except for a vacancy
created by the removal of a director, may be filled by a majority of the
directors then in office, whether or not less than a quorum, or by a sole
remaining director.
ARTICLE IV
Meetings of Directors
Section 1. Regular meetings of the board of directors shall be held
at any place within or without the State of California that has been designated
from time to time by the board of directors. In the absence of such
designation, regular meetings shall be held at the principal executive office of
the corporation, except as provided in
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Section 2. Special meetings of the board of directors may be held at any place
within or without the State of California which has been designated in the
notice of the meeting, or, if not designated in the notice or if there is no
notice, at the principal executive office of the corporation.
Section 2. Immediately following each annual meeting of the
shareholders there shall be a regular meeting of the board of directors of the
corporation at the place of said annual meeting or at such other place as shall
have been designated by the board of directors for the purpose of organization,
election of officers and the transaction of other business. Other regular
meetings of the board of directors shall be held without call on such date and
time as may be fixed by the board of directors; provided, however, that should
any such day fall on a legal holiday, then said meeting shall be held at the
sane time on the next business day thereafter ensuing which is not a legal
holiday. Notice of regular meetings of the directors is hereby dispensed with
and no notice whatever of any such meeting need be given, provided that notice
of any change in the time or place of regular meetings shall be given to all of
the directors in the same manner as notice for special meetings of the board of
directors.
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Section 3. Special meetings of the board of directors for any purpose
or purposes may be called at any time by the chairman of the board or president
or, if both the chairman of the board and the president are absent or are unable
or refuse to act, by any vice president or by any two directors. Notice of the
time and place of special meetings shall be delivered personally or by
telephone to each director, or sent by first-class mail or telegram or facsimile
transmission, charges prepaid, addressed to him at his address as it appears
upon the records of the corporation or, if it is not so shown on the records and
is not readily ascertainable, at the place at which the meetings of the
directors are regularly held. In case such notice is mailed, it shall be
deposited in the United States mail at least four (4) days prior to the time of
the holding of the meeting. In case such notice is telegraphed or sent by
facsimile transmission, it shall be delivered to a common carrier for
transmission to the director or actually transmitted by the person giving the
notice by electronic means to the director at least forty-eight (48) hours prior
to the time of the holding of the meeting. In case such notice is delivered
personally or by telephone as above provided, it shall be so delivered at least
twenty-four (24) hours prior to the time of the holding of the meeting. Any
notice given personally or by telephone may be communicated to either the
director or to a person at the
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office of the director whom the person giving the notice has reason to believe
will promptly communicate it to the director. Such deposit in the mail,
delivery to a common carrier, transmission by electronic means or delivery,
personally or by telephone, as above provided, shall be due, legal and personal
notice to such directors. The notice need not specify the place of the meeting
if the meeting is to be held at the principal executive office of the
corporation, and need not specify the purpose of the meeting.
Section 4. Presence of a majority of the authorized number of
directors at a meeting of the board of directors constitutes a quorum for the
transaction of business, except as hereinafter provided. Members of the board
may participate in a meeting through use of conference telephone or similar
communications equipment, so long as all members participating in such meeting
can hear one another. A meeting at which a quorum is initially present may
continue to transact business notwithstanding the withdrawal of directors,
provided that any action taken is approved by at least a majority of the
required quorum for such meeting. A majority of the directors present, whether
or not a quorum is present, may adjourn any meeting to another time and place.
If the meeting is adjourned for more than twenty-four (24) hours, notice of any
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adjournment to another time or place shall be given prior to the time of the
adjourned meeting to the directors who were not present at the time of the
adjournment.
Section 5. Notice of a meeting need not be given to any director who
signs a waiver of notice or consent to holding the meeting or an approval of the
minutes thereof, whether before or after the meeting, or who attends the meeting
without protesting, prior thereto or at its commencement, the lack of notice to
such director. All such waivers, consents and approvals shall be filed with the
corporate records or made a part of the minutes of the meeting.
Section 6. Any action required or permitted to be taken by the board
of directors may be taken without a meeting if all members of the board shall
individually or collectively consent in writing to such action. Such written
consent or consents shall be filed with the minutes of the proceedings of the
board. Such action by written consent shall have the same force and effect as a
unanimous vote of such directors.
Section 7. The provisions of this Article IV shall also apply, with
necessary changes in points of detail, to committees of the board of directors,
if any, and to actions by such committees (except for the first sentence of
Section 2 of Article IV, which shall not apply, and
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except that special meetings of a committee may also be called at any time by
any two members of the committee), unless otherwise provided by these by-laws or
by the resolution of the board of directors designating such committees. For
such purpose, references to "the board" or "the board of directors" shall be
deemed to refer to each such committee and references to "directors", or
"members of the board" shall be deemed to refer to members of the committee.
Committees of the board of directors may be designated, and shall be subject to
the limitations on their authority, as provided in Section 311 of the General
Corporation Law. The appointment of members or alternate members of a committee
requires the vote of a majority of the authorized number of directors.
ARTICLE V
Officers
Section 1. The officers of the corporation shall be a chairman of the
board or a president, or both, a secretary, and a treasurer, who shall also be
the chief financial officer of the corporation. The corporation may also have,
at the discretion of the board of directors, one or more vice presidents, one or
more assistant secretaries, one or more assistant treasurers, and such other
officers as may be designated from time to time by the board of directors. Any
number of offices may be held by the same person.
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The officers shall be elected by the board of directors and shall hold office at
the pleasure of such board.
Chairman of the Board
Section 2. The chairman of the board, if there be such officer,
shall, if present, preside at all meetings of the board of directors and
exercise and perform such other powers and duties as may be from time to time
assigned to him by the board of directors or prescribed by the by-laws. If there
is not a president, the chairman of the board shall, in addition, be the general
manager and chief executive officer of the corporation and shall have the powers
and duties prescribed in Section 3 of Article V of these by-laws.
President
Section 3. Subject to such powers and duties, if any, as may be
prescribed by these by-laws or the board of directors for the chairman of the
board, if there be such officer, the president shall be the general manager and
chief executive officer of the corporation and shall, subject to the control of
the board of directors, have general supervision, direction and control of the
business and officers of the corporation. He shall preside at all meetings of
the shareholders and, in the absence of the chairman of the board, or if there
be none, at all meetings of the board of directors. He shall have all of the
powers and
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shall perform all of the duties which are ordinarily inherent in the office of
the president, and he shall have such further powers and shall perform such
further duties as may be prescribed for him by the board of directors.
Vice Presidents
Section 4. In the absence or disability or refusal to act of the
president, the vice presidents in order of their rank as fixed by the board of
directors, or, if not ranked, the vice president designated by the president or
the board of directors, shall perform all of the duties of the president and
when so acting shall have all the powers of and be subject to all the
restrictions upon the president. The vice presidents shall have such other
powers and perform such other duties as from time to time may be prescribed for
them, respectively, by the board of directors or the by-laws.
Secretary
Section 5. The secretary shall keep or cause to be kept at the
principal executive office of the corporation or such other place as the board
of directors way order, a book of minutes of all proceedings of the
shareholders, the board of directors and committees of the board, with the time
arid place of holding, whether regular or special, and if special how
authorized, the notice thereof given, the names of those present at directors'
and committee meetings,
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and the number of shares present or represented at shareholders' meetings. The
secretary shall keep or cause to be kept at the principal executive office or at
the office of the corporation's transfer agent a record of shareholders or a
duplicate record of shareholders showing the names of the shareholders and their
addresses, the number of shares and classes of shares held by each, the number
and date of certificates issued for the same and the number and date of
cancellation of every certificate surrendered for cancellation. The secretary
or an assistant secretary, or, if they are absent or unable or refuse to act,
any other officer of the corporation, shall give or cause to be given notice of
all the meetings of the shareholders, the board of directors and committees of
the board required by the by-laws or by law to be given, and he shall keep the
seal of the corporation, if any, in safe custody and shall have such other
powers and perform such other duties as may be prescribed by the board of
directors or by the by-laws
Section 6. It shall be the duty of the assistant secretaries to
assist the secretary in the performance of his duties and generally to perform
such other duties as may be delegated to them by the board of directors.
Treasurer
Section 7. The treasurer shall be the chief financial officer of the
corporation and shall keep and
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maintain, or cause to be kept and maintained, adequate and correct books and
records of account of the corporation. He shall receive and deposit all moneys
and other valuables belonging to the corporation in the name and to the credit
of the corporation and shall disburse the same only in such manner as the board
of directors or the appropriate officers of the corporation may from time to
time determine, shall render to the president and the board of directors,
whenever they request it, an account of all his transactions as treasurer and of
the financial condition of the corporation, and shall perform such further
duties as the board of directors may require.
Section 8. It shall be the duty of the assistant treasurers to assist
the treasurer in the performance of his duties and generally to perform such
other duties as may be delegated to them by the board of directors.
ARTICLE VI
Amendments
Section 1. New by-laws nay be adopted or these by-laws may be amended
or repealed by the affirmative vote or written consent of a majority of the
outstanding sharers entitled to vote, except as otherwise provided by law or by
the articles of incorporation or these by-laws.
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Section 2. Subject to the right of shareholders as provided in
Section 1 of this Article to adopt, amend or repeal by-laws, and except as
otherwise provided by law or by the articles of incorporation, by-laws, other
than a bylaw or amendment thereof changing the authorized number of directors,
may be adopted, amended or repealed by the board of directors.
ARTICLE VII
Annual Report
Section 1. So long as the corporation shall have fewer than one
hundred (100) shareholders of record (determined as provided in Section 605 of
the General Corporation Law of the State of California), the requirement of
Section 1501 of said law that an annual report be sent to the shareholders is
expressly waived.
Section 2. Notwithstanding Section 1 of this Article VII, the
corporation shall, upon the written request of any shareholder made more than
one hundred twenty (120) days after the close of a fiscal year, deliver or mail
to such shareholder the financial statements required by Section 1501(a) of the
General Corporation Law.
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CERTIFICATE OF SECRETARY
I, the undersigned, hereby certify:
1. That I am the duly elected, acting and qualified Secretary of New
ANI, Inc., a California corporation; and
2. That the foregoing by-laws, comprising 17 pages, constitute the
by-laws of such corporation as duly adopted by action of the Incorporator of the
corporation duly taken on March 19, 1980.
Date: April 2, 1980. _______________________________
Secretary
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EXHIBIT 9.1
VOTING TRUST AGREEMENT
This Agreement is made on January 1, 1993, at Fremont, California by and
between the undersigned parties for the purpose of creating a Voting Trust of
the stock of ATG, Inc., a California corporation (hereinafter referred to as
"Company").
1. Exchange of Shares for Voting Trust Certificates. Simultaneously with
the execution of this Agreement, the undersigned parties, hereafter called
Certificate Holders, will exchange, assign and deliver the number of shares of
stock in the Company, authorized to be issued to them and listed opposite their
names, to the Trustee, who will issue and delivery to each of the parties voting
Trust Certificates for the number of shares of the Company transferred to the
Trustee.
2. Form of Certificates. Voting Trust Certificates shall be in
substantially the following form:
No. 5 530,083 Shares
---------- ------------
ATG, INC.
a California corporation
VOTING TRUST CERTIFICATE
This is to certify that the following shareholders has transferred
--------------------------
to the undersigned Trustee the above stated number of shares of the common
stock of ATG, Inc., a California corporation, pursuant to the provisions
of California Corporations Code Section 706(b), to be held by the Trustee
pursuant to the terms of a Voting Trust Agreement dated January 1, 1993,
or any extension thereof (hereafter called "Voting Trust Agreement"), a
copy of which have been delivered to the above-named Certificate Holder,
and filed in the office of the Secretary of the Company at 47375 Fremont
Boulevard, Fremont, California. The Certificate Holder, or his or her
successor or successors in interest, will be entitled to receive payments
equal to all cash dividends collected by the
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Trustee upon the above-stated number of shares, and to the delivery of a
certificate or certificates for shares of stock upon the termination of the
Voting Trust Agreement, in accordance with its provisions.
The Certificate Holder, by the acceptance of this Certificate, agrees
to be bound by all of the provisions of the Voting Trust Agreement as fully
as if the terms of the same were set forth in this Certificate.
Executed as of January 1, 1993
_________________________ ________________________
HOLDER TRUSTEE
3. Transfer of Voting Trust Certificate. The Voting Trust Certificates
shall be transferable only as provided in the Certificates and this Agreement
and upon payment of any charges in effect at the time of transfer. All transfers
shall be recorded in the certificate book and any transfer made of any Voting
Trust Agreement shall vest in the transferee the same limitations as those
imposed on the transferor by the terms of the Voting Trust Certificate so
transferred, by this Agreement and upon such transfer the Trustee shall deliver
a Voting Trust Certificate or Certificates to the transferee for the number of
shares represented by the Voting Trust Certificate so transferred.
4. Non-Withdrawal of Shares. No party to this Agreement may withdraw his
shares from this Voting Trust without the prior written consent of all parties
hereto.
5. Voting by Trustee. During the period of this Voting Trust, the Trustee
shall have the exclusive right to vote the shares or give written consent, in
person or by proxy, at all meetings of the shareholders of the Company, and in
all proceedings
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in which the vote or written consent of shareholders may be required or
authorized by law.
6. Voting at Direction of Certificate Holders. If, before any Certificate
Holders' meeting or before the taking of any corporate action requiring an
affirmative vote or consent of the parties, a majority of the Certificate
Holders of the Company direct the Trustee to vote all the shares in a certain
way, the Trustee must comply with such direction, except as provided below.
In this regard, unless modified in writing by all parties hereto, the
parties hereto in all their respective capacities (whether as an officer,
director, employee or shareholder of the Company) hereby irrevocably agree and
direct the Trustee that, at no time, will said Trustee do any act or omission to
bind the Company without the prior written consent of the Certificate Holders
representing a majority of the outstanding shares of the Company held by the
Certificate Holder with respect to the following:
a. Amending the articles of incorporation or bylaws of the Company;
or
b. Authorizing, granting, or issuing additional shares or
securities of the Company.
The parties hereto acknowledge and agree that any violation of the
foregoing provision will constitute an ultra vires act on behalf of the Company,
and that any ultra vires act will constitute and impose personal liability on
behalf of the violating party with respect to any such prohibited act and
omission. Each party hereto hereby agrees to hold harmless, defend and indemnify
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each other and the Company, from any and all loss arising from a violation or
breach of the terms and provisions hereof.
7. Dividends. In the event that the Company issues dividends the Trustee
shall accept and receive such dividends. Upon receipt of dividends, the same
shall be prorated among the Certificate Holders and the amount of the dividends
shall be distributed to such Holders. In the event that the dividends are in the
form of share certificates having voting rights, the share dividends shall be
held by the Trustee and new Voting Trust Certificates representing the share
dividends shall be issued to the Certificate Holders.
6. Termination of Trust. This Voting Trust shall terminate on whichever
of the following conditions occurs first:
a. December 31, 2002
b. Vote for termination by Certificate Holders representing one
hundred percent of shares currently on deposit with Trustee.
In no event shall the term of this Agreement extend longer than 10
years from the date of execution provided that, at any time within two (2) years
prior to the time expiration of this Agreement as originally fixed or last
extended hereunder, one or more Certificate Holders may, by written agreement
and with the written consent of the Trustee, extend the duration of this
Agreement with respect to their shares for an additional term not exceeding ten
(10) years from the expiration date of this Voting Trust as originally fixed or
as last extending hereunder.
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Upon termination of this agreement the Certificate Holders shall
surrender their Voting Trust Certificates to the Trustee, and the Trustee shall
deliver to the Certificate Holders shares of the Company, properly endorsed for
transfer, equivalent to the amount of shares represented by the Voting Trust
Certificates surrendered.
9. Number and Replacement of Trustee. The number of Trustee shall be one
(1) and shall be as follows: Doreen Chiu. No Trustee may be removed from his or
her office except by the affirmative vote of the Certificate Holders
representing a eighty percent (80%) of the outstanding shares of the Company
held by the Certificate Holders. In the event of the death, resignation, or
removal of the Trustee, a successor Trustee shall be appointed by the
Certificate Holders then representing a majority of the shares deposited in this
Voting Trust.
10. Trustee as Shareholders and Employees. The Trustee, and the
Trustee's successor, may be parties to this Agreement as Certificate Holders,
and to the extent of the shares deposited by them, the Trustee and the Trustee's
successor shall be entitled in all respects to the same rights and benefits as
other Certificate Holders. The Trustee may serve the Company or any of its
subsidiaries as a director or officer or in any other capacity, and in any such
capacity receive compensation from the Company.
11. Trustee's Compensation. The Trustee shall serve without compensation
of any kind except that the Trustee's expenses lawfully incurred in the
administration of his or her duties as
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Trustee shall be reimbursed to the Trustee by the Certificate Holders.
12. Regular Meetings A regular meeting of the Certificate Holders shall
be held at Fremont, California on the last day of October in each year during
the term of this trust. At each such meeting the Certificate Holders shall be
entitled to one vote for each share transferred to the Trustee by them. All
matters pertaining to this trust and the actions of the Trustee may be brought
before the Certificate Holders at any such meeting.
13. Special Meetings. Special meetings of the Certificate Holders may be
called by Certificate Holders representing fifty (50) percent of the shares
deposited. Notice of such special meetings shall be given at least fifteen (15)
days prior to the date of such meeting and the specific matters to be brought
before the meeting shall be included in such notice.
14. Notices from Company. All notices, reports, statements, and other
communications directed to the Trustee from the Company shall be forwarded
forthwith to each Certificate Holder, with the postmarked dated and the date of
receipt endorsed on the communication.
15. Copies of Agreement. This Agreement may be executed in multiple
counterparts but shall not otherwise be separable or divisible. Upon the
execution of this Agreement and the establishment of this Trust, the Trustee
shall cause a duplicate of this Agreement and any extension thereof to be filed
with the secretary of the Company, which duplicates shall be open to the
inspection by a shareholder, a Certificate Holder or an agent or
6
<PAGE>
either, on the same terms as the record of shareholders of the Company is open
to inspection, and in any other manner provided for inspection under the law of
California.
Dated: January 1, 1993
______________________________
DOREEN CHIU, TRUSTEE
<TABLE>
<CAPTION>
CERTIFICATE HOLDERS
Signature Name No. Of Shares
<S> <C> <C>
______________________ Maureen Chan 125,499
______________________ Janet Pau Collier 83,666
______________________ Sophia Wu 20,918
______________________ Lai Ying Kwok Lee 150,000
______________________ Park Keong Lee 150,000
</TABLE>
7
<PAGE>
EXHIBIT 10.1
ASSUMPTION AGREEMENT
--------------------
THIS ASSUMPTION AGREEMENT ("Agreement") is made as of this 2nd day of
September, 1992, by and between TIPPET-RICHARDSON, INC., a California
corporation ("Transferor"), ATG INC., a California corporation ("Transferee"),
and CONFEDERATION LIFE INSURANCE COMPANY, a corporation ("Lender").
RECITALS
--------
A. Transferor is the maker of that certain Promissory Note dated November
18, 1986, as modified by that certain Modification of Note and Mortgage dated
April 23, 1992, each executed by Transferor in favor of Lender, in the original
principal amount of ONE MILLION SIX HUNDRED THOUSAND AND NO/100 DOLLARS
($1,600,000.00) (collectively, the "Note"), on which there is owing an unpaid
principal balance of One Million Five Hundred Sixty-Eight Thousand Two Hundred
Sixty-Eight and 43/100 Dollars ($1,566,266.43) as of the date hereof, together
with interest thereon. Lender is the present holder of the Note.
B. The Note is secured by (1) that certain Deed of Trust, Financing
statement, Security Agreement and Fixture filing (with Assignment of Rents and
Leases) dated November 16, 1966 and recorded November 21, 1986 as Instrument No.
86-293089 in the Official Records of Alameda County, California, as modified by
the Modification of Note and Mortgage, encumbering the real property described
therein (the "Property") and presently owned by Transferor (collectively, the
"Deed of Trust"); (2) that certain Assignment of Lessor's Interest in Lease
dated November 16, 1986 and recorded November 21, 1966 as Instrument No. 86-
293090 in the Official Records of Alameda County, California; and (3) a UCC-1
Financing Statement.
C. Transferor desires to transfer and convey the property to Transferee
upon Transferee's assumption of the obligations of Transferor under the Note and
Deed of Trust.
D. Transferor and Transferee desire to obtain from Lender its written
consent to the sale of the property to Transferee and to Transferee's assumption
of the obligations of Transferor under the terms of the Note and Deed of Trust,
which consent is required by the Deed of Trust.
NOW, THEREFORE; in consideration of the mutual covenants and undertakings
of the parties set forth below, and for other good and valuable consideration,
the receipt and adequacy of which are hereby acknowledged, the parties hereto
hereby agree as follows:
<PAGE>
1. The foregoing recitals of facts and understandings of the parties are
true and correct and are incorporated herein as the agreement of the parties.
2. The installments of principal and interest payable under the terms of
the Note are paid to August 1, 1992. Transferee agrees from and after the date
hereof to make all payments on the Note punctually and at the times, in the
manner, and in all other respects as therein stated; to perform all of the
obligations of Transferor provided in the Note, the Deed of Trust and any other
document executed by Transferor evidencing or securing the Note (collectively,
the "Loan Documents"), at the time, in the manner, and in all other respects as
therein stated; and to be bound by all of the terms of the Note, the Deed of
Trust and any other Loan Document.
3. Lender hereby consents to the conveyance and sale of the Property by
Transferor to Transferee. The right of Lender to accelerate payment of the Note
upon transfer of the Property from Transferor to Transferee is hereby waived by
Lender solely as to said transfer. Lender reserves, and Transferee affirms, the
right of Lender to exercise such right of acceleration with respect to any
subsequent transfer of the Property or any part thereof or interest therein or
upon the occurrence of any other event of default under the Note, the Deed of
Trust or any other Loan Document.
4. The Property shall remain subject to the lien, charge, or encumbrance
of the Deed of Trust and nothing contained herein or any action taken pursuant
to this Agreement shall affect or be construed to affect the lien, charge, or
encumbrance of the Deed of Trust or the priority thereof over other liens,
charges, or encumbrances upon the Property.
5. In consideration of Lender's consent to the transfer of the Property to
Transferee, Transferee shall pay (1) the sum of $15,708.78 to Lender as an
assumption fee; (2) the sum of $2,500.00 to Mason-McDuffie Financial Corporation
as a processing fee; (3) all attorneys' fees and costs incurred by Lender in
connection with the transfer and assumption contemplated hereunder; and (4) all
fees and costs for title and escrow services.
6. Notwithstanding the assumption by Transferee of Transferor's
obligations under the Note, the Deed of Trust and the other Loan Documents,
Transferor shall not be released from any duties, obligations and liabilities
under the Note, the Deed of Trust or any other Loan Document, including, without
limitation, any liability to Lender for damages sustained by Lender prior to or
after the date hereof by reason of the occurrence of any act or omission of
Transferor or any person or entity under the control of Transferor. In
consideration of
-2-
<PAGE>
Lender's consent to the transfer of the Property from Transferor to Transferee,
Transferor hereby waives any and all claims, causes of action or offsets it may
now be entitled to assert against Lender arising from or related in any way to
the Note, the Deed of Trust or the other Loan Documents, or the transaction
therein described, whether known or unknown.
7. Transferor and Transferee each represent and warrant that, to the best
of their knowledge, they are not aware of any defaults under the Note, the Deed
of Trust or any other Loan Document. Transferee further represents and warrants
that it presently has no defense, nor does it have present knowledge of any
facts that would give rise to any defense, to the obligations of Transferor that
Transferee is agreeing hereunder to assume under the Note, the Deed of Trust and
the other Loan Documents.
8. This Agreement shall be governed by and construed in accordance with
the laws of the State of California.
9. This Agreement shall be binding upon and inure to the benefit of the
successors and assigns of the parties hereto.
10. This Agreement may be executed in counterparts and all documents so
executed shall constitute one Agreement binding all parties, notwithstanding
that all of the parties are not signatories to the same counterpart.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first written above.
TRANSFEROR TRANSFEREE
TIPPET-RICHARDSON, INC., ATG INC.,
A California corporation a California corporation
By: _________________________ By: __________________________
Its: ___________________ Its: __________________
LENDER
------
CONFEDERATION LIFE INSURANCE COMPANY,
a corporation APPROVED FOR EXECUTION
___________
U.S. Mtge. Inv.
By: _________________________
Its: ___________________
By: _________________________
Its: ___________________
-3-
<PAGE>
CALIFORNIA ALL-PURPOSE ACKNOWLEDGMENT
(Not Scanned)
<PAGE>
STATE OF GEORGIA )
) SS:
COUNTY OF COBB )
BEFORE ME, a Notary Public in and for the said County and State,
personally appeared the above named Richard C. Warner, known to me to be the
Mortgage and Real Estate Vice President, and Kevin Ellis, known to me to be the
Manager, Mortgage Investments of Confederation Life Insurance Company, and
acknowledged the signing of the foregoing instrument to be their voluntary act
and deed, and the voluntary act and deed of the said Confederation Life
Insurance Company.
IN TESTIMONY WHEREOF I have hereunto subscribed my name and affixed my
notarial seal on the 21st day of September, 1992.
________________________________
NOTARY PUBLIC IN AND FOR
Said County and State
My Commission Expires:
Notary Public. Cobb County, Georgia
My Commission Expires September 21, 1993
<PAGE>
BEFORE ME, a Notary Public in and for the Province of Ontario,
personally appeared the above named Roger Miller, known to me to be the
Secretary-Treasurer of Tippet-Richardson, Inc. and acknowledged the signing of
the foregoing Instrument to be their voluntary act and deed, and the voluntary
act and deed of the said Tippet-Richardson, Inc.
IN TESTIMONY WHEREOF I have hereunto subscribed my name and affixed
my notarial seal on the 9th day of November, 1992.
____________________________________
NOTARY PUBLIC IN AND FOR
Province of Ontario
My Commission does not expire
<PAGE>
THE MANAGEMENT BOARD OF CABINET
I HEREBY CERTIFY AS FOLLOWS:
JOSEPH PATRICK ANTHONY ANDERSON
of the Province of Ontario, whose name is subscribed to the attached Instrument,
was, at the time of subscribing thereto, a NOTARY PUBLIC in and for the Province
of Ontario, Canada, duly commissioned and duly authorized by the laws thereof to
administer oaths, to take affidavits and to certify the proof of deeds and other
instruments in writing to be recorded within the said Province;
I FURTHER CERTIFY THAT I have compared the signature of the said NOTARY PUBLIC
subscribed to the attached Instrument with the specimen signature of the said
NOTARY PUBLIC filed in this office and verily believe the said signature to be
genuine; and THAT I have compared the impression of the Seal of the said NOTARY
PUBLIC appearing on the attached Instrument with the specimen of the seal filed
in this office and verily believe the impression of the Seal to be genuine.
IN TESTIMONY WHEREOF I have hereunto set my Hand
and affixed the Seal of the Management Board
of cabinet of the Province of Ontario at the
City of Toronto in the said Province this
thirtieth day of March, A.D. 1993.
FOR SECRETARY OF THE MANAGEMENT BOARD OF CABINET
<PAGE>
Canada )
Province of Ontario )
City of Toronto ) SS: CERTIFICATE OF AUTHENTICATION
Consulate General of the ) (Other Official)
United states of America )
I, the undersigned, ________ Consul of the united states of America at Toronto,
Canada, duly commissioned and qualified, do hereby certify that
IDA FIGLIANI
_______________________________________________________________
whose (true) signature and seal are, respectively,
subscribed and affixed to the annexed document was, at the time of (subscribing)
the same
FOR SECRETARY OF THE MANAGEMENT BOARD OF CABINET
PROVINCE OF ONTARIO, CANADA
_______________________________________________________________
to whose official acts faith and credit are due.
For the contents of the annexed document, I assume no responsibility.
IN WITNESS WHEREOF I have hereunto set my hand and affixed the seal of the
Consulate General of the United States of America at Toronto, Canada, this 15th
day of APRIL 1993.
(SEAL)
_______________________________
Consul of the United States
of America
LOIS A. GOCHNAUER
<PAGE>
EXHIBIT 10.2
RECORDING REQUESTED BY,
AND WHEN RECORDED, MAIL TO:
SANWA BANK CALIFORNIA
OAKLAND MAIN OFFICE
2127 BROADWAY
OAKLAND, CA 94612
ATTN: CRAIG C. FENDEL, VP/MGR.
DEED OF TRUST (NON-CONSTRUCTION) & ASSIGNMENT OF RENTS
THIS DEED OF TRUST (the "Deed of Trust") is made this 18th day of September,
1997, by and between ATG INC, (the "TRUSTOR") whose address is 4737 Fremont
Boulevard, Fremont, CA 94538, FIRST BANCORP, a California corporation (the
"TRUSTEE") and SANWA BANK CALIFORNIA, a California corporation (the
"BENEFICIARY").
WTNESSETH
THAT THE TRUSTOR IRREVOCABLY GRANTS, TRANSFERS AND ASSIGNS TO THE TRUSTEE, its
successors and assigns, IN TRUST, WITH POWER OF SALE:
All that property now or hereafter acquired in Alameda County, State of
California, described in the attached Exhibit "A" (herein referred to as the
"Property"):
TOGETHER WITH, and including, without limitation: all of the buildings and
improvements now or hereafter erected on the Property; all of the easements,
rights, rights-of-way, privileges, franchises and appurtenances now or
hereafter belonging to, or in any way appertaining, or in any way being a means
of access,to said Property; all rents, issues, profits, royalties, revenue,
income and other benefits of or arising from the use or enjoyment of all or any
portion of the Property or buildings and improvements now or hereafter erected
thereon (subject however to the right, reserved to the TRUSTOR, to collect,
receive and retain such rents issues, profits, royalties, revenue, income and
other benefits prior to any default hereunder or under the note referenced below
or other evidence of debt secured hereby); all gas, oil, water and mineral
rights, profits and stock now or hereafter derived from, appurtenant to, or
pertaining to the Property (and any and all shares of stock evidencing the
same); all crops now or hereafter grown on the Property; and all equipment,
machinery, appliances and fixtures (including replacements and additions
thereto) now or hereafter erected thereon; and
All of the foregoing shall be deemed to be and shall remain a part of the
Property encumbered by this Deed of Trust, and all of the foregoing, together
with the Property, are hereinafter referred to as the "Premises";
FOR THE PURPOSE OF SECURING, in such order of priority as the BENEFICIARY, in
its absolute discretion, may determine:
1. Payment of all obligations and indebtedness pursuant to the following: The
Term Loan facility in the amount of $400,000.00 contained in that certain Term
Loan Agreement dated September 18, 1997 between the TRUSTOR and the BENEFICIARY
(herein referred to as the "Obligation"), and any and all amendments
modifications, extensions or renewals of the Obligation (whether evidenced by
the Obligation or otherwise); together with the payment of interest on such
indebtedness and the payment of all other sums (with interest as therein
provided) according to the terms of the Obligation (and any and all amendments
modifications, extensions, or renewals thereof);
2. Payment of all other sums, with interest as herein provided, becoming due or
payable, under the provisions of this Deed of Trust, to the TRUSTEE or the
BENEFICIARY;
3. Due, prompt and complete observance, performance and discharge of each and
every condition, obligation, covenant and agreement contained in this Deed of
Trust, the Obligation and any document or instrument modifying or amending this
Deed of Trust or the Obligation or otherwise evidencing, securing or pertaining
to the indebtedness evidenced by the Obligation;
4. Payment of such additional sums (with interest thereon) as may hereafter be
borrowed from the BENEFICIARY, or its successors or assigns, by the TRUSTOR or
the then record owner of the Premises and evidenced by one or more instruments
(other than the Obligation) which are by their terms secured by this Deed of
Trust.
TO PROTECT AND MAINTAIN THE SECURITY OF THIS DEED OF TRUST, THE TRUSTOR AGREES:
1. Payment or Obligations When Due. The TRUSTOR shall promptly pay, when due and
in lawful money of the United States of America which shall be legal tender for
public and private debts at the time of payment, each and every indebtedness and
obligation for which this Deed of Trust has been given as security a provided
hereinabove; and the TRUSTOR shall promptly perform, observe and discharge each
and every condition, obligation, covenant and agreement for which this Deed of
Trust has been given as security as provided herein.
2. Maintenance of Premises. The TRUSTOR shall maintain and keep the Premises in
good condition and repair and shall not commit or permit waste of the whole or
part of any item consisting of a part of the Premises. The TRUSTOR shall not
alter, remove or demolish any buildings, improvements, machinery, equipment
appliances or fixtures now or hereafter on the Property without the prior
written consent of the BENEFICIARY.
The TRUSTOR shall promptly repair, replace or restore (in good, workmanlike
manner and in compliance with all laws, ordinances, governmental rules and
<PAGE>
regulations, easements, agreements, covenants, conditions and restrictions
affecting the Premises) all buildings, improvements, machinery, equipment,
appliances and fixtures now or hereafter on the Property, in the event of damage
to or destruction of such buildings, improvements, machinery, equipment,
appliances and fixtures.
The TRUSTOR shall not commit, suffer or permit any act upon the Premises in
violation of law, ordinance, governmental rules and regulations, easements,
agreements, covenants, conditions and restrictions affecting the Premises or use
of the Premises.
The TRUSTOR shall cultivate, irrigate, fertilize, fumigate, spray, prune and do
any other acts which from the character or use of the Property may be reasonably
necessary.
In the performance of all acts required of the TRUSTOR under the above
paragraphs describing maintenance of the Premises, the TRUSTOR shall promptly
pay when due all expenses incurred therefor and shall promptly pay, discharge or
otherwise release all claims for labor performed and materials furnished
therefor,
3. Environmental Compliance.
A. Definitions. For purposes of this section, the following terms are
defined as follows:
(i) "Environmental Claims" shall mean all claims, however asserted,
by any governmental authority or other person alleging potential
liability or responsibility for violation of any Environmental Law or
for release or injury to the environment or threat to public health,
personal injury (including sickness, disease or death), property
damage, natural resources damage, or otherwise alleging liability or
responsibility for damages (punitive or otherwise), cleanup, removal,
remedial or response costs, restitution, civil or criminal penalties,
injunctive relief, or other type of relief, resulting from or based
upon (i) the presence, placement, discharge, emission or release
(including intentional and unintentional, negligent and non-negligent,
sudden or non-sudden, accidental or non-accidental placement, spills,
leaks, discharges, emissions or releases) of any Hazardous Materials
at, in or from the Property, or (ii) any other circumstances forming
the basis of any violation, or alleged violation, of any Environmental
Law.
(ii) "Environmental Laws" shall mean all federal, state or local
laws, statutes, common law duties, rules, regulations, ordinances and
codes, together with all administrative orders, directed duties,
requests, licenses, authorizations and permits of, and agreements
with, any governmental authorities, in each case relating to
environmental, health, safety and land use matters; including the
Comprehensive Environmental Response, Compensation and Liability Act
of 1980 ("CERCLA"), the Clean Air Act, the Federal Water Pollution
Control Act of 1972, the Solid Waste Disposal Act, the Federal
Resource Conservation and Recovery Act, the Toxic Substances Control
Act, the Emergency Planning and Community Right-to-Know Act, the
California Hazardous Waste Control Law, the California Solid Waste
Management, Resource, Recovery and Recycling Act, the California Water
Code and the California Health and Safety- Code.
(iii) "Hazardous Materials" shall mean all those substances which are
regulated by, or which may form the basis of liability under any
Environmental Law, including all substances identified under any
Environmental Law as a pollutant, contaminant, hazardous waste,
hazardous constituent, special waste, hazardous substance, hazardous
material, or toxic substance, or petroleum or petroleum derived
substance or waste.
B. Environmental Representations and Warranties. The TRUSTOR hereby
represents and warrants that the operations and activities of the TRUSTOR on
or at the Premises comply, and during the term of this Deed of Trust will at
all times comply, in all respects with all Environmental Laws; the TRUSTOR
has obtained licenses, permits, authorizations and registrations required
under any Environmental Law ("Environmental Permits") and necessary for its
ordinary operations on or at the Premises, all such Environmental Permits are
in good standing, and the TRUSTOR is in compliance with all material terms
and conditions of such Environmental Permits: neither the TRUSTOR nor the
Property or operations are subject to any outstanding written order from or
agreement with any governmental authority nor subject to any judicial or
docketed administrative proceeding, respecting any Environmental Law.
Environmental Claim or Hazardous Material; there are no Hazardous Materials
or other conditions or circumstances existing, or arising from operations
prior to the date of this Deed of Trust, with respect to the Property that
would reasonably be expected to give rise to Environmental Claims. In
addition, (i) the TRUSTOR does not have or maintain on the Premises any
underground storage tanks which are not properly registered or permitted
under applicable Environmental Laws or which are leaking or disposing of
Hazardous Materials off-site, and (ii) the TRUSTOR has notified all of its
employees of the existence, if any, of any health hazard arising from the
conditions of their employment on or at the Premises and has met all
notification requirements under Title III of CERCLA and all other
Environmental Laws.
C. Environmental Compliance. The TRUSTOR shall.
(i) Conduct its operations on or at the Premises and keep and
maintain the Property in compliance with all Environmental Laws.
(ii) Give prompt written notice to the BENEFICIARY, but in no event
later than 10 days after becoming aware, of the following; (a) any
enforcement, cleanup, removal or other governmental or regulatory actions
instituted, completed or threatened against the TRUSTOR or any of its
affiliates or the Property pursuant to any applicable Environmental Laws,
(b) all other Environmental Claims in connection with the Property, and
(c) any environmental or similar condition on any real property adjoining
or in the vicinity of the Property that could reasonably be anticipated to
cause such the Property or any part thereof to be subject to any
restrictions on the ownership, occupancy, transferability or use of the
Property under any Environmental Laws.
(iii) Upon the written request of the BENEFICIARY, the TRUSTOR shall
submit to the BENEFICIARY, at the TRUSTOR'S sole cost and expense, at
reasonable intervals, a report providing an update of the status of any
environmental, health or safety compliance, hazard or liability issue
identified in any notice required pursuant to this Section.
(iv) At all times indemnify and hold harmless the BENEFICIARY from
and against any and all liability arising out of any Environmental Claims.
4. Insurance. The TRUSTOR shall provide, maintain and keep policies of insurance
(with companies and in form, content, policy limits and terms satisfactory to
the BENEFICIARY, with loss payable to the BENEFICIARY) insuring the Premises
against fire (with an extended coverage endorsement), public liability, loss of
rents or business interruption, flood damage (if the Property is located in a
flood hazard area and if such insurance is available) and such other hazards and
coverages, including earthquake, as the BENEFICIARY from time to time may
reasonably require.
The TRUSTOR shall promptly pay when due all premiums for such insurance, shall
deliver copies of all such insurance policies, renewals of such policies and
premium receipts therefor to the BENEFICIARY, and shall do all things necessary
to obtain prompt settlement or disposition of any claim or loss covered under
such policies.
All such policies shall name the BENEFICIARY as an additional insured and shall
include such endorsements as the BENEFICIARY shall deem necessary to protect its
interest in the Premises. All such policies shall not be cancelable nor subject
to substantial change without at least thirty (30) days' prior written notice
to, and approval by, the BENEFICIARY, and the BENEFICIARY shall receive at least
thirty (30) days' prior written notice of the termination of any such policy.
Without waiving or curing any default in the performance of any obligation under
this Deed of Trust and/or without waiving notice of any such default, the
BENEFICIARY may in its absolute discretion apply the proceeds of such insurance
upon any indebtedness or obligation secured under this Deed of Trust; and/or, in
such order, in such manner and according to such terms and conditions as the
BENEFICIARY may determine, release all or portions of such proceeds
<PAGE>
to the TRUSTOR for the repair replacement, or restoration of the Premises.
5. Payment of Taxes and Assessments. The TRUSTOR shall pay and discharge, at
least ten (10) days prior to delinquency; all taxes, assessments and charges
every kind and nature (including real personal property taxes); all general and
special assessments, including common area maintenance assessments and
assessments on appurtenant water stock; all levies and all permit, inspection
and license fees; all water and sewer rents, connection fees and charges and all
other public and private charges whether of a like or different nature) imposed
upon or assessed against the TRUSTOR or the Premises, or any plan thereof or
upon the revenues, rents, issues, income, or profits thereof or upon the
inventory of goods maintained or stored thereon or therein. The TRUSTOR shall,
within ten (10) days following such payment or discharge and upon the request of
the BENEFICIARY, provide the BENEFICIARY with receipts therefor.
Notwithstanding the foregoing, the TRUSTOR shall have the right to contest the
validity or amount of any such tax, assessment or charge; provided that the
validity or amount thereof is contested diligently and in good faith and
provided further that the TRUSTOR shall protect the Premises against any lien
arising out of any such tax, assessment or charge, or out of any such contest
thereof by obtaining a bond, in form, substance, amount, and issued by a surety,
satisfactory to the BENEFICIARY.
6. Litigation. The TRUSTOR shall appear in and defend any action or proceeding
purporting to affect the security of this Deed of Trust and/or the rights and
powers of the BENEFICIARY and/or the TRUSTEE hereunder, and the TRUSTOR shall
pay all costs and expenses (including costs of evidence of title and attorneys'
fees) in any action or proceeding in which the BENEFICIARY or the TRUSTEE may so
appear and/or in any suit brought by the BENEFICIARY foreclose this Deed of
Trust, to enforce any obligation secured by this Deed of Trust and/or prevent
the breach thereof.
7. Performance of Obligations by Beneficiary or Trustee. Should the TRUSTOR fail
to make any payment, perform any obligation or do any act set forth in secured
by this Deed of Trust, the BENEFICIARY or the TRUSTEE (at the request of the
BENEFICIARY), without obligation to do so, without notice to demand upon the
TRUSTOR and without releasing the TRUSTOR from making such future payments,
performing such future obligations or doing such future acts may make such
payment, perform such obligation or do such act in such manner and to such
extent as the BENEFICIARY or the TRUSTEE may deem necessary to protect the
security of this Deed of Trust. For any and all such purposes, the BENEFICIARY
and/or the TRUSTEE are authorized to enter upon the Premises, and if the
Premises consists of agricultural property, the BENEFICIARY and/or the TRUSTEE
are authorized to prepare for harvest, harvest, remove, and sell all crops that
may be growing upon the Premises and apply the proceeds thereof to the
indebtedness secured by this Deed of Trust.
Without limiting the foregoing, the BENEFICIARY or the TRUSTEE may pay,
purchase, contest or compromise any encumbrance, charge or lien which, in the
sole judgment of the BENEFICIARY or the TRUSTEE, appears to be prior or superior
to this Deed of Trust. In exercising any such power, the BENEFICIARY the TRUSTEE
may pay all necessary expenses incurred therefor and employ legal counsel and
pay its fees.
The TRUSTOR agrees to and shall pay, immediately without demand, all sums so
expended by the BENEFICIARY or the TRUSTEE, with interest, from the date of
expenditure, at a rate which is three percent (3%) per annum in excess of the
rate otherwise payable on such date according to the terms of the Obligation.
8. Condemnation. Any award of damages or other form of compensation awarded in
connection with any condemnation for public use of, or injury to the Property
and/or the buildings and improvements now or hereafter erected thereon (or any
plan thereof) are hereby assigned and shall be paid directly to the BENEFICIARY,
to be used, held, paid, applied or released in the absolute discretion of the
BENEFICIARY and without regard to the adequacy of its security, in the same
manner and with the same effect as provided herein for the disposition of
insurance proceeds. In this regard, the TRUSTOR hereby waives the benefit any
statute, rule or law which may be contrary thereto, and the TRUSTOR hereby
agrees to execute such further assignments therefor as the BENEFICIARY require.
9. Acceptance of Late and Partial Payments. The acceptance by the BENEFICIARY of
the payment of any sum secured by this Deed of Trust after its due date shall
not constitute a waiver of the right to require prompt payment when due of all
other and future sums so secured, or to declare a default as herein provided if
any failure to so pay, or to proceed with foreclosure or sale for any other
default then existing. The acceptance by the BENEFICIARY of the payment of a
portion of any sum secured by this Deed of Trust at such time that such sum in
its entirety is due and payable shall neither cure nor excuse the default caused
by failure pay the whole of such installment or affect any notice of default
recorded prior to such acceptance, unless such notice of default is expressly
revoked in writing by the BENEFICIARY. Such acceptance shall not constitute a
waiver of the BENEFICIARY's rights to require full payment when due of all other
and future sums secured.
10). General Rights of the Beneficiary and the Trustee. At any time or from time
to time, without liability therefor, without notice and without affecting the
liability of any person (including the TRUSTOR) for the payment of any
indebtedness, or the performance of any obligation secured by this Deed of Trust
or the lien of this Deed of Trust on the Premises or any portion thereof:
A. The BENEFICIARY may; (i) release any person liable for the payment of
any such indebtedness or for the performance of any such obligation; (ii)
extend the time or otherwise alter the terms of payment of any such
indebtedness; (iii) accept additional security therefor of any kind,
including deeds of trust and mortgages; and/or (iv) alter, substitute
and/or release any portion of the Premises securing such indebtedness;
B. The TRUSTEE may: (i) upon the written consent of the BENEFICIARY,
consent to the making of any map or plot of the Property; (ii) join in
granting any easements or creating any restrictions on the Property and/or
(iii) join in any extension agreement or any agreement subordinating the
lien or charge on this Deed of Trust.
11. Reconveyance of this Deed of Trust. Upon written request of the BENEFICIARY
stating that all indebtedness secured by this Deed of Trust has been paid upon
surrender of this Deed of Trust and all instruments or documents evidencing such
indebtedness to the TRUSTEE for cancellation and retention and upon payment to
the TRUSTEE of its fees, costs and expenses, incurred or to be incurred thereby,
the TRUSTEE shall reconvey, without warranty, the Premises then he hereunder The
recitals in such reconveyance of any matters or facts shall be conclusive proof
of the truthfulness thereof. The grantee in such reconveyance may be described
as the person or persons legally entitled thereto".
12. Assignment of Rents. The TRUSTOR absolutely and unconditionally hereby
assigns, transfers, conveys, and sets over to the BENEFICIARY all of the rents,
royalties, issues, profits, revenue, income, and other benefits of the Premises
arising from the use or enjoyment of all or any portion thereof or from any
lease agreement pertaining thereto (hereinafter collectively referred to as the
"Rents"); reserving to the TRUSTOR only the right, prior to any default by the
TRUSTOR hereunder, to collect, receive and retain the Rents as they become due
and payable but not otherwise. The TRUSTOR shall, at the request of the
BENEFICIARY, execute such further assignments to the BENEFICIARY of any or all
such leases, agreements and Rents as the BENEFICIARY may require.
Upon any such default by the TRUSTOR hereunder, the BENEFICIARY may, at any time
and without notice (either in person, by agent or representative, or by receiver
appointed by a court) and without regard to the adequacy of any security for the
indebtedness and/or obligations secured by this Deed of Trust: enter upon and
take possession of the Premises or any part thereof, in its own name or in the
name of the TRUSTOR; sue for or otherwise collect the Rents (including past due
and unpaid) and apply such Rents (less costs and expenses of operation and
collection, including attorneys' fees and expenses) to the payment of such
indebtedness secured under this Deed of Trust in such order and proportions as
the BENEFICIARY in its absolute discretion may determine. The entering upon and
taking possession of the Premises and the collection and application of the
Rents shall not cure or waive any default or notice of default hereunder or
invalidate any act done pursuant to such notice.
<PAGE>
13. Sale by Trustee of the Premises. Upon a default in the payment of any
indebtedness, or the performance of any obligation, secured by this Deed of
Trust, or in the event that any representation, covenant or warranty contained
in this Deed of Trust or in any other document evidencing or securing the loan
for which any such indebtedness is evidenced shall be or become untrue, the
BENEFICIARY may (without notice to or demand upon the TRUSTOR): declare all
indebtedness secured by this Deed of Trust immediately due and payable; and/or
execute and record (or cause the TRUSTEE to execute and record) a notice of
default and election to cause the Premises to be sold to satisfy the
indebtedness and obligations secured hereby; and/or commence an action to
foreclose this Deed of Trust and/or take any other action permitted by law to
enforce its rights and remedies hereunder as it may deem to be appropriate. Upon
the recordation of such notice of default, the BENEFICIARY shall deposit this
Deed of Trust and all notes and documents evidencing such indebtedness and/or
such obligations with the TRUSTEE.
After the lapse of such time as may then be required by law following the
recordation of the notice of default, and after the notice of the sale of the
Premises have been given by the TRUSTEE as then required by law, the TRUSTEE
(without demand on the TRUSTOR) shall sell the Premises at the time and place
fixed in such notice of sale, either as a whole or in separate parcels, and in
such order as the TRUSTEE may determine, at public auction to the highest bidder
for cash in lawful money of the United States of America, payable at the time of
sale. The TRUSTEE may postpone the sale of all or any portion of the Premises by
public announcement at such time and place of sale and from time to time
thereafter may postpone such sale by public announcement at the time and place
fixed by the preceding postponement.
The TRUSTEE shall deliver to the purchaser a deed conveying the Premises (or
such portion thereof) so sold, but without any covenant or warranty, express or
implied. The recitals in such deed of any matters or facts shall be conclusive
proof of the truthfulness thereof.
Any person, including the TRUSTOR, the TRUSTEE, or the BENEFICIARY, may purchase
at such sale.
Upon such sale by the TRUSTEE, and after deducting all costs, expenses, and fees
of the TRUSTEE and of this Trust (including the cost of evidence of title in
connection with the sale), the TRUSTEE shall apply the proceeds from the sale to
the payment of the indebtedness and obligations secured by this Deed of Trust
whether evidenced by the Obligation or otherwise; sums representing advances
made or expenditures made and incurred by, and not then repaid to, the
BENEFICIARY or the TRUSTEE under this Deed of Trust or under any document
evidencing or securing any indebtedness secured hereby, together with accrued
interest thereon at the rate specified in the section of this Deed of Trust
entitled "Performance of Obligations by Beneficiary or Trustee"; all other sums
then secured by this Deed of Trust, together with interest as provided in any
document pertaining thereto; and the remainder, if any, to the person or persons
legally entitled thereto.
If this Deed of Trust or the Obligation secured hereby provides for any charge
for prepayment of any indebtedness secured hereby, the TRUSTOR agrees to pay
said charge if any of such indebtedness shall be paid prior to the normal due
date thereof stated in such Obligation or in this Deed of Trust this result
shall obtain even if and notwithstanding the TRUSTOR shall have defaulted in the
payment thereof or in the performance of any obligation hereunder, and the
BENEFICIARY by reason of such default, shall have declared all indebtedness
secured hereby immediately due and payable.
14. Acceleration of Indebtedness Upon Sale of the Premises. In the event the
TRUSTOR, or any successor in interest to the TRUSTOR in the Premises secured by
this Deed of Trust, sells, conveys, alienates, assigns, transfers, or disposes
of the Premises, or any part thereof or any interest therein, or becomes
divested of its title or any interest therein in any manner or way, or enters
into a master lease covering all or any portion thereof or an undivided interest
therein, whether voluntary, involuntary, or otherwise, or enters into an
agreement to do so, without the prior written consent of the BENEFICIARY, then
the BENEFICIARY may at its election, declare the Obligation and such other
indebtedness and obligations secured by this Deed of Trust, irrespective of the
maturity date specified in the Obligation or in any written agreement pertaining
to the Obligation and/or such other indebtedness and obligations, immediately
due and payable without notice. No Waiver of this right shall be effective
unless in writing. Consent by the BENEFICIARY to one such transaction shall not
constitute or be deemed to be a waiver of the rights of the BENEFICIARY provided
herein, or a waiver of the requirement of the prior written consent of the
BENEFICIARY, as to future or succeeding transactions.
15. Acceleration of Indebtedness Upon Change in Ownership, Control, or
Membership of the Trustor. If the TRUSTOR is a corporation, trust, limited or
general partnership, or joint venture, and there shall occur a sale, conveyance,
transfer, disposition or encumbrance (whether voluntary or involuntary, or
otherwise), or should an agreement be entered into to do so, with respect to
more than ten percent (10%) of the issued and outstanding capital stock of the
TRUSTOR (if a corporation), of the beneficial interest of the TRUSTOR (if a
trust), or of any general or limited partnership or joint venture interest (if
the TRUSTOR is a general or limited partnership or joint venture), or if there
shall occur a change in any general partner or any joint venturer, or a change
affecting the ownership, control, or membership of the TRUSTOR (if the TRUSTOR
is a general or limited partnership or a joint venture), then the BENEFICIARY
may, at it, election, declare the Obligation and such other indebtedness and
obligations secured by this Deed of Trust, irrespective of the maturity date
specified in the Obligation or in any written agreement pertaining to the
Obligation and/or such other indebtedness and obligations, immediately due and
payable, without notice, unless the BENEFICIARY shall have given its prior
written consent thereto. Consent to one such transaction shall not constitute or
be deemed to be a waiver of the right to require such consent as to future or
succeeding transactions.
16. Acceleration of Indebtedness Upon an Event of Bankruptcy or Insolvency. The
TRUSTOR agrees that the BENEFICIARY may, at its election, declare the Obligation
and such other indebtedness and obligations secured by this Deed of Trust,
irrespective of the maturity date specified in the Obligation or in any written
agreement pertaining to the Obligation and/or such other indebtedness and
obligations, immediately due and payable, without notice: if any proceeding
under the Bankruptcy Code, or under any present or future federal, state or
other statute, law or regulation pertaining to bankruptcy, insolvency or other
relief for debtors shall be instituted by or against the TRUSTOR or any other
person who may be liable (by way of guaranty, assumption, endorsement or
otherwise) upon the Obligation and/or such other indebtedness and obligations
secured hereby; and/or if a receiver, trustee or custodian shall be appointed
for the TRUSTOR or such other person shall make an assignment for the benefit of
creditors and if such proceeding or receiver, trustee or custodian shall not be
dismissed, or such assignment shall not be voided, within sixty (60) days of
such institution, appointment or making.
17. Successor Trustees. The BENEFICIARY, acting alone, may, from time to time,
by instrument in writing, substitute a successor or successors to any Trustee
named herein or acting hereunder, Such instrument, executed, acknowledged and
recorded in the manner required by law, shall be conclusive proof of proper
substitution of such successor Trustee or Trustees, who shall (without
conveyance from the preceding Trustee) succeed to all of the tide, estate,
rights, powers and duties of such preceding Trustee, Such instrument must
contain the name of the original Trustor, Trustee and Beneficiary hereunder, the
book and page where this Deed of Trust is recorded and the name and address of
the new Trustee. If a notice of default has been recorded, this power of
substitution cannot be exercised until after the costs, fees, and expenses of
the then acting Trustee have been paid to such Trustee, who shall endorse
receipt thereof upon such instrument of substitution.
18. Cumulative Remedies; Additional Security. No remedy herein conferred upon or
reserved to the parties to this Deed of Trust is intended to be exclusive of any
other remedy provided herein or by law. Each such remedy shall be cumulative and
shall be in addition to every other remedy given hereunder or now or hereafter
existing at law or in equity or by statute. No delay or omission of the TRUSTEE
or the BENEFICIARY in the exercising of any right or power accruing upon any
event of default hereunder shall impair such right or power or any other right
or power, nor shall such delay or omission be construed or deemed to be a waiver
of any default or any acquiescence therein.
If there exists additional security for the indebtedness and obligations secured
by this Deed of Trust, the BENEFICIARY, at its election and without limiting or
affecting any of its rights or remedies hereunder, may exercise any of the
rights and remedies to which the BENEFICIARY may be entitled hereunder--either
BENEFICIARY may deem fit without waiving any rights or remedies with respect to
any other security.
<PAGE>
19. Partial Invalidity of this Deed of Trust. In the event any one or more of
the provisions of this Deed of Trust, the Obligation, or any other document
evidencing the indebtedness and obligations secured hereby shall for any reason
be held to be invalid, illegal and/or unenforceable in any respect, such
invalidity, illegality and/or unenforceability shall not affect any other
provision of this Deed of Trust, the Obligation, or any such other document, and
such other provisions shall remain binding and enforceable and shall continue in
effect.
20. Application of California Law. This Deed of Trust has been executed and
delivered in the State of California and is to be construed, enforced and
governed according to and by the laws of California.
21. Miscellaneous Provisions.
A. This Deed of Trust applies to, inures to the benefit of and binds all
parties hereto and their respective heirs, legatees, devisees,
administrators, executors, successors and assigns. The term Beneficiary as
used herein shall mean the owner and holder, including pledgees, of the
Obligation or any other indebtedness secured hereby, whether or not named as
the Beneficiary herein.
B. The headings and captions of the paragraphs of this Deed of Trust are
for reference purposes only and shall not be construed or deemed to define
or limit any of the terms and provisions contained thereunder. Whenever in
this Deed of Trust the context so requires, the gender used includes the
masculine feminine, and/or neuter and the number so used includes the
singular and/or the plural.
C. Any Trustor who is married hereby expressly agrees that recourse may be
had against such person's separate property, but without thereby creating
any lien or charge thereon for any deficiency after sale of the Premises as
herein provided.
D. The pleading of any statute of limitations as a defense to any and all
indebtedness and/or obligations secured by this Deed of Trust is hereby
waived to the fullest extent permissible by law.
E. In the event of the passage, after the date of this Deed of Trust, of
any law deducting from the value of real property, for tax purposes, any
lien or charge thereon, or changing in any way the laws now existing for the
taxation of deeds of trust or indebtedness secured by deeds of trust for
federal, state or local purposes, or changing the manner of collection of
any such taxes as to affect this Deed of Trust or the indebtedness secured
hereby, the TRUSTOR agrees to pay such tax arising from such new law; and if
the TRUSTOR fails to do so or if it would be illegal for the TRUSTOR to do
so, the BENEFICIARY may, a its election and without demand or notice,
declare the entire indebtedness secured by this Deed of Trust (together with
accrued interest thereon) immediately, due and payable.
F. The TRUSTEE accepts this Trust when this Deed of Trust, duly executed
and acknowledged, is made a public record as provided by law. The TRUSTEE is
not obligated to notify any party to this Deed of Trust of a pending sale
under any other deed of trust or of any action or proceeding in which the
TRUSTOR, the BENEFICIARY and/or the TRUSTEE is a party, unless brought by
the TRUSTEE hereunder.
G. The TRUSTOR requests that a copy of any notice of default or any notice
of sale thereunder be mailed to the TRUSTOR at the address first reference
and set forth herein, or at such other address as the TRUSTOR may, from time
to time, notify the TRUSTEE by certified United States mail.
IN WITNESS WHEREOF, this Deed of Trust is executed as of the date first
hereinabove written,
TRUSTOR:
ATG INC.
By: __________________________________
Doreen Chiu, President
ATTACH NOTARY ACKNOWLEDGEMENTS
<PAGE>
CERTIFICATE OF ACKNOWLEDGMENT
STATE OF CALIFORNIA )
) ss
COUNTY OF _____________________)
On __________________________, 19___ before me, _______________________________
personally appeared Doreen Chin, personally known to me (or proved to me on the
basis of satisfactory evidence) (0 be the person(s) whose name(s) is/are
subscribed to the within instrument and acknowledged to me that he/she/they
executed the same in his/her/their authorized capacity(ies), and that by
his/her/their signature(s) on the instrument the person(s), or the entity upon
behalf of which the person(s) acted, executed the instrument.
WITNESS my hand and official seal.
Signature _____________________________________ (Seal)
<PAGE>
EXHIBIT "A"
DESCRIPTION OF REAL PROPERTY
DEED OF TRUST
All that real property located in the County of Alameda, State of California,
legally described as follows:
Parcel 1, Parcel Map 4703, filed November 22, 1985, Map Book 157, Pages 57-58,
Alameda County Records.
Excepting therefrom:
Reserving to the Grantor and its successors and assigns all oil, gas, mineral,
geothermal, and hydrocarbon substances in and under or that may be produced
below a depth of 500 feet below the surface of said property without any right
of entry upon the surface of said land for the purposes of mining, drilling,
exploring or extracting such oil, gas, mineral, geothermal, or hydrocarbon
substances and without any right to the use of or rights in or to any portion of
the surface of said land to a depth of 500 feet below the surface thereof
reserved by King and Lyons, a California general partnership, recorded November
22, 1985, Series No, 85-251319.
A,P, No, 519-1693-021
<PAGE>
EXHIBIT 10.3
DEED OF TRUST
(PARTICIPATION)
THIS DEED OF TRUST, made this 5TH day of AUGUST
1993, by and between ATG INC., A CALIFORNIA CORPORATION, WHO ACQUIRED TITLE AS
ALLIED NUCLEAR INC., AS TO PARCEL A; AND ALLIED TECHNOLOGY GROUP, INC. ALSO
KNOWN AS ATG INC., A CALIFORNIA CORPORATION, AS TO PARCELS B AND C.
hereinafter referred to as "Grantor," whose address is 2025 BATTELE BLVD.,
RICHLAND, WA 99352...
CHICAGO TITLE INSURANCE COMPANY
hereinafter referred to as "Trustee," whose address is PO BOX 6740, KENNEWICK,
WA 99336
WEST ONE BANK, EASTERN WA/FORMERLY: BEN FRANKLIN NATIONAL BANK
hereinafter referred to as "Beneficiary," who maintains an office and place of
business at PO BOX 2487,
PASCO, WA 99302 (3525 W COURT)
in participation with the Small Business Administration, an agency of the United
States.
WITNESSETH, that for and in consideration of $1.00 and other good and
valuable consideration, receipt or which is hereby acknowledged, the Grantor
does hereby bargain, sell, grant, assign, and convey unto the Trustee, his
successors and assigns, all of the following described property situated and
being in the County of BENTON
State of WASHINGTON:
**SEE ATTACHED LEGAL DESCRIPTION**
THE REAL PROPERTY DESCRIBED HEREIN IS
NOT PRINCIPALLY USED FOR AGRICULTURAL
OR FARMING PURPOSES
Together with and including all buildings, all fixtures, including but not
limited to all plumbing, heating, lighting, ventilating, refrigerating,
incinerating, air conditioning apparatus and elevators (the Trustor hereby
declaring that it is intended that the Items herein enumerated shall be deemed
to have been permanently installed as part of the realty), and all improvements
now or hereafter existing thereon; the hereditaments and appurtenances and all
other rights thereunto belonging, or in anywise appertaining, and the
reversion and reversions, remainder and remainders, and the tents, issues, and
profits of the above described property to have and to hold the same unto the
Trustee, and the successors in interest of the Trustee, forever, in fee simple
or such other estate, if any, as is stated herein trust, to secure the payment
of a promissory note of this date, in the principal sum of $ SEVEN HUNDRED FIFTY
THOUSAND DOLLARS AND NO/100* ($750,000.00)
signed by ATG, INC., d.b.a. ALLIED TECHNOLOGY GROUP, INC. AND ATG RICHLAND INC.,
ALLIED ECOLOGY SERVICES, INC., NATURAL SAFETY CONSULTANTS INC.
____________________________________
DOREEN CHIU-PRESIDENT
____________________________________
FRANK CHIU-VICE PRESIDENT/SEC & TREAS.
1
<PAGE>
1. This conveyance is made subject to the further trust that the said Grantor
shall remain in quiet and peaceable possession of the above granted and
described premises and take the profits thereof to his own use until default be
made in any payment of an installment due on said note or in the performance of
any or the covenants or conditions contained therein or in this Deed of Trust;
and, also to secure the reimbursement of the Beneficiary or any other holder of
said note, the Trustee or any substitute trustee of any and all costs and
expenses incurred, including reasonable attorney's fees, on account of any
litigation which may arise with respect to this Trust or with respect to the
indebtedness evidenced by said note, the protection and maintenance of the
property hereinabove described or in obtaining possession of said property after
any sale which may be made as hereinafter provided.
2. Upon the full payment of the indebtedness evidenced by said note and the
interest thereon, the payment of all other sums herein provided for, the
repayment of all monies advanced or expended pursuant to said note or this
instrument, and upon the payment of all other proper costs, charges,
commissions, and expenses, the above described property shall be released and
reconvened to and at the cost of the Grantor.
3. Upon default in any of the convenants or conditions of this instrument or
of the note or loan agreement secured hereby, the Beneficiary or his assigns may
without notice and without regard to the adequacy of security for the
indebtedness secured, either personally or by attorney or agent without bringing
any action or proceeding, or by a receiver to be appointed by the court, enter
upon and take possession of said property or any part thereof, and do any acts
which Beneficiary deems proper to protect the security hereof, and either with
or without taking possession of said property, collect and receive the rents,
royalties, issues, and profits thereof, including rents accrued and unpaid, and
apply the same, less costs of operation and collection, upon the indebtedness
secured by this Deed of Trust, said rents, royalties, issues, and profits, being
hereby assigned to the beneficiary as further security for time payment of such
indebtedness. Exercise of rights under this paragraph shall not cure or waive
any default or notice of default hereunder or invalidate any act done pursuant
to such notice but shall be cumulative to any right and remedy to declare a
default and to cause notice of default to be recorded as hereinafter provided,
and cumulative to any other right and/or remedy hereunder, or provided by law,
and may be exercised concurrently or independently. Expenses incurred by
Beneficiary hereunder including reasonable attorney's fees shall be secured
hereby.
4. The Grantor covenants and agrees that if he shall fail to pay said
indebtedness, or any part thereof, when due, or shall fail to perform any
covenant or agreement of this instrument or of the promissory note secured
hereby, the entire indebtedness hereby secured shall immediately become due,
payable, and collectible without notice, at the option of the Beneficiary or
assigns, regardless of maturity, and the Beneficiary or assigns may enter upon
said property and collect the rents and profits thereof. Upon such default in
payment or performance, and before or after such entry, the Trustee, acting in
the execution of this Trust, shall have the power to sell said property, and it
shall be the Trustee's duty to sell said property (and in case of any default of
any purchaser, to resell) at public auction, to the highest bidder, first giving
four weeks' notice of the time, terms, and place of such sale, by advertisement
not less than once during each of said four weeks in a newspaper published or
distributed in the county or political subdivision in which said property is
situated, all other notice being hereby waived by the Grantor (and the
Beneficiary or any person on behalf of the Beneficiary may bid and purchase at
such sale). Such sale will be held at a suitable place to be selected by the
Beneficiary within said county or political subdivision. The Trustee is hereby
authorized to execute and deliver to the purchaser at such sale a sufficient
conveyance of said property, which conveyance shall contain recitals as to the
happening of default upon which the execution of the power of sale herein
granted depends; and the said Grantor hereby constitutes and appoints the
Trustee as his agent and attorney in fact to make such recitals and to execute
said conveyance and hereby covenants and agrees that the recitals so made shall
be binding and conclusive upon the Grantor, and said conveyance shall be
effectual to bar all equity or right of redemption, homestead dower, right of
appraisement, and all other rights and exemptions, of the Grantor, all of which
are hereby expressly waived and conveyed to the Trustee. In the event of a sale
as hereinabove provided, the Grantor, or any person in possession under the
Grantor, shall then become and be tenants holding over and shall forthwith
deliver possession to the Purchaser at such sale or be summarily dispossessed,
in accordance with the provisions of law applicable to tenants holding over. The
power and agency hereby granted are coupled with an interest and are irrevocable
by death or otherwise, and are granted as cumulative to all other remedies for
the collection of said indebtedness. The Beneficiary or Assigns may take any
other appropriate action pursuant to state or Federal statute either in state or
Federal court or otherwise for the disposition of the property.
5. In the event of a sale as provided in paragraph 4, the Trustee shall be
paid a fee by the Beneficiary in an amount not in excess of percent of
the gross amount of said sale or sales, provided, however, that the amount of
such fee shall be reasonable and shall be approved by the Beneficiary as to
reasonableness. Said fee shall be in addition to the costs and expenses incurred
by the Trustee in conducting such sale. The amount of such costs and expenses
shall be deducted and paid from the sale's proceeds. It is further agreed that
if said property shall be advertised for sale as
<PAGE>
herein provided and not sold, the Trustee shall be entitled to a reasonable fee,
in an amount acceptable to the Beneficiary for the services rendered. The
Trustee shall also be reimbursed by the Beneficiary for all costs and expenses
incurred in connection with the advertising of said property for sale if the
sale is not consummated.
6. The proceeds of any sale of said property in accordance with paragraph 4
shall be applied first to payments of fees, costs, and expenses of said sale,
the expenses incurred by the Beneficiary for the purpose of protecting or
maintaining said property and reasonable attorneys' fees; secondly, to payment
of the indebtedness secured hereby; and thirdly, to pay any surplus or excess to
the person or persons legally entitled thereto.
7. In the event said property is sold pursuant to the authorization
contained in this instrument or at a judicial foreclosure sale and the proceeds
are not sufficient to pay the total indebtedness secured by this instrument and
evidenced by said promissory note, the Beneficiary will be entitled to a
deficiency judgement for the amount of the deficiency without regard to
appraisement, the Grantor having waived and assigned all rights of appraisement
to the Trustee.
8. The Grantor covenants and agrees as follows:
a. He will promptly pay the indebtedness evidenced by said promissory
note at the times and in the manner therein provided.
b. He will pay all taxes, assessments, water rates, and other
governmental or municipal charges, fines or impositions, for which provision
has not been made hereinbefore, and will promptly deliver the official
receipts therefor to the Beneficiary.
c. He will pay such expenses and fees as may be incurred in the
protection and maintenance of said property, including the fees of any
attorney employed by the Beneficiary for the collection of any or all of the
indebtedness hereby secured, of such expenses and fees as may be incurred in
any foreclosure sale by the Trustee, or court proceedings or in any other
litigation or proceeding affecting said property, and attorney's fees
reasonably incurred in any other way.
d. The rights created by this conveyance shall remain in full force and
effect during any postponement or extension of the time of the payment of the
indebtedness evidenced by said note or any part thereof secured hereby.
e. He will continuously maintain hazard insurance of such type or types
and in such amounts as the Beneficiary may from time to time require, on the
improvements now or hereafter on said property, and will pay promptly when
due any premiums therefor. All insurance shall be carried in companies
acceptable to Beneficiary and the policies and renewals thereof shall be held
by Beneficiary and have attached thereto loss payable clauses in favor of and
in form acceptable to the Beneficiary. In the event of loss, Grantor will
give immediate notice in writing to Beneficiary and Beneficiary may make
proof of loss if not made promptly by Grantor, and each insurance company
concerned is hereby authorized and directed to make payment for such loss
directly to Beneficiary instead of to Grantor and Beneficiary jointly, and
the insurance proceeds, or any part thereof, may be applied by Beneficiary at
its option either to the reduction of the indebtedness hereby secured or to
the restoration or repair of the property damaged. In the event of a
Trustee's sale or other transfer or title to said property in extinguishment
of the indebtedness secured hereby, all right, title, and interest of the
Grantor in and to any insurance policies than in force shall pass at the
option of the Beneficiary to the purchaser or Beneficiary.
f. He will keep the said premises in as good order and condition as they
are now and will not commit or permit any waste thereof, reasonable wear and
tear excepted, and in the event of the failure of the Grantor to keep the
buildings on said premises and those to be erected on said premises, or
improvements thereon, in good repair, the Beneficiary may make such repairs
as in the Beneficiary's discretion it may deem necessary for the proper
preservation thereof, and any sums paid for such repairs shall bear interest
from the date of payment at the rate specified in the note, shall he due and
payable on demand and shall be fully secured by this Deed of Trust.
g. He will not without the prior written consent of the Beneficiary
voluntarily create or permit to be created against the property subject to
this Deed of Trust any liens inferior or superior to the lien of this Deed of
Trust and further that he will keep and maintain the same free from the claim
of all persons supplying labor or materials which will enter into the
construction of any and all buildings now being erected or to be erected on
said premises.
h. He will not rent or assign any part of the rent of said property or
demolish, remove, or substantially alter any building without the written
consent of the Beneficiary.
<PAGE>
9. In the event the Grantor fails to pay any Federal, state, or local tax
assessment, income tax or other fails tax lien charge, fee, or other expense
charged to the property hereinabove described, the Beneficiary is hereby
authorized to pay the same and any sum so paid by the Beneficiary shall be added
to and become a part of the principal amount of the indebtedness evidenced by
said promissory note. If the Grantor shall pay and discharge the indebtedness
evidenced by said promissory note, and shall pay such sums and shall discharge
all taxes and liens and the costs, fees, and expenses of making, enforcing and
executing this Deed of Trust, then this Deed of Trust shall be canceled and
surrendered.
10. The Grantor covenants that he is lawfully seized and possessed of and has
the right to sell and convey said property; that the same is free from all
encumbrances except as hereinabove recited; and that he hereby binds himself and
his successors in interest to warrant and defend tile title aforesaid thereto
and every part thereof against the lawful claims of all persons whomsoever.
11. For better security of the indebtedness hereby secured the Grantor, upon
the request of the Beneficiary, its successors or assigns, shall execute and
deliver a supplemental mortgage or mortgages covering any additions,
improvements, or betterments made to the property hereinabove described and all
property acquired after the date hereof (all in form satisfactory to Grantee).
Furthermore, should Grantor fail to cure any default in the payment of a prior
or inferior encumbrance on the property described by this instrument, Grantor
hereby agrees to permit Beneficiary to cure such default, but Beneficiary is not
obligated to do so; and such advances shall become part of the indebtedness
secured by this instrument, subject to the same terms and conditions.
12. That all awards of damages in connection with any condemnation for public
use of or injury to any of said property are hereby assigned and shall be paid
to Beneficiary, who may apply the same to payment of the installments last due
under said note, and the Beneficiary is hereby authorized, in the name of the
Grantor, to execute and deliver valid acquittances thereof and to appeal from
any such award.
13. The irrevocable right to appoint a substitute trustee or trustees is
hereby expressly granted to the Beneficiary, his successors or assigns, to be
exercised at any time hereafter without notice and without specifying any reason
therefor, by filing for record in the office where this instrument is recorded
an instrument of appointment. The Grantor and the Trustee herein named or that
allay hereinafter be substituted hereunder expressly waive notice of the
exercise of this right as well as any requirement or application to any court
for the removal, appointment or substitution of any trustee hereunder.
14. Notice of the exercise of any option granted herein to the Beneficiary or
to the holder of the note secured hereby is not required to be given the
Grantor, the Grantor having hereby waived such notice.
15. If more than one person joins in the execution of this instrument as
Grantor or if anyone so joined be of the feminine sex, the pronouns and relative
words used herein shall be read as if written in the plural or feminine,
respectively, and the term "Beneficiary" shall include any payee of the
indebtedness hereby secured or any assignee or transferee thereof whether by
operation of law or otherwise. The covenants herein contained shall bind and the
rights herein granted or conveyed shall inure to the respective heirs,
executors, administrators, successors, and assigns of the parties hereto.
16. In compliance with section 101.1(d) of the Rules and Regulations of the
Small Business Administration [13 C.F.R. 101.(d)], this instrument is to be
construed and enforced in accordance with applicable Federal law.
17. A judicial decree, order, or judgment holding any provision or portion of
this Instrument invalid or unenforceable shall not in any way impair or preclude
the enforcement of the remaining provisions or portions of this instrument.
<PAGE>
IN WITNESS WHEREOF, the Grantor has executed this instrument and the Trustee
and Beneficiary have accepted the delivery of this instrument as of the day and
year aforesaid.
ATG INC., A CALIFORNIA CORPORATION, WHO ACQUIRED TITLE AS ALLIED NUCLEAR, INC.
AS TO PARCEL A; AND ALLIED TECHNOLOGY GROUP, INC., ALSO KNOWN AS ATG INC., A
CALIFORNIA CORPORATION, AS TO PARCELS B AND C.
______________________________________
DOREEN CHIU-PRESIDENT
______________________________________
VICE PRESIDENT/SEC & TREAS. FRANK CHIU-
Executed and delivered in the presence of tile following witnesses:
_______________________________________
_______________________________________
(Add Appropriate Acknowledgment)
STATE OF WASHINGTON
COUNTY OF FRANKLIN
On this day before me, the undersigned Notary Public, personally appeared
Doreen Chiu-President and Frank Chiu-Vice President/Sec & Treas. for ATG,
INC., known to me to the individuals described in and who executed the
within and foregoing instrument and acknowledged that they signed the
agreement as their voluntary act and deed, for the uses and purposes therein
mentioned.
Given under my hand and official seal this 5th day of August, 1993.
By: Residing in:
Notary Public in and for the State of Washington. My commission expires:
<PAGE>
Order No.: 40816-SW
"EXHIBIT I"
PARCEL A:
- --------
That portion of the Northwest quarter of section 22, Township 10 North Range 28
East, W.M., described as follows:
Beginning at the North quarter corner of said Section 22, thence along the North
line of said Section 22, South 89 degrees 41'20" West, 370.00 feet; thence South
00 degrees 27'46" East, parallel to the East line of said Northwest quarter,
40.00 feet to the True point of beginning; thence continuing South 00 degrees
27'46" East, 417.42 feet, thence South 89"41'20~' West, 417.42 feet; thence
North 00 degrees 27'46" West, 417.42 feet, to a point 40.00 feet South of the
North line of said Section 22; thence North 89 degrees 41'20" East, 417.42
feet to the True Point of Beginning.
PARCEL B:
- --------
That portion of the Northwest quarter of Section 22, Township 10 North, flange
28 East, W.M., Benton county, Washington, described as follows:
Beginning at the North quarter corner of said Section 22; thence South 89
degrees 41'20" West 787.42 feet along the North line of said Section 22; thence
South 00 degrees 27'51" East 40.00 feet, parallel to the East line of said
Northwest quarter and the True Point of Beginning. Thence continuing South 00
degrees 27'51" East, 417.42 feet; thence South 89 degrees 41'20" West, 417.42
feet; thence North 00 degrees 27'51" West 471.42 feet, to a point 40.00 feet
South of tile North line of said Section 22; thence North 89 degrees 41'20"
East, 417.42 feet to the True Point of Beginning.
PARCEL C:
- --------
That portion of the Northwest quarter of Section 22, Township 10 North, flange
28 East, W.M., Benton county, Washington, described as follows:
Beginning at the North quarter corner of said Section 22; thence South 89
degrees 41'20" West, 1,539.71 feet along the North line of said Section 22;
thence South 00 degrees 30'26" East, 40.00 feet to the True Point of Beginning;
thence continuing South 00 degrees 30'26" East, 745.00 feet; thence North 89
degrees 41'20" East, 1169.12 feet; thence North 00 degrees 27'51" West, 327.58
feet to the Southeast corner of a record of survey, recorded in Volume 1 of
Surveys, page 1192, records of Benton county, Washington; thence South 89
degrees 41'20" West, 834.84 feet; along the South line of said record of Survey
No. 1192 to the southwest corner of record of a survey, recorded in Volume 1 of
Surveys, page 1277, records of Benton county, Washington; thence North 00
degrees 27'5l" Nest along the West line of said record of Survey No. 1277;
417.42 feet to the Northwest corner of said record of Survey No. 1277; thence
South 8904112019 West, 334.84 feet to the Point of Beginning.
ATG, INC. d.b.a. ALLIED TECHNOLOGY GROUP, INC. AND ATG RICHLAND, INC., ALLIED
ECOLOGY SERVICES, INC., NATURAL SAFETY CONSULTANTS, INC.
_________________________ _________________________________________
DOREEN CHIU-PRESIDENT FRANK CHIU-VICE PRESIDENT/SEC & TREAS.
<PAGE>
EXHIBIT 10.4
Sanwa
Bank
California
ACCOUNTS RECEIVABLE CREDIT AGREEMENT
This Accounts Receivable Credit Agreement ("Agreement") is made and entered into
this 19th day of April 1996 by and between SANWA BANK CALIFORNIA (the "Bank")
and ATG INC. (the "Borrower").
SECTION I
DEFINITIONS
1.01. Certain Defined Terms. Unless elsewhere defined in this Agreement the
following terms shall have the following meanings (such meanings to be generally
applicable to the singular and plural forms of the terms defined):
A. "Account Debtor" shall mean the person or entity obligated to the
Borrower upon an account.
B. "Advance" shall mean an advance to the Borrower under any line of
credit facility or similar facility provided for in Section II of this
Agreement which provides for draws by the Borrower against an established
credit line.
C. "Borrowing Base" shall mean, as determined by the Bank from time to
time, the lesser of: (i) 90% of the aggregate amount of Eligible Accounts
of the Borrower; or (ii) $4,000,000.00.
D. "Business Day" shall mean a day, other than a Saturday or Sunday, on
which commercial banks are open for business in California.
E. "Collateral" shall mean the property in which the Bank is granted a
security interest pursuant to provisions of the section herein entitled
"Collateral", together with any other personal or real property in which
the Bank may be granted a lien or security interest to secure payment of
the Obligations.
F. "Debt" shall mean all liabilities of the Borrower less Subordinated
Debt.
G. "Effective Tangible Net Worth" shall mean the Borrower's stated net
worth plus Subordinated Debt but less all intangible assets of the
Borrower (i.e., goodwill, trademarks, patents, copyrights, organization
expense and similar intangible items).
H. "Eligible Account" shall mean, at any time, the gross amount, less
returns, discounts, credits or offsets of any nature, of the trade
accounts owing to the Borrower by Account Debtors containing selling
terms not exceeding 30 days but excluding the following:
(i) Accounts with respect to which the Account Debtor is an
officer, employee or agent of the Borrower.
(ii) Accounts with respect to which goods are placed on
consignment, guaranteed sale or other terms by reason of which the
payment by the Account Debtor may be conditional.
(iii) Accounts with respect to which the Account Debtor is not a
resident of the United States except to the extent such accounts are
supported by adequate Eximbank insurance or other insurance
acceptable to the Bank or by irrevocable letters of credit issued by
banks satisfactory to the Bank.
(iv) Accounts with respect to which the Account Debtor is a
subsidiary of, or affiliated with, the Borrower or its shareholders,
officers or directors.
(v) Accounts with respect to which the Borrower is or may become
liable to the Account Debtor for goods bold or services rendered by
the Account Debtor to the Borrower.
(vi) That portion of the accounts of any single Account Debtor that
exceeds 15% of all of the Borrower's accounts.
(vii) Accounts which have not been paid in full within 60 days from
the date payment was due or 90 days from the original date of
invoice, whichever is less.
(viii) All accounts of any single Account Debtor if 25% or more of
the dollar amount of all such accounts are represented by accounts
which have not been paid in full within 60 days from the date payment
was due or 90 days from the original date of invoice, whichever is
less.
(ix) Accounts which are subject to dispute, counterclaim or setoff.
(x) Accounts with respect to which the goods have not been shipped
or delivered, or the services have not been rendered, to the Account
Debtor.
(xi) Accounts with respect to which the Bank, in its sole
discretion, deems the creditworthiness or financial condition of the
Account Debtor to be unsatisfactory.
(xii) Accounts of any Account Debtor who has filed or had filed
against it a petition in bankruptcy, or an application for relief
under any provision of any state or federal bankruptcy, insolvency or
debtor-in-relief acts; or who has had appointed a trustee, custodian
or receiver for the assets of such Account Debtor; or who has made an
assignment for the benefit of creditors or has become insolvent or
fails generally to pay its debts (including its payrolls) as such
debts become due.
(xiii) Accounts for which recoverable costs and accrued profit on
progress completed have not been billed to the Account Debtor.
(xiv) Accounts with respect to which the Account Debtor is the
United States or any department or agency thereof, except any such
accounts which have been properly assigned to the Bank pursuant to
the Assignment of Claims Act and for which the Bank is receiving
payments under such accounts directly from the Account Debtor.
I. "Environmental Claims" shall mean all claims, however asserted, by
any governmental authority or other person alleging potential liability
or responsibility for violation of any Environmental Law or for release
or injury to the environment or threat to public health, personal injury
(including sickness, disease or death), property damage, natural
resources damage, or otherwise alleging liability or responsibility for
damages (punitive or otherwise), cleanup, removal, remedial or response
costs, restitution, civil or criminal penalties, injunctive relief, or
other type of relief, resulting from or based upon (i)
<PAGE>
the presence, placement, discharge, emission or release (including
intentional and unintentional, negligent and non-negligent, sudden or
non-sudden, accidental or non-accidental placement, spills, leaks,
discharges, emissions or releases) of any Hazardous Materials at, in, or
front property owned, operated or controlled by the Borrower, or (ii) any
other circumstances forming the basis of any violation, or alleged
violation, of any Environmental Law.
J. "Environmental Claim" shall mean all federal, state or local law,
statutes, common law duties, rules, regulations, ordinances and codes,
together with all administrative orders, directed duties, requests,
licenses, authorizations and permits of, and agreements with, any
governmental authorities, in each case relating to environmental, health,
safety and land use matters; including the Comprehensive Environmental
Response, Compensation and Liability Act of 1980 ("CERCLA") the Clean Air
Act, the Federal Water Pollution Control Act of 1972, the Solid Waste
Disposal Act, the Federal Resource Conservation and Recovery Act, the
Toxic Substances Control Act, the Emergency Planning and Community Right-
to-Know Act, the California Hazardous Waste Control Law, the California
Solid Waste Management, Resource, Recovery and Recycling Act, the
California Water Code and the California Health and Safety Code.
K. "ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time, including (unless the content
otherwise requires) any rules or regulations promulgated thereunder.
L. "Event of Default" shall have the meaning set fort in the section
herein entitled "Events of Default".
M. "Hazardous Materials" shall mean, all those substances which are
regulated by, or which may form the basis of liability under any
Environmental Law, including all substances identified under any
Environmental Law as a pollutant, contaminant, hazardous waste, hazardous
constituent, special waste, hazardous substance, hazardous material, or
toxic substance, or petroleum, or petroleum derived substance or waste.
N. "Indebtedness" shall mean, with respect to the Borrower, (i) all
indebtedness for borrowed money or for the deferred purchase price of
property or services in respect of which the Borrower is liable,
continently or otherwise, as obligor, guarantor or otherwise, or in
respect of which the Borrower otherwise assures a creditor against loss
and (ii) obligations under leases which shall have been or should be, in
accordance with generally accepted accounting principles, reported as
capital leases in respect of which the Borrower is liable, continently or
otherwise, or in respect of which the Borrower otherwise assures a
creditor against loss.
O. "Obligations" shall mean all amounts owing by the Borrower to the
Bank pursuant to this Agreement.
P. "Permitted Liens" shall mean: (i) liens and security interests
security indebtedness owed by the Borrower to the Bank; (ii) liens for
taxes, assessments or similar charges either not yet due or being
contested in good faith, provided proper reserves are maintained therefor
in accordance with generally accepted accounting procedure; (iii) liens
of materialmen, mechanics, warehousemen, or carrier: or other like liens
arising in the ordinary course of business and securing obligations which
are not yet delinquent; (iv) purchase money liens or purchase money
security interests upon or in any property acquired or held by the
Borrower in the ordinary course of business to secure Indebtedness
outstanding on the date hereof or permitted to be incurred pursuant to
this Agreement: (v) liens and security interests which, as of the date
hereof, have been disclosed to and approved by the Bulk in writing; and
(vi) those liens and security interests which in the aggregate constitute
an immaterial and insignificant monetary amount with respect to the net
value of the Borrower's assets.
Q. "Reference Rate" shall mean an index for a variable interest rate
which is quoted, published or announced from time to time by the Bank as
its reference rate and as to which loans may be made by the Bank at,
below or above such reference rate.
R. "Subordinated Debt" shall mean such liabilities of the Borrower which
have been subordinated to those owed to the Bank in a manner acceptable
to the Bank.
1.02. Accounting Terms. All references to financial statements, assets,
liabilities, and similar accounting items not specifically defined herein shall
mean such financial statements or such items prepared or determined in
accordance with generally accepted accounting principles consistently applied
and, except where otherwise specified, all financial data submitted pursuant to
this Agreement shall be prepared in accordance with such principles.
1.03. Other Terms. Other terms not otherwise defined shall have the meanings
attributed to such terms in the California Uniform Commercial Code.
SECTION II
CREDIT FACILITIES
2.01. Commitment to Lend. Subject to the terms and conditions of this Agreement
and so long as no Event of Default occurs, the Bank agrees to extend to the
Borrower the credit accommodations that follow.
2.02. Accounts Receivable Line of Credit Facility. The Bank agrees to make
loans and Advances to the Borrower, upon the Borrower's request therefor made
prior to the Expiration Date (as defined below in this Section 2.02), against
the Eligible Accounts of the Borrower, provided the aggregate amount of such
Advances outstanding at any time does not exceed the Borrowing Base. Within the
foregoing limits, the Borrower may borrow, partially or wholly prepay, and
reborrow under this Accounts Receivable line of Credit facility.
A. Purpose. Advances made under this Accounts Receivable Line of Credit
shall be used for working capital.
B. Interest Rate. Interest shall accrue on the outstanding principal
balance of Advances under this Accounts Receivable Line of Credit at a
variable rate equal to the Bank's Reference Rate, as it may change from
time to time, plus 1.000% per annum. (Such rate is refereed to in this
Section 2.02 as the "Variable Rate".) The Variable Rate shall be adjusted
concurrently with any change in the Reference Rate. Interest shall be
calculated on the basis of 360 days per year but charged on the actual
number of days elapsed.
C. Payment of Interest. The Borrower hereby promises and agrees to pay
interest monthly on the last day of each month, commencing on April 30,
1996.
D. Repayment of Principal. Unless sooner due in accordance with the
terms of this Agreement, on April 30, 1997 the Borrower hereby promises
and agrees to pay to the Bank in full the aggregate unpaid principal
balance of all Advances then outstanding, together with all accrued and
unpaid interest thereon.
In addition to the above payments, if at any time the aggregate principal
amount of the outstanding Advances shall exceed the applicable Borrowing
Base, the Borrower hereby promises and agrees, immediately upon written
or telephonic notice from the Bank, to pay to the Bank an amount equal to
the difference between the outstanding principal balance of the Advances
and the Borrowing Base.
Any payment received by the Bank shall, at the Bank's option, first be
applied to pay any late fees or other fees then due and unpaid, and then
to interest then due and unpaid and the remainder thereof (if any) shall
be applied to reduce principal.
E. Late Fee. If any regularly scheduled payment of principal and/or
interest (exclusive of the final payment upon maturity), or any portion
thereof, under this Accounts Receivable Line of Credit is not paid within
ten (10) calendar days after it is due, a late payment charge equal to
five percent (5%) of such past due payment may be assessed and shall be
immediately payable.
<PAGE>
F. Making Line Advances/Notice or Borrowing. Each Advance made hereunder
shall be conclusively deemed to have been made at the request of and for
the benefit of the Borrower (i) when credited to any deposit account of
the Borrower maintained with the Bank or (ii) when paid in accordance
with the Borrower's written instructions. Subject to any other
requirements set forth in this Agreement, Advances shall be made by the
Bank upon telephonic or written notice received from the Borrower in form
acceptable to the Bank, which notice shall be received not later than
2:00 p.m. (California Tune) on the date specified for such Advance, which
date shall be a Business Day. Requests for Advances received after such
time may, at the Bank's option, be deemed to be a request for an Advance
to be made on the next succeeding Business Day.
G. Facility Fees. The following fees for this facility shall be paid in
cash upon execution of this Agreement or prior to funding of this
facility: Loan Fees in the amount of 56,250.00.
H. Expiration of the Accounts Receivable line of Credit Facility. Unless
earlier terminated in accordance with the terms of this Agreement, the
Bank's commitment to make Advances to the Borrower hereunder shall
automatically expire on April 30, 1997 (the Expiration Date"), and the
Bank shall be under no further obligation to advance any monies
thereafter.
I. Line Account. The Bank shall maintain on its books a record of
account in which the Bank shall make entries for each Advance and such
other debits and credits as shall be appropriate in connection with the
Accounts Receivable Line of Credit facility (the "Line Account"). The
Bank shall provide the Borrower with a monthly statement of the
Borrower's Line Account, which statement shall be considered to be
correct and conclusively binding on the Borrower unless the Bank is
notified by the Borrower to the contrary within thirty (30) days after
the Borrower's receipt of any such statement which is deemed to be
incorrect.
J. Amounts Payable on Demand. If the Borrower fails to pay on demand any
amount so payable under this Agreement, the Bank may, at its option and
without any obligation to do so and without waiving any default
occasioned by the Borrower's failure to pay such amount, create an
Advance in an amount equal to the amount so payable, which Advance shall
thereafter bear interest as provided under this Accounts Receivable Line
of Credit facility.
In addition, the Borrower hereby authorizes the Bank if and to the extent
payment owed to the Bank under this Accounts Receivable Line of Credit
facility is not made when due, to charge, from time to time, against any
or all of the deposit accounts maintained by the Borrower with the Bank
any amount so due.
SECTION III
COLLATERAL
3.01. Grant or Security Interest. To secure payment and performance of all of
the Borrower's Obligations under this Agreement and the performance of all the
terms, covenants and agreements contained in this Agreement (and any and all
modifications, extensions and renewals of the Agreement) and in any other
document, instrument or agreement evidencing or related to the Obligations or
the Collateral, and also to secure all other liabilities, loans, guarantees,
covenants and duties owed by the Borrower to the Bank, whether or not evidenced
by this or by any other agreement, absolute or contingent, due or to become due,
now existing or hereafter and howsoever created, the Borrower hereby grants to
the Bank a security interest in and to all of the following property:
A. Equipment. All goods and equipment ("Equipment") now owned or
hereafter acquired by the Borrower or in which the Borrower now has or
may hereafter acquire any interest including, but not limited to all
machinery, furniture furnishings, fixtures, tools, supplies and motor
vehicles of every kind and description and all additions, accessions,
improvements, replacements and substitutions thereto and thereof.
B. Inventory. All inventory ("Inventory") now owned or hereafter
acquired by the Borrower including, but not limited to, all raw
materials, work in process, finished goods, merchandise, parts and
supplies of every kind and description, including inventory temporarily
out of the Borrower's custody or possession, together with all returns on
accounts.
C. Accounts and Contract Rights. All accounts and contract rights now
owned or hereafter created or acquired by the Borrower, including but not
Limited to, all receivables and all rights and benefits due to the
Borrower under any contract or agreement.
D. General Intangibles. All general intangibles now owned or hereafter
created or acquired by the Borrower, including but not limited to,
goodwill, trademarks, trade styles, trade names, patents, patent
applications, software, customer lists and business records.
E. Chattel Paper and Documents. All documents, instruments and chattel
paper now owned or hereafter acquired by the Borrower.
F. Monies and other Property in Possession. All monies, and property of
the Borrower now or hereafter in the possession of the Bank or the Bank's
agents, or any one of them, including, but not limited to, all deposit
accounts, certificates of deposit, stocks, bonds, indentures, warrants,
options and other negotiable and non-negotiable securities and
instruments, together with all stock rights, rights to subscribe,
liquidating dividends, cash dividends, payments, dividends paid in stock,
new securities or other property to which the Borrower may become
entitled to receive on account of such property.
3.02. Continuing Lien & Proceeds. The Bank's security interest in the
Collateral shall be a continuing lien and shall include all proceeds and
products of the Collateral including, but not Limited to, the proceeds of any
insurance thereon as well as all accounts, contract rights, documents,
instruments and chattel paper resulting from the sale or disposition of any
Equipment.
3.03. Exclusion of Consumer Debt. The Obligations and performance secured
hereby shall not include any indebtedness of the Borrower incurred for personal,
family or household purposes except to the extent any disclosure required under
any consumer protection law (including but not limited to the Truth in Lending
Act) or any regulation thereto, as now existing or hereafter amended, is or has
been given.
SECTION IV
CONDITIONS PRECEDENT
4.01. Conditions Precedent to the Initial Extension of Credit and/or First
Advance. The obligation of the Bank to make the initial extension of credit
and/or the first Advance hereunder is subject to the conditions precedent that
the Bank shall have received before the date of such extension of credit and/or
the first Advance all of the following, in form and substance satisfactory to
the Bank:
A. Authority to Borrow. Evidence relating to the duly given approval and
authorization of the execution, delivery and performance of this
Agreement, all other documents, instruments and agreements required under
this Agreement and all other actions to be taken by the Borrower
hereunder or thereunder.
B. Guarantors. Continuing guaranties in favor of the Bank, in form and
substance satisfactory to the Bank, executed by Doreen Chiu, Frank Chiu,
ATG Richland Corporation and Allied Ecology Services, Inc. (each a
"Guarantor"), together with evidence that the execution, delivery and
performance of the Guaranties by each Guarantor has been duly authorized.
C. Subordinations. The subordination to all indebtedness from time to
time owed by the Borrower to the Bank of certain indebtedness now or
hereafter owing by the Borrower to the following creditors, each such
subordination to be in form and substance satisfactory to the Bank:
Doreen Chiu, Richard Eng, Jack Cheng and Sophia Wu
<PAGE>
(each a "Creditor"). Each Creditor shall also provide evidence that the
execution, delivery and performance of the subordination by such Creditor
has been duly authorized.
D. Loan Fees. Evidence that any required loan fees and expenses as set
forth above with respect to each credit facility have been paid or
provided for by the Borrower.
E. Audit. The opportunity to conduct an audit of the Borrower's books,
records and operations and the Bank shall be satisfied as to the
condition thereof.
F. Miscellaneous Documents. Such other documents, instruments,
agreements and opinions as are necessary, or as the Bank may reasonably
require, to consummate the transactions contemplated under this
Agreement, all fully executed.
4.02. Conditions Precedent to All Extensions of Credit and/or Advances. The
obligation of the Bank to make any extensions of credit and/or each Advance to
or on account of the Borrower (including the initial extension of credit and/or
the first Advance) shall be subject to the further conditions precedent that, as
of the date of each extension of credit or Advance and after the making of such
extension of credit or Advance:
A. Representations and Warranties. The representations and warranties
set forth in the Section entitled "Representations and Warranties" herein
and in any other document, instrument, agreement or certificate delivered
to the Bank hereunder are true and correct.
E. Collateral. The security interest in the Collateral has been duly
authorized, created and perfected with first priority and is in full
force and effect and the Bank has been provided with satisfactory
evidence of all filings necessary to establish such perfection and
priority.
C. Event of Default. No event has occurred and is continuing which
constitutes, or, with the lapse of time or giving of notice or both,
would constitute an Event of Default.
D. Reporting Requirements. The Bank shall have received all documents
required to be delivered under the "Reporting Requirements" provisions of
the "Covenants" section of this Agreement.
E. Subsequent Approvals, Etc. The Bank shall have received such
supplemental approvals, opinions or documents as the Bank may reasonably
request.
4.03. Reaffirmation of statements. For the purposes hereof, the Borrower's
acceptance of the proceeds of any extension of credit and the Borrower's
execution of any document or instrument evidencing or creating any Obligation
hereunder shall each be deemed to constitute the Borrower's representation and
warranty that the statements set forth above in this Section are true and
correct.
SECTION V
REPRESENTATIONS AND WARRANTIES
The Borrower hereby makes the following representations and warranties to the
Bank, which representations and warranties are continuing:
5.01. Status. The Borrower is a corporation duly organized and validly existing
under the laws of the State of California and is properly licensed, qualified to
do business and in good standing in, and, where necessary to maintain the
Borrower's rights and privileges, has complied with the fictitious name statute
of every jurisdiction in which the Borrower is doing business.
5.02. Authority. The execution, delivery and performance by the Borrower of
this Agreement and any instrument, document or agreement required hereunder have
been duly authorized and do not and will not: (i) violate any provision of any
law, rule, regulation, writ, judgment or injunction presently in effect
affecting the Borrower; (ii) require any consent or approval of the
stockholders of the Borrower or violate any provision on of the articles of
incorporation or bylaws of the Borrower; or (iii) result in a breach of or
constitute a default under any material agreement to which the Borrower is a
party or by which it or its properties may be bound or affected.
5.03. Legal Effect. This Agreement constitutes, and any document, instrument or
agreement required hereunder when delivered will constitute, legal, valid and
binding obligations of the Borrower enforceable against the Borrower in
accordance with their respective terms.
5.04. Fictitious Trade Styles. The Borrower currently uses no fictitious trade
styles in connection with its business operations. The Borrower shall notify the
Bank within thirty (30) days of the use of any fictitious trade style at any
future date, indicating the trade style and state(s) of its use.
5.05. Financial Statements. All financial statements, information and other
data which may have been and which may hereafter be submitted by the Borrower to
the Bank are true, accurate and correct and have been and will be prepared in
accordance with generally accepted accounting principles consistently applied
and accurately represent the Borrower's financial condition and, as applicable,
the other information disclosed therein. Since the most recent submission of any
such financial statement, information or other data to the Bank, the Borrower
represents and warrants that no material adverse change in the Borrower's
financial condition or operations has occurred which has not been fully
disclosed to the Bank in writing.
5.06. Litigation. Except as have been disclosed to the Bank in writing, there
are no actions, suits or proceedings pending or, to the knowledge of the
Borrower, threatened against or affecting the Borrower or the Borrower's
properties before any court or administrative agency which, if determined
adversely to the Borrower, would have a material adverse effect on the
Borrower's financial condition, operations or the Collateral.
5.07. Title to Assets. The Borrower has good and marketable title to all of its
assets (including, but not limited to, the Collateral) and the same are not
subject to any security interest encumbrance, lien or claim of any third person
except for Permitted Liens.
5.08. ERISA. If the Borrower has a pension, profit sharing or retirement plan
subject to ERISA, such plan has been and will continue to be funded in
accordance with its terms and otherwise complies with and continues to comply
with the requirements of ERISA.
5.09. Taxes. The Borrower has filed all tax returns required to be filed and
paid all taxes shown thereon to be due, including interest and penalties, other
than taxes which are currently payable without penalty or interest or those
which are being duly contested in good faith.
5.10. Environmental Compliance. The operations of the Borrower comply, and
during the term of this Agreement will stall times comply, in all respects with
all Environmental Laws; the Borrower has obtained licenses, permits,
authorizations and registrations red under any Environmental Law
("Environmental Permits") and necessary for its ordinary operations, all such
Environmental Permits are in good standing, and the Borrower is in compliance
with all material terms and conditions of such Environmental Permits; neither
the Borrower nor any of its present properties or operations are subject to any
outstanding written order from or agreement with any governmental authority nor
subject to any judicial or docketed administrative proceeding, respecting any
Environmental Law, Environmental Claim or Hazardous Material; there are no
Hazardous Materials or other conditions or circumstances existing, or arising
from operations prior to the date of this Agreement, with respect to any
property of the Borrower that would reasonably be expected to give rise to
Environmental Claims; provided however, that with respect to property Leased
from an unrelated third party, the foregoing representation is made to the best
knowledge of the Borrower. In addition, (i) the Borrower does not have or
maintain any underground storage tanks which are not property registered or
permitted under applicable Environmental Laws or which are leaking or disposing
of Hazardous Materials off-site, and (ii) the Borrower has notified all of its
employees of the existence, if any, of any health hazard arising from the
conditions of their employment and have met all notification requirements under
Title III of CERCLA and all other Environmental Laws.
<PAGE>
5.11. Accounts. Each Eligible Account represent a bona fide sale conforming to
the requirements set forth for "Eligible Accounts" in the Definitions section
hereof.
SECTION VI
COVENANTS
The Borrower covenants and agrees that during the term of this Agreement, and
so long thereafter as the Borrower is indebted to the Bank under this Agreement,
the Borrower shall, unless the Bank otherwise consents in writing:
6.01. Preservation of Existence; Compliance with Applicable Laws. Maintain and
preserve its existence and all rights and privileges now enjoyed; not to
liquidate or dissolve, merge or consolidate with or into, or acquire any other
business organization; and conduct its business in accordance with all
applicable laws, rules and regulations.
6.02. Maintenance of Insurance. Maintain insurance in such amount and covering
such risks as is usually carried by companies engaged in similar businesses and
owning similar properties in the same general areas in which the Borrower
operates and maintain such other insurance and coverages as may be required by
the Bank. All such insurance shall be in form and amount and with companies
satisfactory to the Bank. With respect to insurance covering properties in which
the Bank maintains a security interest or lien, such insurance shall be in an
amount not less than the full replacement value thereof, at the Bank's request,
shall name the Bank as loss payee pursuant to a loss payable endorsement
satisfactory to the Bank and shall not be altered or canceled except upon ten
(10) days' prior written notice to the Bank. Upon the Bank's request, the
Borrower shall furnish the Bank with the original policy or binder of all such
insurance.
6.03. Maintenance of Collateral and Other Properties. Except for Permitted
Liens, the Borrower shall keep and maintain the Collateral free and clear of all
levies, liens, encumbrances and security interests (including, but not limited
to, any lien of attachment, judgement or execution) and defend the Collateral
against any such levy, lien, encumbrance or security interest; comply wit all
laws, statutes and regulations pertaining to the Collateral and its use and
operation; execute, file and record such statements, notices and agreements,
take such actions and obtain such certificates and other documents as necessary
to perfect, evidence and continue the Bank's security interest in the Collateral
and the priority thereof; maintain accurate and complete records of the
Collateral which show all sales, claims and allowances; and properly care for,
house, store and maintain the Collateral in good condition, free of misuse,
abuse and deterioration, other than normal wear and tear. The Borrower shall
also maintain and preserve all its properties in good working order and
condition in accordance with the general practice of other businesses of similar
character and size, ordinary wear and tear excepted.
6.04. Location and Maintenance of Equipment.
A. Location. The Equipment shall at all times be in the Borrower's
physical possession, shall not be held for sale or lease and shall be
kept only at the following location(s): 47375 Fremont Boulevard, Fremont,
CA 94538.
The Borrower shall not secrete, abandon or remove, or permit the removal
of, the Equipment, or any part thereof, from the location(s) shown above
or remove or permit to be removed any accessories now or hereafter placed
upon the Equipment.
B. Equipment Schedules. Upon the Bank's demand, the Borrower shall
immediately provide the Bank with a complete and accurate description of
the Equipment including, as applicable, the make, model, identification
number and serial number of each item of Equipment. In addition, the
Borrower shall immediately notify the Bank of the acquisition of any new
or additional Equipment or the replacement of any existing Equipment and
shall supply the Bank with a complete description of any such additional
or replacement Equipment.
C. Maintenance of Equipment. The Borrower shall, at the Borrower's sole
cost and expense, keep and maintain the Equipment in a good state of
repair and shall not destroy, misuse, abuse, illegally use or be
negligent in the care of the Equipment or any part thereof. The Borrower
shall not remove, destroy, obliterate, change, cover, paint, deface or
alter the name plates, serial numbers, labels or other distinguishing
numbers or identification marks placed upon the Equipment or any part
thereof by or on behalf of the manufacturer, any dealer or rebuilder
thereof, or the Bank. The Borrower shall not be released from any
liability to the Bank hereunder because of any injury to or loss or
destruction of the Equipment. The Borrower shall allow the Bank and its
representatives free access to and the right to inspect the Equipment at
all times and shall comply with the terms and conditions of any leases
covering the real property on which the Equipment is located and any
orders, ordinances, laws, regulations or rules of any federal, state or
municipal agency or authority having jurisdiction of such real property
or the conduct of business of the persons having control or possession of
the Equipment.
D. Fixtures. The Equipment is not now and shall not at any time
hereafter be so affixed to the real property on which it is located as to
become a fixture or a part thereof. The Equipment is now and shall at all
times hereafter be and remain personal property of the Borrower.
6.05. Location and Quality of Inventory. The Inventory (i) is now and shall at
all times hereafter be of good and merchantable quality and free from defects;
(ii) is not now and shall not at any time hereafter be stored with a bailee,
warehouseman or similar party without the Bank's prior written consent and, in
such event, the Borrower will concurrently therewith cause any such bailee,
warehouseman or similar party to issue and deliver to the Bank, in form
acceptable to the Bank, warehouse receipts in the Bank's name evidencing the
storage of inventory; (iii) shall all times be in the Borrower's physical
possession; (iv) shall not be held by others on consignment, sale on approval,
or sale or return; and (v) shall be kept only at the following locations(s):
47375 Fremont Boulevard, Fremont, CA 94538.
6.06. Payment of Obligations and Taxes. Make timely payment of all assessments
and taxes and all of its liabilities and obligations including, but not limited
to, trade payables, unless the same are being contested in good faith by
appropriate proceedings with the appropriate court or regulatory agency. For
purposes hereof, the Borrower's issuance of a check, draft or similar instrument
without delivery to the intended payee shall not constitute payment.
6.07. Inspection Rights. At any reasonable time and from time to time permit
the Bank or any representative thereof to examine and flake copies of the
records and visit the properties of the Borrower and to discuss the business and
operations of the Borrower with any employee or representative thereof. If the
Borrower now or at any time hereafter maintains any records (including, but not
limited to, computer generated records and computer programs for the generation
of such records) in the possession of a third party, the Borrower hereby agrees
to notify such third party to permit the Bank free access to such records at all
reasonable times and to provide the Bank with copies of any records it may
request, all at the Borrower's expense, the amount of which shall be
payable immediately upon demand. In addition, the Bank may, at any reasonable
time and from time to time, conduct inspections and audits of the Collateral and
the Borrower's accounts payable, the cost and expenses of which shall be paid by
the Borrower to the Bank upon demand.
6.08. Reporting Requirements. Deliver or cause to be delivered to the bank in
form and detail satisfactory to the Bank:
A. Annual Statements. Not later than 120 days after the end of each of
the Borrower's fiscal years, a copy of the annual financial report of the
Borrower for such year, which report shall be a CPA audited report.
B. Interim Statements. Not later than 30 days after the end of each
fiscal quarter, the Borrower's financial statement as of the end of such
fiscal quarter.
C. Receivables and Payables Agings. Not later than 30 days after the end
of each month, an aging of accounts receivable and an aging of accounts
payable indicating separately (i) the amount of Eligible Accounts; (ii)
the amount of total accounts receivable which are current, 1 to 30 days
past the date of invoice, 31 to 60 days past the
<PAGE>
date of invoice, and over 60 days past the date of invoice; and an aging
of accounts payable indicating the amount of such payables which are
current, 1 to 30 days past the date of invoice, 31 to 60 days past the
date of invoice, and over 60 days past the date of invoice.
D. Borrowing Base Certificate. Not later than 30th day of each month,
the Borrower shall deliver to the Bank a certificate (each a "Borrowing
Base Certificate") in form and substance satisfactory to the Bank with
proper insertions, duly executed by the Borrower, certifying the value of
Eligible Accounts as of the last day of the preceding month. Such
Borrowing Base Certificate shall establish the Borrowing Base for
purposes hereof from the date of receipt by the Bank until the earlier of
the date the next Borrowing Base Certificate is received or the date such
Borrowing Base Certificate is due. Notwithstanding anything to the
contrary in this Agreement, the Bank may, at its option, at any time and
from time to time require that each request for an Advance under the
Accounts Receivable Line of Credit facility described in Section II of
this Agreement be accompanied by a Borrowing Base Certificate based upon
which the Bank shall calculate the Borrowing Base for the purpose of
determining the maximum dollar amount which may, from time to time, be
outstanding under such Accounts Receivable Line of Credit.
E. Other Information. Promptly upon the Bank's request, such other
information pertaining to the Borrower, the Collateral, or any Guarantor
as the Bank may reasonably request.
6.09. Payment of Dividends. The Borrower shall not declare or pay any dividends
on any claim of its stock now or hereafter outstanding except dividends payable
solely in the corporation's capital stock.
6.10. Redemption or Repurchase of Stock. The Borrower shall not redeem or
repurchase any claim of its corporate stock now or hereafter outstanding.
6.11. Additional Indebtedness. Not, after the date hereof, create, incur or
assume, directly or indirectly, any liability or indebtedness other than
(i) indebtedness owed or to be owed to the Bank, (ii) indebtedness to trade
creditors incurred in the ordinary course of the Borrower's business, or (iii)
additional indebtedness incurred in equipment leasing up to an aggregate amount
not exceeding $2,000,000.00 in any one fiscal year.
6.12. Loans. Not make any loans or advances or extend credit to any third
person, including, but not limited to, directors, officers, shareholders,
partners, employees, affiliated entities or subsidiaries of the Borrower, except
for credit extended in the ordinary course of the Borrower's business as
presently conducted.
6.13. Liens and Encumbrances. Not create, assume or permit to exist any
security interest, encumbrance, mortgage, deed of trust or other lien
(including, but not limited to, a lien of attachment, judgment or execution)
affecting any of the Borrower's properties, or execute or allow to be filed any
financing statement or continuation thereof affecting any such properties,
except for Permitted Liens or as otherwise provided in this Agreement and except
for liens or encumbrances up to an aggregate amount not exceeding $2,000,000.00
for equipment leasing in any one fiscal year.
6.14. Transfer Assets. Not sell, contract for sale, transfer, convey, assign,
lease or sublet any assets of the Borrower, including, but not limited to, the
Collateral, except in the ordinary course of business as presently conducted by
the Borrower, and then, only for full, fair and reasonable consideration.
6.15. Change in the Nature of Business. Not make any material change in the
Borrower's financial structure or in the nature of the Borrower's business as
existing or conducted as of the date of this Agreement.
6.16. Financial Condition. Maintain at all times:
A. Net Worth. A minimum Effective Tangible Net Worth of not less than
$10,600,000.00.
E. Debt to Net Worth Ratio. A Debt to Effective Tangible Net Worth ratio
of not more than 1.15 to 1.00.
C. Quick Ratio. A Quick ratio of not less than 120 to 1.00. For purposes
of foregoing, the term "Quick Ratio" is defined as cash plus billed
receivables divided by current liabilities.
D. Debt Service Coverage Ratio, A minimum Debt Service Coverage Ratio of
not less than 1.05 to 1.00. For purposes of the foregoing, the term "Debt
Service Coverage Ratio" is defined as the sum of net income plus
depreciation plus interest expense divided by current portion long term
debt plus interest expense.
E. Profitability. A minimum net profit on a quarterly basis of at least
$1.00 beginning June 30, 1996 and thereafter.
6.17. Compensation of Employees. Compensate the employees of the Borrower for
services rendered at an hourly rate at least equal to the minimum hourly rate
prescribed by any applicable federal or state law or regulation.
6.18. Capital Expenses. Not make any fixed capital expenditure or any
commitment therefor, including, but not limited to, incurring liability for uses
which would be, in accordance with generally accepted accounting principles,
reported as capital leases, or purchase any real or personal property except for
expenditures in an aggregate amount not exceeding $4,000,000.00 in any one
fiscal year.
6.19. Environmental Compliance, The Borrower shall:
A. Conduct the Borrower's operations and keep and maintain all of its
properties in compliance with all Environmental Laws.
B. Give prompt written notice to the Bank, but in no event later than 10
days after becoming aware, of the following: (i) any enforcement,
cleanup, removal or other governmental or regulatory actions instituted,
completed or threatened against the Borrower or any of its affiliates or
any of its respective properties pursuant to any applicable Environmental
Laws, (ii) all other Environmental Claims, and (iii) any environmental or
similar condition on any real property adjoining or in the vicinity of
the property of the Borrower or its affiliates that could reasonably be
anticipated to cause such property or any part thereof to be subject to
any restrictions on the ownership, occupancy, transferability or use of
such property under any Environmental Laws.
C. Upon the written request of the Bank, the Borrower shall submit to the
Bank at its sole cost and expense, at reasonable intervals, a report
providing an update of the status of any environmental, health or safety
compliance, hazard or liability issue identified in any notice required
pursuant to this Section.
D. At all times indemnify and hold harmless the Bank from and against any
and all liability arising out of any Environmental Claims.
6.20. Notice. Give the Bank prompt written notice of any and all (i) Events of
Default; (ii) litigation, arbitration or administrative proceedings to which the
Borrower is a party and in which the claim or liability exceeds $100,000.00 or
which affects the Collateral; (iii) any change in the place of business of the
Borrower or the acquisition of more than one place of business by the Borrower;
(iv) any proposed or actual change in the name, identity or business nature of
the Borrower; (v) any change in the location of the Equipment or Inventory; and
(vi) other matters which have resulted in, or might result in a material adverse
change in the Collateral or the financial condition or business operations of
the Borrower.
<PAGE>
SECTION VII
EVENTS OF DEFAULT
Any one or more of the following described events shall constitute an event of
default under this Agreement:
7.01. Non-Payment. The Borrower shall fail to pay any Obligations within 10
days of when due.
7.02. Performance Under This and Other Agreements. The Borrower shall fail in
any material respect to perform or observe any term, covenant or agreement
contained in this Agreement or in any document, instrument or agreement
evidencing or relating to any indebtedness of the Borrower (whether owed to the
Bank or third persons), and any such failure (exclusive of the payment of money
to the Bank under this Agreement or under any other document, instrument or
agreement, which failure shall constitute and be an immediate Event of Default
if not paid when due or when demanded to be due) shall continue for more than 30
days after written notice from the Bank to the Borrower of the existence and
character of such Event of Default.
7.03. Representations and Warranties; Financial Statements. Any representation
or warranty made by the Borrower under or in connection with this Agreement or
any financial statement given by the Borrower or any Guarantor shall prove to
have been incorrect in any material respect when made or given or when deemed to
have been made or given.
7.04. Insolvency. The Borrower or any Guarantor shall: (i) become insolvent or
be unable to pay its debts as they mature; (ii) make an assignment for the
benefit of creditors or to an agent authorized to liquidate any substantial
amount of its properties or assets; (iii) file a voluntary petition in
bankruptcy or seeking reorganization or to effect a plan or other arrangement
with creditors; (iv) file an answer admitting the material allegations of an
involuntary petition relating to bankruptcy or reorganization or join in any
such petition; (v) become or be adjudicated a bankrupt; (vi) apply for or
consent to the appointment of, or consent that an order be made, appointing any
receiver, custodian or trustee for itself or any of its properties, assets or
businesses; or (vii) any receiver, custodian or trustee shall have been
appointed for all or a substantial part of its properties, assets or businesses
and shall not be discharged within 30 days after the date of such appointment.
7.05. Execution. Any writ of execution or attachment or any judgment lien shall
be issued against any property of the Borrower and shall not be discharged or
bonded against or released within 30 days after the issuance or attachment of
such writ or lien.
7.06. Revocation or Limitation of Guaranty. Any Guaranty shall be revoked or
limited or its enforceability or validity shall be contested by any Guarantor,
by operation of law, legal proceeding or otherwise or any Guarantor who is a
natural person shall die.
7.07. Suspension. The Borrower shall voluntarily suspend the transaction of
business or allow to be suspended, terminated, revoked or expired any permit,
license or approval of any governmental body necessary to conduct the Borrower's
business as now conducted.
7.08. Change in Ownership. There shall occur a sale, transfer, disposition or
encumbrance (whether voluntary or involuntary), or an agreement shall be entered
into to do so, with respect to more than 10% of the issued and outstanding
capital stock of the Borrower.
7.09. Impairment of Collateral. There shall occur any injury or damage to
all or any part of the Collateral or all or any part of the Collateral shall be
lost, stolen or destroyed which changes cause the Collateral, in the sole and
absolute judgement of the Bank, to become unacceptable as to character and
value.
SECTION VIII
REMEDIES ON DEFAULT
Upon the occurrence of any Event of Default, the Bank may, at its sole
election, without demand and upon only such notice as may be required by
law:
8.01. Acceleration. Declare any or all of the Borrower's indebtedness owing to
the Bank, whether under this Agreement or under any other document, instrument
or agreement, immediately due and payable, whether or not otherwise due and
payable.
8.02. Cease Extending Credit. Cease making Advances or otherwise extending
credit to or for the account of the Borrower under this Agreement or under any
other agreement now existing or hereafter entered into between the Borrower and
the Bank.
8.03. Termination. Terminate this Agreement as to any future obligation of the
Bank without affecting the Borrower's obligations to the Bank or the Bank's
rights and remedies under this Agreement or under any other document, instrument
or agreement.
8.04. Segregate Collections. Require the Borrower to segregate all collections
and proceeds of the Collateral so that they are capable of identification and to
deliver such collections and proceeds to the Bank, in kind, without commingling,
at such times and in such manner as required by the Bank.
8.05. Records of Collateral. Require the Borrower to periodically deliver to
the Bank records and schedules showing the status, condition and location of the
Collateral and such contracts or other matters which affect the Collateral. In
connection herewith, the Bank may conduct such audits or other examination of
such records, including, but not limited to, verification of balances owing by
any account debtor of the Borrower, as the Bank, in its sole and absolute
discretion, deems necessary.
8.06. Notification of Account Debtors.
A. Notify any or all of the Borrower's Account Debtors, or any buyers or
transferees of the Collateral or other persons of the Bank's interest in
the Collateral and the proceeds thereof and instruct such person(s) to
thereafter make any payment due the Borrower directly to the Bank.
B. The Borrower hereby irrevocably and unconditionally appoints the Bank
as its attorney-in-fact to: (i) endorse the Borrower's name on any notes,
acceptances, checks, drafts, money orders or other evidence of payment
that may come into the Bank's possession; (ii) sign the Borrower's name
on any invoice or bill of lading relating to any of the Collateral; (iii)
notify post office authorities to change the address for delivery of mail
addressed to the Borrower to such address as the Bank may designate and
take possession of and open mail addressed to the Borrower and remove
therefrom, proceeds of and payments on the Collateral; and (iv) demand,
receive and endorse payment and give receipts, releases and satisfactions
for and sue for all money payable to the Borrower. All of the preceding
may be done either in the name of the Bank or in the name of the Borrower
with the same force and effect a the Borrower could have done had this
Agreement not been entered into.
C. Require the Borrower to indicate on the face of all invoices (or such
other documentation as may be specified by the Bank relating to the sale,
delivery or shipment of goods giving rise to the account) that the
account has been assigned to the Bank and that all payments are to be
made directly to the Bank at such address as the Bank may designate.
8.07. Compromise. Grant extensions, compromise claims and scale any account for
less than the amount owing thereunder, all without notice to the Borrower or
<PAGE>
any obligor on or guarantor of the Obligations.
8.08. Protection of Security Interest. Make such payments and do such acts as
the Bank, in its sole judgment, considers necessary and reasonable to protect
its security interest or lien in the Collateral. The Borrower hereby irrevocably
authorizes the Bank to pay, purchase, contest or compromise any encumbrance,
flea or claim which the Bank. in its sole judgment, deems to be prior or
superior toils security interest. Further, the Borrower hereby agrees to pay to
the Rant, upon demand there for, all expenses and expenditures (including
attorneys' fees) incurred in connection with the foregoing.
8.09. Foreclosure. Enforce any security interest or lien given or provided for
under this Agreement or under any security agreement, mortgage, deed of trust or
other document relating to the Collateral, in such manner and such order, as to
all or any part of the Collateral, as the Bank, in its said judgment, deems to
be necessary or appropriate and the Borrower hereby waives any and all right:,
obligations or defenses now or hereafter established by law relating to the
foregoing. In the enforcement of its security interest or lien, the Bank is
authorized to enter upon the premises where any Collateral is located and take
possession of the Collateral or any part thereof, together with the Borrower's
records pertaining thereto, or the Bank may require the Borrower to assemble the
Collateral and records pertaining thereto and make such Collateral and records
available to the Bank at a place designated by the Bank. The Bank may sell the
Collateral or any portions thereof, together with all additions, accessions and
accessories thereto, giving only such notices and following only such procedures
are required by law, at either a public or private sale, or both, with or
without having the Collateral present at the time of sale, which sale shall be
on such terms and conditions and conducted in such manner as the Bank determines
in its sole judgment to be commercially reasonable. Any deficiency which exists
after the disposition or liquidation of the Collateral shall be a continuing
liability of any obligor on or any guarantor of the Obligations and shall be
immediately paid to the Rant
8.10. Application of Proceeds. All amounts received by the Bank as proceeds
from the disposition or liquidation of the Collateral shall be applied to the
Borrower's indebtedness to the Bank as follows: first, to the costs and expenses
of collection, enforcement, protection and preservation of the Bank's lien in
the Collateral, including court costs and reasonable attorneys' fees, whether or
not suit is commenced by the Bank; next, to these costs and expenses incurred by
the Bank in protecting, preserving, enforcing, collecting, selling or disposing
of the Collateral; next, to the payment of accrued and unpaid interest on all of
the Obligations; next, to the payment of the outstanding principal balance of
the Obligations; and last, to the payment of any other indebtedness owed by the
Borrower to the Bank. Any excess Collateral or excess proceeds existing after
the disposition or liquidation of the Collateral will be returned or paid by the
Bank to the Borrower.
8.11. Non-Exclusivity of Remedies. Exercise one or more of the Bank's rights
set forth herein or seek such other rights or pursue such other remedies as may
be provided by law, in equity or in any other agreement now existing or
hereafter entered into between the Borrower and the Bank, or otherwise.
SECTION IX
MISCELLANEOUS PROVISIONS
9.01. Default Interest Rate. If an Event of Default has occurred and is
continuing, the Bank, at its option, may require the Borrower to pay to the Bank
interest on any Indebtedness or amount payable under this Agreement at a rate
which is 3% in excess of the rate or rates otherwise then in effect under' this
Agreement.
9.02. Disposal of Invoices. All documents, schedules, invoices or other paper
received by the Bank from the Borrower may be destroyed or disposed of six (6)
months after receipt by the Bank, unless the Borrower requests in writing the
return thereof, which shall be done at the Borrower's expense.
9.03. Rights of the Bank With or Without Default. The Borrower agrees that the
Bank may at any time and at its option, whether or not the Borrower is in
default:
A. Require the Borrower to provide daily, or at such other time as
required by the Bank: (i) a transaction report and schedule of accounts
receivable which indicates all sales made and all collections received
for each such day; (ii) all remittances and collections of accounts in
kind, and without commingling, to be applied to the payment of the
Borrower's Obligations on the next Business Day following receipt
thereof; provided however, that if such amounts are received in a form
other than cash or bank wire, the Bank may withhold application of such
amounts for such time to the extent permitted by law as the Bank, in its
sole discretion. deems reasonable to allow for collection and provided
further that any remittances and collections received by the Bank later
than 2:00 p.m. (California time) on any day shall be deemed received on
the next succeeding Business Day; and (iii) clear and legible copies of
all invoices or sales receipt: evidencing the sale of goods or services
by the Borrower.
The Borrower hereby understands and agrees that, in the event the Bank
directs the Borrower to comply with the provisions of the above
paragraph, the proceeds of accounts ("Collections") shall not be
immediately applied to reduce the Borrower's Obligations but shall he
applied only when final settlement for such Collections is effected.
B. Require the Borrower to direct all Account Debtors to forward all
remittances, payments and proceeds of the Collateral directly to the Bank
at such address as the Bank may designate. In connection therewith, the
Borrower hereby irrevocably constitutes and appoints the Bank as its
attorney-in-fact to endorse the Borrower's name on any notes,
acceptances, checks, drafts, money orders or other evidence of payment
that may come into the Bank's possession.
C. Require the Borrower to deliver to the Bank, at such times designated
by the Bank, records and schedules which show the status and condition of
the Collateral, where it is located and such contracts or other matters
which affect the Collateral.
D. Send verification requests to any Account Debtor.
E. Make inquiries of the Borrower's trade vendors.
9.04. Indemnification. The Borrower agrees to hold the Bank harmless from and
to indemnify and defend the Bank from any liability, claim, loss or expense
(including, but not limited to, attorneys' fees) arising from any transaction
between the Borrower and any Account Debtor including, but not limited to, any
loss, claim or liability arising from:
A. Any violation of any federal or state consumer protection law
(including, but not limited to, the federal Truth-In-Lending Act) and
regulations promulgated thereunder.
E. Improper collection practices or procedures of the Borrower.
C. Any unlawful acts taken by the Borrower in connection with the
collection of any account(s).
D. Any suit by any person against the Bank resulting or arising from
such person's dealings with the Borrower.
9.05. Reliance. Each warranty, reprepresentation, covenant and agreement
contained in this Agreement shall be conclusively presumed to have been relied
upon by the Bank regardless of any investigation made or information possessed
by the Bank and shall be cumulative and in addition to any other warranties,
representations, covenants or agreements which the Borrower shall now or
hereafter give, or cause to be given, to the Bank.
<PAGE>
9.06. Dispute Resolution.
A. Disputes. It is understood and agreed that, upon the request or any party
to this Agreement, any dispute, claim or controversy of any kind, whether in
contract or in tort, statutory or common law, legal or equitable, now
existing or hereinafter arising between the parties in any way arising out
of, pertaining to or in connection with: (i) this Agreement, or any related
agreements, documents or instruments, (ii) all past and present loans,
credits, accounts, deposit accounts (whether demand deposits or time
deposits), safe deposit boxes, safekeeping agreements, guarantees, letters
of credit, goods or service, or other transactions, contracts or agreements
of any kind, (iii) any incidents, omissions, acts, practices, or occurrences
causing injury to any party whereby another party or its agents, employees
or representatives may be liable, in whole or in part, or (iv) any aspect of
the past or present relationships of the parties, shall be resolved through
a two-step dispute resolution process administered by the Judicial
Arbitration & Mediation Services, Inc. ("JAMS") as follows:
B. Step I - Mediation. At the request of any party to the dispute, claim, or
controversy, the matter shall be referred to the nearest office of JAMS for
mediation, which is an informal, non-binding conference or conferences
between the parties in which a retired judge or justice from the JAMS panel
will seek to guide the parties to a resolution of the case.
C. Step II - Arbitration (Contracts Not Secured By Real Property). Should
any dispute, claim or controversy remain unresolved at the conclusion of the
Step I Mediation Phase, then (subject to the restriction at the end of this
subparagraph) all such remaining matters shall be resolved by final and
binding arbitration before a different judicial panelist, unless the parties
shall agree to have the mediator panelist act as arbitrator. The hearing
shall be conducted at a location determined by the arbitrator in Los
Angeles, California (or such other city as may be agreed upon by the
parties) and shall be administered by and in accordance with the then
existing Rules of Practice and Procedure of JAMS and judgement upon any
award rendered by the arbitrator may be entered by any State or Federal
Court having jurisdiction thereof. The arbitrator shall determine which is
the prevailing party and shall include in the award that party's reasonable
attorneys' fees and costs. This subparagraph shall apply only if, at the
time of the submission of the matter to JAMS, the dispute or issues involved
do not arise out of any transaction which is secured by real property
collateral or, if so secured, all parties consent to such submission.
As soon as practicable after selection of the arbitrator, the arbitrator, or
the arbitrator's designated representative, shall determine a reasonable
estimate of anticipated fees and costs of the arbitrator, and render a
statement to each party setting forth that party's pro-rata share of said
fees and costs. Thereafter, each party shall, within 10 days of receipt of
said statement, deposit said sum with the arbitrator. Failure of any party
to make such a deposit shall result in a forfeiture by the non-depositing
party of the right to prosecute or defend the claim which is the subject of
the arbitration, but shall not otherwise serve to abate, stay or suspend the
arbitration proceedings.
D. Step II - Trial by Court Reference (Contracts Secured By Real Property).
If the dispute, claim or controversy is not one required or agreed to be
submitted to arbitration, as provided in the above subparagraph, and has not
been resolved by Step I mediation, then any remaining dispute, claim or
controversy shall be submitted for determination by a trial on Order of
Reference conducted by a retired judge or justice from the panel of JAMS
appointed pursuant to the provisions of Section 638(1) of the California
Code of Civil Procedure, or any amendment, addition or successor section
thereto, to hear the case and report a statement of decision thereon. The
parties intend this general reference agreement to be specifically
enforceable in accordance with said section. If the parties are unable to
agree upon a member of the JAMS panel to act as referee, then one shall be
appointed by the Presiding Judge of the county wherein the hearing is to be
held. The parties shall pay in advance, to the referee, the estimated
reasonable fees and costs of the reference, as may be specified in advance
by the referee. The parties shall initially share equally, by paying their
proportionate amount of the estimated fees and costs of the reference.
Failure of any party to make such a fee deposit shall result in a forfeiture
by the non-depositing party of the right to prosecute or defend any cause of
action which is the subject of the reference, but shall not otherwise serve
to abate, stay or suspend the reference proceeding.
E. Provisional Remedies, Self Help and Foreclosure. No provision of, or the
exercise of any rights under any portion of this Dispute Resolution
provision, shall limit the right of any party to exercise self-help remedies
such as set off, foreclosure against any real or personal property
collateral, or the obtaining of provisional or ancillary remedies, such is
injunctive relief or the appointment of a receiver, from any court having
jurisdiction before, during or after the pendency of any arbitration. At the
Bank's option, foreclosure under a deed of trust or mortgage may be
accomplished either by exercise of power of sale under the deed of trust or
mortgage, or by judicial foreclosure. The institution and maintenance of an
action for provisional remedies, pursuit of provisional or ancillary
remedies or exercise of self-help remedies shall not constitute a waiver of
the right of any party to submit the controversy or claim to arbitration.
9.07. Waiver of Jury. The Borrower and the Bank hereby expressly and
voluntarily waive any and all rights, whether arising under the California
constitution, any rules of the California Code of Civil Procedure, common law or
otherwise, to demand a trial by jury in any action, matter, claim or cause of
action whatsoever arising out of or in any way related to this Agreement or any
other agreement, document or transaction contemplated hereby.
9.08. Restructuring Expenses. In the event the Bank and the Borrower negotiate
for, or enter into, any restructuring, modification or refinancing of the
Indebtedness under this Agreement for the purposes of remedying an Event of
Default, The Bank, may require the Borrower to reimburse all of the Bank's costs
and expenses incurred in connection therewith, including, but not limited to
reasonable attorneys' fees and the costs of any audit or appraisals required by
the Bank to be performed in connection with such restructuring, modification or
refinancing.
9.09. Attorneys' Fees. In the event of any suit, mediation, arbitration or
other action in relation to this Agreement or any document, instrument or
agreement executed with respect to, evidencing or securing the indebtedness
hereunder, the prevailing party, in addition to all other sums to which it may
be entitled, shall be entitled to reasonable attorneys' fees.
9.10. Notices. All notices, payments, requests, information and demands which
either party hereto may desire, or may be required to give or make to the other
party shall be given or made to such party by hand delivery or through deposit
in the United States mail, postage prepaid, or by Western Union telegraph
addressed to the address set forth below such party's signature to this
Agreement or to such other address a may be specified from time to time in
writing by either pay to the other.
9.11. Waiver. Neither the failure nor delay by the Bank in exercising any right
hereunder or under any document, instrument or agreement mentioned herein shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right hereunder or under any document, instrument or agreement mentioned herein
preclude other or further exercise thereof or the exercise of any other right;
nor shall any waiver of any right or default hereunder or under any other
document, instrument or agreement mentioned herein constitute a waiver of any
other right or default or constitute a waiver of any other default of the same
or any other term or provision.
9.12. Conflicting Provisions. To the extent that any of the terms or provisions
contained in this Agreement are inconsistent with those contained in any other
document, instrument or agreement executed pursuant hereto, the terms and
provisions contained herein shall control. Otherwise, such provisions shall be
considered cumulative.
9.13. Binding Effect; Assignment. This Agreement shall be binding upon and
inure to the benefit of the Borrower and the Bank and their respective
successors and assigns, except that the Borrower shall not have the right to
assign its rights hereunder or any interest herein without the Bank's prior
written consent. The Bank may sell, assign or grant participations in all or any
portion of its rights and benefits hereunder. The Borrower agrees that, in
connection with any such sale, grant or assignment, the Bank may deliver to the
prospective buyer, participant or assignee financial statements and other
relevant information relating to the Borrower and any guarantor.
<PAGE>
9.14. Jurisdiction. This Agreement, any notes issued hereunder, the rights of
the parties hereunder to and concerning the Collateral, and any documents,
instruments or agreements mentioned or referred to herein shall be governed by
and construed according to the laws of the State of California, to the
jurisdiction of whose courts the parties hereby submit.
9.15. Headings. The headings set forth herein are solely for the purpose of
identification and have no legal significance.
9.16. Entire Agreement This Agreement and all documents, instruments and
agreements mentioned herein constitute the entire and complete understanding of
the parties with respect to the transactions contemplated hereunder. All
previous conversations, memoranda and writings between the parties or pertaining
to the transactions contemplated hereunder that are not incorporated or
referenced in this Agreement or in such documents, instruments and agreements
are superseded hereby.
IN WITNESS WHEREOF, this Agreement has been executed by the parties hereto as of
the date first hereinabove written.
BANK: BORROWER
By:___________________________________ By:_____________________________
Jo-Jo Kochaphum, Authorized Officer Doreen Chiu, President
Address: Address:
Oakland Office 47375 Fremont Boulevard
2127 Broadway Fremont, CA 94538
Oakland, CA 94612
<PAGE>
EXHIBIT 10.5
SANWA
BANK
CALIFORNIA
AMENDMENT OF COMMERCIAL CREDIT AGREEMENT
This Amendment of Commercial Credit Agreement ("Amendment") is made and entered
into this 30th day of April, 1997 by and between SANWA BANK CALIFORNIA (the
"Bank") and ATG INC (the "Borrower") with respect to the following:
This Amendment shall be deemed to be a part of and subject to that certain
commercial credit agreement between the parties hereto and dated as of April 19,
1996, as it may have been or be amended from time to time, and any and all
addenda, riders, exhibits and schedules thereto (collectively, the "Agreement").
Unless otherwise defined herein, all terms used in this Amendment shall have the
same meanings as in the Agreement. To the extent that any of the terms or
provisions of this Amendment conflict with those contained in the Agreement, the
terms and provisions contained herein shall control.
WHEREAS, the Borrower and the Bank mutually desire to extend, amend and/or
modify the Agreement.
NOW THEREFORE, for value received and hereby acknowledged, the Borrower and the
Bank agree as follows:
1. Revised Repayment of Principal. The date contained in section 2.02 D of the
Agreement, which is currently April 30, 1997, shall be modified and amended to
be May 30, 1997.
2. Revised Expiration of the Accounts Receivable Line of Credit Facility. The
date contained in section 2.02 H of the Agreement, which is currently April 30,
1997, shall be modified and amended to be May 30, 1997.
3. Incorporation Into Agreement. On and after the effective date of this
Amendment, each reference in the Agreement to "this Agreement", "hereunder",
hereof, "herein" or words of like import referring to the Agreement shall mean
and be referenced to the Agreement as amended by this Amendment.
4. No Waiver. The execution, delivery and performance of this Amendment shall
not, except as expressly provided herein, constitute a waiver of any provision
of, or operate as a waiver of any right, power or remedy of the Bank under, the
Agreement.
5. Confirmation of Other Terms and Conditions. Except as specifically provided
in this Amendment, all other terms, conditions and covenants of the Agreement
which are unaffected by this Amendment shall remain unchanged and shall continue
in full force and effect and the Borrower hereby covenants and agrees to perform
and observe all terms, covenants and agreements provided for in the Agreement,
as hereby amended.
IN WITNESS WHEREOF, this Amendment has been executed by the parties hereto as of
the date first hereinabove written.
IN WITNESS WHEREOF, this Agreement has been executed by the parties hereto as of
the date first hereinabove written.
BANK: BORROWER
SANWA BANK CALIFORNIA ATG INC.
By:___________________________________ By:________________________________
Jo-Jo Kochaphum, Authorized Officer Doreen Chiu, President
<PAGE>
EXHIBIT 10.6
[LOGO OF SANWA BANK APPEARS HERE]
AMENDMENT OF COMMERCIAL CREDIT AGREEMENT
This Amendment of Commercial Credit Agreement ("Amendment") is made and entered
into this 26th day of June, 1997 by and between SANWA BANK CALIFORNIA (the
"Bank") and ATG INC. (the "Borrower") with respect to the following:
This Amendment shall be deemed to be a part of and subject to that certain
commercial credit agreement between the parties hereto and dated as of April 19,
1996, as it may have been or be amended from time to time, and any and all
addenda, riders, exhibits and schedules thereto (collectively, the "Agreement").
Unless otherwise defined herein, all terms used in this Amendment shall have the
same meanings as in the Agreement. To the extent that any of the terms or
provisions of this Amendment conflict with those contained in this Agreement,
the terms and provisions contained herein shall control.
WHEREAS, the Borrower and the Bank mutually desire to extend, amend and/or
modify the Agreement.
NOW THEREFORE, the value required and hereby acknowledged, the Borrower and the
Bank agrees as follows:
1. Revised Repayment of Principal. The date contained in section 2.02 D of the
Agreement, which is currently May 30, 1997, shall be modified and amended to be
August 31, 1997.
2. Revised Expiration of the Accounts Receivable Line of Credit Facility. The
date contained in section 2.02 H of the Agreement, which is currently May
30, 1997, shall be modified and amended to be August 31, 1997.
3. Incorporation Into Agreement. On and after the effective date of this
Amendment, each reference in the Agreement to "this Agreement", "hereunder",
"hereof, "herein" or words of like import referring to the Agreement shall mean
and be referenced to the Agreement as amended by this Amendment.
4. No Waiver. The execution, delivery and performance of this Amendment shall
not, except as expressly provided herein, constitute a waiver of any provision
of, or operate as a waiver of any right, power or remedy of the Bank, under the
Agreement.
5. Confirmation of Other Terms and Conditions. Except as specifically provided
in this Amendment, all other terms, conditions and covenants of the Agreement
which are unaffected by this Amendment shall remain unchanged and shall continue
in full force and effect and the Borrower hereby covenants and agrees to perform
and observe all terms, covenants and agreements provided for in the Agreement,
as hereby amended.
IN WITNESS WHEREOF, this Amendment has been executed by the parties hereto as of
the date first hereinabove written.
BANK: BORROWER:
SANWA BANK OF CALIFORNIA ATG INC
By: [SIGNATURE ILLEGIBLE] By: /s/ Doreen Chiu
--------------------------- --------------------------
Authorized Officer Doreen Chiu, President
Craig C. Fendel V.P. & Mgr.
/s/ Craig C. Fendel
<PAGE>
EXHIBIT 10.7
THIRD AMENDMENT TO ACCOUNTS RECEIVABLE CREDIT AGREEMENT
This Third Amendment to Accounts Receivable Credit Agreement (the
"Amendment") is made and entered into this 1st day of August, 1997, by and
between SANWA BANK CALIFORNIA (the "Bank") and ATG, Inc. the "Borrower") with
respect to the following.
This Third Amendment shall be deemed to be part of and subject to that
certain Accounts Receivable Credit Agreement dated as of April 19, 1996, as it
may be amended from time to time, and any and all addenda and riders thereto
(collectively the "Agreement"). Unless otherwise defined herein, all terms and
used in this Amendment shall have the same meanings as in the Agreement. To the
extent that any of the terms or provisions of this Amendment conflict with those
contained in the Agreement, the terms and provisions contained herein shall
control.
WHEREAS, the Borrower and the Bank mutually desire to extend and/or modify the
Agreement.
NOW THEREFORE, for value received and hereby acknowledged, the Borrower and the
Bank agree as follows:
Check and complete as applicable:
1. Revised Repayment of Principal. The date contained in Section 202D of
the Agreement, which is currently August 31, 1997 under the Second Amendment,
shall be modified and amended to June 30, 1998.
2. Modification of Interest Rate. Commencing on August 31, 1997, the rate
of interest provided for in Section 2.02B of the Agreement shall be modified to
be the Reference Rate plus 0.50% per annum.
3. Extension of Expiration Date. The Expiration Date provided for in
Section 202H of the Agreement shall be extended to June 30, 1998.
4. Release of Guarantor. Bank hereby releases Allied Ecology Services, Inc.
from its guaranty.
5. Loan Fee. Borrower will pay a loan extension and facility fee in the
amount of $6,000.00.
6. Financial Covenant. Borrower will maintain a minimum effective tangible
net worth of $12,250,000.00.
7. Loans to Third Parties. Borrower will not make any loans to third
parties in excess of $500,000 plus accrued interest.
8. Confirmation of Other Terms and Conditions of the Agreement. Except as
specifically provided in this Amendment, all other terms, conditions and
covenants of the Agreement and the Security Agreement unaffected by this
Amendment shall remain unchanged and shall continue in full force and effect and
the Borrower hereby covenants and agrees to perform and observe all terms,
covenants and agreements provided for in the Agreement, as hereby amended.
<PAGE>
IN WITNESS WHEREOF, this Amendment has been executed by the parties hereto
as of the date first hereinabove written.
BANK: BORROWER
SANWA BANK CALIFORNIA ATG INC.
By:_________________________________ By:____________________________________
Craig Fendel, VP and Manager Doreen Chiu, President
(Name/Title) (Name/Title)
<PAGE>
EXHIBIT 10.8
TERM LOAN AGREEMENT
This Term Loan Agreement ("Agreement") is made and entered into this 18th day of
September, 1997 by and between SANWA BANK CALIFORNIA (the "Bank" and ATG INC.
(the "Borrower").
SECTION 1
DEFINITIONS
1.01 Certain Defined Terms. Unless elsewhere defined in this Agreement the
following terms shall have the following meanings (such meanings to be generally
applicable to the singular and plural forms of the terms defined):
A. "Business Day" shall mean a day, other than a Saturday or Sunday, on
which commercial banks are open for business in California.
B. "Collateral" shall mean the property in which the Bank is granted a
security interest pursuant to provisions of the section herein entitled
"Collateral" together with any other personal or real property in which
the Bank may be granted a lien or security interest to secure payment of
the Obligations.
C. "Debt" shall mean all liabilities of the Borrower less Subordinated
Debt.
D. "Effective Tangible Net Worth" shall mean the Borrower's stated net
worth plus Subordinated Debt but less all intangible assets of the
Borrower (i.e, goodwill, trademarks, patents, copyrights, organization
expense and similar intangible items).
E. "Environmental Claims" shall mean all claims, however asserted, by
any governmental authority or other person alleging potential liability
or responsibility for violation of any Environmental Law or for release
or injury to the environment or threat to public health, personal injury
(including sickness, disease or death), property damage, natural
resources damage, or otherwise alleging liability or responsibility for
damages (punitive or otherwise) cleanup, removal, remedial or response
costs, restitution, civil or criminal penalties, injunctive relief, or
other type of relief, resulting from or based upon (i) the presence,
placement, discharge, emission or release (including intentional and
unintentional, negligent and non-negligent, sudden or non-sudden
accidental or non-accidental placement, spills, leaks, discharges,
emissions or releases) of any Hazardous Materials at, in, or from
property owned, operated or controlled by the Borrower, or (ii) any other
circumstances forming the basis of any violation, or alleged violation,
of any Environmental Law.
F. "Environmental Laws" shall mean all federal, state or local laws,
statutes, common law duties, rules, regulations, ordinances and codes,
together with all administrative orders, directed duties, requests,
licenses, authorizations and permits of, and agreements with, any
governmental authorities, in each case relating to environmental, health,
safety and land use matters; including the Comprehensive Environmental
Response, Compensation and Liability Act of 1980 ("CERCLA"), the Clean
Air Act, the Federal Water Pollution Control Act of 1972, the Solid Waste
Disposal Act, the Federal Resource Conservation and Recovery Act, the
Toxic Substances Control Act, the Emergency Planning and Community Right-
to-Know Act, the California Hazardous Waste Control Law, the California
Solid Waste Management, Resource, Recovery and Recycling Act, the
California Water Code and the California Health and Safety Code.
G. "ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time, including (unless the context
otherwise requires) any rules or regulations promulgated thereunder.
H. "Event of Default" shall have the meaning set forth in the section
herein entitled "Events of Default".
I. "Hazardous Materials" shall mean all those substances which are
regulated by, or which may form the basis of liability under any
Environmental Law including all substances identified under any
Environmental Law as a pollutant, contaminant, hazardous waste, hazardous
constituent, special waste hazardous substance, hazardous material, or
toxic substance, or petroleum or petroleum derived substance or waste.
J. "Indebtedness" shall mean, with respect to the Borrower, (i) all
indebtedness for borrowed money or for the deferred purchase price of
property or services in respect of which the Borrower is liable,
contingently or otherwise, as obligor, guarantor or otherwise, or in
respect of which the Borrower otherwise assures a creditor against loss
and (ii) obligations under leases which shall have been or should be, in
accordance with generally accepted accounting principles, reported as
capital leases in respect of which the Borrower is liable, contingently
or otherwise, or in respect of which the Borrower otherwise assures a
creditor against loss.
K. "Obligations" shall mean all amounts owing by the Borrower to the
Bank pursuant to this Agreement.
L. "Permitted Liens" shall mean: (i) liens and security interests
securing indebtedness owed by the Borrower to the Bank; (ii) liens for
taxes, assessment, or similar charges either not yet due or being
contested in good faith, provided proper reserves are maintained therefor
in accordance with generally accepted accounting procedure; (iii) liens
of materialmen, mechanics, warehousemen, or carriers or other like liens
arising in the ordinary course of business and securing obligations which
are not yet delinquent; (iv) purchase money liens or purchase money
security interests upon or in any property acquired or held by the
Borrower in the ordinary course of business to secure Indebtedness
outstanding on the date hereof or permitted to be incurred pursuant to
this Agreement; (v) liens and security interests which, as of the date
hereof, have been disclosed to and approved by the Bank in writing; and
(vi) those liens and security interests which in the aggregate constitute
an immaterial and insignificant monetary amount with respect to the net
value of the Borrower's assets.
M. "Reference Rate" shall mean an index for a variable interest rate
which is quoted, published or announced from time to time by the Bank as
its reference rate and as to which loans may be made by the Bank at,
below or above such reference rate.
N. "Subordinated Debt" shall mean such liabilities of the Borrower which
have been subordinated to those owed to the Bank in a manner acceptable
to the Bank.
1.02. Accounting Terms. All references to financial statements, assets,
liabilities, and similar accounting items not specifically defined herein shall
mean such financial statements or such items prepared or determined in
accordance with generally accepted accounting principles consistently applied
and, except where otherwise specified, all financial data submitted pursuant to
this Agreement shall be prepared in accordance with such principles.
1.03. Other Terms. Other terms not otherwise defined shall have the meanings
attributed to such terms in the California Uniform Commercial Code.
<PAGE>
SECTION II
CREDIT FACILITIES
2.01. Commitment to Lend, Subject to the terms and conditions of this Agreement
and so long as no Event of Default occurs, the Bank agrees to extend to the
Borrower the credit accommodations that fallow.
2.02. Term Loan, The Bank agrees to lend to the Borrower up to the maximum
amount of $400,000.00 (the "Term Loan").
A. Purpose. The Term Loan shall be used to pay off an existing term loan
with the Bank and to provide additional funds to purchase 30 acres of
unimproved land to build a new facility.
B. Interest Rate. Interest shall accrue on the outstanding principal
balance under this Term Loan at a variable rate equal to the Bank's
Reference Rate, as it may change from time to time, plus 1,750% per
annum. (Such rate is referred to in this Section 2,02 as the "Variable
Rate.") The Variable Rate shall be adjusted concurrently with any change
in the Reference Rate. Interest shall be calculated on the basis of 360
days per year but charged on the actual number of days elapsed.
C. Payment of Interest. The Borrower hereby promises and agrees to pay
interest monthly on the last day of each month, commencing an October 31,
1997. If interest is not paid as it becomes due, without waiving any
Event of Default occasioned by such non-payment, the Bank may, at its
option but without any obligation to do so, add such unpaid interest to
principal and it shall thereafter become and be treated as part of the
principal and shall thereafter bear like interest.
D. Repayment of Principal. Unless sooner due in accordance with the
terms of this Agreement, the Borrower hereby promises and agrees to pay
principal in 60 monthly installments of S6,667.00 per installment,
commencing on October 31, 1997 and continuing on the last day of each
month thereafter.
On September 30, 2002 the Borrower hereby promises and agrees to pay to
the Bank in full the aggregate unpaid principal balance then outstanding,
together with all accrued and unpaid interest thereon.
Any payment received by the Bank shall, at the Bank's option, first be
applied to pay any late fees or other fees then due and unpaid, and then
to interest then due and unpaid and the remainder thereof (if any) shall
be applied to reduce principal.
E. Late Fee. If any regularly scheduled payment of principal and/or
interest (exclusive of the final payment upon maturity), or any portion
thereof, under this Term Loan is not paid within ten (10) calendar days
after it is due, a late payment charge equal to five percent (5%) of such
past due payment may be assessed and shall be immediately payable.
F. Term Loan Account. The Bank shall maintain on its books a record of
account in which the Bank shall make entries setting forth all payments
made, the application of such payments to interest and principal, accrued
and unpaid interest (if any) and the outstanding principal balance under
the Term Loan (the "Term Loan Account. The Bank shall provide the
Borrower with a monthly statement of the Borrower's Term Loan Account,
which statement shall be considered to be correct and conclusively
binding on the Borrower unless the Bank is notified by the Borrower to
the contrary within thirty (30) days after the Borrower's receipt of any
such statement which is deemed to be incorrect.
SECTION III
COLLATERAL
3.01. Grant of Security Interest. To secure payment and performance of all of
the Borrower's Obligations under this Agreement and the performance of all the
terms, covenants and agreements contained in this Agreement (and any and all
modifications, extensions and renewals of the Agreement) and in any other
document, instrument or agreement evidencing or related to the Obligations or
the Collateral, and also to secure all other liabilities, loans, guarantees,
covenants and duties owed by the Borrower to the Bank, whether or not evidenced
by this or by any other agreement, absolute or contingent, due or to became due,
now existing or hereafter and howsoever created, the Borrower hereby grants to
the Bank a security interest in and to all of the following property:
A. Equipment. All goods and equipment ("Equipment") now owned or
hereafter acquired by the Borrower or in which the Borrower now has or
may hereafter acquire any interest including, but not limited to, all
machinery, furniture, furnishings, fixtures, tools, supplies and motor
vehicles of every kind and description and all additions, accessions,
improvements, replacements and substitutions thereto and thereof.
B. Inventory. All inventory ("Inventory") now owned or hereafter
acquired by the Borrower including, but not limited to, all raw
materials, work in process, finished goods, merchandise, pants and
supplies of every kind and description, including inventory temporarily
out of the Borrower's custody or possession, together with all returns an
accounts.
C. Accounts and Contract Rights. All accounts and contract rights now
owned or hereafter created or acquired by the Borrower, including but not
limited to, all receivables and all rights and benefits due to the
Borrower under any contract or agreement.
D. General Intangibles. All general intangibles now owned or hereafter
created or acquired by the Borrower, including but not limited to,
goodwill trademarks, trade styles, trade names, patents, patent
applications, software, customer lists and business records.
E. Chattel Paper and Documents. All documents, instruments and chattel
paper now owned or hereafter acquired by the Borrower.
F. Monies and Other Property in Possession. All monies, and property of
the Borrower now or hereafter in the possession of the Bank or the Bank's
agents, or any one of them, including, but not limited to, all deposit
accounts, certificates of deposit, stocks, bonds, indentures, warrants,
options and other negotiable and non-negotiable securities and
instruments, together with all stock rights, rights to subscribe,
liquidating dividends, cash dividends, payments, dividends paid in stock,
new securities or other property to which the Borrower may become
entitled to receive on account of such property.
3.02. Real Property Security. The Borrower hereby agrees that all of the
Obligations referenced in this Agreement and the Borrower's performance of each
and all of the terms, covenants and agreements contained in this Agreement shall
be secured by a deed of trust, in farm and substance satisfactory to the Bank
(the "Deed of Trust"), encumbering as a lien of second encumbrance certain real
property described in the attached "Real Property Schedule" (the "Real
Property") located in the County of Alameda, State of California, subject only
to current taxes and assessments not yet due and payable.
3.03. Continuing Lien & Proceeds. The Bank's security interest in the
Collateral shall be a continuing lien and shall include all proceeds and
products of the Collateral including, but not limited to, the proceeds of any
insurance thereon as well as all accounts, contract rights, documents,
instruments and chattel paper resulting from the sale or disposition of any
Equipment.
3.04. Exclusion of Consumer Debt. The Obligations and performance secured
hereby shall not include any indebtedness of the Borrower incurred for personal,
<PAGE>
family or household purposes except to the extent any disclosure required under
any consumer protection law (including but not limited to the Truth in Lending
Act) or any regulation thereto, as now existing or hereafter amended, is or has
been given.
SECTION IV
CONDITIONS PRECEDENT
4.01. Conditions Precedent to the Initial Extension of Credit. The obligation
of the Bank to make the initial extension of credit hereunder is subject to the
conditions precedent that the Bank shall have received before the date of such
extension of credit all of the following, in form and substance satisfactory to
the Bank:
A. Authority to Borrow. Evidence relating to the duly given approval and
authorization of the execution, delivery and performance of this
Agreement, all other documents, instruments and agreements required under
this Agreement and all other actions to be taken by the Borrower
hereunder or thereunder.
B. Guarantors. Continuing guaranties in favor of the Bank, in form and
substance satisfactory to the Bank, executed by Doreen Chiu, Frank Chiu
and ATG Richland Corporation (each a "Guarantor"), together with evidence
that the execution, delivery and performance of the Guaranties by each
Guarantor has been duly authorized.
C. Loan Fees. Evidence that any required loan fees and expenses as set
forth above with respect to each credit facility have been paid or
provided for by the Borrower.
D. Audit. The opportunity to conduct an audit of the Borrower's books,
records and operations and the Bank shall be satisfied as to the
condition thereof.
E. Real Property Documents. The following documents relating to the real
property security provided for in this Agreement:
(i) An appraisal of the Real Property.
(ii) A title insurance policy or binder in the amount of
$400,000.00 issued by a title insurance company satisfactory to
the Bank and in such form and substance and with such
endorsements as are satisfactory to the Bank. Such title
insurance policy or binder shall indicate to the Bank's
satisfaction that the Deed of Trust shall constitute a lien of
second encumbrance on the Real Property subject only to Permitted
Title Exceptions.
(iii) Evidence that the Deed of Trust has been recorded and
constitutes a lien on the Real Property subject only to the
Permitted Title Exceptions.
(iv) Reimbursement to the Bank in the amount of all escrow,
recordation and appraisal fees, title guaranty or insurance
premiums, closing costs and all other out-of-pocket expenses
incurred by the Bank with respect to the Real Property.
F. Miscellaneous Documents. Such other documents, instruments,
agreements and opinions as are necessary, or as the Bank may reasonably
require, to consummate the transactions contemplated under this
Agreement, all fully executed.
4.02 Conditions Precedent to All Extensions of Credit. The obligation of the
Bank to make any extensions of credit to or on account of the Borrower
(including the initial extension of credit) shall be subject to the further
conditions precedent that, as of the date of each extension of credit and after
the making of such extension of credit:
A. Representations and Warranties. The representations and warranties
set forth in the Section entitled "Representations and Warranties" herein
and in any other document, instrument, agreement or certificate delivered
to the Bank hereunder are true and correct.
B. Collateral. The security interest in the Collateral has been duly
authorized, created and perfected with first priority and is in full
force and effect and the Bank has been provided with satisfactory
evidence of all filings necessary to establish such perfection and
priority.
C. Event of Default. No event has occurred and is continuing which
constitutes, or, with the lapse of time or giving of notice or both,
would constitute an Event of Default.
D. Subsequent Approvals, Etc. The Bank shall have received such
supplemental approvals, opinions or documents as the Bank may reasonably
request.
4.03. Reaffirmation of Statements. For the purposes hereof the Borrower's
acceptance of the proceeds of any extension of credit and the Borrower's
execution of any document or instrument evidencing or creating any Obligation
hereunder shall each be deemed to constitute the Borrower's representation and
warranty that the statements set forth above in this Section are true and
correct.
SECTION V
REPRESENTATIONS AND WARRANTIES
The Borrower hereby makes the following representations and warranties to the
Bank, which representations and warranties are continuing:
5.01. Status. The Borrower is a corporation duly organized and validly existing
under the laws of the State of California and is properly licensed, qualified to
do business and in good standing in, and, where necessary to maintain the
Borrower's rights and privileges, has complied with the fictitious name statute
of every jurisdiction in which the Borrower is doing business.
5.02. Authority. The execution, delivery and performance by the Borrower of
this Agreement and any instrument, document or agreement required hereunder have
been duly authorized and do not and will not: (i) violate any provision of any
law, rule, regulation, writ, judgment or injunction presently in effect
affecting the Borrower: (ii) require any consent or approval of the stockholders
of the Borrower or violate any provision of the articles of incorporation or
bylaws of the Borrower: or (iii) result in a breach of or constitute a default
under any material agreement to which the Borrower is a party or by which it or
its properties may be bound or affected.
5.03. Legal Effect. This Agreement constitutes, and any document, instrument or
agreement required hereunder when delivered will constitute, legal, valid and
binding obligations of the Borrower enforceable against the Borrower in
accordance with their respective terms.
5.04. Fictitious Trade Styles. The Borrower currently uses no fictitious trade
styles in connection with its business operations. The Borrower shall notify the
Bank within thirty (30) days of the use of any fictitious trade style at any
future date, indicating the trade style and state(s) of its use.
5.05. Financial Statements. All financial statements, information and other
data which may have been and which may hereafter be submitted by the Borrower to
the Bank are true, accurate and correct and have been and will be prepared in
accordance with generally accepted accounting principles consistently applied
and accurately represent the Borrower's financial condition and, as applicable,
the other information disclosed therein. Since the most recent submission of any
such financial statement, information or other data to the Bank, the Borrower
represents and warrants that no material adverse change in the Borrower's
financial condition or operations has occurred which has not been fully
disclosed to the Bank in writing.
5.06. Litigation. Except as have been disclosed to the Bank in writing, there
are no actions, suits or proceedings pending or, to the knowledge of the
Borrower,
<PAGE>
threatened against or affecting the Borrower or the Borrower's properties before
any court or administrative agency which, if determined adversely to the
Borrower, would have a material adverse effect on the Borrower's financial
condition, operations or the Collateral.
5.07. Title to Assets. The Borrower has good and marketable title to all of its
assets (including, but not limited to, the Collateral) and the same are not
subject encumbrance, lien or claim of any third person except for Permitted
Liens.
5.08. ERISA. If the Borrower has a pension, profit sharing or retirement plan
subject to ERISA, such plan has been and will continue to be funded in
accordance with its terms and otherwise complies with and continues to comply
with the requirements of ERISA.
5.09. Taxes. The Borrower has filed all tax returns required to be filed and
paid all taxes shown thereon to be due, including interest and penalties, other
than taxes which are currently payable without penalty or interest or those
which are being duly contested in good faith.
5,10. Environmental Compliance. The operations of the Borrower comply, and
during the term of this Agreement will at all times comply, in all respects
with all Environmental Laws; the Borrower has obtained licenses, permits,
authorizations and registrations required under any Environmental Law
("Environmental Permits") and necessary for its ordinary operations, all such
Environmental Permits are in good standing, and the Borrower is in compliance
with all material terms and conditions of such Environmental Permits; neither
the Borrower nor any of its present properties or operations are subject to any
outstanding written order from or agreement with any governmental authority nor
subject to any judicial or docketed administrative proceeding, respecting any
Environmental Law, Environmental Claim or Hazardous Material; there are no
Hazardous Materials or other conditions or circumstances existing, or arising
from operations prior to the date of this Agreement, with respect to any
property of the Borrower that would reasonably be expected to give rise to
Environmental Claims; provided however, that with respect to property leased
from an unrelated third party, the foregoing representation is made to the best
knowledge of the Borrower. In addition, (i) the Borrower does not have or
maintain any underground storage tanks which are not properly registered or
permitted under applicable Environmental Laws or which are leaking, or disposing
of Hazardous Materials off-site, and (ii) the Borrower has notified all of its
employees of the existence, if any, of any health hazard arising from the
conditions of their employment and have met all notification requirements under
Tide III of CERCLA and all other Environmental Laws.
SECTION VI
COVENANTS
The Borrower covenants and agrees that, during the term of this Agreement, and
so long thereafter as the Borrower is indebted to the Bank under this Agreement
the Borrower shall, unless the Bank otherwise consents in writing:
6.01. Preservation of Existence; Compliance with Applicable Laws, Maintain and
preserve its existence and all rights and privileges now enjoyed; not liquidate
or dissolve; merge or consolidate with or into, or acquire any other business
organization; and conduct its business in accordance with all applicable laws,
rules an regulations.
6.02. Maintenance of Insurance. Maintain insurance in such amounts and covering
such risks as is usually carried by companies engaged in similar businesses and
owning similar properties in the same general areas in which the Borrower
operates and maintain such other insurance and coverages as may be required by
the Bank. All such insurance shall be in form and amount and with companies
satisfactory to the Bank. With respect to insurance covering properties in which
the Bank maintains a security interest or lien, such insurance shall be in an
amount not less than the full replacement value thereof, at the Bank's request,
shall name the Bank as loss payee pursuant to a loss payable endorsement
satisfactory to the Bank and shall not be altered or canceled except upon ten
(10) days' prior written notice to the Bank. Upon the Bank's request, the
Borrower shall furnish the Bank with the original policy or binder of all such
insurance.
6.03. Maintenance of Collateral and Other Properties. Except for Permitted
Liens, the Borrower shall keep and maintain the Collateral free and clear of all
levies, liens, encumbrances and security interests (including but not limited
to, any lien of attachment, judgement or execution) and defend the Collateral
against any such levy, lien, encumbrance or security interest; comply with all
laws, statutes and regulations pertaining to the Collateral and its use and
operation; execute, file, and record such statements, notices and agreements,
take such actions and obtain such certificates and other documents as necessary
to perfect, evidence and continue the Bank's security interest in the Collateral
and the priority thereof; maintain accurate and complete records of the
Collateral which show all sales, claim and allowances; and properly claim for,
house, store and maintain the Collateral in good condition, free of misuse,
abuse and deterioration, other than normal wear and tear. The Borrower shall
also maintain and preserve all its properties in good working order and
condition in accordance with the general practice of the businesses of similar
character and size, ordinary wear and tear excepted.
6.04. Location and Maintenance of Equipment.
A. Location. The Equipment shall at all times be in the Borrower's
physical possession, shall not be held for sale or lease and shall be
kept only at the following location(s): 47375 Fremont Boulevard, Fremont,
CA 94538.
The Borrower shall not secrete, abandon or remove, or permit the removal
of the Equipment, or any part thereof, from the location(s) shown above
of remove or permit to be removed any accessories now or hereafter placed
upon the Equipment.
B. Equipment Schedules. Upon the Bank's demand, the Borrower shall
immediately provide the Bank with a complete and accurate description of
the Equipment including, as applicable, the make, model, identification
number and serial number of each item of Equipment. In addition, the
Borrower shall immediately notify the Bank of the acquisition of any new
or additional Equipment or the replacement of any existing Equipment and
shall supply the Bank with a complete description of any such additional
or replacement Equipment.
C. Maintenance of Equipment. The Borrower shall, at the Borrower's sole
cost and expense, keep and maintain the Equipment in a good state of
repair an shall not destroy, misuse, abuse, illegally use or be negligent
in the care of the Equipment or any part thereof. The Borrower shall not
remove, destroy obliterate, change, cover, paint, deface or alter the
name plates, serial numbers, labels or other distinguishing numbers or
identification marks placed upon the Equipment or any part thereof by or
on behalf of the manufacturer, any dealer or rebuilder thereof, or the
Bank. The Borrower shall not be released from an liability to the Bank
hereunder because of any injury to or loss or destruction of the
Equipment. The Borrower shall allow the Bank and its representative free
access to and the right to inspect the Equipment at all times and shall
comply with the terms and conditions of any leases covering the real
property on which the Equipment is located and any orders, ordinances,
laws, regulations or rules of any federal, state or municipal agency or
authority having jurisdiction of such real property or the conduct of
business of the persons having control or possession of the Equipment.
D. Fixtures. The Equipment is not now and shall not at any time
hereafter be so affixed to the real property on which it is located as to
become a fixture or part thereof. The Equipment is now and shall at all
times hereafter be and remain personal property of the Borrower.
6.05. Location and Quality of Inventory. The Inventory (i) is now and shall at
all times hereafter be of good and merchantable quality and free from defects:
(ii) is not now and shall not at any time hereafter be stored with a bailee,
warehouseman or similar party without the Bank's prior written consent and, in
such event, the Borrower will concurrently therewith cause any such bailee,
warehouseman or similar party to issue and deliver to the Bank, in form
acceptable to the Bank warehouse receipts in the Bank's name evidencing the
storage of inventory; (iii) shall at all times (except as otherwise permitted by
this section) be in the Borrower's physical possession; (iv) shall not be held
by others on consignment, sale on approval, or sale or return; and (v) shall be
kept only at the following locations:
<PAGE>
47375 Fremont Boulevard, Fremont, CA 94538.
6.06 Payment of Obligations and Taxes. Make timely payment of all assessments
and taxes and all of its liabilities and obligations including, but not limited
to, trade payables, unless the same are being contested in good faith by
appropriate proceedings with the appropriate court or regulatory agency. For the
purposes hereof, the Borrower's issuance of a check, draft or similar instrument
without delivery to the intended payee shall not constitute payment.
6.07. Inspection Rights. At any reasonable time and from time to time permit
the Bank or any representative thereof to examine and make copies of the records
and visit the properties of the Borrower and to discuss the business and
operations of the Borrower with any employee or representative thereof. If the
Borrower now or at any time hereafter maintains any records (including, but not
limited to, computer generated records and computer programs for the generation
of such records) in the possession of a third party, the Borrower hereby agrees
to notify such third party to permit the Bank free access to such records at all
reasonable times and to provide the Bank with copies of any records it may
request, all at the Borrower's expense, the amount of which shall be payable
immediately upon demand. In addition, the Bank may, at any reasonable time and
from time to time, conduct inspections and audits of the Collateral and the
Borrower's account payable, the cost and expenses of which shall be paid by the
Borrower to the Bank upon demand.
6.08. Repenting Requirements. Deliver or cause to be delivered to the Bank in
form and detail satisfactory to the Bank:
A. Annual Statements. Not later than 120 days after the end of each of
the Borrower's fiscal years, a copy of the annual financial report of the
Borrower for such year, which report shall be a CPA audited report.
B. Interim Statements. Not later than 30 days after the end of each
fiscal quarter, the Borrower's financial statement as of the end of such
fiscal quarter.
C. Other Information. Promptly upon the Bank's request, such other
information pertaining to the Borrower, the Collateral, or any Guarantor
as the Bank may reasonably request.
6.09. Payment of Dividends. The Borrower shall not declare or pay any dividends
on any class of its stock now or hereafter outstanding except dividends payable
solely in the corporation's capital stock.
6.10. Redemption or Repurchase of Stock. The Borrower shall not redeem or
repurchase any class of its corporate stock now or hereafter outstanding.
6.11. Additional Indebtedness. Not, after the date hereof, create, incur or
assume, directly or indirectly, any liability or indebtedness other than (i)
indebtedness owed or to be owed to the Bank, (ii) indebtedness to trade
creditors incurred in the ordinary course of the Borrower's business, or (iii)
(iii) indebtedness incurred equipment leasing up to an aggregate amount not
exceeding $2,000,000.00 in any one fiscal year.
6.12. Liens and Encumbrances. Not create, assume or permit to exist any
security interest, encumbrance, mortgage, deed of trust or other lien
(including, but not limited to, a lien of attachment, judgment or execution)
affecting any of the Borrower's properties, or execute or allow to be filed any
financing statement or continuation thereof affecting any such properties,
except for Permitted Liens or as otherwise provided in this Agreement and except
for liens or encumbrances up to an aggregate amount not exceeding $2,000,000.00
for equipment leasing in any one fiscal year.
6.13. Transfer Assets. Not sell, contract for sale, transfer, convey, assign,
lease or sublet any assets of the Borrower, including, but not limited to, the
Collateral except in the ordinary course of business as presently conducted by
the Borrower, and then, only for full, fair and reasonable consideration.
6.14. Change in the Nature or Business. Not make any material change in the
Borrower's financial structure or in the nature of the Borrower's business as
existing or conducted as of the date of this Agreement.
6.15. Financial Condition, Maintain at all times:
A. Net Worth, A minimum Effective Tangible Net Worth of not less than
512,250,000.00.
B. Debt to Net Worth Ratio, A Debt to Effective Tangible Net Worth ratio
of not more than 1.15 to 1.00.
C. Quick Ratio, A ratio of cash, cash equivalents, and accounts
receivable to current liabilities of not less than 1,30 to 1.00.
D. Debt Service Coverage Ratio, A Debt Service Coverage Ratio (defined
herein as the sum of net profit after tax plus depreciation, amortization
and interest expense less dividends, distributions and withdrawals
divided by the current portion of long term debt plus interest expense)
of not less than 1.05 to 1.00.
E. Profitability, The Borrower shall not show a loss in any two
consecutive fiscal quarters.
6.16. Compensation of Employees. Compensate the employees of the Borrower for
services rendered at an hourly rate at least equal to the minimum hourly rate
prescribed by any applicable federal or state law or regulation.
6.17. Capital Expenses. Not make any fixed capital expenditure or any
commitment therefor, including, but not limited to, incurring liability for uses
which would be, in accordance with generally accepted accounting principles,
reported as capital leases, or purchase any real or personal property except for
expenditures in an aggregate amount not exceeding 54,000,000,00 in any one
fiscal year.
6.18. Loans. Not make any loans or advances or extend credit to any third
person, including, but not limited to, directors, officers, shareholders,
partners employees, affiliated entities or subsidiaries of the Borrower, except
for credit extended in the ordinary course of the Borrower's business as
presently conducted and except loans up to an aggregate amount not exceeding
$500,000.00 plus accrued interest in any one fiscal year.
6.19. Environmental Compliance. The Borrower shall:
A. Conduct the Borrower's operations and keep and maintain all of its
properties in compliance with all Environmental Laws.
B. Give prompt written notice to the Bank, but in no event later than 10
days after becoming aware, of the following: (i) any enforcement,
cleanup, removal or other governmental or regulatory actions instituted,
completed or threatened against the Borrower or any of its affiliates or
any of its respective properties pursuant to any applicable Environmental
Laws, (ii) all other Environmental Claims, and (iii) any environmental or
similar condition on any real property adjoining or in the vicinity of
the property of the Borrower or its affiliates that could reasonably be
anticipated to cause such property or any part thereof to be subject to
any restrictions on the ownership, occupancy, transferability or use of
such property under any Environmental Laws.
C. Upon the written request of the Bank, the Borrower shall submit to
the Bank, at its sole cost and expense, at reasonable intervals, a report
providing an update of the status of any environmental, health or safety
compliance, hazard or liability issue identified in any notice required
pursuant to this Section.
D. At all times indemnify and hold harmless the Bank from and against
any and all liability arising out of any Environmental Claims.
6,20. Notice. Give the Bank prompt written notice of any and all (i) Events of
Default; (ii) litigation, arbitration or administrative proceedings to which the
Borrower is a party and in which the claim or liability exceeds $100,000.00 or
which affects the Collateral; (iii) any change in the place of business of the
Borrower or the acquisition of more than one place of business by the Borrower;
(iv) any proposed or actual change in the name, identity or business nature of
the Borrower;
<PAGE>
(v) any change in the location of the Equipment or Inventory; and (vi) other
matters which have resulted in, or might result in a material adverse change in
the Collateral or the financial condition or business operations of the
Borrower.
SECTION VII
EVENTS OF DEFAULT
Any one or more of the following described events shall constitute an event of
default under this Agreement:
7.01. Non-Payment. The Borrower shall fail to pay any Obligations within 10
days of when due.
7.02. Performance Under This and Other Agreements. The Borrower shall fail in
any material respect to perform or observe any term, covenant or agreement
contained in this Agreement or in any document, instrument or agreement
evidencing or relating to any indebtedness of the Borrower (whether owed to the
Bank or third persons), and any such failure (exclusive of the payment of money
to the Bank under this Agreement or under any other document, instrument or
agreement, which failure shall constitute and be an immediate Event of Default
if not paid when due or when demanded to be due) shall continue for more than 30
days after written notice from the Bank to the Borrower of the existence and
character of such Event of Default.
7.03. Representations and Warranties; Financial Statements. Any representation
or warranty made by the Borrower under or in connection with this Agreement or
any financial statement given by the Borrower or any Guarantor shall prove to
have been incorrect in any material respect when made or given or when deemed to
have been made or given.
7.04. Insolvency. The Borrower or any Guarantor shall: (i) become insolvent or
be unable to pay its debts as they mature: (ii) make an assignment for the
benefit of creditors or to an agent authorized to liquidate any substantial
amount of its properties or assets; (iii) file a voluntary petition in
bankruptcy or seeking reorganization or to effect a plan or other arrangement
with creditors; (iv) file an answer admitting the material allegations of an
involuntary petition relating to bankruptcy or reorganization or join in any
such petition; (v) become or be adjudicated a bankrupt; (vi) apply for or
consent to the appointment of, or consent that an order be made, appointing any
receiver, custodian or trustee for itself or any of its properties, assets or
businesses; or (vii) any receiver, custodian or trustee shall have been
appointed for all or a substantial part of its properties, assets or businesses
and shall not be discharged within 30 days after the date of such appointment.
7.05. Execution. Any writ of execution or attachment or any judgment lien shall
be issued against any property of the Borrower and shall not be discharged or
bonded against or released within 30 days after the issuance or attachment of
such writ or lien.
7.06. Revocation or Limitation of Guaranty. Any Guaranty shall be revoked or
limited or its enforceability or validity shall be contested by any Guarantor,
by operation of law, legal proceeding or otherwise or any Guarantor who is a
natural person shall die.
7.07. Suspension. The Borrower shall voluntarily suspend the transaction of
business or allow to be suspended, terminated, revoked or expired any permit,
license or approval of any governmental body necessary to conduct the
Borrower's business as now conducted.
7.08. Change in Ownership. There shall occur a sale, transfer, disposition or
encumbrance (whether voluntary or involuntary), or an agreement shall be entered
into to do so, with respect to more than 10% of the issued and outstanding
capital stock of the Borrower.
7.09. Impairment of Collateral. There shall occur any injury or damage to all
or any part of the Collateral or all or any part of the Collateral shall be
lost, stolen or destroyed, which changes cause the Collateral, in the sole and
absolute judgement of the Bank, to become unacceptable as to character and
value.
SECTION VIII
REMEDIES ON DEFAULT
Upon the occurrence of any Event of Default, the Bank may, at its sole election,
without demand and upon only such notice as may be required by law:
8.01. Acceleration. Declare any or all of the Borrower's indebtedness owing to
the Bank, whether under this Agreement or under any other document, instrument
or agreement, immediately due and payable, whether or not otherwise due and
payable.
8.02. Cease Extending Credit. Cease extending credit to or for the account of
the Borrower under this Agreement or under any other agreement now existing or
hereafter entered into between the Borrower and the Bank.
8.03. Termination. Terminate this Agreement as to any future obligation of the
Bank without affecting the Borrower's obligations to the Bank or the Bank's
rights and remedies under this Agreement or under any other document, instrument
or agreement.
8.04. Segregate Collections. Require the Borrower to segregate all collections
and proceeds of the Collateral so that they are capable of identification and to
deliver such collections and proceeds to the Bank, in kind, without commingling,
at such times and in such manner as required by the Bank.
8.05. Records of Collateral. Require the Borrower to periodically deliver to
the Bank records and schedules showing the status, condition and location of the
Collateral and such contracts or other matters which affect the Collateral, In
connection herewith, the Bank may conduct such audits or other examination of
such records, including, but not limited to, verification of balances owing by
any account debtor of the Borrower, as the Bank, in its sole and absolute
discretion, deems necessary.
8.06. Notification of Account Debtors.
A. Notify any or all of the Borrower's Account Debtors, or any buyers or
transferees of the Collateral or other persons of the Bank's interest in
the Collateral and the proceeds thereof and instruct such person(s) to
thereafter make any payment due the Borrower directly to the Bank.
B. The Borrower hereby irrevocably and unconditionally appoints the Bank
as its attorney-in-fact to: (i) endorse the Borrower's name on any notes,
acceptances, checks, drafts, money orders or other evidence of payment
that may come into the Bank's possession; (ii) sign the Borrower's name
on any invoice or bill of lading relating to any of the Collateral; (iii)
notify post office authorities to change the address for delivery of mail
addressed to the Borrower to such address as the Bank may designate and
take possession of and open mail addressed to the Borrower and remove
therefrom, proceeds of and payments on the Collateral; and (iv) demand,
receive and endorse payment and give receipts, releases and satisfactions
for and sue for all money payable to the Borrower. All of the preceding
may be done either in the name of the Bank or in the name of the Borrower
with the same force and effect as the Borrower could have done had this
Agreement not been entered into.
C. Require the Borrower to indicate on the face of all invoices (or such
other documentation as may be specified by the Bank relating to the sale,
delivery or shipment of goods giving rise to the account) that the
account has been assigned to the Bank and that all payments are to be
made directly to the Bank at such address as the Bank may designate.
<PAGE>
8.07. Compromise. Grant extensions, compromise claims and settle any account
for less than the amount owing thereunder, all without notice to the Borrower or
any obligor on or guarantor of the Obligations.
8.08. Protection of Security Interest. Make such payments and do such acts as
the Bank, in its sole judgment, considers necessary and reasonable to protect
its security interest or lien in the Collateral. The Borrower hereby irrevocably
authorizes the Bank to pay, purchase, contest or compromise any encumbrance,
lien claim which the Bank, in its sole judgment, deems to be prior or superior
to its security interest. Further, the Borrower hereby agrees to pay to the
Bank, upon demand therefor, all expenses and expenditures (including attorneys'
fees) incurred in connection with the foregoing.
8.09. Foreclosure. Enforce any security interest or lien given or provided for
under this Agreement or under any security agreement, mortgage, deed of trust or
other document relating to the Collateral, in such manner and such order, as to
all or any part of the Collateral, as the Bank, in its sole judgment, deems to
be necessary or appropriate and the Borrower hereby waives any and all rights,
obligations or defenses now or hereafter established by law relating to the
foregoing. In the enforcement of its security interest or lien, the Bank is
authorized to enter upon the premises when any Collateral is located and take
possession of the Collateral or any part thereof, together with the Borrower's
records pertaining thereto, or the Bank may require the Borrower to assemble the
Collateral and records pertaining thereto and make such Collateral and records
available to the Bank at a place designated by the Bank. The Bank may sell the
Collateral or any portions thereof together with all additions, accessions and
accessories thereto, giving only such notices and following only such procedures
as are required by law, at either a public or private sale, or both, with or
without having the Collateral present at the time of sale, which sale shall be
on such terms and conditions and conducted in such manner as the Bank determines
in its sole judgment to be commercially reasonable. Any deficiency which exists
after the disposition or liquidation of the Collateral shall be a continuing
liability of any obligor on or any guarantor of the Obligations and shall be
immediately paid to the Bank.
8.10. Application of Proceeds. All amounts received by the Bank as proceeds
from the disposition or liquidation of the Collateral shall be applied to the
Borrower's indebtedness to the Bank as follows: first, to the costs and expenses
of collection, enforcement, protection and preservation of the Bank's lien in
the Collateral, including court costs and reasonable attorneys' fees, whether or
not suit is commenced by the Bank; next, to those costs and expenses incurred by
the Bank in protecting, preserving, enforcing, collecting, selling or disposing
of the Collateral; next, to the payment of accrued and unpaid interest on all of
the Obligations; next, to the payment of the outstanding principal balance of
the Obligations; and last, to the payment of any other indebtedness owed by the
Borrower to the Bank. Any excess Collateral or excess proceeds existing after
the disposition or liquidation of the Collateral will be returned or paid by the
Bank to the Borrower.
8.11. Non-Exclusivity of Remedies. Exercise one or more of the Bank's rights
set forth herein or seek such other rights or pursue such other remedies as may
be provided by law, in equity or in any other agreement now existing or
hereafter entered into between the Borrower and the Bank, or otherwise.
SECTION IX
MISCELLANEOUS PROVISIONS
9,01. Default Interest Rate. If an Event of Default has occurred and is
continuing, the Bank, at its option, may require the Borrower to pay to the Bank
interest of any Indebtedness or amount payable under this Agreement at a rate
which is 3% in excess of the rate or rates otherwise then in effect under this
Agreement.
9,02. Reliance. Each warranty, representation, covenant and agreement contained
in this Agreement shall be conclusively presumed to have been relied upon by the
Bank regardless of any investigation made or information possessed by the Bank
and shall be cumulative and in addition to any other warranties, representations
covenants or agreements which the Borrower shall now or hereafter give, or cause
to be given, to the Bank.
9,03. Dispute Resolution.
A. Disputes. It is understood and agreed that, upon the request of any
party to this Agreement, any dispute, claim or controversy of any kind,
whether in contract or in tort, statutory or common law, legal or
equitable, now existing or hereinafter arising between the parties in any
way arising out of, pertaining to or in connection with: (i) this
Agreement, or any related agreements, documents or instruments, (ii) all
past and present loans, credits, accounts, deposit accounts (whether
demand deposits or time deposits), safe deposit boxes, safekeeping
agreements, guarantees, letters of credit, goods or services, or other
transactions, contracts or agreements of any kind, (iii) any incidents,
omissions, acts, practices, or occurrences causing injury to any party
whereby another party or its agents, employees or representatives may be
liable, in whole or in pan, or (iv) any aspect of the past or present
relationships of the parties, shall be resolved through a two-step
dispute resolution process administered by the Judicial Arbitration &
Mediation Services, Inc, ("JAMS") as follows:
B. Step I - Mediation. At the request of any party to the dispute, claim
or controversy, the matter shall be referred to the nearest office of
JAMS for mediation, which is an informal, nonbinding conference or
conferences between the parties in which a retired judge or justice from
the JAMS panel will seek to guide the panics to a resolution of the case.
C. Step II - Arbitration (Contracts Not Secured By Real Property).
Should any dispute, claim or controversy remain unresolved at the
conclusion of the Step I Mediation Phase, then (subject to the
restriction at the end of this subparagraph) all such remaining matters
shall be resolved by final and binding arbitration before a different
judicial panelist, unless the parties shall agree to have the mediator
panelist act as arbitrator. The hearing shall be conducted at a location
determined by the arbitrator in Los Angeles, California (or such other
city as may be agreed upon by the parties) and shall be administered by
and in accordance with the then existing Rules of Practice and Procedure
of JAMS and judgement upon any award rendered by the arbitrator may be
entered by any State or Federal Court having jurisdiction thereof. The
arbitrator shall determine which is the prevailing party and shall
include in the award that party's reasonable attorneys' fees and costs.
This subparagraph shall apply only if, at the time of the submission of
the matter to JAMS, the dispute or issues involved do not arise out of
any transaction which is secured by real property collateral or, if so
secured, all parties consent to such submission.
As soon as practicable after selection of the arbitrator, the arbitrator,
or the arbitrator's designated representative, shall determine a
reasonable estimate of anticipated fees and costs of the arbitrator, and
render a statement to each party setting forth that party's pro-rata
share of said fees and costs. Thereafter, each party shall, within 10
days of receipt of said statement, deposit said sum with the arbitrator.
Failure of any party to make such a deposit shall result in a forfeiture
by the non-depositing party of the right to prosecute or defend the claim
which is the subject of the arbitration, but shall not otherwise serve to
abate, stay or suspend the arbitration proceedings.
D. Step II - Trial By Court Reference (Contracts Secured By Real
Property). If the dispute, claim or controversy is not one required or
agreed to be submitted to arbitration, as provided in the above
subparagraph, and has not been resolved by Step I mediation, then any
remaining dispute, claim or controversy shall be submitted for
determination by a trial on Order of Reference conducted by a retired
judge or justice from the panel of JAMS appointed pursuant to the
provisions of Section 638(1) of the California Code of Civil Procedure,
or any amendment, addition or successor section thereto, to hear the case
and report a statement of decision thereon. The parties intend this
general reference agreement to be specifically enforceable in accordance
with said section. If the parties are unable to agree upon a member of
the JAMS panel to act as referee, then one shall be appointed by the
Presiding Judge of the county wherein the hearing is to be held. The
panics shall pay in advance, to the referee, the estimated reasonable
fees and costs of the reference, as may be specified in advance by the
referee. The parties shall initially share equally, by paying their
proportionate amount of the estimated fees and costs of the reference.
Failure of any party to make such a fee deposit shall result in a
forfeiture by the non-depositing party of the right to prosecute or
defend any cause of action which is the subject of the reference, but
shall not otherwise serve to abate, stay or suspend the reference
proceeding.
<PAGE>
E. Provisional Remedies, Self Help and Foreclosure. No provision of, or
the exercise of any rights under any portion of this Dispute Resolution
provision, shall limit the right of any party to exercise self help
remedies such as setoff, foreclosure against any real or personal
property collateral, or the obtaining of provisional or ancillary
remedies, such as injunctive relief of the appointment of a receiver,
from any court having jurisdiction before, during or after the pendency
of any arbitration. At the Bank's option, foreclosure under a deed of
trust or mortgage may be accomplished either by exercise of power of sale
under the deed of trust or mortgage, or by judicial foreclosure. The
institution and maintenance of an action for provisional remedies,
pursuit of provisional or ancillary remedies or exercise of self help
remedies shall not constitute a waiver of the right of any party, to
submit the controversy or claim to arbitration.
9.04. Waiver of Jury. The Borrower and the Bank hereby expressly and
voluntarily waive any and all rights, whether arising under the California
constitution, any rules of the California Code of Civil Procedure, common law or
otherwise, to demand a trial by Jury in any action, matter, claim or cause of
action whatsoever arising out of or in any way related to this Agreement or any
other agreement, document or transaction contemplated hereby.
9.05. Restructuring Expenses. In the event the Bank and the Borrower negotiate
for, or enter into, any restructuring, modification or refinancing of the
Indebtedness under this Agreement for the purposes of remedying an Event of
Default, The Bank, may require the Borrower to reimburse all of the Bank's costs
and expenses incurred in connection therewith, including, but not limited to
reasonable attorneys' fees and the costs of any audit or appraisals requited by
the Bank to be performed in connection with such restructuring, modification or
refinancing.
9.06. Attorneys' Fees. In the event of any suit, mediation, arbitration or
other action in relation to this Agreement or any document, instrument or
agreement executed with respect to, evidencing or securing the indebtedness
hereunder, the prevailing party, in addition to all other sums to which it may
be entitled, shall be entitled to reasonable attorneys' fees.
9.07. Notices. All notices, payments, requests, information and demands which
either party hereto may desire, or may be required to give or make to the other
party shall be given or made to such party by hand delivery or through deposit
in the United States mail, postage prepaid, or by Western Union telegram,
addressed to the address set forth below such party's signature to this
Agreement or to such other address as may be specified from time to time in
writing by either party to the other.
9.08. Waiver. Neither the failure nor delay by the Bank in exercising any right
hereunder or under any document, instrument or agreement mentioned herein shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right hereunder or under any document, instrument or agreement mentioned herein
preclude other or further exercise thereof or the exercise of any other right
nor shall any waiver of any right or default hereunder or under any other
document, instrument or agreement mentioned herein constitute a waiver of any
other right or default or constitute a waiver of any other default of the same
or any other term or provision.
9.09. Conflicting Provisions. To the extent that any of the terms or
provisions contained in this Agreement are inconsistent with those contained in
any other document, instrument or agreement executed pursuant hereto, the terms
and provisions contained herein shall control. Otherwise, such provisions shall
be considered cumulative.
9.10. Binding Effect: Assignment. This Agreement shall be binding upon and
inure to the benefit of the Borrower and the Bank and their respective
successors and assigns, except that the Borrower shall not have the right to
assign its rights hereunder or any interest herein without the Bank's prior
written consent. The Bank may sell, assign or grant participations in all or any
portion of its rights and benefits hereunder. The Borrower agrees that, in
connection with any such sale, grant or assignment, the Bank may deliver to the
prospective buyer, participant or assignee financial statements and other
relevant information relating to the Borrower and any guarantor.
9.11. Jurisdiction. This Agreement, any notes issued hereunder, the rights of
the parties hereunder to and concerning the Collateral, and any documents,
instruments or agreements mentioned or referred to herein shall be governed by
and construed according to the laws of the State of California, to the
jurisdiction of whose courts the parties hereby submit.
9.12. Headings. The headings set forth herein are solely for the purpose of
identification and have no legal significance.
9.13. Entire Agreement. This Agreement and all documents, instruments and
agreements mentioned herein constitute the entire and complete understanding of
the parties with respect to the transactions contemplated hereunder. All
previous conversations, memoranda and writings between the panics or pertaining
to the transactions contemplated hereunder that are not incorporated or
referenced in this Agreement or in such documents, instruments and agreements
are superseded hereby.
IN WITNESS WHEREOF, this Agreement has been executed by the parties hereto as
of the date first hereinabove written.
BANK: BORROWER:
SANWA BANK CALIFORNIA ATG INC.
By:_______________________________________ By:_________________________
Craig Fendel, Authorized Officer Doreen Chiu, President
Address: Address:
Oakland Main Office 47375 Fremont Boulevard
2127 Broadway Fremont, CA 94538
Oakland, CA 94612
<PAGE>
REAL PROPERTY SCHEDULE
The following is the Real Property described in the Collateral section of this
Term Loan Agreement dated September 18, 1997 to which this Schedule is attached.
Item 1: 47375 Fremont Boulevard, Fremont, CA 94538.
All that real property located in the County of Alameda, State of California,
legally described as follows:
Parcel 1, Parcel Map 4703, filed November 22, 1985, Map Book 157, Pages 57-
58, Alameda County Records.
Excepting therefrom:
Reserving to the Grantor and its successors and assigns all oil, gas,
mineral, geothermal, and hydrocarbon substances in and under or that may be
produced below a depth of 500 feet below the surface of said property
without any right of entry upon the surface of said land for the purposes of
mining, drilling, exploring or extracting such oil, gas, mineral,
geothermal, or hydrocarbon substances and without any right to the use of or
rights in or to any portion of the surface of said land to a depth of 500
feet below the surface thereof reserved by King and Lyons, a California
general partnership, recorded November 22, 1985, Series No, 85-251319.
A,P, No, 519-1693-021
<PAGE>
EXHIBIT 10.9
ATG INC.
ALLIED TECHNOLOGY GROUP
December 2, 1997
Subject: Employment Package
Dear Mr. Steve Guerrettaz:
We would like to propose the following as our employment offer:
1. Position: Chief Financial Officer. You will report directly to the
Chief Executive Officer of the company. You will be responsible for all
financial and administrative matters, with emphases in budgeting, cost
control, and profitability of the company.
2. Wages: $150,000 per year
3. Stock Option: 30,000 shares at an option price of $5.00 per share, to
be earned over a period of three years, and may be exercised over a period
of 10 years. Such options are not exercisable until ATG stocks become
tradable at the stock exchange. Should ATG be sold or merged, the options
vested will be exercisable at the closing of the transaction.
4. You will receive an additional 10,000 shares of options, exercisable at
the option price of $5.00 per share at the completion of the ATG's IPO. You
will receive another 20,000 shares of options, exercisable at the option
price of $5.00 per share at the completion of the secondary offering. Such
options can be exercised over a period of 10 years.
5. If we decide to separate for reasons other than cause, the options
earned will be vested at separation. However, such vested options will be
only exercisable after ATG stock is tradable at the stock exchange.
6. You will be eligible to participate at the ATG stock option incentive
program for executive officers and senior executives as determined by the
Board following the IPO.
7. You will immediately be eligible to the 401-K plan, and standard full
time employees benefits that ATG offers.
8. Bonus based on overall company profit and your performance and
milestones, up to 20% of your annual base salary. Measurements of bonus
will be finalized in the first quarter of 1998.
9. There will be a salary review after twelve month services. Such review
will be based on performance and profitability of company.
10. Your employment at ATG will be at least one year provided that there is
no gross negligence.
11. ATG will pay for your dues and fees for your continued memberships in:
(a) Financial Executives Institute, (b) Association for Corporate Growth
and (c) AICPA and Cal Society of CPA's.
<PAGE>
12. You will be entitled to three weeks vacation per year.
13. We will reimburse you upto the standard net amount we pay or other ATG
employees if you choose not to take the ATG health insurance benefits. We
will provide you a life insurance policy in the amount of $100,000.
14. The above offer will expire at 5 p.m., December 3, 1997.
Please feel free to contact my office should you have any question.
Sincerely,
Doreen Chiu
President
I hereby agree and accept the above described employment terms and
conditions.
___________________________
Steve Guerrettaz
<PAGE>
EXHIBIT 10.10
ATG INC.
ALLIED TECHNOLOGY GROUP
Mr. Fred Feizollahi
4089 Terra Alta Drive
San Ramon CA, 94583 February 20, 1995
Dear Fred,
Allied Technology Group, Inc., (ATG) is pleased to extend to you an employment
offer with the following responsibilities, position, salary, benefits,
incentives and conditions.
1. Responsibilities. Your responsibilities will be management of our Western
operations which includes execution of projects handled by our Fremont
office and waste treatment services contracts handled by our Richland
Facility. Although your home office will be Fremont, frequent travel to the
Richland plant may be needed.
2. Position. Initially you will have two positions, Manager of Richland
Facility, and Manager of Western Projects. After six months when you've
become thoroughly familiar with the company projects and financial
operations, you will be promoted to the position of a vice president
responsible for our Western operations.
3. Salary. As your starting salary with ATG, we will match your current salary
at Morrison Knudsen Corporation. Upon acceptance of this offer, please
submit a paycheck stub that shows your current MK salary. Furthermore, your
salary will be subject to review within six months and annually thereafter.
4. Benefits. Standard company benefits. ATG 401K contribution is discretionary
and any such contribution will depend on the company profitability.
5. Incentives. The following incentives are offered to you.
a. Stock bonus. 5000 shares for each year of employment with ATG and for
the next five years. The stock bonus options will be terminated at the
end of the five years and a new arrangement will be negotiated with
you.
b. Stock incentive. The annual base stock bonus of 5000 will be increased
depending on the ATG annual sales. The additional stock incentive
provided to you will be 1000 shares for each $1,000,000 ATG annual
sale increase over and above the sales in the base year which is
designated to be 12/30/1995. For example, if the ATG annual sale in
1996 is twenty five million as compared to twenty million is 1995, an
additional 5000 stocks will be given to you. The stock incentive
option is subject to minimum company after tax profit of 10%, or
proportional reduction on the stock incentive will occur. For example,
if the company profit is zero, no stock incentives will be given to
you. If profit is 5%, only half of the stock incentives will be issued
to you.
<PAGE>
ATG INC.
Fred Feizollahi
Page 2 of 2
2/20/95
ALLIED TECHNOLOGY GROUP
c. Stock purchase option. We will give you the option to purchase ATG
shares at $7.5 per share after ATG is taken public. Beginning with the
initial public offering (IPO) you will have an option of purchasing
100,000 shares during a five period (20,000 shares at IPO and 20,000
shares per year thereafter).
d. Cash bonus. A standard bonus program will be established for all ATG
employees. You will be subject to this cash bonus program.
6. Conditions. The following conditions will apply to your employment.
a. Issuance date. All bonus and incentive stocks will be issued to you
before January 31 of the following year except as noted below.
a. Initial Public Offering (IPO). ATG currently plans to take the company
public in the 1996-97 time frame. Immediately upon IPO, you will
receive a minimum of three years of bonus stock (see 5a above) and all
of the incentive stocks (see 5b) issued to you as of the date of IPO.
b. Severance. If at any time before the next three years ATG decides to
termite your employment, ATG will immediately issue to you a minimum
of three years of the bonus stocks (see 5a above) and all of the
incentive stocks (see 5b) that have been issued to you as of the date
of your termination. Furthermore, if ATG offers to purchase back all
of your share you must agree to sell them it $7.50 per share. If ATG
does not offer to purchase back your share, ATG will pay you $5,000
(five thousand dollars) per month for a period of 12 (twelve) months
after your termination.
We look forward to see you on board as an ATG employee. Please indicate
your acceptance of this offer by returning a signed copy of this offer letter.
Sincerely,
Frank Chiu
Executive Vice President
________________________________________
Offer accepted, Fred Faramarz Feizollahi
<PAGE>
EXHIBIT 10.11
CONSULTANT AGREEMENT
THIS CONSULTANT AGREEMENT is entered effective as of July 1, 1992 by
and between ED L. VINECOUR (hereinafter referred to as "Consultant") and ATG,
INC., a California corporation (hereinafter referred to as "the Company").
WITNESSETH:
WHEREAS, effective as of July 1, 1992, Consultant entered into a STOCK
PURCHASE AGREEMENT with the Company (hereinafter referred to as "the Agreement")
pursuant to which Seller agreed to sell to the Company 669,375 shares of the
outstanding common stock of the Company which constitutes all of Consultant's
right, title and interest in and to shares of and any and all interest in the
Company except as issued pursuant to the Agreement; and
WHEREAS, for a substantial period of time Consultant has been a valued
employee, officer, director and principal of the Company and, effective as of
June 30, 1992, is no longer an employee or officer of the Company and is
resigning as a director thereof; and
WHEREAS, the Company desires to retain, effective upon the resignation of
Consultant, the services of Consultant, whose experience, knowledge and
abilities are valuable to the Company;
1
<PAGE>
NOW, THEREFORE, in consideration of the mutual covenants herein
contained the parties hereto agree as follows:
1. DUTIES.
The Company hereby engages and retains Consultant as an independent
contractor to consult for the Company from July 1, 1992 until June 30, 2002.
Consultant shall be available to the Company during the term hereof for such
time as is reasonably required by the Company to assist in the determination of
the basic direction and strategies of the Company and for such other duties as
may reasonably be assigned to him from time to time by the board of directors of
the Company. In this regard, Consultant shall make himself available, should the
Company request his services, for up to five hundred (500) hours during any one
year period hereof (commencing July 1st of each year, beginning July 1, 1992).
2. INDEPENDENT CONTRACTOR.
Consultant will be considered, for all purposes, an independent
contractor, and he will not, either directly or indirectly, act as an agent,
servant or employee of the Company. Consultant shall not make any commitments or
incur any liabilities on behalf of the Company without the prior written consent
of an authorized representative of the Company. Consultant will pay all expenses
of, and all federal and state taxes, social security, federal and state
unemployment taxes, and any other payroll or withholding taxes relating to him.
Consultant shall not benefit
2
<PAGE>
from nor participate in any pension plan of the Company, nor in any health or
welfare plan of the Company; provided, however, that Consultant shall retain all
of his COBA rights with respect to the Company for the initial 18 months of this
Agreement and, thereafter, the Company agrees to reimburse Consultant, on a
monthly basis for the differential, if any, for the then cost of health
insurance provided to the Company's employees and the cost of Consultant's
procurement of similar policies of health insurance for Consultant and
Consultant's immediate family.
3. COMPENSATION.
For and in consideration of Consultant's entering into this Agreement,
the Company agrees to pay to Consultant the sum of Six Hundred Thousand Dollars
($600,000.00) payable in one hundred twenty (120) consecutive monthly
installments of Five Thousand Dollars ($5,000.00) due on the first day of each
month commencing August 1, 1992.
4. EXONERATION.
In the event that Consultant defaults under obligations on his part to
be performed under this Agreement, the Company shall not bring any action or
proceeding, or otherwise assert any claim for consequential or other damages
against Consultant nor withhold any payments which are due hereunder on account
of any loss, cost, damage or expanse which the Company may suffer or incur
because of any act or omission of Consultant in the performance of his
3
<PAGE>
obligations hereunder, and the Company hereby expressly waives all such claims.
5. NOTICES.
Any notice or request required or permitted to be given shall be given
in writing and shall be deemed to have been given when deposited in the United
States of America mail, first class, postage prepaid, duly addressed, registered
or certified, return receipt requested, at the following addresses, or at such
other address or addresses as is directed by either party by written notice
delivered to the other as in this paragraph provided:
CONSULTANT COMPANY
Ed L. Vinecour ATG, Inc.
Route 1, Box AA 280 44075 Fremont Boulevard
Oakley, CA 94561 Fremont, CA 94538
6. INUREMENT.
This Agreement shall inure to the benefit of and shall be binding upon
the assigns, successors in interest, personal representatives, estates, heirs
and legatees of each of the parties hereto.
7. ATTORNEY'S FEES.
In the event of any controversy, claim or dispute between the parties
hereto arising out of or relating to this Agreement or the breach thereof, the
prevailing party shall be entitled to recover from the losing party reasonable
expenses, attorneys fees
4
<PAGE>
and costs.
8. ENTIRE AGREEMENT.
This Agreement contains the entire agreement of e parties hereto and
supersedes any prior written or oral agreements between then concerning the
subject matter contained herein. There are no express or implied
representations, warranties, arrangements or understandings, oral or written,
between and among the parties hereto, relating to the subject matter contained
in this Agreement which are not fully expressed herein.
9. GOVERNING LAW.
This Agreement shall be governed by and construed in accordance with
the provisions of the laws of the state of California.
Executed on the day and year first above written at Fremont,
California.
"COVENANTOR" _______________________________
Ed L. Vinecour
"COMPANY" ATG, INC.
a California corporation
By ____________________________
Authorized Representative
5
<PAGE>
EXHIBIT 10.12
NON-COMPETITION AGREEMENT
THIS NON-COMPETITION AGREEMENT is entered effective as of July 1, 1992
by and between Ed L. Vinecour (hereinafter referred to as "Covenantor") and ATG,
Inc., a California corporation (hereinafter referred to as "the Company").
WITNESSETH:
WHEREAS, effective as of July 1, 1992, Covenantor entered into a STOCK
PURCHASE AGREEMENT with the Company (hereinafter referred to as "the Agreement")
pursuant to which Seller agreed to sell to the Company, in complete redemption,
669,375 shares of the outstanding common stock of the Company which constitutes
all of Covenantor's right, title and interest in and to shares of any and all
interests in the Company except as issued pursuant to the Agreement; and
WHEREAS, a condition to the purchase and sale contemplated in the
Agreement is that Covenantor agree to forego his right to compete with the
Company in accordance with the terms and conditions herein contained;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained the parties hereto agree as follows:
1
<PAGE>
1. COVENANT NOT TO COMPETE.
Covenantor agrees that he will not at any time within the ten (10)
year period immediately following the consummation of the purchase and sale
described in the Agreement, either directly or indirectly, engage in the low
level nuclear waste collection, processing, recycling and/or disposal business
within the United States of America or have any interest in any person, firm,
corporation or business (whether as an employee, officer, director, agent,
security holder, creditor, consultant or otherwise) that engages in the low
level nuclear waste collection, processing, recycling and/ or disposal business
in said territory for so long as the Company or any person deriving title to the
goodwill of the Company, shall engage in this activity in such territory. The
foregoing notwithstanding, the ownership of less than five percent (5%) of any
one class of the publicly traded securities of a corporation which has total
assets exceeding One Million Dollars ($1,000,000.00) shall not be prohibited by
the provisions of this paragraph.
2. CONSIDERATION.
For and in consideration of Covenantor's covenant not to compete herein
above contained, the Company agrees to pay to Covenantor the sum of Two Hundred
Ninety Thousand Dollars ($290,000.00) payable in annual installments on each
July 1st, commencing on July 1, 1993 in accordance with the following schedule:
2
<PAGE>
<TABLE>
<CAPTION>
PAYMENT DATE PAYMENT AMOUNT
<S> <C>
July 1, 1993 $20,000.00
July 1, 1994 $90,000.00
July 1, 1995 $90,000.00
July 1, 1996 $90,000.00
</TABLE>
At the written election(s) of Covenantor given to the Company at least
thirty (30) days prior to any payment date set forth above, in lieu of the
payments otherwise due hereunder Company shall purchase for Covenantor such
annuity policy or policies as may be designated by Covenantor provided that the
acquisition cost of same shall not exceed the payment amount otherwise then due
hereunder. This option may be exercised in whole or in part with respect to any
payment due by the company to Covenantor hereunder.
3. DEFAULT BY COVENANTOR.
In the event that Covenantor defaults under this Agreement and fails to
cure such default within thirty (30) days of the date of written notice from the
Company given in the manner herein provided, then and in that event the Company
shall be entitled to injunctive relief, and such other relief as may be provided
by law or in equity. Covenantor hereby acknowledges and agrees that any breach
by him of the covenant not to compete contained herein is likely to result in
injury of a nature which would justify the entry of an injunction and temporary
restraining order against Covenantor to restrain any such breach. In the event
of any such breach by
3
<PAGE>
Covenantor, the Company shall be also entitled, if it so elects, to institute
and prosecute proceedings in any court of competent jurisdiction, either in law
or in equity, to obtain consequential damages and to enforce the specific
performance of Covenantor's covenant herein contained.
4. JUDICIAL MODIFICATION.
If any part of this Agreement is found to be unenforceable, the
remainder of this Agreement shall be preserved in full force and effect and the
covenant not to compete herein contained shall be modified to the minimum extent
necessary to rake it enforceable under the laws of the State of California.
5. NOTICES.
Any notice or request required or permitted to be given shall be given
in writing and shall be deemed to have been given when deposited in the United
States of America mail, first class, postage prepaid, duly addressed, registered
or certified, return receipt requested, at the following addresses, or at such
other address or addresses as is directed by either party by written notice
delivered to the other as in this paragraph provided:
COVENANTOR COMPANY
Ed L. Vinecour ATG, Inc.
Route 1, Box AA 280 Fremont Boulevard
Oakley, CA 94562 Fremont, CA 94538
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6. INUREMENT.
This Agreement shall inure to the benefit of and shall be binding upon
the assigns, successors in interest, personal representatives, estates, heirs
and legatees of each of the parties hereto.
7. ATTORNEY'S FEES.
In the event of any controversy, claim or dispute between the parties
hereto arising out of or relating to this Agreement or the breach thereof, the
prevailing party shall be entitled to recover from the losing party reasonable
expenses, attorneys fees and costs.
8. AGREEMENT
This Agreement contains the entire agreement of the parties hereto and
supersedes any prior written or oral agreements between them concerning the
subject matter contained herein. There are no express or implied
representations, warranties, arrangements or understandings, oral or written,
between and among the parties hereto, relating to the subject matter contained
in this Agreement which are not fully expressed herein.
9. GOVERNING LAW.
This Agreement shall be governed by and construed in accordance with
the provisions of the laws of the State of California.
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Executed on the day and year first above written at Fermont, California.
"COVENANTOR" _______________________________
Ed L. Vinecour
"COMPANY" ATG, INC.
a California corporation
By ____________________________
Authorized Representative
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EXHIBIT 10.13
COLLECTIVE BARGAINING AGREEMENT
between
ALLIED TECHNOLOGY GROUP, INC.
and
INTERNATIONAL UNION OF OPERATING ENGINEERS #280
1
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
Article 1 - Preamble 4
Article 2 - Union Recognition 4
Article 3 - Union Security 4
Article 4 - Payroll Deduction 5
Article 5 - Business Representative Access 5
Article 6 - Bulletin Board 5
Article 7 - Non-Discrimination 6
Article 8 - Management Rights 6
Article 9 - Due Process in Discipline 6
Article 10 - Seniority/Reduction in Work Force 7
Article 11 - Jury Duty 8
Article 12 - Funeral Leave 8
Article 13 - Hours of Work and Overtime 8
Article 14 - Vacation 10
Article 15 - Holidays 11
Article 16 - Compensation for Travel Time 12
Article 17 - Tuition Assistance/Commercial Driver's License (CDL)
Miscellaneous Facilities 12
Article 18 - Sick Leave 13
Article 19 - Health and Welfare Programs 14
Article 20 - Pensions 14
Article 21 - Performance of Duty, Strikes and lockouts 14
</TABLE>
2
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<TABLE>
<S> <C> <C>
Article 22 - Grievance Procedure 15
Article 23 - Savings Clause 16
Article 24 - Entire Agreement 16
Article 25 - Probation 17
Article 26 - Substance Abuse 17
Article 27 - Health and Safety 17
Article 28 - Appendices Incorporated into Agreement 18
Article 29 - Term of Agreement 18
Article 30 - Subcontracting 18
Signature Page 19
Appendix A 20
</TABLE>
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Article 1
Preamble
This mutual Agreement is entered into by the International Union of Operating
Engineers Local #280 (hereinafter referred to as the Union) and Allied
Technology Group, Inc., Richland, WA (hereinafter referred to as the Employer).
The purpose of this Agreement is the promotion of harmonious relations between
the Company and the Union; the establishment of equitable and peaceful
procedures for the resolution of differences; and the establishment of rates of
pay, hours of work, and other terms and conditions of employment.
Article 2
Union Recognition
The Employer recognizes the Union as the sole and exclusive bargaining agent for
all employees employed at its Richland, Washington facility in the job
classifications set forth in Appendix A of this Agreement. Excluded are all
Office Clerical Employees, Managerial Employees, Confidential Employees, Guards,
and Supervisors as defined by the National Labor Relations Act. Unit
certification is granted to the Union per National Labor Relations Board
certification case 19-CR-l3183. If the Company establishes a new operation in
Richland, Washington, the Company and the Union agree to discuss whether or not
the employees in the operation should be included in the bargaining unit. Absent
agreement on this subject; either party may petition the NRLB to determine
whether or not the employees should be included in the bargaining unit.
Article 3
Union Security
Section 1. All regular full-time employees hired after the effective date of
this Agreement shall become members of the Union within thirty (30) days
following the signing of this Agreement and shall remain members in good
standing during the life of this Agreement as a condition of continued
employment.
Section 2. The Employer shall discharge non-complying employees upon receipt of
a written request to the Plant Manager from the Union.
Section 3. The Union agrees to defend at its own expense and hold the Employer
harmless in the administration of Article 3 and Article 4.
Section 4. The Employer shall notify the Union of any changes to the bargaining
unit.
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<PAGE>
Article 4
Payroll Deduction
The Employer agrees to deduct from the paycheck of each employee covered by this
Agreement, who has so authorized it by signed notice submitted to the Employer,
the initiation fee and regular monthly dues. The Employer shall transmit such
fees to the Union once each month on behalf of the employees involved.
The Union shall provide at least thirty (30) calendar days written notice in
advance of a change in either initiation fees or dues.
Employees who authorize deduction of dues may cancel this authorization once
annually on the anniversary date of contract or at the expiration of the
Agreement upon thirty (30) days written notice to the Employer and the Union.
Article 5
Business Representative Access
The Employer agrees to allow reasonable access to Company facilities for
business representatives who have been properly authorized by the Union. The
Union shall notify the Plant Manager in writing of the name(s) of such
representatives. Such access shall be permitted in a manner as not to in any way
interfere with the work of employees of the functions of the Company. This
Article shall apply within the constraints of federal or state regulations and
statutes.
Such business representatives shall in each case obtain prior permission from
the Plant Manager or his designated representative of their presence on the
property prior to contacting employees. Such access shall not be unreasonably
denied. Nothing in this Article shall be construed as entitling the business
representative to talk to the employees during their work hours. Lunch and break
periods are not considered work time.
Article 6
Bulletin Board
A bulletin board found to be acceptable and in compliance with the needs or
limited use by the Union shall be provided by the Employer. This bulletin board
shall be used, maintained, and controlled exclusively by the Union members. It
is understood and agreed to that no material shall be posted which is obscene,
defamatory, or libelous.
The location of this bulletin board shall be out of public view and in the lunch
room.
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Article 7
Non-Discrimination
It is mutually agreed between the Employer and the Union that there shall be no
discrimination against any employee because of race, color, creed, national
origin, sex, age, disability or Vietnam-era status. Military leaves shall be
administered in conformance with Title 38 of the Revised Codes of Washington.
Normally, discrimination issues that arise in the work place will be handled by
the proper agency. However, with an appropriate waiver, an employee may elect to
use the grievance and arbitration procedure to finally resolve the issue.
Article 8
Management Rights
Except as otherwise specifically stated elsewhere in this Agreement, the
Employer has the sole right and discretion to operate and run its business as it
sees fit. By way of example, and not limitation, the Employer shall have the
exclusive right and power to set work schedules; determine the products to be
manufactured; determine production levels, quality and quantity standards, sales
methods, prices, types of equipment, tools and machinery to be used; determine
when employees should be promoted or demoted; determine when layoffs tire
necessary; subcontract part or all of its operations or work; determine the
number of employees to be employed, including the number of employees to be
assigned to any particular machine or shift; fill openings; establish work
rules; direct and supervise all of its employees; evaluate the performance and
capabilities of its employees; assign employees to various machines, jobs, and
shifts; determine when overtime must be worked (nothing in this Agreement shall
be read to preclude supervisors or management employees from performing
bargaining unit work when reasonably necessary and when such work does not
permanently displace regular full-time employees); determine when temporary
employees must be utilized, providing that temporary employees will not be
utilized at a time that regular employees are on layoff (aside from layoffs due
to medical, disability, or voluntary absences from work); determine the skills,
abilities, and competency of its employees; and determine whether or not to
terminate or shut down its operations in Richland, Washington.
Article 9
Due Process in Discipline
The Employer may discipline employees for just cause. In any meeting between
representatives of the Employer and an employee in which disciplinary action is
to be taken, the employee shall be entitled to have present, the Union's
business representative or steward. Any disciplinary action involving a written
reprimand, suspension, demotion, or discharge shall be subject to the grievance
and arbitration procedure set forth in this Agreement. Copies of all documented
disciplinary action taken against an employee shall be provided to the Union
upon employee request.
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<PAGE>
Article 10
Seniority / Reduction in Force
Section 1. The decision to reduce the work force shall be the exclusive
authority of the Employer.
Section 2. Layoffs will occur according to seniority within the applicable job
classification to which individuals are assigned only if skills, performance,
and abilities are equal. The Employer will have sole discretion to determine
skills, performance, and abilities of its employees so long as such
determinations are not arbitrary or capricious.
Section 3. Employees laid off in accordance with the provisions of this Article
will be eligible for rehire in the inverse order or layoff for a period of
eighteen (18) months following layoff.
Section 4. Except in cases or emergencies, power failure, or Acts of God,
written notice shall be provided to each employee scheduled for layoff at least
ten (10) work days prior to layoff.
Section 5. In the event an employee is eligible for recall as in Section 3,
above, the Employer will notify the employee by certified mail, return receipt
requested, at the last address provided in writing by the employee. The employee
must accept the recall within two weeks of notification. Failure either to
respond or to accept the recall releases the Employer from all further
obligation to the employee. The Employer may use temporary employee(s) until
such time as the employee accepts or rejects the recall.
Section 6. A seniority roster will be provided annually to the Union.
Section 7. The parties recognize the necessity for the Company to employ
temporary employees to augment the regular full-time work force during periods
of increased production. Temporary employees are not covered by this Agreement.
Temporary employees may be employed for up to (180) days in a twelve (12) month
period. If a temporary employee is employed for more than 180 days in a 12 month
period without mutual agreement by the parties, such employee shall become a
regular full-time employee of the Company.
Section 8. As regular full-time vacancies occur, regular full-time employees
shall be given first consideration to fill vacancies that constitute a promotion
within the bargaining unit. Following first consideration of regular full-time
personnel, should a vacancy remain, next consideration to fill such a vacancy
will be given to temporary employees. Upon acceptance to full-time positions and
following successful completion of the ninety (90) day probationary period,
temporary employees shall be credited seniority from the first day of their most
recent continuous employment as a temporary employee.
7
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Article 11
Jury Duty
The Employer will giant employees time off for mandatory jury duty. Employees
who have successfully completed their probationary period will receive full pay
less witness fees received for up to 40 hours. Employer compensation for service
as a subpoenaed witness (not Employer related) or on jury duty only applies to
absence from regularly scheduled work hours.
For service required by the Employer as a witness, Employer compensation outside
of regularly scheduled work hours is payable at the overtime rate if such
service is in excess of the normal daily or normal weekly working hours'
schedules.
Employees who are involved in suits against the Employer as plaintiffs or
complaints shall do so without compensation and on their own time (off-shift
hours, vacations, etc.).
Employees called for jury/witness duty to report to the Court and are
released early will contact their Supervisor and return to Employer duties if so
instructed.
Article 12
Funeral Leave
The Employer shall allow up to three (3) working days per bereavement with pay
to employees who have been employed for thirty (30) or more days of
uninterrupted service and who have suffered the loss by death of a member of the
employee's immediate family. In the event either extended travel or estate
administration duties are required by the employee, the Plant Manager, in his
discretion, may grant up to five (5) days of funeral leave. The two (2)
additional days shall be deducted from the employee's accumulated sick leave or
accrued vacation.
For the purpose of the above "immediate family" is defined as spouse, parent,
daughter son, brother, sister, mother-in-law, father-in-law, daughter-in-law,
son-in-law grandparent, grandchild, a person who is legally acting in one of the
above capacities, or another relative living in the employee's residence, but
not more distant relatives.
Article 13
Hours of Work and Overtime
Section 1 Hours of Duty - The normal work day for employees shall be 6:30 a.m.
to 3:00 p.m. or an optional 4-10 hour shift may be established beginning at 6:30
a.m. and ending at 5:00 p.m.
8
<PAGE>
The normal work week shall consist of consecutive days, Monday through Friday. A
thirty (30) minute uncompensated mealtime is normally scheduled. The equivalent
of two fifteen (15) minute rest periods during a normal work shift shall be
provided in a normal work day. The break periods are to be taken in the break
room or as otherwise approved by the Supervisor.
Compensation for the normal work week will be straight time for the first forty
(40) hours of work and time and one half for additional hours as required in the
above schedule.
Company will initiate a "Letter of Understanding" that assures, that, absent
extraordinary situations, employees normal work week will not be shortened or
adjusted to avoid the payment of overtime.
Section 2. Overtime Pay and Exceptions - Except as provided below, overtime
shall be paid for hours worked in excess of 40 hours per week.
Exceptions:
(a) When an employee is involved in trading days off with another
employee which results in work in excess of the normal work week;
(b) When, due to a shortage of personnel or extraordinary
circumstances, an employee's previously approved vacation must be
cancelled and rescheduled.
Section 3. Notice of Work Schedule Change - Employees shall be provided twenty-
four (24) hours advance notice in the event or work schedule changes, except in
extraordinary situations.
Extraordinary situations are defined as any situation outside the normal which
impacts Company operations and for which the Company has no control.
Section 4. Approval for Overtime Work and Compensation - Authority for approval
of any overtime work shall be limited to Supervision. Approval shall be in
advance where practicable. Overtime shall be paid at one and one-half times the
rate of pay for the work performed, there shall be no compounding or
"pyramiding" of overtime pay. Also, see holidays.
Section 5. Call Time - An employee called back to work, while on personal time,
will be paid a minimum of two (2) hours call time. Employees required to report
in early for their normal shift and for employees held over after their normal
shift will not be eligible for call time minimum.
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<PAGE>
Section 6. Job Transfers - An employee permanently transferred from a job in one
classification to a job classified at either a higher or lower rate of pay, will
receive the rate of pay for the job to which he is transferred.
Section 7. Overtime List - A separate, voluntary overtime list shall be
established for each classification represented by the bargaining unit. The
overtime list will be purged of all hours at the beginning of each month.
Overtime will be offered first to the qualified employee with the least amount
of total overtime hours. Overtime will be distributed as equally as practicable.
Employees shall be called for overtime work starting with the name at the top of
the appropriate list. When an employee has worked four (4) or more hours of
overtime, his name shall rotate to the bottom of the list. If an employee
refuses to work offered overtime, except for illness or during vacation, his
name shall be rotated to the bottom of the list.
In the event overtime is refused by all employees in a classification, the
qualified employee with the least overtime hours will be required to work.
If employees in the needed classifications cannot be contacted, employees on the
other classification lists may be called.
Article 14 Vacation
Annual vacation with pay shall be granted to employees on the following basis:
Section 1. Scheduling of Vacation Leave: Regular full-time employees may request
and use vacation leave, subject to the approval of the Supervisor.
Section 2. Limits on Accumulating Vacation Leave: Accumulated vacation (annual)
leave shall not exceed thirty (30) working days as of December 31st of any year.
Section 3. Vacation Schedule - Vacation time shall be computed for those on the
regular full-time payroll of the Employer on the following basis:
(a) 1 to 5 years 5/6 of a day per month 80 hours
(b) 5 to 10 years 1.25 days per month (1-1/4) 120 hours
(c) 10 to 35 years 1.67 days per month (1-2/3) 160 hours
The amount of vacation will be set forth from the schedule. The number of days
accrued to his credit will be computed from the schedule. Vacation accrual shall
occur only while an employee is on regular full-time employee status.
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After a new employee has completed six (6) months of regular full-time
employment, he will be entitled to vacation subject to the approval of the
Supervisor.
Section 4. Payment for Vacation Leave at Termination - Should an employee leave
the employment of the Employer, prior to his having had the opportunity to take
his vacation, the Employer, upon his separation from the employment thereof,
will pay any accrued vacation time, at the above rate, provided that the
employee has been employed at least 90 days as a regular full-time employee, on
the next pay period following separation from the Employer.
Section 5. Annual Accrual of Vacation - Employees shall not be entitled to use
their annual accrual of vacation in advance of actual accrual except in
instances of Plant Manager approval.
Section 6. Cancellation and Rescheduling - In the event of an emergency or a
personal shortage due to unusual circumstances, vacations may be delayed by the
request of the Plant Manager, provided that those vacations will be promptly
rescheduled at a mutually agreeable time.
Article 15 Holidays
Section 1. Except as hereinafter specified, the following days shall be observed
as holidays. Employees shall be paid for such day(s) based upon the normal shift
schedule being worked in the work week in which the holiday is observed:
HOLIDAY
(a) New Year's Day
(b) President's Day
(c) Memorial flay
(d) Independence Day
(e) Labor Day
(f) Thanksgiving Day
(g) Day after Thanksgiving
(h) Day berate Christmas
(i) Christmas Day
(j) Day before New Year's Day
Section 2. Employees shall normally be scheduled off with pay on each of the
identified holidays as observed by the Employer.
Section 3. If an employee works any of the holidays lined above, that employee
shall be compensated at the rate of two times his regular pay for the hours
worked only on the day actually observed by the Employer.
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Section 4. In order to be paid for a holiday not worked, an employee must have
worked the last scheduled day preceding the holiday, and the first scheduled day
following the date of which the Employer observes the holiday, or must be on an
approved absence.
Section 5. When any of the holidays falls on a Saturday, the Friday immediately
preceding such a holiday shall be observed as the holiday, when any of the
holidays fall on a Sunday, the Monday immediately following shall be observed as
a holiday.
Article 16
Compensation for Travel Time
Section 1. The Employer agrees to reimburse employees required to travel for
reasonable out-of-pocket expenses that may be incurred for transportation,
meals, and lodging. Expenses covered shall be limited to those incurred only in
connection with the assignment and shall cover employee expenses only. Proof of
expenditures shall be required for reimbursement. Per diem allowances may be
authorized by the Company in lieu of actual expenses. However, per diem
allowances will be discussed and agreed by employee and Employer prior to
assignment.
Section 2. An employee's normal pay on an eight or ten hour work day shall apply
in connection with travel assignments.
Section 3. When travel by an employee's private vehicle is required and
authorized by management, such travel shall be reimbursed in accordance with the
mileage reimbursement at the ATG Corporate approved rate.
Article 17
Tuition Assistance / Commercial Driver's License (CDL)/ Miscellaneous Facilities
The employer agrees to provide the following:
A. The Employer will reimburse employees for the cost of job related education
and training that has been approved in advance by the Employer.
B. The Company shall reimburse employees for the costs incurred by the employee
to maintain his/her Employer required CDL and the endorsements required for
his/her job duties. Reimbursement shall be limited to license testing fees;
license fee, exclusive of regular basic driver's license fee. Employees shall
each be responsible to timely obtain and maintain their CDL with the
endorsements necessary to perform their job duties.
The Company shall arrange for and pay up front for the cost of the required CDL
physical exam at a location to be determined by the Company.
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C. The Employer agrees to furnish adequate microwave ovens and refrigerators to
be located in the common lunch room.
Article 18 Sick Leave
A. Upon successful completion of the 90 days probation period, regular full-
time employees shall begin to accumulate sick leave at the rate of 1.54 hours
every two weeks for each full month of continuous employment. Employees may
accumulate up to forty (40) hours of sick leave per year. Employees may credit
against sick leave those absences which are necessary only for reasons of
illness or injury defined below.
B. Any employee, who must take sick leave, shall as soon as possible notify the
Supervisor. The Supervisor will, on a continuous basis, determine that sick
leave privileges are not abused. After an illness absence, the Employer may
require the employee to obtain a release from his/her physician before returning
to work.
C. Sick leave may be taken for absences covered by the State and Federal Family
Leave Statutes.
D. An employee who suffers a compensable on the job injury requiring absence
from work will be permitted to apply accumulated sick leave to the first three
(3) work days of such absence less any state compensation which may be
applicable. During the absence of such employee, said employee will be
considered as being "on leave of absence-compensable injury" and as such the
Employer will continue to pay the medical, hospital, dental, vision, and hire
insurance premium. If the employee qualifies for time loss payments, those
payments will he made at a rate established by the State of Washington
Department of Labor and Industries and payment will be made directly to the
employee. The employee agrees to follow State approved claim procedures and to
keep the Employer informed of the claim's processing status.
E. Under no circumstances will sick leave be taken in lieu of annual leave
(vacation).
F. January 1st of each year, regular full-time employees will begin to accrue
sick time from a zero balance. Sick time which has not been used will not
be carried into the new calendar year.
Each employee shall receive an itemized statement of total sick leave earned and
accrued quarterly. Any discrepancies or errors must be reported within the next
quarter and reconciled with
payroll.
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Article 19
Health and Welfare Programs
Section 1. Upon successful completion of the probationary period, all regular
full-time employees shall be enrolled in the MSC-PP04 medical insurance and
Fortis Group Dental insurance programs. The Company will maintain the full cost
of the insurance plan, for employees, for the life of this Agreement. The
Company agrees to maintain the benefit(s) and cost of employee (only) life
insurance for the term of this Agreement.
Section 2. Should it become cost effective to change insurance carriers during
the life of this Agreement, the Company may choose to do so provided benefits of
the described insurance plans are not diminished.
Section 3. Beginning in the second year/anniversary of this Agreement, the
Company will apply $50.00 towards the monthly insurance premium for employees
optioning for dependent coverage. This contribution applies towards Company
sponsored insurance programs only.
Article 20
Pensions
Section 1. Beginning in the second year/anniversary of this Agreement, the
Company agrees to enroll its regular full-time employees in the IUOE Central
Pension Plan. Contribution rate to the plan shall be in the amount of twenty-
five (5.25) cents per hour worked up to a maximum of 2,080 hours per contract
year for each regular full-time employee covered by this Agreement. Employees
are not entitled to participate in the Company's 401(k) plan.
Section 2. The Company agrees to make a payroll deduction to an annuity plan
which the Union may sponsor in lieu of the existing Company 401(k) plan. No
Company contributions will be made to said plan.
Article 21
Performance of Duty, Strikes, and Lockouts
Section 1. The Union agrees that no employee shall engage in a slowdown, work
stoppage, or strike including a sympathy strike provided that a reserved gate is
established, nor shall any employee refuse to perform assigned duties.
Section 2. The Employer agrees that there shall be no lockouts.
Section 3. The conditions stated in Sections 1 and 2 of this Article shall
remain in effect with or without a signed labor agreement, unless either party
serves notice to the other following the expiration date of this contract.
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Article 22
Grievance Procedure
A. Should differences arise between the Company and the Union or employees as
to the meaning and application of the provisions of this Agreement, or as to the
compliance of either party with any of the obligations under this Agreement,
earnest effort will be made to settle such differences immediately under the
following procedure:
(1) Between the aggrieved employee or employees, with the Union
representative or steward, together with the Supervisor of the department
involved. All grievances must be submitted within seven (7) days after
occurrence.
(2) Between the Union representative or representatives, not exceeding two
(2), with or without the aggrieved employee or employees, and the Plant
Manager or designated representative. All grievances must be reduced to
writing, identifying the factual basis of the grievance and the section of
the Collective Bargaining Agreement that has been violated and presented in
this step within teal (10) days after the previous step.
(3) If a settlement agreement is not reached in the preceding manner, then
either party may submit the case to arbitration. Within five (5) days after
notice of intent to arbitrate, designated representatives of the Company
and of the Union will meet for the purpose of selecting an arbitrator, who
shall be selected either by the agreement of the parties or by alternately
striking arbitrators from a list provided by the FMCS.
B. The respective parties shall bear the expenses they incur in preparing the
arbitration and expenses of the arbitrator shall be equally shared by the
parties hereto.
C. The arbitrator shall not decide any grievance or dispute which does not
specifically arise out of the express terms of this Agreement.
D. The arbitrator shall not decide on the merits of wisdom or any action or
failure to act, but only on the contractual obligations inherent in this
Agreement.
E. it is the intent of this Agreement that the arbitrator submit his decision
with the least practicable delay.
F. When a settlement is agreed upon at any step set forth in this Article, such
settlement agreements shall be final and binding upon both parties.
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G. Nothing in this Agreement shall be deemed to limit the right of the Company
to discharge an employee for cause. Any case involving the discharge of any
employee may become a grievance and be honored immediately in accordance with
the procedures act forth in this Agreement. The complaint must be filed in
writing with the Company within seven (7) days of such layoff or discharge.
Failure to file automatically precludes any claim.
The parties hereto agree that the arbitrator may award either partial or all
backpay as justified in instances where reinstatement is ordered, but may not
award emotional distress, punitive, liquidated, or consequential damages.
Backpay awards shall not exceed sixty (60) days.
H. Unless the parties otherwise agree, each grievance and arbitration shall be
separately grieved and arbitrated..
I. Any of the time limitations specified in this procedure may be extended by
mutual agreement between the parties.
Article 23
Savings Clause
If any Article of this Agreement or any Appendix hereto should be held invalid
by operation of law or by any tribunal of competent jurisdiction, or if
compliance with or enforcement of any Article or Appendix should be restrained
by such tribunal the remainder of this Agreement and Appendices shall not be
affected thereby, and the parties shall enter into collective bargaining
negotiations if deemed necessary by either one, for the purpose of arriving at a
mutually satisfactory replacement of such Article.
Article 24
Entire Agreement
Section 1. This Agreement expressed herein in writing constitutes the entire
agreement between the parties and no oral statement shall add to or supersede
any of its provisions.
Section 2. The parties acknowledge that each has had the unlimited right and
opportunity to make demands and proposals with respect to any matter deemed a
proper subject for collective bargaining. The results of the exercise of that
right are set forth in this Agreement. Therefore, except as otherwise provided
in this Agreement, the Employer and the Union for the duration of this
Agreement, each voluntarily and unqualifiedly, agree to waive the right to
oblige the other party to bargain with respect to any subject or matter whether
or not specifically referred to or covered in this Agreement.
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Article 25
Probation
Regular full-time employees shall serve a probation period of ninety (90)
calendar days from date of being accepted in that capacity. Within this period,
the Employer shall have the right to terminate any probationary employee without
a showing of cause and the employee shall not be entitled to use the grievance
and arbitration provisions of this Agreement.
Article 26
Substance Abuse
The Employer and Union mutually agree that the we of drugs, alcohol, and other
substances which impairs the ability of an employee to safely and effectively
perform his duties is not in the best interest of the Employer, Union, or the
public safety. Therefore, the Employer and Union agree to the development,
implementation, and administering of a reasonable testing program.
Article 27
Health and Safety
The Employer will provide safety inspections, first aid service, and radiation
protection equipment to minimize accidents and health hazards to the Employees
at the plant during the hours of their employment. The union agrees to cooperate
with the Employer to the end that employees will use any required safety
equipment when so provided and observe such safety and health regulations as
prescribed by the Employer.
The Employer will set up a Safety Committee for the employees and employees will
be asked to serve on the committee for a fixed period of time. The Union shall
designate, to serve on the committee in an advisory capacity, a number of
employees equal to the number of Employer designees. The committee will meet at
least once monthly the Employer will, upon request, provide the Union minutes
of reports of the Safety Committee meetings as prepared for distribution.
The Employer will provide for periodic medical examinations of all employees.
Employees may discuss their examinations with the examining doctor. All
employees covered by this Agreement will comply with safety rules and
regulations established by the Employer covering work performed under this
Agreement.
When an employee is involved in an industrial accident that combines personal
injury and/or radioactive contamination, the employee's pay is continued up to
the time of his release from the area in which the employee undergoes prescribed
decontamination procedure. If the employee is released from his area prior to
the end of his/her regular shift, he/she is continued in a pay status until the
end of such regular shift, unless overtime premiums are involved. When in such
situations, the employee is directed to report to a
17
<PAGE>
medical facility, or the Whole Body Counter, he/she will be continued in a pay
status until the end of his/her regular shift if he/she is released from the
facilities mentioned above prior to the end of his/her regular shift or if
he/she is working hours other than his/her regular shift, he/she will be paid at
the applicable rate until such time as hue/she is released from the facilities
mentioned above.
The parties hereto recognize the principle that radiation exposure should be
held to the lowest practical level consistent with the requirements of the job
and the interests of the affected employees.
Article 28
Appendices Incorporated into Agreement
Pay Rates, Appendix A or other appendices are conditions agreed to and are
hereby incorporated into this Agreement by this Article.
Article 29
Term of Agreement
This Agreement shall extend from the date of ratification by the parties and
expire twenty-four (24) calendar months later unless extended by mutual
agreement.
Article 30
Subcontracting
The Employer shall advise the Union of any decision to subcontract work normally
performed by bargaining unit employees. If the subcontracting of bargaining work
results in a loss of bargaining unit jobs, the Employer will negotiate about the
effect of the subcontracting upon the affected employees. If the decision to
subcontract work is based upon labor costs, the Employer agrees to negotiate
with the Union about the decision to subcontract. The Union and Employer agree
that they will promptly meet to negotiate about this subject.
18
<PAGE>
SIGNATURE PAGE
ALLIED TECHNOLOGY GROUP, INC.
and
INTERNATIONAL UNION OF OPERATING ENGINEERS LOCAL 280
IUOE LOCAL 280 ALLIED TECHNOLOGY GROUP, INC.
_____________________________ _____________________________
Business Manager Plant Manager
_____________________________
President
_____________________________
Recording Secretary
_____________________________
Business Representative
_____________________________ ATTEST:
Steward
_________________________________
Title: __________________________
19
<PAGE>
WAGES & QUALIFICATIONS
APPENDIX A
1. Effective upon the ratification date of this Agreement, the Company agrees
to increase the hourly rate of employees pay by thirty-five (0.35) cents
per hour.
2. Effective upon due sixth, twelfth, and fifteenth month anniversary dates of
this Agreement, the Company agrees to increase the hourly rate of employees
pay by an additional twenty-five (0.25) cents per hour.
3. Parties agree that a minimum of one (1) Board Qualified bargaining unit
employee shall sit on the Board Qualification interview committee.
4. An employee who achieves his or her first Board Qualification shall receive
a one (1.00) dollar per hour wage increase.
5. After achieving the initial Board Qualification, subsequent salary
adjustments will be provided upon promotion(s) of employees into vacancies
where different Board Qualifications am required and achieved by the
employee. Other than specified herein, the Employer may determine, at its
discretion, when employees may seek a second or any additional Board
Qualifications.
6. Aside from not being able to participate in the Employer's 401(k) Plan, no
bargaining unit employee shall suffer a pay or benefit reduction as a
result of the signing of this Agreement.
WAGE SCHEDULE
Upon Ratification
<TABLE>
<CAPTION>
DOUBLE BQ
ENTRY LEVEL SINGLE BQ (As Authorized) LEAD
<S> <C> <C> <C>
10.357 11.35 12.35 13.35
6 Month Contract Anniversary
10.60 11.60 12.60 13.60
12 Month Contract Anniversary
10.85 11.85 12.85 13.85
15 Month Contract Anniversary
11.10 12.10 13.10 14.10
</TABLE>
20
<PAGE>
EXHIBIT 10.14
ATG INC.
--------
STOCK PURCHASE AGREEMENT
------------------------
This Agreement is made and dated as of, _________ ___, 19 between ATG, INC.,
a California Corporation with its principal office located at 47375 Fremont
Boulevard, Fremont, California 94538 (the "Company"), and __________________
(the "Purchaser").
1. Purchase and Sale of Shares.
----------------------------
1.1 Sale and Issuance of Shares. Subject to the terms and conditions
---------------------------
hereof, the Company shall issue and sell to the Purchaser, and the Purchaser
shall purchase from the Company, shares (the "Shares") of Common Stock for
a cash purchase price of $_________. Such purchase of stock is for investment
purpose only.
1.2 Closing. The closing of the purchase and sale of the Shares
--------
hereunder (the "Closing") shall be held at the ATG Inc. office at 47375 Fremont
Blvd. on ______________________ or at such other time and place as is agreed by
the parties. (The date of the Closing is hereinafter referred to as the "Closing
Date"). At the Closing, the Company will deliver to the Purchaser a certificate
representing the Shares, which Shares shall be registered in the Purchaser's
name, upon the Purchaser's delivery to the Company of the purchase price
therefor by cashier's or certified check, in the amount of $__________ payable
to the order of the Company.
2. Definitions.
------------
For purposes of this Agreement: (a) The "Business" of the Company shall
mean the business, properties, prospects, assets, liabilities or condition
(financial or otherwise) of the Company or any Subsidiary, taken as a whole; (b)
"Material Adverse Event" shall mean an occurrence or occurrences having a
consequence that, individually or in the aggregate, either (i) adversely affects
ten percent (10%) or more of the Business of the Company, or (ii) is reasonably
foreseeable, has a reasonable likelihood of occurring, and if it were to occur
might adversely affect ten
1
<PAGE>
percent (10%) or more of the Business of the Company; and (c) "the Subsidiaries"
of the Company shall mean the companies listed on the Disclosure Schedule as
Subsidiaries of the Company including, without limitation, National Safety
Consultants, Inc., Allied Ecology Services, Inc. and ATG Richland Corporation.
3. Representations and Warranties of the Company.
----------------------------------------------
The Company represents and warrants to the Purchaser that, as of the date
of this Agreement, except as set forth on the attached Disclosure Schedule, or
set forth in the Financial Statements:
3.1 Organization and Standing. The Company and each of its Subsidiaries
-------------------------
is a corporation duly organized and validly existing and is in good standing in
the jurisdiction of its incorporation, and is authorized in the jurisdiction of
its incorporation to exercise its corporate powers, rights and privileges. The
Company and each Subsidiary has all requisite corporate power and authority to
own and lease its property and conduct its business as presently conducted.
3.2 Authorization. All corporate action on the part of the Company and
--------------
its officers, directors and shareholders that is necessary for the
authorization, execution and delivery of this Agreement, the Shareholders'
Agreement date as of the date hereof, among the Company and the signatories
thereto (the "Shareholders' Agreement"), the form of which is attached as
Exhibit A hereto, and any other agreements entered into by the Company in order
to fulfill the transactions contemplated by this Agreement (the Shareholders'
Agreement and such other agreements referred to collectively as the "Other
Agreements"), for the performance of the Company's obligations hereunder and
thereunder and for the issuance and delivery of the Shares, has been taken or
will be taken prior to the Closing. This Agreement and the Other Agreements,
when executed and delivered, shall constitute legal, valid and binding
obligations of the Company.
3.3 Capitalization.
---------------
3.3.1. Authorized. The authorized capital stock of the Company
-----------
consists of 5,000,000 shares of common stock, no par value ("Common Stock"). The
Common Stock has the rights and privileges set forth in the Articles.
2
<PAGE>
3.3.2. Issued. There are issued and outstanding __________ shares
-------
of Common Stock. A list of all the shareholders of the Company with the number
of shares owned by each shareholder as of the date hereof is set forth in the
Disclosure Schedule. All such issued and outstanding shares have been duly
authorized and validly issued, are fully paid and nonassessable and were issued
in compliance with all applicable state and federal laws concerning the issuance
of securities.
3.4 Subsidiaries. The Company owns the percentage of the capital stock
-------------
specified opposite the name of each Subsidiary in the Disclosure Schedule. The
Company does not presently own or control, directly or indirectly, any equity
interest in any corporation, association or business entity other than its
Subsidiaries. Except as set forth in the Disclosure Schedule, the Company is
not, directly or indirectly, a participant in any joint venture or partnership.
3.5 Validity of Securities; Compliance with Security Laws. The Shares,
------------------------------------------------------
when issued, sold and delivered in accordance with the terms of this Agreement
and the Articles, will be duly and validly issued, fully paid and nonassessable,
will be free and clear of any liens or encumbrances and will be issued in
compliance with applicable federal and state securities laws; provided, however,
that the Shares may be subject to restrictions on transfer under state and
federal securities laws and under the Shareholders' Agreement.
3.6 Governmental Consents. No consent, approval, order or authorization
----------------------
of, or registration, qualification, designation, declaration or filing with, any
governmental authority on the part of the Company is required in connection with
the valid execution, delivery and performance of the Agreement and the Other
Agreements, except for the notification of change in ownership to be filed with
the Small Business Administration and filings required by applicable state
securities laws, all of which shall be properly and timely filed by the Company.
3.7 Compliance with Other Instruments. The execution, delivery and
----------------------------------
performance of this Agreement and the Other Agreements will not result in any
violation, be in conflict with or constitute, with or without the passage of
time or giving of notice, a default under, or require any consent or waiver
(which has not been obtained) under, any Contract (as such term is defined in
Section 3.12 below). The execution, delivery and performance of this Agreement
and the Other Agreements and the issuance and sale of the Shares will not result
in the creation of any mortgage, pledge, lien, encumbrance or charge upon any of
the properties or assets of the Company or any Subsidiary.
3
<PAGE>
3.8 Compliance With Laws; Permits. To the knowledge of the Company: (a)
------------------------------
the Company and each of the Subsidiaries is in substantive compliance with all
governmental statutes, laws, ordinances, rules and regulations known to the
Company to be applicable to it or to any Subsidiary; (b) the execution, delivery
and performance of this Agreement and the issuance and sale of the Shares will
not result in any violation of any governmental statute, rule or regulation
applicable to the Company or any Subsidiary; (c) the Company and each Subsidiary
has all permits, licenses, orders and approvals of any federal, state, local or
foreign governmental or regulatory body (collectively, the "Permits") that are
material to or necessary in the conduct of its business; (d) all Permits are in
full force and effect, no violations have been recorded in respect of any such
Permits, and no proceedings are pending or threatened to revoke or limit any
such Permits.
3.9 Litigation. To the Company's knowledge, there is no action, suit,
-----------
proceeding, or investigation (collectively, "Actions") pending or currently
threatened against the Company or any Subsidiary which questions the validity of
this Agreement or the Other Agreements or the right of the Company to enter into
such agreements or to consummate the transactions contemplated hereby and
thereby, or which might result, either individually or in the aggregate, in a
Material Adverse Event or any change in the current equity ownership of the
Company or any Subsidiary, nor is the Company aware that there is any reasonable
basis for the foregoing. The Disclosure Schedule lists all of the Actions to
which the Company or any Subsidiary is a party or to its knowledge is threatened
to be made a party or which to its knowledge are otherwise pending. To the
Company's knowledge, neither the Company nor any Subsidiary is a party or
subject to, and none of their assets are bound by, the provisions of any order,
writ, injunction, judgement or decree of any court or government agency or
instrumentality. The Disclosure Schedule lists all material Actions which the
Company or any Subsidiary intends to initiate.
3.10 Financial Statements.
---------------------
(a) The Company has delivered to the Purchaser its audited
consolidated balance sheet at December 31, _________, December 31, __________
and December 31, __________, a copy of which is attached as Exhibits B-1 and B-2
respectively, and its audited consolidated statements of income, of changes in
shareholder's equity and of changes in financial position for the years
then-ended (collectively, the "Financial Statements"). The Financial Statements
are complete and correct in all material respects and
4
<PAGE>
have been prepared in accordance with generally accepted accounting principles
applied on a consistent basis throughout the periods indicated. The Financial
Statements fairly present the consolidated financial condition of the Company
and its subsidiaries as of the respective dates of the balance sheets contained
therein, and the statements of operations contained therein accurately present
the consolidated operating results of the Company and its subsidiaries during
the periods respectively indicated therein.
(b) All accounts receivable, if any, of the Company (including
those reflected on the unaudited balance sheet included in the Financial
Statements or acquired on or prior to the Closing Date) arose in the ordinary
and usual course of business of the Company, as the case may be, represent valid
obligations due to the Company and have been collected or are, to the Company's
knowledge, collectible in the ordinary and usual course of business in the
aggregate recorded amounts hereof in accordance with their terms.
3.11 Absence of Changes. Since the date of the most recent balance sheet
-------------------
included in the Financial Statements:
(a) Neither the Company nor its subsidiaries entered into any
transaction involving amounts in excess of $100,000 that was not in the ordinary
course of its business;
(b) There have been no events or conditions that, either
individually or in the aggregate, might constitute a Material Adverse Event;
(c) There has not been any change in the assets, liabilities or
financial condition or operations of the Company from that reflected in the
Financial Statements, except changes in the ordinary course of business which,
individually or in the aggregate, would not constitute a Material Adverse Event;
(d) Neither the Company nor its subsidiaries has declared or paid
any dividend or made any distribution on its capital stock, or redeemed,
purchased or otherwise acquired any of its capital stock;
(e) There have not been any loans made by the Company to its
employees, officers or directors other than advances of expenses made in the
ordinary course of business;
(f) There has not been any waiver by the Company of a right or of a
debt owed to it where the value of such right or debt is in excess of $100,000;
and
5
<PAGE>
3.12 Material Contracts and Commitments. The Disclosure Schedule lists
-----------------------------------
(i) all of the Company's and each Subsidiary's contracts, pursuant to which
either the Company, a Subsidiary or another party thereto is obligated to pay in
excess of $300,000 or which require the Company's performance or payment beyond
1996, (ii) all licenses and pending applications for licenses from governmental
authorities (other than local business licenses) required by the Company in the
conduct of its business.
3.13 No Defaults. Neither the Company nor, to the Company's knowledge,
------------
any Subsidiary, is in violation of its Articles or Certificate of Incorporation,
bylaws or other charter document or, to the Company's knowledge, in material
default under any of the Contracts. To the Company's knowledge, no other party
to any of the Contracts is in material default thereunder.
3.14 Voting or Other Stock Agreements. There are no agreements or
---------------------------------
arrangements between the Company or any Subsidiary and any of the Company's
shareholders, or to the knowledge of the Company, between or among any of the
Company's shareholders, which grant special rights with respect to any shares of
the Company's capital stock or which in any way affect any shareholder's ability
or right freely to alienate or vote such shares.
3.15 Title to Property and Assets. The Company and each of its
-----------------------------
Subsidiaries has good and marketable title to its properties and assets, both
real and personal, and to all its leasehold interests, in each case free and
clear of all mortgages, liens, security interests and encumbrances, except (a)
as stated in the Financial Statements or in the notes thereto, (b) for liens for
current taxes not yet delinquent, (c) for liens imposed by law and incurred in
the ordinary course of business for obligations not yet due to carriers,
warehousemen, laborers, materialment and the like, (d) for liens in respect of
pledges or deposits under workers' compensation laws or similar legislation and
(e) for minor defects in title, none of which, either individually or in the
aggregate, materially interferes with the use of such property. The properties
and assets of the Company and each Subsidiary are in good condition and repair
in all material respects.
3.16 Employee Compensation Plans. Neither the Company nor any Subsidiary
----------------------------
is a party to or bound by any currently effective deferred compensation
agreement, bonus plan, incentive plan or arrangement, profit sharing plan,
retirement agreement or other employee compensation agreement.
6
<PAGE>
3.17 Disclosure. No representation, warranty or statement by the Company
-----------
in this Agreement or in any written statement or certificate furnished or to be
furnished to the Purchaser pursuant to this Agreement contains or will contain
any untrue statement of a material fact or, when taken together, any material
omission.
3.18 Transaction with Affiliates. Except for (i) transactions relating
----------------------------
to purchases of shares of the Company's Common Stock, (ii) regular salary
payments and fringe benefits under the Company's standard compensation
arrangements, (iii) the transactions listed in the Disclosure Schedule and (iv)
the issuance and sale of the Shares pursuant to the terms and conditions of this
Agreement, none of the officers, employees or directors of the Company or any
Subsidiary or any member of their immediate families, or any other Affiliate of
the Company or, to the Company's knowledge, of any Subsidiary or any such
persons, are a party to any arrangement, transaction or business relationship
with the Company or any Subsidiary. There have been no assumptions or guarantees
by the Company or any Subsidiary of any obligations of such persons or
Affiliates. For purposes of this Agreement, the term "Affiliate" shall mean any
person or entity directly or indirectly controlling, controlled by, or under
common control with the Company or any Subsidiary, and for the purposes of this
definition, "control" (including with corrective meanings, the terms
"controlling," "controlled by" and "under common control with"), as applied to
any person or entity, means the possession, directly or indirectly, of the power
to direct or cause the direction of the management and policies of that person
or entity, whether through the ownership of voting securities or by contract or
otherwise.
3.19 Tax Returns and Audits. The Company and each of its Subsidiaries
-----------------------
has duly prepared and timely filed all governmental tax returns required to be
filed by it and has paid or established adequate reserves in the Financial
Statements for the payment of all taxes, assessments, fees and charges shown on
such returns or on assessments received by the Company or any Subsidiary. No
deficiency assessment or proposed adjustment of the Company's or of any
Subsidiary's income taxes is pending.
3.20 Insurance. The Company and its Subsidiaries have, or will have, as
----------
of the Closing Date, fire, casualty and liability insurance policies, with
extended coverage, in such amounts and with such policy limits as are normal for
companies of similar size
7
<PAGE>
and engaged in a similar business. The Disclosure Schedule sets forth an
accurate and complete list of all policies of insurance maintained by the
Company, in effect of the Closing Date, indicating in each case, the category of
risks covered, the names of the underwriters and the policy limits.
3.21 Offering. Subject to the accuracy of the Purchaser's
---------
representations in Section 4 hereof, the sale and issuance of the Shares to be
issued in conformity with the terms of this Agreement constitute transactions
exempt from the registration requirements of section 5 of the Securities Act of
1933 (the "Act").
3.22 Minute Books. The minute books of the Company contain a complete
-------------
summary of all meetings of directors and stockholders since the time of
incorporation of the Company and reflect all transactions referred to in such
minutes accurately in all material respects.
3.23 Special Status. The Company is a "small business concern owned and
---------------
controlled by socially and economically disadvantaged individuals" within the
terms of Section 8 (a) of the Small Business Act [15 U.S.C.A. 637 (a)]. To the
knowledge of the Company, the execution, delivery and performance of this
Agreement and the issuance and sale of the Shares will not result in any change
in the Company's status for purposes of Section 8 (a) of the Small Business Act
[15 U.S.C.A. 637(a)].
4. Representations, Warranties of the Purchaser and Restrictions on Transfer
-------------------------------------------------------------------------
Imposed by the Act.
- -------------------
4.1 Representations and Warranties. The Purchaser hereby represents and
-------------------------------
warrants to the Company as follows:
4.1.1. Authorization. Assuming due execution and delivery by the
--------------
Company, this Agreement and any of the Other Agreements to which the Purchaser
is a party constitute legal, valid and binding obligations of the Purchaser.
4.1.2. Investment.
-----------
(a) The Purchaser is aware that the Shares have not been
registered under the Act nor qualified under the California Securities Law on
the ground that no distribution or public offering of the Shares is to be
effected, and that in this connection the Company is relying in part on the
representations of the Purchaser set forth in this Section 4;
8
<PAGE>
(b) The Purchaser has been further advised that no public
market now exists for any of the securities issued by the Company and that a
public market may never exist for the Shares;
(c) The Purchaser is purchasing the Shares for his own
account and not with a view to, or for sale in connection with, any distribution
thereof;
(d) By reason of his business or financial experience, the
Purchaser has the capacity to protect his own interest inconnection with the
transactions contemplated hereunder;
(e) The Purchaser is aware of the Company's business
affairs and financial condition and has acquired sufficient information about
the Company to reach an informed and knowledgeable decision to acquire the
Shares; and
(f) The Purchaser is an Accredited Investor, as defined in
Rule 501 of Regulation D.
4.2 Transfer of Securities. None of the Shares shall be transferable
-----------------------
except subject to the Shareholders' Agreement and upon the conditions specified
in this Section 4.2, which conditions are intended to insure compliance with the
provisions of the Act in respect to the transfer of such Shares.
4.2.1. Legend. Unless and until otherwise permitted by this
-------
Section 4.2, each certificate or other document evidencing any of the Shares
shall be endorsed with a legend substantially in the following form:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 ("ACT"). SUCH SECURITIES MAY NOT BE TRANSFERRED UNLESS IN
ACCORDANCE WITH THE AGREEMENT COVERING THE PURCHASE OF THESE SECURITIES AND
UNLESS PURSUANT TO A REGISTRATION STATEMENT UNDER THE ACT, OR IN THE OPINION OF
COUNSEL FOR THE COMPANY SUCH REGISTRATION IS UNNECESSARY IN ORDER FOR SUCH
TRANSFER TO COMPLY WITH THE ACT."
4.2.2. Restrictions of Transfer. The Company shall not be required
-------------------------
to register any transfer of Shares unless and until one of the following events
shall have occurred:
9
<PAGE>
(a) The Company shall have received a statement of the
circumstances surrounding the transfer and, if reasonably requested by the
Company, an opinion of counsel for the Purchaser, in form and substance
reasonably requested by the Company, an opinion of counsel for the Purchaser, in
form and substance reasonably acceptable to the Company and its counsel, stating
that the transfer is (i) exempt from registration under the Act as then in
effect, and the Rules and Regulations of the Securities and Exchange Commission
(the "Commission") thereunder, and (ii) with the California Commissioner of
Corporations; or
(b) The Shares are transferred pursuant to a registration
statement which has been filed with the Commission and has become effective.
Within five business days after delivery to the Company and its
counsel of the statement or the opinion described in clause (a) above, the
Company either shall deliver to the proposed transferor a statement to the
effect that such statement or opinion is not satisfactory in the reasonable
opinion of its counsel or shall authorize the Company's transfer agent to make
the requested transfer.
4.2.3 Termination of Registration and Removal of Legend. The
--------------------------------------------------
restrictions on transfer imposed by this Section 4.2 shall cease and terminate
as to the Shares, when (i) such securities shall have been effectively
registered under the Act and sold by the holder thereof in accordance with such
registration, or (ii) an acceptable opinion as described in Section 4.2.2. (a)
states that all future transfers of such securities by the transferor or the
contemplated transferee would be exempt for registration under the Act. When
the restrictions on transfer contained in this Section 4.2 have terminated as
provided above, the holder of the securities as to which such restrictions shall
have terminated or the transferee of such holder shall be entitled to receive
promptly from the Company, without expense to him, new certificates not bearing
the legends set forth in Section 4.2.1.
4.3 Brokers or Finders. Other than the one described in the Disclosure
-------------------
Schedule, the Purchaser has not incurred and will not incur, directly, or
indirectly, any other liability for brokers' or finders' fees, agents'
commissions or other similar charges in connection with this Agreement or any of
the transactions contemplated hereby.
4.4 Financial Condition. The Purchaser has the financial capability to
--------------------
perform his obligations under this Agreement.
10
<PAGE>
5. Conditions to Obligations of Purchaser.
---------------------------------------
The obligation of the Purchaser to purchase the Shares at the Closing is
subject to each of the following conditions having been fulfilled on or prior to
the Closing Date or waived by the Purchaser in accordance with the provisions of
Section 8.1 hereof;
5.1 Representations and Warranties Correct; Performance of Obligations.
-------------------------------------------------------------------
The representations and warranties made by the Company in Section 3 hereof shall
be true and correct when made, and shall be true and correct on the Closing Date
with the same force and effect as if they had been made on and as of said date;
no Material Adverse Event shall have occurred prior to the Closing Date.
5.2 Consents and Waivers. The Company shall have obtained any and all
---------------------
consents, permits and waivers and made all filings necessary or appropriate for
consummation of the transactions contemplated by this Agreement.
5.3 Shareholders' Agreement. The Shareholders' Agreement and its
------------------------
Amendment shall not have been executed and delivered by each party thereto in
substantially the form of Exhibit A hereto.
5.4 Legal Investment. At the time of the Closing, the purchase of the
-----------------
Shares by the Purchaser hereunder shall be legally permitted by all laws and
regulations to which the Purchaser and the Company are subject.
5.5 Satisfactory Proceedings. All corporate and legal proceedings taken
-------------------------
by the Company in connection with the transactions contemplated by this
Agreement and all documents relating to such transactions shall be satisfactory
to the Purchaser.
6. Conditions to Obligation of the Company.
----------------------------------------
The Company's obligation to issue, sell and deliver the Shares to the
Purchaser at the Closing is subject to the following conditions having been
fulfilled on or prior to the Closing Date or waived by the Company in accordance
with the provisions of Section 8.1 hereof:
6.1 Representations and Warranties. The representations and warranties
-------------------------------
made by the Purchaser in Section 4 hereof shall be true and correct when made,
and shall be true and correct on the Closing Date with the same force and effect
as if they had been made on and as of said date.
11
<PAGE>
6.2 Payment of Purchase Price. The Company shall have received from the
--------------------------
Purchaser on or prior to the Closing Date, a cashier's or certified check, in
the amount of $_________, payable to the order of the Company.
7. Covenants of the Company.
-------------------------
The Company hereby covenants and agrees as follows:
7.1 Information. The Company shall, subject to appropriate limitations
------------
to protect the confidentiality of such information, (i) furnish to the Purchaser
such information concerning the Company as the Purchaser may from time to time
reasonably request, including, without limitation, information as to the state
of development of the Company's products and services, (ii) offer the Purchaser
the right to visit the properties of the Company at reasonable times, to
interview key employees of the Company at their places of employment at
reasonable times and to examine the books of account of the Company.
7.2 Cooperation. The Company shall cooperate in supplying such
------------
information as may be reasonably requested by the Purchaser to complete and file
any information reporting forms presently or subsequently required by any
governmental agency in connection with the sale of the Shares.
7.3 Confidentiality. The Company agrees that, except as may be required
----------------
by applicable law, neither it nor its directors, officers or employees will
disclose to any third party the names of the Purchaser, or any persons
affiliated with the Purchaser.
7.4 Transaction with Affiliates. The Company shall not enter into any
----------------------------
arrangement transaction or business relationship with (i) any Subsidiary, (ii)
any officer, employee or director of the Company or any Subsidiary, or any
member of their immediate families, or (iii) any other Affiliates of the
Company, any Subsidiary or any such persons, unless such arrangement,
transaction or business relationship is at arms-length and for full and fair
consideration.
7.5 Use of Proceeds. The proceeds from the sale of the Shares shall be
----------------
used by the Company only for the purposes stated in the Disclosure Schedule.
12
<PAGE>
7.6 Termination of Covenants. The covenants of the Company set forth in
-------------------------
Section 7.1 shall be terminated and be of no further force or effect upon the
date when a registration statement filed by the Company under the Act, in
connection with the first underwritten public offering of its securities on Form
S-1, became effective.
7.7 Rule 144. The Company covenants that (i) at all times after the
---------
Company first becomes subject to the reporting requirements of Section 13 or 15
(d) of the Securities Exchange Act of 1934, the Company will use its best
efforts to comply with the current public information requirements of Rule 144
(c) (1); (ii) if prior to becoming subject to such reporting requirements an
over-the-counter market develops for the Common Stock, the Company will use its
best efforts to make publicly available the information required by Rule 144 (c)
(2); and (iii) at all such times as Rule 144 is available for use by the
Purchaser, the Company promptly will furnish the Purchaser upon request with all
information within the possession of the Company required for the preparation
and filing of Form 144, and (iv) file with the Commission in a timely manner all
reports and other documents required of the Company under the Act and the
Securities Exchange Act of 1934, as amended.
7.8 Piggy-Back Registration Rights.
-------------------------------
7.8.1 Notice of Piggyback Registration and Inclusion of the
-----------------------------------------------------
Shares. In the event the Company decides to register any share of the Common
- -------
Stock in compliance with the Act, the Company will on each occasion: (i)
promptly give the Purchaser written notice thereof (which shall include a list
of the jurisdictions in which the Company intends to attempt to qualify such
securities under the applicable blue sky or other state securities laws); and
(ii) include in such registration (and any related qualification under blue sky
laws or other compliance), and in any underwriting involved therein, all the
Shares as specified in a written request delivered to the Company by the
Purchaser within 15 days after delivery of such written notice from the Company.
7.8.2 Underwriting in Piggyback Registration. If the registration
---------------------------------------
of which the Company gives notice is for a registered public offering involving
an underwriting, the Company shall so advise the Purchaser as a part of the
written notice given pursuant to Section 7.8.1. In such event the right of
13
<PAGE>
the Purchaser to registration shall be conditioned upon such underwriting and
the inclusion of the Shares in such underwriting to the extent provided in this
Section 7.8. All shareholders proposing to distribute their shares of Common
Stock through such underwriting shall (together with the Company and the other
shareholders distributing their shares through such underwriting) enter into an
underwriting agreement with the underwriter's representative for such offering.
The Purchaser shall have the right to participate in the selection of the
underwriters for an offering pursuant to this Section 7.8.
7.9 No Dilution. From and after the Closing Date, the Company shall not
------------
issue any shares of its capital stock or any other securities, or grant any
rights, options, warrants, preemptive rights, conversion rights or other rights
or agreements for the purchase or acquisition from the Company of any shares of
its capital stock or any other securities, to any person or entity
(collectively, and "Event"), without (a) first granting to the Purchaser the
right to purchase or acquire such share or other securities, on the same terms
and conditions as those governing the rights granted to or agreements with such
other person or entity, so that the Purchaser may continue to hold, on a fully
diluted basis, the same percentage of equity interest in the Company, after
accounting for such Event as prior to accounting for such Event, or (b)
otherwise taking any and all steps necessary to ensure that, after accounting
for such Event, the Purchaser would continue to hold, on a fully diluted basis,
the same percentage of equity interest in the Company as prior to accounting for
such Event.
8. Miscellaneous.
--------------
8.1 Waivers and Amendments. Any term of this Agreement may be amended,
-----------------------
and the observance of any terms of this Agreement may be waived in any respect,
only with the written consent of the Purchaser and the Company. The Purchaser
shall have the absolute right to exercise or refrain from exercising any right
or rights that the Purchaser may have by reason of this Agreement, including,
without limitation, the right to consent to the waiver of any obligation of the
Company under this Agreement and to enter into an agreement with the Company to
amend or modify this Agreement.
14
<PAGE>
8.2 Governing Law. This Agreement shall be governed in all respects by
--------------
the laws of the State of California applicable to agreements between California
residents entered into and to be performed entirely within California.
8.3 Survival. The representations, warranties, covenants and agreements
---------
made herein shall survive the execution of this Agreement and the Closing of the
transactions contemplated hereby. All statements as to factual matters
contained in any certificate, exhibit or other instrument delivered by or on
behalf of the Company pursuant hereto or in connection with the transactions
contemplated hereby shall be deemed to be the representations and warranties of
the Company hereunder as of the date of such certificate or instrument.
8.4 Successors and Assigns. The provisions hereof shall inure to the
-----------------------
benefit of, and be binding upon, the successors, assigns, heirs, executors and
administrators of the parties hereto.
8.5 Entire Agreement. This Agreement, the Other Agreements and the
-----------------
other documents delivered pursuant hereto and thereto constitute the full and
entire understanding and agreement between the parties with regard to the
subjects hereof and thereof.
8.6 Notices, Etc. All notices and other communications required or
-------------
permitted hereunder shall be in writing and shall be deemed effectively given
upon personal delivery or upon the seventh day following mailing by registered
air mail, postage prepaid, addressed (a) if to the Purchaser, at his address set
forth on the first page of this Agreement, or at such other address as he shall
have furnished to the Company in writing, and (b) if to the Company, to its
address set forth on the first page of this Agreement, or at such other address
as the Company shall have furnished to the Purchaser.
8.7 Delays or Omissions. No delay or omission to exercise any right,
--------------------
power or remedy accruing to any party hereto shall impair any such right, power
or remedy of such party or be construed to be a waiver thereof. Waiver by a
party of any term or condition of this Agreement hereto shall not be construed
as a waiver of a subsequent breach or failure of the same term or condition or a
waiver of any other term or condition contained in this Agreement.
15
<PAGE>
8.8 Severability. If any provision of this Agreement is held to be
-------------
invalid or unenforceable, it shall, to the extent possible, be modified so as to
carry out the intent of the parties to the extent possible, and the validity,
legality and enforceability of the remaining provisions of this Agreement shall
not in any way be affected or impaired thereby.
8.9 Counterparts. This Agreement may be executed in any number of
-------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
themselves or by their respective representatives thereunto duly authorized as
of the day and year first above written.
COMPANY: PURCHASER:
ATG INC., a California ____________________________
Corporation
By___________________________
Title________________________
16
<PAGE>
EXHIBIT 10.15
Sanwa
Bank
California
CONTINUING GUARANTY
For value received and in consideration of the extension of credit by SANWA BANK
CALIFORNIA (the Bank") to ATG INC. (the "Debtor") or the benefits to the
undersigned derived therefrom, the undersigned (the "Guarantor"), guarantees and
promises to pay to the Bank any and all Indebtedness (as defined below) and
agrees as follows:
1. Indebtedness The term Indebtedness is used herein in its most comprehensive
sense and includes any and all advances, debts, obligations, guaranties and
liabilities of the Debtor heretofore, now, or hereafter made, incurred or
created, whether voluntary or involuntary and however arising, whether direct or
acquired by the Bank by assignment or succession, whether due or not due,
absolute or contingent, liquidated or unliquidated, determined or undetermined,
and whether the Debtor may be liable individually or jointly with others, or
whether recovery upon any Indebtedness may be or hereafter becomes barred by any
statute of limitations or whether any Indebtedness may be or hereafter becomes
otherwise unenforceable.
2. Guaranty. The Guarantor unconditionally agrees to pay to the Bank or its
order, on demand, an amount equal to the amount of the Indebtedness or otherwise
perform any obligation of the Debtor undertaken pursuant to any Indebtedness. In
addition to any maximum principal liability hereunder, the Guarantor agrees to
(i) bear the expenses enumerated hereunder in the paragraph herein entitled
"Attorneys' Fees" and (ii) pay interest on the Indebtedness at the rate(s)
applicable thereto. Notwithstanding the foregoing, the Bank may allow the
Indebtedness to exceed the Guarantor's liability hereunder. Any payment by the
Guarantor shall not reduce the maximum principal obligation of the Guarantor
hereunder unless written notice to that effect is actually received by the Bank
at or prior to the time of such payment. Any payment by the Debtor or any other
person shall not reduce the Guarantor's maximum principal liability hereunder.
3. Right to Amend or Modify Indebtedness. The Guarantor authorizes the Bank, at
its sole discretion, with or without notice and without affecting the
Guarantor's liability hereunder, from time to time to: (i) change the time or
manner of payment of any Indebtedness by renewal, extension, modification,
acceleration or otherwise; (ii) alter or change any provision of any
Indebtedness including, but not limited to, the rate of interest thereon, and
any document, instrument or agreement (other than this Guaranty) evidencing,
guaranteeing, securing or related to any Indebtedness; (iii) release, discharge,
exonerate, substitute or add one or more parties liable on any Indebtedness or
one or more endorsers, cosigners or guarantors for any Indebtedness; (iv) obtain
collateral for the payment of any Indebtedness or any guaranty thereof; (v)
release existing or after-acquired collateral on such terms as the Bank, in its
sole discretion, shall determine; (vi) apply any sums received from the Debtor,
any endorser, cosigner, other guarantor or other person liable on any
Indebtedness or from the sale or collection of collateral or its proceeds to any
indebtedness whatsoever owed or to be owed to the Bank by the Debtor in any
other or amount and regardless of whether or not such indebtedness is guaranteed
hereby, is secured by collateral or is due and payable; and (vii) apply to any
Indebtedness, in any order or amount, regardless of whether such Indebtedness is
secured by collateral or is due and payable, any sums received from the
Guarantor or from the sale of collateral in which the Guarantor has granted the
Bank a security interest.
4. Waivers. The Guarantor hereby unconditionally and irrevocably acknowledges
and agrees to the matters set forth below:
A. Deficiency. In the event that any Indebtedness is now or hereafter
secured by a deed of trust, the Guarantor waives any defense and all rights
and benefits of those laws purporting to state that no deficiency judgment
may be recovered on certain real property purchase money obligations (as
presently contained in Section 580b of the California Code of Civil Procedure
and as it may be amended or superceded in the future) and those laws
purporting to state that no deficiency judgment may be recovered after a
trustee's sale under a deed of trust (as presently contained in Section 580d
of the California Code of Civil Procedure and as it may be amended or
superseded in the future). THE GUARANTOR ACKNOWLEDGES THAT A FORECLOSURE BY A
TRUSTEE'S SALE UNDER A DEED OF TRUST MAY RESULT IN THE DESTRUCTION OF THE
GUARANTOR'S SUBROGATION RIGHTS THAT MAY OTHERWISE EXIST AND THAT A
DESTRUCTION OF THOSE RIGHTS MAY CREATE A DEFENSE TO A DEFICIENCY JUDGEMENT.
THE GUARANTOR HEREBY SPECIFICALLY WAIVES ANY SUCH DEFENSE.
B. Election of Remedies. The Guarantor waives any defense based upon the
Guarantor's loss of a right against the Debtor arising from the Bank's
election of a remedy on any Indebtedness under bankruptcy or other debtor
relief laws or under any other laws, including, but not limited to, those
purporting to reduce the Bank's right against the Guarantor in proportion to
the principal obligation of any Indebtedness (as presently contained in
Section 2809 of the California Civil Code and as it may be amended or
superseded in the future).
Without limiting the generality of the foregoing, the Guarantor waives all
rights and defenses arising out of an election of remedies by the Bank even
tough that election of remedies, such as a nonjudicial foreclosure with
respect to security for a guaranteed obligation, has destroyed the
Guarantor's rights of subrogation and reimbursement against the Debtor by
operation of Section 580d of the California Code of Civil Procedure or
otherwise.
C. Statute of limitations. The Guarantor waives the benefit of the statute
of limitations affecting the Guarantor's liability hereunder or the
enforcement hereof.
D. Action Against the Debtor and Collateral (and Other Remedies). The
Guarantor waives all right to require the Bank to: (i) proceed against the
Debtor, any endorser, cosigner, other guarantor or other person liable on any
Indebtedness; (ii) join the Debtor or any endorser, cosigner, other guarantor
or other person liable on any Indebtedness in any action or actions that may
be brought and prosecuted by the Bank solely and separately against the
Guarantor on any Indebtedness; (iii) proceed against any item or items of
collateral securing any Indebtedness or any guaranty thereof; or (iv) pursue
or refrain from pursuing any other remedy whatsoever in the Bank's power.
E. Debtor's Defenses. The Guarantor waives any defense arising by reason of
any disability or other defense of the Debtor, the Debtor's successor or any
endorser, cosigner, other guarantor or other person liable on any
Indebtedness. Until all Indebtedness has been paid in full, even though it
may be in excess of the liability incurred hereby, the Guarantor shall not
have any right of subrogation and the Guarantor waives any benefit of and
right to participate in any collateral now or hereafter held by the Bank. The
Guarantor waives all presentments, demands for performance, notices of
nonperformance, protests, notices of protest, notices of dishonor, notices of
sale of any collateral securing any Indebtedness or any guaranty thereof, and
notice of the existence, creation or incurring of new or additional
indebtedness,
F. Debtor's Financial Condition. The Guarantor hereby recognizes,
acknowledges and agrees that advances may be made in the future from time to
time with respect to any Indebtedness without authorization from or notice to
the Guarantor even though the financial condition of the Debtor, any
endorser, cosigner, other guarantor or other person liable on any
Indebtedness may have deteriorated since the date of this Guaranty. The
Guarantor waives all right to require the Bank to disclose any information
with respect to: (i) any Indebtedness now existing or hereafter incurred;
(ii) the present or future financial condition, credit or character of the
Debtor, any endorser, cosigner, other guarantor or other person liable on any
Indebtedness; (iii) any present or future collateral securing any
Indebtedness or any guaranty thereof;
1
<PAGE>
or (iv) any present or future action or inaction on the part of the Bank,
the Debtor or any endorser, cosigner, other guarantor or other person liable
on any Indebtedness. The Guarantor hereby assumes the responsibility for
being informed of the financial condition, credit and character of the
Debtor and of all circumstances bearing upon the risk of nonpayment of any
Indebtedness which diligent inquiry would reveal.
5. Right of Set-off, Grant of Security Interest. In addition to all liens upon
and rights of set-off against any monies, securities or other property of the
Guarantor given to the Bank by law, the Bank shall have a security interest in
and a right to set off against all monies, securities and other property of the
Guarantor now or hereinafter in the possession of or on deposit with the Bank,
the Bank's agents or any one or more of them, whether held in general or special
account or deposit or for safekeeping or otherwise; and each such security
interest and right of set-off may be exercised without demand upon or notice to
the Guarantor. No action or inaction by the Bank with respect to any security
interest or right of set-off shall be deemed a waiver thereof arid every right
of set-off and security interest shall continue in full force and effect until
specifically released by the Bank in writing. The security interest created
hereby shall secure all of the Guarantor's obligations under this Guaranty.
6. Right of Foreclosure. The Bank may foreclose, either by judicial foreclosure
or by exercise of power of sale, any deed of trust securing any Indebtedness
even though such foreclosure may destroy or diminish the Guarantor's rights
against the Debtor. The Guarantor shall be liable to the Bank for any part of
any Indebtedness remaining unpaid after any such foreclosure whether or not such
foreclosure was for fair market value.
7. Subordination. Any indebtedness of the Debtor or any endorser, cosigner,
other guarantor or other person liable on any Indebtedness now or hereafter owed
to the Guarantor is hereby subordinated to the Indebtedness. Such indebtedness
owed to the Guarantor shall, if the Bank so requests, be collected, enforced and
received by the Guarantor as trustee for the Bank and be paid over to the Bank
on account of the Indebtedness but without reducing or affecting in any manner
the liability of the Guarantor set forth herein. Should the Guarantor fail to
collect the proceeds of any such indebtedness owed to it and pay the proceeds to
the Bank, the Bank, as the Guarantor's attorney-in-fact, may do such acts and
sign such documents in the Guarantor's name as the Bank considers necessary to
effect such collection.
8. Invalid, Fraudulent or Preferential Payments. The Guarantor agrees that, to
the extent the Debtor or any endorser, cosigner, other guarantor or other person
liable on any Indebtedness makes a payment or payments to, or is credited for
any payment or payments made for or on behalf of the Debtor to the Bank, which
payment or payments, or any part thereof, is subsequently invalidated,
determined to be fraudulent or preferential, set aside or required to be repaid
to any trustee, receiver, assignee or any other party whether under any
bankruptcy, state or federal law or under any common law or equitable cause or
otherwise, then, to the extent thereof, the obligation or part thereof intended
to be satisfied thereby shall be revived, reinstated and continued in full force
and effect as if such payment or payments had not originally been made or
credited.
9. Joint and Several Obligations, Independent Obligations. If more than one
Guarantor signs this Guaranty, the obligations hereunder are joint and several.
The Guarantor's obligations hereunder are independent of the obligations of the
Debtor or any endorser, cosigner, other guarantor or other person liable on any
Indebtedness and a separate action or actions may be brought and prosecuted
against the Guarantor on any Indebtedness.
10. Financial Information. The Guarantor hereby agrees to deliver or cause to
be delivered to the Bank:
A. Other Information. Guarantor to provide: (i) Not later than April 1st of
each year, a copy of the personal financial statement of the Guarantor for
such year, which statement shall be prepared by the Guarantor; and (ii)
within 10 days of filing but not later than October 31st of each year, a
copy of the Guarantor's federal income tax return filed for such year.
11. Acknowledgement of Receipt, Receipt of a true copy of this Guaranty is
hereby acknowledged by the Guarantor. The Guarantor understands and agrees
that this Guaranty shall not constitute a commitment of any nature whatsoever by
the Bank to renew or hereafter extend credit to the Debtor. The Guarantor agrees
that this Guaranty shall be effective with or without notice from the Bank of
the Bank's acceptance hereof.
12. Continuing Guaranty. This Guaranty is a continuing guaranty. Revocation
shall be effective only upon written notice personally received by an officer of
the Bank at the originating office indicated below or actually received at the
originating office by United States mail postage prepaid. Notice shall be
effective at any office of the Bank should the originating office no longer be
in existence. Revocation shall be effective at the close of the Bank's business
day when such notice is actually received. Any revocation shall be effective
only as to the revoking party and shall not affect that party's obligation with
respect to any Indebtedness existing before such revocation is effective.
13. Non-Reliance. In executing this Guaranty, the undersigned is not relying,
and has not relied, upon any statement or representation made by the Bank, or
any employee, agent or representative of the Bank, with respect to the status,
financial condition or other matters related to the Debtor or the relationship
between the Debtor and the Bank.
14. Multiple Guaranties. If the Guarantor has executed or does execute more
than one guaranty of any indebtedness of the Debtor to the Bank, the limits of
liability thereunder and hereunder shall be cumulative.
15. Severability. Should any one or more previsions of this Guaranty be
determined to be illegal or unenforceable, all other provisions shall remain
effective.
16. Corporate or Partnership Authority. If the Debtor is a corporation or
partnership, the Bank need not inquire into the power of the Debtor or the
authority of its officers, directors, partners or agents acting or purporting to
act in its behalf and any credit granted in reliance upon the purported exercise
of such power or authority is guarantied hereunder.
17. Separate Property. Any married person who sign this Guaranty expressly
agrees that recourse may be had against such person's separate property for all
obligations hereunder.
18. Assignment. The Bank may, with or without notice, assign this Guaranty in
whole or in part. This Guaranty shall inure to the benefit of the Bank, its
successors and assigns, and shall bind the Guarantor and the Guarantor's heirs,
executors, administrators, successors and assigns.
19. Waiver of Jury. The Guarantor and the Bank hereby expressly arid
voluntarily waive any and all rights, whether arising under the California
constitution, any rules of the California Code of Civil Procedure, common law or
otherwise, to demand a trial by jury in any action, matter, claim or cause of
action whatsoever arising out of or in any way related to this Guaranty or any
other agreement, document or transaction contemplated hereby.
20. Dispute Resolution.
A. Disputes. It is understood and agreed that, upon the request of any
party to this Guaranty, any dispute, claim or controversy of any kind,
whether in contract or in tort, statutory or common law, legal or
equitable, now existing or hereinafter arising between the parties in any
way arising out of, pertaining to or in connection with: (i) this Guaranty,
or any related agreements, documents or instruments, (ii) all past and
present loans, credits, accounts, deposit accounts (whether demand deposits
or time deposits), safe deposit boxes, safekeeping agreements, guarantees,
letters of credit, goods or services, or other transactions, contracts or
agreements of any kind, (iii) any incidents, omissions, acts, practices, or
occurrences causing injury to any party whereby another party or its
agents, employees or representatives may be liable, in whole or in part, or
(iv) any aspect of the past or present relationships of the parties, shall
be resolved through a two-step dispute resolution process administered by
the Judicial Arbitration & Mediation Services, Inc. ("JAMS") as follows:
2
<PAGE>
B. Step I - Mediation. At the request of any party to the dispute, claim
or controversy, the matter shall be referred to the nearest office of JAMS
for mediation, which is an informal, nonbinding conference or conferences
between the parties in which a retired judge or justice from the JAMS panel
will seek to guide the parties to a resolution of the case.
C. Step II - Arbitration (Contracts Not Secured By Real Property). Should
any dispute, claim or controversy remain unresolved at the conclusion of
the Step I Mediation Phase, then (subject to the restriction at the end of
this subparagraph) all such remaining matters shall be resolved by find and
binding arbitration before a different judicial panelist, unless the
parties shall agree to have the mediator panelist act as arbitrator. The
hearing shall be conducted at a location determined by the arbitrator in
Los Angeles, California (or such other city as may be agreed upon by the
parties) and shall be administered by and in accordance with the then
existing Rules of Practice and Procedure of JAMS and judgement upon any
award rendered by the arbitrator may be entered by any State or Federal
Court having jurisdiction thereof. The arbitrator shall determine which is
the prevailing party and shall include in the award that party's reasonable
attorneys' fees and costs. This subparagraph shall apply only if, at the
time of the submission of the matter to JAMS, the dispute or issues
involved do not arise out of any transaction which is secured by real
property collateral or, if so secured, all parties consent to such
submission.
As soon as practicable after selection of the arbitrator, the arbitrator,
or the arbitrator's designated representative, shall determine a reasonable
estimate of anticipated fees and costs of the arbitrator, and render a
statement to each party setting forth that party's pro-rata share of said
fees and costs. Thereafter, each party shall, within 10 days of receipt of
said statement, deposit said sum with the arbitrator. Failure of any party
to make such a deposit shall result in a forfeiture by the non-depositing
party of the right to prosecute or defend the claim which is the subject of
the arbitration, but shall not otherwise serve to abate, stay or suspend
the arbitration proceedings.
D. Step II - Trial By Court Reference (Contracts Secured By Real
Property). If the dispute, claim or controversy is not one required or
agreed to be submitted to arbitration, as provided in the shove
subparagraph, and has not been resolved by Step I mediation, then any
remaining dispute, claim or controversy shall be submitted for
determination by a trial on Order of Reference conducted by a retired judge
or justice from the panel of JAMS appointed pursuant to the provisions of
Section 638(1) or the California Code of Civil Procedure, or any amendment,
addition or successor section thereto, to hear the case and report a
statement of decision thereon. The parties intend this general reference
agreement to be specifically enforceable in accordance with said section.
If the parties are unable to agree upon a member of the JAMS panel to act
as referee, then one shall be appointed by the Presiding Judge of the
county wherein the hearing is to be held. The parties shall pay in advance,
to the referee, the estimated reasonable fees and costs of the reference,
as may be specified in advance by the referee. The parties shall initially
share equally, by paying their proportionate amount of the estimated fees
and costs of the reference. Failure of any party to make such a fee deposit
shall result in a forfeiture by the non-depositing party of the right to
prosecute or defend any cause of action which is the subject of the
reference, but shall not otherwise serve to abate, stay or suspend the
reference proceeding.
E. Provisional Remedies, Self Help and Foreclosure. No provision of, or
the exercise of any rights under any portion of this Dispute Resolution
provision, shall limit the right of any party to exercise self help
remedies such as set off, foreclosure against any real or personal property
collateral, or the obtaining of provisional or ancillary remedies, such as
injunctive relief or the appointment of a receiver, from any court having
jurisdiction before, during or after the pendency of any arbitration. At
the Bank's option, foreclosure under a deed of trust or mortgage may be
accomplished either by exercise of power of sale under the deed of trust or
mortgage, or by judicial foreclosure. The institution and maintenance of an
action for provisional remedies, pursuit of provisional or ancillary
remedies or exercise of self help remedies shall not constitute a waiver of
the right of any party to submit the controversy or claim to arbitration.
21. Attorneys' Fees. Whether or not any suit, action, arbitration or other
dispute resolution proceeding is instituted, the Guarantor agrees to pay
reasonable attorneys' fees and all other costs and expenses which may be
incurred in the collection of any Indebtedness, in the protection or
preservation of, or realization on, any collateral securing any Indebtedness and
in the enforcement by the Bank of this Guaranty.
22. Governing Law. This Guaranty shall be governed by and construed according
to the laws of the State of California and the Guarantor hereby submits to the
jurisdiction of the courts of the State of California.
23. Entire Agreement. This Guaranty and all documents, instruments and
agreements mentioned herein constitute the entire and complete understanding of
the panics with respect to the transactions contemplated hereunder. All previous
conversations, memoranda and writings between the parties pertaining to the
transactions contemplated hereunder not incorporated or referenced in this
Guaranty or in such documents, instruments and agreements are superseded hereby.
24. Headings. The headings used herein are solely for the purpose of
identification and have no legal significance.
25. Address of the Bank. The Bank's originating office under this Guaranty is:
Oakland Office. 2127 Broadway, Oakland, CA 94612.
26. Maximum Principal Liability. THE MAXIMUM PRINCIPAL LIABILITY UNDER THIS
GUARANTY is the amount of $5,000,000.00, plus interest at the rate(s)
applicable to any Indebtedness as set forth in the paragraph herein entitled
"Guaranty" and the expenses enumerated in the paragraph herein entitled
"Attorneys' Fees".
This Guaranty is made as of 4-19-96 ,which shall be the date of this Guaranty.
Executed by the undersigned Guarantor as of the date set forth above.
GUARANTOR:
Doreen Chiu
Address:
46970 Ocotillo Court
Fremont, CA 94539
3
<PAGE>
EXHIBIT 10.16
Sanwa
Bank
California
CONTINUING GUARANTY
For value received and in consideration of the extension of credit by SANWA BANK
CALIFORNIA (the "Bank") to ATG INC. (the "Debtor") or the benefits to the
undersigned derived therefrom, the undersigned (the "Guarantor"), guarantees and
promises to pay to the Bank any and all Indebtedness (as defined below) and
agrees as follows:
1. Indebtedness. The term Indebtedness is used herein in its most comprehensive
sense and includes any and all advances, debts, obligations, guaranties and
liabilities of the Debtor heretofore, now, or hereafter made, incurred or
created, whether voluntary or involuntary and however arising, whether direct or
acquired by the Bank by assignment or succession, whether due or not due,
absolute or contingent, liquidated or unliquidated, determined or undetermined,
and whether the Debtor may be liable individually or jointly with others, or
whether recovery upon any Indebtedness may be or hereafter becomes barred by any
statute of limitations or whether any Indebtedness may be or hereafter becomes
otherwise unenforceable.
2. Guaranty. The Guarantor unconditionally agrees to pay to the Bank or its
order, on demand, an amount equal to the amount of the Indebtedness or otherwise
perform any obligation of the Debtor undertaken pursuant to any Indebtedness. In
addition to any maximum principal liability hereunder, the Guarantor agrees to
(i) bear the expenses enumerated hereunder in the paragraph herein entitled
"Attorneys' Fees" and (ii) pay interest on the Indebtedness at the rate(s)
applicable thereto. Notwithstanding the foregoing, the Bank may allow the
Indebtedness to exceed the Guarantor's liability hereunder. Any payment by the
Guarantor shall not reduce the maximum principal obligation of the Guarantor
hereunder unless written notice to that effect is actually received by the Bank
at or prior to the time of such payment. Any payment by the Debtor or any other
person shall not reduce the Guarantor's maximum principal liability hereunder.
3. Right to Amend or Modify Indebtedness. The Guarantor authorizes the Bank, at
its sole discretion, with or without notice and without affecting the
Guarantor's liability hereunder, from time to time to: (i) change the time or
manner of payment of any Indebtedness by renewal, extension, modification,
acceleration or otherwise; (ii) alter or change any provision of any
Indebtedness including, but not limited to, the rate of interest thereon, and
any document, instrument or agreement (other than this Guaranty) evidencing,
guaranteeing, securing or related to any Indebtedness; (iii) release, discharge,
exonerate, substitute or add one or more parties liable on any Indebtedness or
one or more endorsers, cosigners or guarantors for any Indebtedness; (iv) obtain
collateral for the payment of any Indebtedness or any guaranty thereof; (v)
release existing or after-acquired collateral on such terms as the Bank, in its
sole discretion, shall determine; (vi) apply any sums received from the Debtor,
any endorser, cosigner, other guarantor or other person liable on any
Indebtedness or from the sale or collection of collateral or its proceeds to any
indebtedness whatsoever owed or to be owed to the Bank by the Debtor in any
other or amount and regardless of whether or not such indebtedness is guaranteed
hereby, is secured by collateral or is due and payable; and (vii) apply to any
Indebtedness, in any order or amount, regardless of whether such Indebtedness is
secured by collateral or is due and payable, any sums received from the
Guarantor or from the sale of collateral in which the Guarantor has granted the
Bank a security interest.
4. Waivers. The Guarantor hereby unconditionally and irrevocably acknowledges
and agrees to the matters set forth below:
A. Deficiency. In the event that any Indebtedness is now or hereafter
secured by a deed of trust, the Guarantor waives any defense and all rights
and benefits of those laws purporting to state that no deficiency judgment
may be recovered on certain real property purchase money obligations (as
presently contained in Section 580b of the California Code of Civil Procedure
and as it may be amended or superceded in the future) and those laws
purporting to state that no deficiency judgment may be recovered after a
trustee's sale under a deed of trust (as presently contained in Section 580d
of the California Code of Civil Procedure and as it may be amended or
superseded in the future). THE GUARANTOR ACKNOWLEDGES THAT A FORECLOSURE BY A
TRUSTEE'S SALE UNDER A DEED OF TRUST MAY RESULT IN THE DESTRUCTION OF THE
GUARANTOR'S SUBROGATION RIGHTS THAT MAY OTHERWISE EXIST AND THAT A
DESTRUCTION OF THOSE RIGHTS MAY CREATE A DEFENSE TO A DEFICIENCY JUDGEMENT.
THE GUARANTOR HEREBY SPECIFICALLY WAIVES ANY SUCH DEFENSE.
B. Election of Remedies. The Guarantor waives any defense based upon the
Guarantor's loss of a right against the Debtor arising from the Bank's
election of a remedy on any Indebtedness under bankruptcy or other debtor
relief laws or under any other laws, including, but not limited to, those
purporting to reduce the Bank's right against the Guarantor in proportion to
the principal obligation of any Indebtedness (as presently contained in
Section 2809 of the California Civil Code and as it may be amended or
superseded in the future).
Without limiting the generality of the foregoing, the Guarantor waives all
rights and defenses arising out of an election of remedies by the Bank, even
though that election of remedies, such as a nonjudicial foreclosure with
respect to security for a guaranteed obligation, has destroyed the
Guarantor's rights of subrogation and reimbursement against the Debtor by
operation of Section 580d of the California Code of Civil Procedure or
otherwise.
C. Statute of limitations. The Guarantor waives the benefit of the statute
of limitations affecting the Guarantor's liability hereunder or the
enforcement hereof.
D. Action Against the Debtor and Collateral (and Other Remedies). The
Guarantor waives all right to require the Bank to: (i) proceed against the
Debtor, any endorser, cosigner, other guarantor or other person liable on any
Indebtedness; (ii) join the Debtor or any endorser, cosigner, other guarantor
or other person liable on any Indebtedness in any action or actions that may
be brought and prosecuted by the Bank solely and separately against the
Guarantor on any Indebtedness; (iii) proceed against any item or items of
collateral securing any Indebtedness or any guaranty thereof; or (iv) pursue
or refrain from pursuing any other remedy whatsoever in the Bank's power.
E. Debtor's Defenses. The Guarantor waives any defense arising by reason of
any disability or other defense of the Debtor, the Debtor's successor or any
endorser, cosigner, other guarantor or other person liable on any
Indebtedness. Until all Indebtedness has been paid in full, even though it
may be in excess of the liability incurred hereby, the Guarantor shall not
have any right of subrogation and the Guarantor waives any benefit of and
right to participate in any collateral now or hereafter held by the Bank. The
Guarantor waives all presentments, demands for performance, notices of
nonperformance, protests, notices of protest, notices of dishonor, notices of
sale of any collateral securing any Indebtedness or any guaranty thereof, and
notice of the existence, creation or incurring of new or additional
indebtedness,
F. Debtor's Financial Condition. The Guarantor hereby recognizes,
acknowledges and agrees that advances may be made in the future from time to
time with respect to any Indebtedness without authorization from or notice to
the Guarantor even though the financial condition of the Debtor, any
endorser, cosigner, other guarantor or other person liable on any
Indebtedness may have deteriorated since the date of this Guaranty. The
Guarantor waives all right to require the Bank to disclose any information
with respect to: (i) any Indebtedness now existing or hereafter incurred;
(ii) the present or future financial condition, credit or character of the
Debtor, any endorser, cosigner, other guarantor or other person liable on any
Indebtedness; (iii) any present or future collateral securing any
Indebtedness or any guaranty thereof;
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or (iv) any present or future action or inaction on the part of the Bank, the
Debtor or any endorser, cosigner, other guarantor or other person liable on
any Indebtedness. The Guarantor hereby assumes the responsibility for being
informed of the financial condition, credit and character of the Debtor and
of all circumstances bearing upon the risk of nonpayment of any Indebtedness
which diligent inquiry would reveal.
5. Right of Set-off, Grant of Security Interest. In addition to all liens upon
and rights of set-off against any monies, securities or other property of the
Guarantor given to the Bank by law, the Bank shall have a security interest in
and a right to set off against all monies, securities and other property of the
Guarantor now or hereinafter in the possession of or on deposit with the Bank,
the Bank's agents or any one or more of them, whether held in general or special
account or deposit or for safekeeping or otherwise; and each such security
interest and right of set-off may be exercised without demand upon or notice to
the Guarantor. No action or inaction by the Bank with respect to any security
interest or right of set-off shall be deemed a waiver thereof arid every right
of set-off and security interest shall continue in full force and effect until
specifically released by the Bank in writing. The security interest created
hereby shall secure all of the Guarantor's obligations under this Guaranty.
6. Right of Foreclosure. The Bank may foreclose, either by judicial foreclosure
or by exercise of power of sale, any deed of trust securing any Indebtedness
even though such foreclosure may destroy or diminish the Guarantor's rights
against the Debtor. The Guarantor shall be liable to the Bank for any part of
any Indebtedness remaining unpaid after any such foreclosure whether or not such
foreclosure was for fair market value.
7. Subordination. Any indebtedness of the Debtor or any endorser, cosigner,
other guarantor or other person liable on any Indebtedness now or hereafter owed
to the Guarantor is hereby subordinated to the Indebtedness. Such indebtedness
owed to the Guarantor shall, if the Bank so requests, be collected, enforced and
received by the Guarantor as trustee for the Bank and be paid over to the Bank
on account of the Indebtedness but without reducing or affecting in any manner
the liability of the Guarantor set forth herein. Should the Guarantor fail to
collect the proceeds of any such indebtedness owed to it and pay the proceeds to
the Bank, the Bank, as the Guarantor's attorney-in-fact, may do such acts and
sign such documents in the Guarantor's name as the Bank considers necessary to
effect such collection.
8. Invalid, Fraudulent or Preferential Payments. The Guarantor agrees that, to
the extent the Debtor or any endorser, cosigner, other guarantor or other person
liable on any Indebtedness makes a payment or payments to, or is credited for
any payment or payments made for or on behalf of the Debtor to the Bank, which
payment or payments, or any plan thereof, is subsequently invalidated,
determined to be fraudulent or preferential, set aside or required to be repaid
to any trustee, receiver, assignee or any other party whether under any
bankruptcy, state or federal law or under any common law or equitable cause or
otherwise, then, to the extent thereof, the obligation or part thereof intended
to be satisfied thereby shall be revived, reinstated and continued in full force
and effect as if such payment or payments had not originally been made or
credited.
9. Joint and Several Obligations; Independent Obligations. If more than one
Guarantor signs this Guaranty, the obligations hereunder are joint and several.
The Guarantor's obligations hereunder are independent of the obligations of the
Debtor or any endorser, cosigner, other guarantor or other person liable on any
Indebtedness and a separate action or actions may be brought and prosecuted
against the Guarantor on any Indebtedness.
10. Financial Information. The Guarantor hereby agrees to deliver or cause to
be delivered to the Bank:
A. Other Information. Guarantor to provide: (i) Not later than April 1st of
each year, a copy of the personal financial statement of the Guarantor for
such year, which statement shall be prepared by the Guarantor; and (ii)
within 10 days of filing but not later than October 31st of each year, a copy
of the Guarantor's federal income tax return filed for such year.
11. Acknowledgement of Receipt. Receipt of a true copy of this Guaranty is
hereby acknowledged by the Guarantor. The Guarantor understands and agrees that
this Guaranty shall not constitute a commitment of any nature whatsoever by the
Bank to renew or hereafter extend credit to the Debtor. The Guarantor agrees
that this Guaranty shall be effective with or without notice from the Bank of
the Bank's acceptance hereof.
12. Continuing Guaranty. This Guaranty is a continuing guaranty. Revocation
shall be effective only upon written notice personally received by an officer of
the Bank at the originating office indicated below or actually received at the
originating office by United States mail postage prepaid. Notice shall be
effective at any office of the Bank should the originating office no longer be
in existence. Revocation shall be effective at the close of the Bank's business
day when such notice is actually received. Any revocation shall be effective
only as to the revoking party and shall not affect that party's obligation with
respect to any Indebtedness existing before such revocation is effective.
13. Non-Reliance. In executing this Guaranty, the undersigned is not relying,
and has not relied, upon any statement or representation made by the Bank, or
any employee, agent or representative of the Bank, with respect to the status,
financial condition or other matters related to the Debtor or the relationship
between the Debtor and the Bank.
14. Multiple Guaranties. If the Guarantor has executed or does execute more
than one guaranty of any indebtedness of the Debtor to the Bank, the limits of
liability thereunder and hereunder shall be cumulative.
15. Severability. Should any one or more previsions of this Guaranty be
determined to be illegal or unenforceable, all other provisions shall remain
effective.
16. Corporate or Partnership Authority. If the Debtor is a corporation or
partnership, the Bank need not inquire into the power of the Debtor or the
authority of its officers, directors, partners or agents acting or purporting to
act in its behalf and any credit granted in reliance upon the purported exercise
of such power or authority is guarantied hereunder.
17. Separate Property. Any married person who sign" this Guaranty expressly
agrees that recourse may be had against such person's separate property for all
obligations hereunder.
18. Assignment. The Bank may, with or without notice, assign this Guaranty in
whole or in part This Guaranty shall inure to the benefit of the Bank, its
successors and assigns, and shall bind the Guarantor and the Guarantor's heirs,
executors, administrators, successors and assigns.
19. Waiver of Jury. The Guarantor and the Bank hereby expressly arid
voluntarily waive any and all rights, whether arising under the California
constitution, any rules of the California Code of Civil Procedure, common law or
otherwise, to demand a trial by jury in any action, matter, claim or cause of
action whatsoever arising out of or in any way related to this Guaranty or any
other agreement, document or transaction contemplated hereby.
20. Dispute Resolution.
A. Disputes. It is understood and agreed that, upon the request of any party
to this Guaranty, any dispute, claim or controversy of any kind, whether in
contract or in tort, statutory or common law, legal or equitable, now
existing or hereinafter arising between the parties in any way arising out
of, pertaining to or in connection with: (i) this Guaranty, or any related
agreements, documents or instruments, (ii) all past and present loans,
credits, accounts, deposit accounts (whether demand deposits or time
deposits), safe deposit boxes, safekeeping agreements, guarantees, letters of
credit, goods or services, or other transactions, contracts or agreements of
any kind, (iii) any incidents, omissions, acts, practices, or occurrences
causing injury to any party whereby another party or its agents, employees or
representatives may be liable, in whole or in part, or (iv) any aspect of the
past or present relationships of the parties, shall be resolved through a
two-step dispute resolution process administered by the Judicial Arbitration
& Mediation Services, Inc. ("JAMS") as follows:
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B. Step I - Mediation. At the request of any party to the dispute, claim
or controversy, the matter shall be referred to the nearest office of JAMS
for mediation, which is an informal, nonbinding conference or conferences
between the parties in which a retired judge or justice from the JAMS panel
will seek to guide the parties to a resolution of the case.
C. Step II - Arbitration (Contracts Not Secured By Real Property). Should
any dispute, claim or controversy remain unresolved at the conclusion of
the Step I Mediation Phase, then (subject to the restriction at the end of
this subparagraph) all such remaining matters shall be resolved by find and
binding arbitration before a different judicial panelist, unless the
parties shall agree to have the mediator panelist act as arbitrator. The
hearing shall be conducted at a location determined by the arbitrator in
Los Angeles, California (or such other city as may be agreed upon by the
parties) and shall be administered by and in accordance with the then
existing Rules of Practice and Procedure of JAMS and judgement upon any
award rendered by the arbitrator may be entered by any State or Federal
Court having jurisdiction thereof. The arbitrator shall determine which is
the prevailing party and shall include in the award that party's reasonable
attorneys' fees and costs. This subparagraph shall apply only if, at the
time of the submission of the matter to JAMS, the dispute or issues
involved do not arise out of any transaction which is secured by real
property collateral or, if so secured, all parties consent to such
submission.
As soon as practicable after selection of the arbitrator, the arbitrator,
or the arbitrator's designated representative, shall determine a reasonable
estimate of anticipated fees and costs of the arbitrator, and render a
statement to each party setting forth that party's pro-rata share of said
fees and costs. Thereafter, each party shall, within 10 days of receipt of
said statement, deposit said sum with the arbitrator. Failure of any party
to matte such a deposit shall result in a forfeiture by the non-depositing
party of the right to prosecute or defend the claim which is the subject of
the arbitration, but shall not otherwise serve to abate, stay or suspend
the arbitration proceedings.
D. Step II - Trial By Court Reference (Contracts Secured By Real
Property), if the dispute, claim or controversy is not one required or
agreed to be submitted to arbitration, as provided in the shove
subparagraph, and has not been resolved by Step I mediation, then any
remaining dispute, claim or controversy shall be submitted for
determination by a trial on Order of Reference conducted by a retired judge
or justice from the panel of JAMS appointed pursuant to the provisions of
Section 638(1) or the California Code of Civil Procedure, or any amendment,
addition or successor section thereto, to hear the case and report a
statement of decision thereon. The parties intend this general reference
agreement to be specifically enforceable in accordance with said section,
if the parties are unable to agree upon a member of the JAMS panel to act
as referee, then one shall be appointed by the Presiding Judge of the
county wherein the hearing is to be held. The parties shall pay in advance,
to the referee, the estimated reasonable fees and costs of the reference,
as may be specified in advance by the referee. The parties shall initially
share equally, by paying their proportionate amount of the estimated fees
and costs of the reference. Failure of any party to make such a fee deposit
shall result in a forfeiture by the non-depositing party of the right to
prosecute or defend any cause of action which is the subject of the
reference. but shall not otherwise serve to abate, stay or suspend the
reference proceeding.
E. Provisional Remedies, Self Help and Foreclosure. No provision of, or
the exercise of any rights under any portion of this Dispute Resolution
provision, shall limit the right of any party to exercise self help
remedies such as set off, foreclosure against any real or personal property
collateral, or the obtaining of provisional or ancillary remedies, such as
injunctive relief or the appointment of a receiver, from any court having
jurisdiction before, during or after the pendency of any arbitration. At
the Bank's option, foreclosure under a deed of trust or mortgage may be
accomplished either by exercise of power of sale under the deed of trust or
mortgage, or by judicial foreclosure. The institution and maintenance of an
action for provisional remedies, pursuit of provisional or ancillary
remedies or exercise of self help remedies shall not constitute a waiver of
the right of any party to submit the controversy or claim to arbitration.
21. Attorneys' Fees. Whether or not any suit, action, arbitration or other
dispute resolution proceeding is instituted, the Guarantor agrees to pay
reasonable attorneys' fees and all other costs and expenses which may be
incurred in the collection of any Indebtedness, in the protection or
preservation of, or realization on, any collateral securing any Indebtedness and
in the enforcement by the Bank of this Guaranty.
22. Governing Law. This Guaranty shall be governed by and construed according
to the laws of the State of California and the Guarantor hereby submits to the
jurisdiction of the courts of the State of California.
23. Entire Agreement. This Guaranty and all documents, instruments and
agreements mentioned herein constitute the entire and complete understanding of
the panics with respect to the transactions contemplated hereunder. All previous
conversations, memoranda and writings between the parties pertaining to the
transactions contemplated hereunder not incorporated or referenced in this
Guaranty or in such documents, instruments and agreements are superseded hereby.
24. Headings. The headings used herein are solely for the purpose of
identification and have no legal significance.
25. Address of the Bank. The Bank's originating office under this Guaranty is:
Oakland Office, 2127 Broadway, Oakland, CA 94612.
26. Maximum Principal Liability. THE MAXIMUM PRINCIPAL LIABILITY UNDER THIS
GUARANTY is the amount of $5,000,000.00, plus interest at the rate(s)
applicable to any Indebtedness as set forth in the paragraph herein entitled
"Guaranty" and the expenses enumerated in the paragraph herein entitled
"Attorneys' Fees".
This Guaranty is made as of 4-19-96, which shall be the date of this Guaranty.
Executed by the undersigned Guarantor as of the date set forth above.
GUARANTOR:
Frank Chiu
Address:
46970 Ocotillo Court
Fremont, CA 94539
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EXHIBIT 10.17
CONTINUING GUARANTY
(Individual Guarantor)
SAFECO
Name and Address of Guarantor: Name and Address of Creditor:
Doreen M. Chiu SAFECO Credit Company, Inc.
46970 Ocotillo Ct. Northwest Division
Fremont, California 94538 4909 156th Ave NE
Redmond, WA 98052-6664
The undersigned ("Guarantor") requests that SAFECO Credit Company, Inc.
("Creditor") extend credit or other financial accommodations to ATG Inc. dba
Allied Technology Group ("Debtor")
In consideration of this extension of credit or financial accommodation, and
other good and valuable consideration, receipt and sufficiency of which is
acknowledged, Guarantor, as primary obligor and not endorser, absolutely and
unconditionally guarantees the full and prompt payment when due of all present
and future obligations of Debtor to Creditor, howsoever created, direct or
indirect, absolute or contingent, now existing or hereafter arising, due or to
become due, whether the obligations represent principal, interest, rent, late
charges, indemnities, an accelerated balance, liquidated damages, a deficiency
after sale or other disposition of leased equipment or collateral, or other sums
owing to Creditor (all such obligations being hereafter referred to as the
"Indebtedness"). Guarantor further agrees to pay all costs and expenses of every
kind and nature, including without limitation, attorney fees (incurred with or
without litigation and in bankruptcy proceedings), out-of-pocket expenses and
court costs, paid or incurred by Creditor in attempting to collect the
indebtedness and in enforcing, preserving or interpreting this "Guaranty".
This is a continuing guaranty. Creditor may from time to time grant credit or
other financial accommodations to Debtor without further notice to Guarantor.
The Guaranty shall remain in full force and effect until Guarantor delivers to
Creditor written notice revoking the Guaranty as to Indebtedness incurred after
receipt of the written notice, but the revocation shall not affect any
Indebtedness incurred prior to receipt of the notice. The execution of this
Continuing Guaranty shall not extinguish, release or waive any obligations,
promises or guarantees contained in any guaranty previously executed by
Guarantor.
Guarantor represents and warrants to Creditor that: (a) Guarantor has the legal
capacity and power to enter into this Guaranty and perform its obligations
hereunder, and (b) this Guaranty constitutes the valid, binding and enforceable
obligation of Guarantor in accordance with its terms.
Guarantor waives notice of acceptance of this Guaranty by Creditor and all
notices and demands of any kind to which Guarantor may be entitled, including
without limitation, all demands for payment and notices of nonpayment,
presentment, protest, notice of protest, and dishonor and notice of disposition
of collateral under UCC 9-504. Guarantor further waives any defense arising by
reason of the disability of Debtor, any tack of authority of Debtor with respect
to the Indebtedness, the invalidity, illegality or lack of enforceability of the
indebtedness, the failure of Creditor to acquire tide to any leased equipment or
a security interest in any collateral or to perfect or maintain any interest
therein or the loss or impairment of the liability of Debtor. Payment of any
sums now or hereafter owing to Guarantor by Debtor is hereby subordinated in
right of payment to the payment of the Indebtedness.
Without notice to or consent of Guarantor, and without affecting the obligations
of Guarantor under this Guaranty, Creditor may from time to time (a) change the
terms of the Indebtedness with the concurrence of Debtor, including but not
limited to, renewal, extension, refinancing, modification of the interest rate
or change in the manner or place of payment; (b) accelerate the maturity of, or
release or compromise, any Indebtedness, or release any guarantor or release or
impair any security for this Guaranty or the Indebtedness; (c) proceed against
the Guarantor for payment of any Indebtedness without first proceeding against
the Debtor or any other guarantor or any security for the indebtedness; (d)
abstain from taking any action or exercising any right against Debtor, the
security or any other guarantor. The rights of Creditor are cumulative and shall
not be exhausted by exercise of any rights against Guarantor or Debtor until all
Indebtedness has been paid.
The obligations of each Guarantor shall be joint and several, binding upon their
respective heirs, personal nonrepresentatives, successors and assigns and inure
to the benefit of the successors and assigns of Creditor. If legal action is
taken to enforce this Guaranty, such action may be maintained separately or
joined with an action against Debtor or any other Guarantor of Debtors
obligations.
If a claim is made upon Creditor at any time for repayment of any amounts
received by Creditor from any source on account of any Indebtedness and Creditor
repays or becomes liable to repay such claim by reason of any judgment or order
of any court or administrative body, or any settlement or compromise thereof,
Guarantor shall be liable to Creditor hereunder for such amounts to the same
extent as Guarantor would have been liable to Creditor if such amounts had never
been received by Creditor, notwithstanding the termination of this Guaranty or
the cancellation of any note or other instrument evidencing any indebtedness of
Debtor.
This writing is intended by the parties to be an integrated and final expression
of this Guaranty agreement and also is intended to be a complete and exclusive
statement of the terms of that agreement. No course of prior dealing between the
parties, no usage of trade and no parol or extrinsic evidence of any nature
shall be used to supplement, modify or vary any of the terms of this Guaranty.
If any provision of this Guaranty is in conflict with any applicable statute,
rule or law, such provision shall be deemed to be null and void to the extent it
is in conflict, but without invalidating any other provision of this Guaranty.
There are no conditions to the full effectiveness of this Guaranty.
Any notice or demand required or permitted to be given by Creditor to Guarantor
may be given by first class mail postage prepaid or overnight delivery to
Guarantor at the address shown above until Guarantor advises Creditor of a
different address in writing.
GUARANTOR UNCONDITIONALLY WAIVES ITS RIGHTS TO A JURY TRIAL OF ANY CLAIM OR
CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS GUARANTY, THE INDEBTEDNESS, OR
ANY DEALINGS BETWEEN GUARANTOR AND CREDITOR RELATING TO THIS GUARANTY.
This Guaranty shall be governed by and construed in accordance with the internal
laws (without applying the conflicts of law rules) of the State of California.
May 20, 1997
- ------------------------------------------------
Date
Guarantor: ____________________________
Doreen M. Chiu
Witness: _____________________________
<PAGE>
EXHIBIT 10.18
CONTINUING GUARANTY
(INDIVIDUAL GUARANTOR)
SAFECO
Name and Address of Guarantor: Name and Address of Creditor:
Doreen M. Chiu SAFECO Credit Company, Inc.
46970 Ocotillo Ct. Northwest Division
Fremont, California 94538 4909 156th Ave NE
Redmond, WA 98052-6664
The undersigned ("Guarantor") requests that SAFECO Credit Company, Inc.
("Creditor") extend credit or other financial accommodations to ATG Inc. dba
Allied Technology Group ("Debtor")
In consideration of this extension of credit or financial accommodation, and
other good and valuable consideration, receipt and sufficiency of which is
acknowledged, Guarantor, as primary obligor and not endorser, absolutely and
unconditionally guarantees the full and prompt payment when due of all present
and future obligations of Debtor to Creditor, howsoever created, direct or
indirect, absolute or contingent, now existing or hereafter arising, due or to
become due, whether the obligations represent principal, interest, rent, late
charges, indemnities, an accelerated balance, liquidated damages, a deficiency
after sale or other disposition of leased equipment or collateral, or other sums
owing to Creditor (all such obligations being hereafter referred to as the
"Indebtedness"). Guarantor further agrees to pay all costs and expenses of every
kind and nature, including without limitation, attorney fees (incurred with or
without litigation and in bankruptcy proceedings), out-of-pocket expenses and
court costs, paid or incurred by Creditor in attempting to collect the
indebtedness and in enforcing, preserving or interpreting this "Guaranty".
This is a continuing guaranty. Creditor may from time to time grant credit or
other financial accommodations to Debtor without further notice to Guarantor.
The Guaranty shall remain in full force and effect until Guarantor delivers to
Creditor written notice revoking the Guaranty as to Indebtedness incurred after
receipt of the written notice, but the revocation shall not affect any
Indebtedness incurred prior to receipt of the notice. The execution of this
Continuing Guaranty shall not extinguish, release or waive any obligations,
promises or guarantees contained in any guaranty previously executed by
Guarantor.
Guarantor represents and warrants to Creditor that: (a) Guarantor has the legal
capacity and power to enter into this Guaranty and perform its obligations
hereunder, and (b) this Guaranty constitutes the valid, binding and enforceable
obligation of Guarantor in accordance with its terms.
Guarantor waives notice of acceptance of this Guaranty by Creditor and all
notices and demands of any kind to which Guarantor may be entitled, including
without limitation, all demands for payment and notices of nonpayment,
presentment, protest, notice of protest, and dishonor and notice of disposition
of collateral under UCC 9-504. Guarantor further waives any defense arising by
reason of the disability of Debtor, any lack of authority of Debtor with respect
to the Indebtedness, the invalidity, illegality or lack of enforceability of the
indebtedness, the failure of Creditor to acquire tide to any leased equipment or
a security interest in any collateral or to perfect or maintain any interest
therein or the loss or impairment of the liability of Debtor. Payment of any
sums now or hereafter owing to Guarantor by Debtor is hereby subordinated in
right of payment to the payment of the Indebtedness.
Without notice to or consent of Guarantor, and without affecting the obligations
of Guarantor under this Guaranty, Creditor may from time to time (a) change the
terms of the Indebtedness with the concurrence of Debtor, including but not
limited to, renewal, extension, refinancing, modification of the interest rate
or change in the manner or place of payment; (b) accelerate the maturity of, or
release or compromise, any Indebtedness, or release any guarantor or release or
impair any security for this Guaranty or the Indebtedness; (c) proceed against
the Guarantor for payment of any Indebtedness without first proceeding against
the Debtor or any other guarantor or any security for the indebtedness; (d)
abstain from taking any action or exercising any right against Debtor, the
security or any other guarantor. The rights of Creditor are cumulative and shall
not be exhausted by exercise of any rights against Guarantor or Debtor until all
Indebtedness has been paid.
The obligations of each Guarantor shall be joint and several, binding upon their
respective heirs, personal nonrepresentatives, successors and assigns and inure
to the benefit of the successors and assigns of Creditor. If legal action is
taken to enforce this Guaranty, such action may be maintained separately or
joined with an action against Debtor or any other Guarantor of Debtors
obligations.
If a claim is made upon Creditor at any time for repayment of any amounts
received by Creditor from any source on account of any Indebtedness and Creditor
repays or becomes liable to repay such claim by reason of any judgment or order
of any court or administrative body, or any settlement or compromise thereof,
Guarantor shall be liable to Creditor hereunder for such amounts to the same
extent as Guarantor would have been liable to Creditor if such amounts had never
been received by Creditor, notwithstanding the termination of this Guaranty or
the cancellation of any note or other instrument evidencing any indebtedness of
Debtor.
This writing is intended by the parties to be an integrated and final expression
of this Guaranty agreement and also is intended to be a complete and exclusive
statement of the terms of that agreement. No course of prior dealing between the
parties, no usage of trade and no parol or extrinsic evidence of any nature
shall be used to supplement, modify or vary any of the terms of this Guaranty.
If any provision of this Guaranty is in conflict with any applicable statute,
rule or law, such provision shall be deemed to be null and void to the extent it
is in conflict, but without invalidating any other provision of this Guaranty.
There are no conditions to the full effectiveness of this Guaranty.
Any notice or demand required or permitted to be given by Creditor to Guarantor
may be given by first class mail postage prepaid or overnight delivery to
Guarantor at the address shown above until Guarantor advises Creditor of a
different address in writing.
GUARANTOR UNCONDITIONALLY WAIVES ITS RIGHTS TO A JURY TRIAL OF ANY CLAIM OR
CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS GUARANTY, THE INDEBTEDNESS, OR
ANY DEALINGS BETWEEN GUARANTOR AND CREDITOR RELATING TO THIS GUARANTY.
This Guaranty shall be governed by and construed in accordance with the internal
laws (without applying the conflicts of law rules) of the State of California.
May 20th, 1997
- -----------------------------------------------
Date
Guarantor: _________________________________
Frank Y. K. Chiu
Witness: __________________________________
<PAGE>
EXHIBIT 10.19
--------------------------
Expiration Date 11-30-90
SBA LOAN NO.
GP-549, 190 30 05-SPO
--------------------------
SMALL BUSINESS ADMINISTRATION (SBA)
GUARANTY
AUGUST 6 , 1993
In order to induce WEST ONE BANK, EASTERN WA, (hereinafter called "Lender")
to make a loan or FORMERLY BEN FRANKLIN NATIONAL BANK loans, or renewal or
extension thereof, to ATG, INC., d.b.a. ALLIED TECHNOLOGY GROUP, INC. AND ATG
RICHLAND, INC. ALLIED ECOLOGY SERVICES, Inc., NATURAL SAFETY CONSULTANTS, INC.
(hereinafter called "Debtor"), the Undersigned hereby unconditionally guarantees
to Lender its successors and assigns, the due and punctual payment when due,
whether by acceleration or otherwise, in accordance with the terms thereof, of
the principal of and interest on and all other sums payable, or stated to be
payable, with respect to the note of the Debtor, made by the Debtor to Lender,
dated AUGUST 6, 1993 _________________________ in the principal amount of $
750,000.00, with interest at the rate of 8.75% / FIRST 42 MONTHS PRIME+2.75% /
LAST 42 MONTHS + CEILING 12% AND FLOOR 5.5% per cent per annum. Such note, and
the interest thereon and all other sums payable with respect thereto are
hereinafter collectively called "Liabilities." As security for the performance
of this guaranty the Undersigned hereby mortgages, pledges, assigns, transfers
and delivers to Lender certain collateral (if any), listed in the schedule on
the reverse side hereof. The term "collateral" as used herein shall mean any
funds, guaranties, agreements or other property or rights or interests of any
nature whatsoever, or the proceeds thereof, which may have been, are, or
hereafter may be, mortgaged, pledged, assigned, transferred or delivered
directly or indirectly by or on behalf of the Debtor or the Undersigned or any
other party to Lender or to the holder of the aforesaid note of the Debtor, or
WHICH may have been, are, or hereafter may be held by any party as trustee or
otherwise, as security, whether immediate or underlying, for the performance of
this guaranty or the payment of the Liabilities or any of them or any security
therefor.
The Undersigned waives any notice of the incurring by the Debtor at any time
of any of the Liabilities, and waives any and all presentment, demand, protest
or notice of dishonor, nonpayment, or other default with respect to any of the
Liabilities and any obligation of any party at any time comprised in the
collateral. The Undersigned hereby grants to Lender full power, in its
uncontrolled discretion and without notice to the undersigned, but subject to
the provisions of any agreement between the Debtor or any other party and Lender
at the time in force, to deal in any manner with the Liabilities and the
collateral, including, but without limiting the generality of the foregoing, the
following powers:
(a) To modify or otherwise change any terms of all or any part of the
Liabilities or the rate of interest thereon (but not to increase the
principal amount of the note of the Debtor to Lender), to grant any
extension or renewal thereof and any other indulgence with respect
thereto, and to effect any release, compromise or settlement with respect
thereto;
(b) To enter into any agreement of forbearance with respect to all or any
part of the Liabilities, or with respect to all or any part of the
collateral, and to change the terms of any such agreement;
(c) To forbear from calling for additional collateral to secure any of the
Liabilities or to secure any obligation comprised in the collateral;
(d) To consent to the substitution, exchange, or release of all or any part
of the collateral, whether or not the collateral, if any, 2 received by
Lender upon any such substitution, exchange, or release shall be of the
same or of a different character or value than the collateral surrendered
by Lender;
(e) In the event of the nonpayment when due, whether by acceleration or
otherwise, of any of the Liabilities, or in the event of default in the
performance of any obligation comprised in the collateral, to realize on
the collateral or any part thereof, as a whole or in such parcels or
subdivided interests as Lender may elect, at any public or private sale
or sales, for cash or on credit or for future delivery, without demand,
advertisement or notice of the time or place of sale or any adjournment
thereof (the Undersigned hereby waiving any such demand, advertisement
and notice to the extent permitted by law), or by foreclosure or
otherwise, or to forbear from realizing thereon, all as Lender in its
uncontrolled discretion may deem proper, and to purchase all or any part
of the collateral for its own account at any such sale or foreclosure,
such powers to be exercised only to the extent permitted by law.
The obligations of the Undersigned hereunder shall not be released,
discharged or in any way affected, nor shall the Undersigned have any rights or
recourse against Lender, by reason of any action Lender may take or omit to take
under the foregoing powers.
In case the Debtor shall fail to pay all or any part of the Liabilities when
due, whether by acceleration or otherwise, according to the terms of said note,
the Undersigned, immediately upon the written demand of Lender, will pay to
Lender the amount due and unpaid by the Debtor as aforesaid, in like manner as
if such amount constituted the direct and primary obligation of the Undersigned.
Lender shall not be required, prior to any such demand on, or payment by, the
Undersigned, to make any demand upon or pursue or exhaust any of its rights or
remedies against the Debtor or others with respect to the payment of any of the
Liabilities, or to pursue or exhaust any of its rights or remedies with respect
to any part of the collateral. The Undersigned shall have not right of
subrogation whatsoever with respect to the Liabilities or the collateral unless
and until Lender shall have received full payment of all the Liabilities.
<PAGE>
The obligations of the Undersigned hereunder, and the rights of Lender in the
collateral shall not be released, discharged or in any way affected, nor shall
the Undersigned have any rights against Lender, by reason of the fact that any
of the collateral may be in default at the time of acceptance thereof by Lender
or later; nor by reason of the fact that a valid lien in any of the collateral
may not be conveyed to, or created in favor of, Lender, nor by reason of the
fact that any of the collateral may be subject to equities or defenses or claims
in favor of others or may be invalid or detective in any way; nor by reason of
the tact that any of the Liabilities may be invalid for any reason whatsoever;
nor by reason of the tact that the value of any of the collateral, or the
financial condition of the Debtor or of any obligor under or guarantor of any of
the collateral, may not have been correctly estimated or may have changed or may
hereafter change; nor by reason of any deterioration, waste, or loss by fire,
theft, or otherwise of any of the collateral, unless such deterioration, waste,
or loss be caused by the willful act or willful failure to act of Lender.
The Undersigned agrees to furnish Lender, or the holder of the aforesaid note
of the Debtor, upon demand, but not more often than semiannually, so long as any
part of the indebtedness under such note remains unpaid, a financial statement
setting forth, in reasonable detail, the assets, liabilities, and net worth of
the Undersigned.
The Undersigned acknowledges and understands that if the Small Business
Administration (SBA) enters into, has entered into, or will enter into, a
Guaranty Agreement, with Lender or any other tending institution, guaranteeing a
portion of Debtor's Liabilities, the Undersigned agrees that it is not a
coguarantor with SBA and shall have no right of contribution against SBA. The
Undersigned further agrees that all liability hereunder shall continue
notwithstanding payment by SBA under its Guaranty Agreement to the other tending
institution.
The term "Undersigned" as used in this agreement shall mean the signer or
signers of this agreement, and such signers, if more than one, shall be jointly
and severally liable hereunder. The Undersigned further agrees that all
liability hereunder shall continue notwithstanding the incapacity, lack of
authority, death, or disability of any one or more of the Undersigned, and that
any failure by Lender or its assigns to file or enforce a claim against the
estate of any of the Undersigned shall not operate to release any other of the
Undersigned from liability hereunder The failure of any other person to sign
this guaranty shall not release or affect the liability of any signer hereof.
__________________________________
DOREEN CHIU
__________________________________
FRANK CHIU
__________________________________
NOTE.-Corporate guarantors must execute guaranty in corporate name, by duly
authorized officer, and seal must be affixed and duly attested; partnership
guarantors must execute guaranty in firm name, together with signature of a
general partner. Formally executed guaranty is to be delivered at the time of
disbursement of loan.
(LIST COLLATERAL SECURING THE GUARANTY)
<PAGE>
EXHIBIT 10.20
18210 REDMOND WAY
REDMOND, WA 98052-5090
GREAT WESTERN LEASING P.O. Box 126
Division of Selland Auto Transport, Inc. REDMOND, WA 98073-0126
(206) 869-6415
GUARANTY AGREEMENT
Lease No. K-541
The undersigned, in consideration of the execution by Great Western Leasing
Division of Selland Auto Transport, Inc., its successors and assigns
("Lessor" herein), of the foregoing Lease Agreement and every Schedule
incorporated therein, jointly and severally guarantee Lessor that the
undersigned will duly perform each and every covenant and obligation, and will
duly and fully pay each and every lease payment and other sums owing under said
Lease Agreement. This guaranty shall be an absolute, direct, continuing, and
unlimited guaranty, and Lessor shall not be bound to exhaust its recourse
against Lessee before being entitled to payment or performance by the
undersigned. Lessor may compound and settle with Lessee, or any one or more
guarantor, or surrender or exchange any security without notice to and without
affecting the obligation of any guarantor. The undersigned agree to remain bound
notwithstanding any extensions of the lease or payment, modification or
subleases, and the undersigned hereby consents thereto.
The undersigned hereby waives all notices, including notice of acceptance hereof
and any demand or notice of nonpayment or nonperformance given by Lessor. The
joint and several obligations and liabilities of the undersigned hereunder shall
survive the death of any or all of the undersigned, and shall be binding on the
estate or successor thereof. The undersigned shall have no right to subrogation
or claim as a result of any payment hereunder until all claims of Lessor under
the lease have been paid.
Address: 46970 Ocotillo Ct.
Fremont, CA 94539
Signed: ___________________________
Frank Chiu
Signed: ___________________________
Doreen Chiu
Dated: September 1, 1994
Witness: __________________________
<PAGE>
EXHIBIT 10.21
GUARANTY
To: The CIT Group/Equipment Financing, Inc.
Each of us severally requests you to extend credit to or to purchase security
agreements, leases, notes, accounts and or other obligations (herein generally
termed "paper) of or from or otherwise to do business with
ATG Inc. Fremont CA
- --------------------------------------------------------------------------------
Company City State
hereinafter called the "Company," and to induce you so to do and in
consideration thereof and of benefits to accrue to each of us therefrom, each of
us, as a primary obligor, jointly and severally and unconditionally guarantees
to you that the Company will fully and promptly pay and perform all its present
and future obligations to you, whether direct or indirect, joint or several,
absolute or contingent, secured or unsecured, matured or unmatured and whether
originally contracted with you or otherwise acquired by you, irrespective of any
invalidity or unenforceability of any such obligation or the insufficiency,
invalidity or unenforceability of any security therefor; and agrees, without
your first having to proceed against the Company or to liquidate paper or any
security therefor, to pay on demand all sums due and to become due to you from
the Company and all losses, costs, attorneys' fees or expenses which may be
suffered by you by reason of the Company's default or default of any of the
undersigned hereunder; and agrees to be bound by and on demand to pay any
deficiency established by a sale of paper and or security held, with or without
notice to us. This guaranty is an unconditional guarantee of payment and
performance. No guarantor shall be released or discharged, either in whole or in
part, by your failure or delay to perfect or continue the perfection of any
security interest in any property which secures the obligations of the Company
or any of us to you, or to protect the property covered by such security
interest.
No termination hereof shall be effected by the death of any or all of us. No
termination shall be effective except by notice sent to you by certified mail
return receipt requested naming a termination date effective not less than 90
days after the receipt of such notice by you; or effective as to any of us who
has not given such notice; or affect any transaction effected prior to the
effective date of termination.
Each of us waives: notice of acceptance hereof; presentment, demand, protest and
notice of nonpayment or protest as to any note or obligation signed, accepted,
endorsed or assigned to you by the Company; any and all rights of subrogation,
reimbursement, indemnity, exoneration, contribution or any other claim which any
of us may now or hereafter have against the Company or any other person directly
or contingently liable for the obligations guaranteed hereunder, or against or
with respect to the Company's property (including, without limitation, property
collateralizing its obligations to you), arising from the existence or
performance of this guaranty; all exemptions and homestead laws and any other
demands and notices required by law; all setoffs and counterclaims; and any duty
on your part (should such duty exist) to disclose to any of us any matter, fact
or thing related to the business operations or condition (financial or
otherwise) of the Company or its affiliates or property, whether now or
hereafter known by you.
You may at any time and from time to time, without our consent, without notice
to us and without affecting or impairing the obligation of any of us hereunder,
do any of the following:
(a) renew, extend (including extensions beyond the original term of the
respective item of paper), modify, release or discharge any obligations of
the Company, of its customers, of co-guarantors (whether hereunder or under
a separate instrument) or of any other party at any time directly or
contingently liable for the payment of any of said obligations;
(b) accept partial payments of said obligations;
(c) accept new or additional documents, instruments or agreements relating to or
in substitution of said obligations;
(d) settle, release (by operation of law or otherwise), compound, compromise,
collect or liquidate any of said obligations and the security therefor in
any manner;
(e) consent to the transfer or return of the security, take and hold additional
security or guaranties for said obligations;
(f) amend, exchange, release or waive any security or guaranty; or
(g) bid and purchase at any sale of paper or security and apply any proceeds or
security, and direct the order and manner of sale.
If a claim is made upon you at any time for repayment or recovery of any
amount(s) or other value received by you, from any source, in payment of or on
account of any of the obligations of the Company guaranteed hereunder and you
repay or otherwise become liable for all or any part of such claim by reason of:
(a) any judgment, decree or order of any court or administrative body having
competent jurisdiction; or
(b) any settlement or compromise of any such claim,
we shall remain jointly and severally liable to you hereunder for the amount so
repaid or for which you are otherwise liable to
Page 1 of 2
<PAGE>
the same extent as if such amount(s) had never been received by you,
notwithstanding any termination hereof or the cancellation of any note or other
agreement evidencing any of the obligations of the Company. This guaranty shall
bind our respective heirs, administrators, representatives, successors, and
assigns, and shall inure to your successors and assigns, including, but not
limited to, any party to whom you may assign any item or items of paper, we
hereby waiving notice of any such assignment. All of your rights are cumulative
and not alternative.
By execution of this guaranty each guarantor hereunder agrees to waive all
rights to trial by jury in any action, proceeding, or counterclaim on any matter
whatsoever arising out of, in connection with, or related to this guaranty.
Executed 1/13, 1994.
INDIVIDUAL NOTE: Individual guarantors must sign without titles. Sign "John
GUARANTORS Smith," not "John Smith, President." Use street addresses,
not P.O. Boxes.
/s/ Frank Chiu Individually
- -----------------------------------------------
Frank Chiu
46970 Ocotillo Ct., Fremont, CA 94539 Home Address
- -----------------------------------------------
/s/ Doreen Chiu Individually
- -----------------------------------------------
Doreen Chiu
46970 Ocotillo Ct., Fremont CA 94539 Home Address
- -----------------------------------------------
_______________________________________________ Individually
_______________________________________________ Home Address
_______________________________________________ Individually
_______________________________________________ Home Address
WITNESS _______________________________________
HOME ADDRESS __________________________________
CORPORATE NOTE: Enter exact name of corporation on first blank line,
GUARANTORS followed by city and state.
<TABLE>
<S> <C>
__________________________________________
Name of Corporation
CORPORATE SEAL
__________________________________________
City & State
By _____________________ Title ___________ ___________________________________________
Have signed by President, Vice President or Treasurer. Attest Secretary
__________________________________________
Name of Corporation
CORPORATE SEAL
__________________________________________
City & State
By _____________________ Title ___________ ___________________________________________
Have signed by President, Vice President or Treasurer. Attest Secretary
</TABLE>
Page 2 of 2
<PAGE>
Exhibit 10.22
LESSOR: LESSEE:
CALIFORNIA THRIFT & LOAN ATG, INC.
P.O. BOX 1199 47375 FREMONT BLVD.
SANTA BARBARA, CA 93102 FREMONT, CA 94538
COMMERCIAL
LEASE AGREEMENT
<TABLE>
<CAPTION>
QTY. DESCRIPTION OF LEASED EQUIPMENT SERIAL NO.
<S> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
EQUIPMENT AS DESCRIBED ON ADDENDA I ATTACHED HERETO AND MADE A PART HEREOF.
[X] If box checked then Addenda incorporated herein.
- -----------------------------------------------------------------------------------------------------------------------------------
EQUIPMENT LOCATION: (If other than Billing Address of Lessee)
2025 BATTELLE BLVD. City: RICHLAND County: BENTON State: WA Zip: 99352
- -----------------------------------------------------------------------------------------------------------------------------------
LEASE TERM MONTHLY RENT First Rental Pmt. Due Upon Check in the amount of $5,465.28 must
Acceptance [X] accompany completed lease.
48 months $2,620.14 30 Days After Acceptance [ ] This amount includes:
Other (Specify) ___________ $__________Security Deposit
$225.00 Documentation Fee
$5,240.28 First & Last 1 mos. rental
$___________Other_____________
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
THIS LEASE IS A NON-CANCELLABLE FINANCE LEASE
1. AGREEMENT TO LEASE. Lessor agrees to lease to Lessee, and Lessee agrees
to lease from Lessor, subject to the terms of this Lease Agreement and any
schedules or addenda attached hereto, the personal property identified above or
in the attached schedules or addenda. Lessor may insert in this Lease the serial
numbers, and other identification data, of the leased equipment when determined
by Lessor. The equipment shall be installed at, and shall not be removed from
the equipment location identified above without Lessor's written consent.
Equipment required to be registered under applicable state vehicle laws shall
not be removed from the state of registration without Lessor's written consent.
The lease term shall commence upon the date accepted by the authorized signature
of Lessor, as evidenced below. This Lease shall have no effect prior to such
acceptance. This Lease is not subject to cancellation for any reason other than
Lessor's failure or inability to acquire the leased equipment. In that event
both parties shall be released herefrom, and Lessor shall return any advance
payments received from Lessee, less actual expenses paid to third parties such
as appraisers and title companies, and neither party shall have any liability
for consequential or other damages.
2. STATUS OF PARTIES, WARRANTIES AND DEFENSES. This is a finance lease--
U.C.C. Section 2A103(1)(g). Lessee has selected the leased equipment
manufacturer and supplier. Lessor has not manufactured or supplied the leased
equipment but is acquiring the same or the right to possession and use of the
same solely in connection with this Lease, and at the request of Lessee. Lessee
has been provided with a copy of the contract evidencing Lessor's purchase of
the leased equipment, or a list of the suppliers with notice that Lessee may
have rights thereunder and advice to contact such suppliers for a description of
such rights.
LESSOR MAKES NO WARRANTY, EXPRESS OR IMPLIED, WITH RESPECT TO THE LEASED
EQUIPMENT. LESSOR MAKES NO WARRANTY THAT THE LEASED EQUIPMENT WILL BE FIT FOR A
PARTICULAR PURPOSE. LESSOR MAKES NO WARRANTY OF MERCHANTABILITY.
Lessor assigns to Lessee, so long as Lessee is not in default hereunder,
all warranties made by any manufacturer or supplier of the leased equipment.
Lessee's sole remedy in the event of a claimed breach of warranty or other
defect in or failure of the leased equipment, shall be in accordance with such
manufacturer's or supplier's warranty, and Lessee may not withhold or fail to
pay any installments due hereunder to Lessor.
3. PAYMENT. Lessor acknowledges receipt of the advance payment described
above. Such sum shall be held by Lessor as security for the performance of the
terms of this Lease. If Lessee requests cancellation of this Lease prior to
Lessor's acquisition of the leased equipment, and Lessor grants such request,
Lessor shall retain this sum as liquidated damages for such anticipatory breach.
Lessee promises and agrees to pay all rental installments on the date designated
by Lessor and to pay such other charges as are herein provided. Payments shall
be payable at the office of Lessor, or to such other person and/or at such other
place as Lessor may from time to time designate in writing. Lessor may apply
remittances received to unpaid rental installments and/or charges on a due date
basis, remittance received being applied to the oldest unpaid rental installment
or charge.
4. FINANCIAL AND EQUIPMENT CONDITION. Lessor may inspect the equipment at
any time, and Lessee agrees to keep it in good condition and repair at Lessee's
expense and house the same in suitable shelter, and not to sell or otherwise
dispose of the equipment or any accessories attached hereto. Lessee shall cause
the equipment to be maintained and serviced in accordance with the
recommendations of the manufacturer. Lessee agrees to furnish Lessor upon
request current financial statements reflecting the Lessee's financial status
during the term of the Lease. All lease Guarantors hereby agree to furnish
Lessor upon request current personal financial statements reflecting Guarantor's
financial status during the term of the Lease.
5. OWNERSHIP. No title or right in said equipment shall pass to Lessee
except by the rights herein expressly granted. Plates or other markings may be
affixed to or placed on said equipment by Lessor or at Lessor's request, by
Lessee at Lessee's expense, indicating the Lessor is the owner thereof, and
Lessee will not remove the same. Upon the termination of the initial lease
period, Lessee will immediately crate, insure, and ship the equipment and
operating manuals to whatever destination Lessor shall direct, all at Lessee's
expense, in as good condition as received less normal wear and tear, said
destination to be confirmed by Lessee prior to shipment. Lessee agrees to pay
Lessor monthly rent at the rate specified for the initial term or any month or
part thereof from the end of the initial term until the equipment is received by
Lessor. Said equipment shall always remain and be deemed personal property even
though attached to realty. Lessee shall maintain each unit of equipment so that
it may be removed from the building in which it is placed without damage to the
building. All replacements, accessories, or capital improvements made to or
placed in or upon said equipment shall become component parts thereof and title
thereto shall immediately vest in Lessor and shall be included under the terms
hereof. The Lessee agrees that the Lessor is authorized, at its option, to file
financing statements or amendments thereto without the signature of the Lessee
with respect to any or all of the lease property and, if a signature is required
by law, then the Lessee appoints Lessor as Lessee's attorney-in-fact to execute
any such financing statements and further agrees to pay the Lessor a
documentation fee to cover the expense of making such filing(s). Lessee further
agrees to itself execute such documents and take such action, as Lessor may
request to protect Lessor and carry out the intent of this agreement.
6. EXPIRATION OF LEASE. At the expiration of the lease term stated
herein, this lease shall continue on a month-to-month basis, and Lessee shall
continue to pay the monthly rent hereunder, until this lease is terminated by
(1) delivery of the leased equipment to Lessor as provided in Paragraph 5 or (2)
Lessee's exercise of the purchase option, or purchase agreement, if any, and
payment of the purchase price under such option or agreement.
7. ASSIGNMENT. Lessor may assign the lease and its assignee may assign
the same. All rights of Lessor hereunder shall be succeeded by any assignee
hereof and said assignee's title to this Lease, to the rental herein provided
for to be paid, and in and to said equipment shall be free from all defense,
set-offs or counterclaims of any kind which Lessee may be entitled to assert
against Lessor. Lessee hereby waives the same as against such assignee; it
being understood and agreed that any assignee of Lessor does not assume
obligations of the Lessor herein named.
LESSEE SHALL NOT ASSIGN, MORTGAGE, OR HYPOTHECATE THIS LEASE OR ANY
INTEREST HEREIN OR SUBLET SAID EQUIPMENT WITHOUT SUCH CONSENT SHALL BE VOID.
TITLE TO THE EQUIPMENT SUBJECT TO THIS LEASE IS RETAINED BY THE LESSOR AND THE
LESSEE COVENANTS THAT IT WILL NOT PURPORT TO PLEDGE OR ENCUMBER THE EQUIPMENT IN
ANY MANNER WHATSOEVER, NOR PERMIT ANY LIENS, CHARGES OR ENCUMBRANCE TO ATTACH
THERETO.
8. INSURANCE. Lessee assumes the entire risk of loss or damages to the
equipment whether or not covered by insurance, and no such loss shall relieve
Lessee of its obligations hereunder. Lessee agrees to keep the equipment
insured and provide proof of insurance to Lessor; to protect all interests of
Lessor, at Lessee's expense, against all risks of loss or damage from any cause
whatsoever for not less than the unpaid balance of the lease rentals due
hereunder or eighty percent (80%) of the then current value of said equipment,
whichever is higher; and to purchase insurance in an amount reasonable under the
circumstances to cover the liability of Lessor for public liability and property
damage. Said insurance policies and the proceeds therefrom shall be the sole
property of Lessor and Lessor shall be named as an insured in all said policies
and as sole loss payee in the policies insuring the equipment. Each policy
shall expressly provide that said insurance as to Lessor and its assigns shall
not be invalidated by any act, omission or neglect of Lessee and cannot be
cancelled without thirty (30) days prior written notice to Lessor. As to each
policy, Lessee shall furnish Lessor a Certificate of Insurance and copy of
policy from the insurer reflecting the coverage required by this paragraph on or
before Commencement date of Lease. The proceeds by such insurance whether
resulting from loss or damage or return of premium or otherwise, shall be
applied toward the replacement or repair of said equipment or the payment of
obligations of Lessee hereunder at the option of Lessor. Lessee hereby appoints
Lessor as Lessee's attorney-in-fact to make claim for, receive payment of and
execute or endorse all documents, checks or drafts for loss or damage or return
premium under any insurance policy issued on said equipment. If Lessee fails to
maintain the insurance required by this paragraph, Lessor may, but it's not
obligated to, obtain insurance in such forms and amounts as it deems reasonable
to protect its interests and Lessee agrees to reimburse Lessor for all such
costs, together with interest at the rate provided herein upon demand.
9. INDEMNITY. Lessee shall, at its sole cost and expense, indemnify, hold
harmless and defend Lessor and its agents, employees, officers and directors
from and against any and all claims, actions, suits, proceedings, costs,
expenses, damages and liabilities, including attorney's fees, arising out of,
connected with, resulting from or relating to the equipment or the condition,
delivery, leasing, location, maintenance, manufacture, operation, ownership,
possession, purchase, repair, repossession, return, sale, selection, service or
use thereof, including without limitation (a) claims involving latent or other
defects (whether or not discoverable by Lessee or Lessor), (b) claims for
trademark patent or copyright infringement, and (c) claims for injury or death
to persons or damage to property or loss of business or anticipatory profits,
whether resulting from acts or omissions of Lessee or Lessor or otherwise.
Lessee shall give Lessor prompt written notice of any claims or liability
covered by this paragraph. The indemnities under this paragraph shall survive
the satisfaction of all other obligations of Lessee herein and the termination
of this Lease.
10. TAXES AND FEES. Lessee agrees to use, operate and maintain said
equipment in accordance with all laws; to pay all licensing and registration
fees for said equipment; to keep the same free of levies, liens and
encumbrances; TO SHOW THE EQUIPMENT AS "LEASED EQUIPMENT" ON LESSEE'S PERSONAL
PROPERTY TAX RETURNS; TO PAY ALL PERSONAL PROPERTY TAXES ASSESSED AGAINST THE
EQUIPMENT, WHICH SUM LESSEE SHALL REMIT TO THE TAXING AUTHORITY; to pay all
other taxes, assessments, fees and penalties which may be levied or assessed on
or in respect to said equipment or its use or any interest therein, or rental
payments thereon including but not limited to all federal, state and local
taxes, however designated, levied or assessed upon the Lessee and Lessor or
either of them or said equipment, or upon the sale, ownership, use or operation
thereof. Lessor may pay such taxes
<PAGE>
and other amounts and may file such returns on behalf of Lessee if Lessee fails
to do so as provided herein. Lessee agrees to reimburse Lessor for reasonable
costs incurred in collecting any charges, taxes, assessments or fees for which
Lessee is liable hereunder.
11. ADVANCES. All advances made and costs incurred by Lessor to preserve
said equipment or to discharge and pay any taxes, assessments, fees, penalties,
liens or encumbrances thereon or to insure the equipment shall be added to the
unpaid balance of rentals due hereunder and shall be repayable by Lessee to
Lessor immediately together with interest thereon at the rate of one and six
tenths (1.6%) percent per month until paid.
12. DEFAULT. Lessee shall be in default hereunder upon the occurrence of
any of the following events: (a) failure of Lessee to pay any rental payment or
other amount required hereunder when due; (b) failure of Lessee to perform any
other obligation hereunder or observe any other term or provision hereof; (c)
any representation or warranty made to Lessor by Lessee or by any Guarantor
proves to have been false in any material respect when made; (d) levy, seizure
or attachment or other involuntary transfer of the equipment; (e) assignment for
benefit of creditors or bulk transfer of assets by, or insolvency, cessation of
business, termination of existence, death or dissolution of, Lessee or any
Guarantor. As used herein, the term "Guarantor" shall include any guarantor of
this Lease and any owner of any property given as security for Lessee's
obligations hereunder.
Upon the occurrence of a default hereunder, Lessor may exercise any one or
more of the following remedies without demand or notice to Lessee and without
terminating or otherwise affecting Lessee's obligations hereunder: (i) declare
the entire balance of rent for the remaining term of this Lease to be
immediately due and payable; (ii) require Lessee to assemble the equipment and
make it available to Lessor at a place designated by Lessor which is reasonably
convenient to both parties; (iii) take and hold possession of the equipment and
render the equipment unusable, and for this purpose enter and remove the
equipment from any premises where the same may be located without liability to
Lessee for any damage caused thereby; (iv) sell or lease the equipment or any
part thereof at public or private sale for cash, on credit or otherwise, with or
without representations or warranties, and upon such terms as shall be
acceptable to Lessor; (v) use and occupy the premises of Lessee for the purpose
of taking, holding, re-conditioning, displaying, selling or leasing the
equipment, without cost to Lessor or liability to Lessee; (vi) demand, sue for
and recover from Lessee all sums due hereunder.
13. DAMAGES. In the event of any default hereunder, Lessor may elect to
accelerate the obligation of Lessee and, in such event, shall be entitled to
recover the sum of (a) delinquent lease payments with interest thereon at the
legal rate, (b) any unamortized brokerage commission, (c) the anticipated
residual value of the equipment, and (d) the lease payments to become due in the
future discounted to present value as of the date of entry of judgment at a rate
equal to 80% of the New York Prime rate as of that date. Lessee shall be
entitled to a credit for net proceeds received by Lessor upon sale or release of
the equipment, if any, discounted to present value. Lessee shall also be liable
for all costs incurred by Lessor in retaking, protecting and disposing of the
equipment, including reasonable legal fees and costs.
14. LATE CHARGE. In the event a rent payment or personal property tax
payment is not made when due hereunder the Lessee promises to pay (1) a late
charge to the Lessor or his assigns not later than one month thereafter, in an
amount calculated at the rate of five cents per one ($1.00) dollar of each such
delayed payment. The late charge and/or the interest payments set forth in this
contract shall apply only when permitted by law and, if not permitted by law,
the late charges and/or interest payments shall be calculated at the maximum
rate permissible by law. In the event that a check or other instrument tendered
for payment is dishonored, Lessor shall be entitled to a ten dollar ($10.00)
fee.
15. OMISSION. The omission by the Lessor at any time to enforce any
default or right reserved to it, or to require performance of any of the terms,
covenants or provisions hereof by the Lessee at any time designated, shall not
be a waiver of any such default or right to which the Lessor is entitled, nor
shall it in any way affect the right of the Lessor to enforce such provisions
thereafter. The Lessor may exercise all remedies simultaneously, pursuant to
the terms hereof, and any such action shall not operate to release the Lessee
until the full amount of the rentals due and to become due and all other sums to
be paid hereunder have been paid.
16. BINDING AGREEMENT. The provisions of this agreement apply to and bind
the heirs, executors, administrators, successors, and assigns of the respective
parties hereto.
17. GOVERNING LAW, VENUE, JURY WAIVER. This Agreement shall be governed
and interpreted in accordance with the laws of the state of Lessor's principal
office, and any suit hereon shall be brought in the county of such office. To
the extent permitted by law, the parties waive their right to a jury trial.
18. IT IS SPECIFICALLY UNDERSTOOD AND AGREED THAT ALL UNDERSTANDINGS AND
AGREEMENTS HERETOFORE MADE BETWEEN THE PARTIES HERETO RELATIVE TO THIS LEASE ARE
MERGED IN THIS AGREEMENT, WHICH CONTAINS THE ENTIRE AGREEMENT AND UNDERSTANDING
OF THE PARTIES HERETO, AND NEITHER PARTY RELIES UPON ANY OTHER STATEMENT OR
REPRESENTATION, EXCEPT FOR THE CREDIT APPLICATION AND FINANCIAL STATEMENTS OF
LESSEE AND ANY GUARANTOR PROVIDED IN CONNECTION HEREWITH. THIS AGREEMENT MAY
NOT BE MODIFIED OR CANCELLED EXCEPT BY AN INSTRUMENT IN WRITING SIGNED BY THE
LESSEE AND A CORPORATE OFFICER OF THE LESSOR.
19. This lease is not effective nor accepted until signed by an officer of
lessor, which is the last act necessary for the effectiveness of this lease.
Accepted by Lessor CALIFORNIA THRIFT & LOAN
-------------------------------------------------
By [SIGNATURE ILLEGIBLE] Date 12/20/94
--------------------- --------------------------------------
SEE REVERSE SIDE FOR TERMS AND CONDITIONS WHICH ARE A PART OF THIS LEASE.
ATG, INC.
- --------------------------------------------------------------------
LESSEE (Complete Legal Name)
By: [SIGNATURE ILLEGIBLE] President 12/?/94
- ---------------------------------------------------------------------
Authorized Signature Title Date
By:
_____________________________________________________________________
Authorized Signature Title Date
/s/ SIGNATURE ILLEGIBLE
- ---------------------------------------------------------------------
Witness
_______________________________________________________________________________
GUARANTEE
_______________________________________________________________________________
To induce LESSOR to enter into the above lease, and any extensions,
renewals, modifications or additions thereto, the undersigned and each of them
if there be more than one (hereinafter jointly and severally called "Guarantor")
jointly and severally guarantees and promises to pay to Lessor at the address
set out above, or at such other place as Lessor shall from time to time advise
in writing, on demand, the due and punctual payment and performance of any and
all indebtedness of the above-named Lessee ("Lease"). This is a guaranty of
payment and performance and not of collection. The Guarantor's obligations
hereunder shall be unconditional (and shall not be subject to any defense,
setoff, counterclaim or recoupment whatsoever) irrespective of the genuineness,
validity, regularity or enforceability of the indebtedness or any conduct of the
Lessee and/or Lessor which might constitute a legal or equitable discharge of a
surety, guarantor or guaranty.
The obligations hereunder are independent of the obligations of Lessee or
the obligations of any other person(s) or guarantor(s) who may be liable to
Lessor in whole or in part for the indebtedness, and a separate action or
actions may be brought and prosecuted against Guarantor or any of them (if there
be more than one) whether action is brought against Lessee alone or whether
Lessee be joined in any such action or actions.
Guarantor authorizes Lessor, without notice or consent and without
affecting, impairing or discharging in whole or in part its liability,
hereunder, from time to time to (a) renew, modify, amend, compromise, extend,
accelerate, discharge or otherwise change the time for payment of, or otherwise
change the terms or provisions of the lease or any part thereof, including
increase or decrease of the rent; (b) take and hold security for the payment of
this guaranty or the indebtedness guaranteed, and exchange, enforce, waive and
release any such security; (c) apply such security and direct the order or
manner of sale thereof as Lessor in its discretion may determine; and (d)
release or substitute in whole or in part any one or more of the endorsers,
Guarantor or anyone else who may be partially or wholly liable for any part of
the indebtedness. Lessor may without notice assign this guaranty in whole or in
part.
Guarantor waives any right to require Lessor to (a) proceed with or exhaust
remedies against Lessee; (b) proceed against or exhaust any security held from
Lessee or Guarantor; (c) pursue any other remedy in Lessor's power whatsoever,
or (d) proceed against any other person(s) or Guarantor(s) who may be liable to
Lessor in whole or in part for the indebtedness. Guarantor waives any defense
arising by reason of any disability or other defense of Lessee or by reason of
the cessation or modification from any cause whatsoever of the liability of
Lessee. Until all indebtedness of Lessee to Lessor shall have been paid in full,
Guarantor shall have no right to subrogation, and waives any right to enforce
any remedy which Lessor now has or may hereafter have against Lessee, and waives
any benefit of, and any right to participate in any security now or hereafter
held by Lessor. Guarantor waives diligence, all presentiments, demands for
performance, notices of non-performance, default, protests, notices of protest,
notices of dishonor, notices of acceptance of this guaranty and of the
existence, creation, or incurring of new, changed, modified, increased or
additional indebtedness, all other notices of every and any kind and trial by
jury in any action or proceeding arising out of, under, on or by reason of this
guaranty or any other dispute between Guarantor and Lessor.
Where any one or more of Lessees are corporations or partnerships it is not
necessary for Lessor to inquire into the powers of Lessee or the officers,
directors, partners, or agents acting or purporting to act on their behalf, and
any indebtedness made or created in reliance upon the professed exercise of such
powers shall be guaranteed and be indebtedness hereunder.
Guarantor agrees to pay the attorney's fees and all other costs and
expenses which may be incurred by Lessor in the enforcement of this guaranty and
agrees that all attorney's fees, costs and expenses incurred in pursuing or
enforcing rights and/or any collateral or security shall constitute so much
additional indebtedness hereby guaranteed.
Any married person who signs this guaranty hereby expressly agrees that
recourse may be had against his or her separate property for all obligations
under this guaranty.
This guaranty cannot be changed, modified or terminated orally; shall be
deemed delivered and shall be construed, interpreted and enforced in accordance
with and under the law of the State of California. The obligations of Guarantor
hereunder shall be binding upon its successors, representatives, estates and
assigns and shall inure to the benefit of Lessor's successors and assigns.
/s/ Frank Chiu
- --------------------------------------------------------------------------------
(Signature) An Individual FRANK CHIU
X
________________________________________________________________________________
(Signature) An Individual
X
________________________________________________________________________________
(Signature) An Individual
/s/ Doreen Chiu
- --------------------------------------------------------------------------------
(Signature) An Individual DOREEN CHIU
X
________________________________________________________________________________
(Signature) An Individual
X
________________________________________________________________________________
(Signature) An Individual
Witness [SIGNATURE ILLEGIBLE] Witness___________________ Witness________________
---------------------
<PAGE>
EXHIBIT 10.39
PROMISSORY NOTE
$1,280,180 Fremont, California
December 31, 1997
For good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the undersigned, ATG Inc., a California corporation
("Payor"), hereby promises to pay Doreen M. Chiu ("Payee"), or order, the
principal sum of One Million Two Hundred Eighty Thousand One Hundred Eighty
Dollars ($1,280,180) with simple interest thereon at a rate of ten percent (10%)
per annum from the date hereof. All payments on this Note shall be made at such
address as the holder of this Note may advise Payor in writing, in lawful money
of the United States of America.
All accrued interest and the entire principal amount of this Note shall be
payable on the fifteenth day following the date of delivery by Payee to Payor of
written demand therefor. This Note may be prepaid in whole or in part at any
time without penalty.
Payor hereby waives presentment for payment, protest, notice of protest and
notice of non-payment of this Note. In the event that any suit or proceeding is
instituted by the holder of this Note for collection hereof, the holder of this
Note shall be entitled to repayment by the Payor of all costs and expenses
incurred therewith, including court costs and attorneys' fees, regardless of
whether a lawsuit is instituted. This Note may be extended or renewed by the
holder hereof, at the holder's option, but no such extension or renewal shall be
effective unless made in writing, and Payor acknowledges that it is not entitled
to any extension or renewal and has been given no assurance of any nature with
respect thereto. No failure on the part of the holder of this Note to exercise,
or delay in exercising, any right, remedy or privilege under this Note shall
operate as a waiver thereof, nor shall a single or partial exercise thereof
preclude any further exercise of such right, remedy, or privilege. The waiver by
the holder of this Note of any default hereunder shall not be deemed, nor shall
the same constitute, waiver of any subsequent default on the part of Payor of a
same or different nature. This Note shall be governed by the laws of the State
of California.
ATG Inc., a California corporation
By: /s/ Steven J. Guerrettaz
------------------------
Name: Steven J. Guerrettaz
Title: Chief Financial Officer
<PAGE>
EXHIBIT 21.1
List of Subsidiaries
1. ATG Richland Corporation, a Washington corporation
<PAGE>
Exhibit 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-1 of our
report, dated January 31, 1998, on our audits of the consolidated financial
statements of ATG Inc. and subsidiary. We also consent to the references to our
firm under the captions "Experts" and "Selected Consolidated Financial Data."
Coopers & Lybrand L.L.P.
San Jose, California
February 11, 1998
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF ATG INC. FOR THE YEARS ENDED DECEMBER 31,
1996 AND 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1997
<PERIOD-START> JAN-01-1996 JAN-01-1997
<PERIOD-END> DEC-31-1996 DEC-31-1997
<CASH> 2,969 2,586
<SECURITIES> 0 0
<RECEIVABLES> 6,953 8,554
<ALLOWANCES> (46) (119)
<INVENTORY> 0 0
<CURRENT-ASSETS> 11,430 12,498
<PP&E> 18,105 24,944
<DEPRECIATION> (3,060) (2,840)
<TOTAL-ASSETS> 26,976 37,227
<CURRENT-LIABILITIES> 7,097 10,846
<BONDS> 2,930 6,202
16,319 19,416
0 0
<COMMON> 5,948 6,337
<OTHER-SE> (5,318) (5,769)
<TOTAL-LIABILITY-AND-EQUITY> 26,976 37,227
<SALES> 18,235 19,107
<TOTAL-REVENUES> 18,235 19,107
<CGS> 11,082 11,172
<TOTAL-COSTS> 11,082 11,172
<OTHER-EXPENSES> 6,656 7,020
<LOSS-PROVISION> 6 73
<INTEREST-EXPENSE> 129 0
<INCOME-PRETAX> 510 973
<INCOME-TAX> 2 (45)
<INCOME-CONTINUING> 508 1,018
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 508 1,018
<EPS-PRIMARY> 0 .09
<EPS-DILUTED> 0 .08
</TABLE>
<PAGE>
EXHIBIT 99.1
CONSENT OF NOMINEE
I, Andrew C. Kadak, hereby consent to being named as a nominee for director
of ATG Inc., a California corporation (the "Company"), in connection with the
Company's Registration Statement on Form S-1 (the "Registration Statement") to
be filed with the Securities and Exchange Commission (the "Commission"). I
understand that the Registration Statement is being filed with the Commission in
connection with the initial public offering of the Company's Common Stock.
Dated: February 6, 1998 /s/ Andrew C. Kadak
----------------------------
Andrew C. Kadak
<PAGE>
EXHIBIT 99.2
CONSENT OF NOMINEE
I, Earl E. Gjelde, hereby consent to being named as a nominee for director
of ATG Inc., a California corporation (the "Company"), in connection with the
Company's Registration Statement on Form S-1 (the "Registration Statement") to
be filed with the Securities and Exchange Commission (the "Commission"). I
understand that the Registration Statement is being filed with the Commission in
connection with the initial public offering of the Company's Common Stock.
Dated: February 6, 1998 /s/ Earl E. Gjelde
----------------------------
Earl E. Gjelde
<PAGE>
EXHIBIT 99.3
CONSENT OF NOMINEE
I, William M. Hewitt, hereby consent to being named as a nominee for
director of ATG Inc., a California corporation (the "Company"), in connection
with the Company's Registration Statement on Form S-1 (the "Registration
Statement") to be filed with the Securities and Exchange Commission (the
"Commission"). I understand that the Registration Statement is being filed with
the Commission in connection with the initial public offering of the Company's
Common Stock.
Dated: February 6, 1998 /s/ William M. Hewitt
----------------------------
William M. Hewitt
<PAGE>
EXHIBIT 99.4
CONSENT OF NOMINEE
I, Steven J. Guerrettaz, hereby consent to being named as a nominee for
director of ATG Inc., a California corporation (the "Company"), in connection
with the Company's Registration Statement on Form S-1 (the "Registration
Statement") to be filed with the Securities and Exchange Commission (the
"Commission"). I understand that the Registration Statement is being filed with
the Commission in connection with the initial public offering of the Company's
Common Stock.
Dated: February 6, 1998 /s/ Steven J. Guerrettaz
---------------------------
Steven J. Guerrettaz
